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 risk-based pricing to more effectively reach 
underserved borrowers, and for other purposes.
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 risk-
based pricing to more effectively reach underserved bor-
rowers, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Expanding American Homeownership Act of 2006’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
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 in-
creased 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.
SEC. 2. FINDINGS AND PURPOSES. 
(a) FINDINGS.—The Congress finds that—
(1) one of the primary missions of the Federal 
Housing Administration (FHA) single family mort-
gage insurance program is to reach borrowers who 
are underserved, or not served, by the existing con-
ventional mortgage marketplace; 
(2) the FHA program has a long history of in-
novation, which includes pioneering the 30-year self-
amortizing mortgage and a safe-to-seniors reverse
mortgage product, both of which were once thought 
too risky to private lenders; 
(3) the FHA single family mortgage insurance 
program traditionally has been a major provider of 
mortgage insurance for home purchases; 
(4) the FHA mortgage insurance premium 
structure, as well as FHA’s product offerings, 
should be revised to reflect FHA’s enhanced ability 
to determine risk at the loan level and to allow FHA 
to better respond to changes in the mortgage mar-
ket; 
(5) during past recessions, including the oil-
patch downturns in the mid-1980s, FHA remained 
a viable credit enhancer and was therefore instru-
mental in preventing a more catastrophic collapse in 
housing markets and a greater loss of homeowner 
equity; and 
(6) as housing price appreciation slows and in-
terest rates rise, many homeowners and prospective 
homebuyers will need the less-expensive, safer fi-
nancing alternative that FHA mortgage insurance 
provides. 
(b) PURPOSES.—The purposes of this Act are—
(1) to provide flexibility to FHA to allow for 
the insurance of housing loans for low- and mod-
erate-income homebuyers during all economic cycles 
in the mortgage market; 
(2) to modernize the FHA single family mort-
gage insurance program by making it more reflective 
of enhancements to loan-level risk assessments and 
changes to the mortgage market; and 
(3) to adjust the loan limits for the single fam-
ily mortgage insurance program to reflect rising 
house prices and the increased costs associated with 
new construction. 
SEC. 3. MAXIMUM PRINCIPAL LOAN OBLIGATION. 
Paragraph (2) of section 203(b) of the National 
Housing Act (12 U.S.C. 1709(b)(2)) is amended—
(1) by striking subparagraphs (A) and (B) and 
inserting the following new subparagraphs: 
‘‘(A) not to exceed the lesser of—
‘‘(i) in the case of a 1-family resi-
dence, the median 1-family house price in 
the area, as determined by the Secretary; 
and in the case of a 2-, 3-, or 4-family res-
idence, the percentage of such median 
price that bears the same ratio to such me-
dian price as the dollar amount limitation 
in effect under section 305(a)(2) of the 
Federal Home Loan Mortgage Corporation
Act (12 U.S.C. 1454(a)(2)) for a 2-, 3-, or 
4-family residence, respectively, bears to 
the dollar amount limitation in effect 
under such section for a 1-family resi-
dence; or 
‘‘(ii) the dollar amount limitation de-
termined under such section 305(a)(2) for 
a residence of the applicable size; 
except that the dollar amount limitation in ef-
fect for any area under this subparagraph may 
not be less than the greater of (I) the dollar 
amount limitation in effect under this section 
for the area on October 21, 1998, or (II) 65 
percent of the dollar limitation determined 
under such section 305(a)(2) for a residence of 
the applicable size; and 
‘‘(B) not to exceed the appraised value of 
the property, plus any initial service charges, 
appraisal, inspection and other fees in connec-
tion with the mortgage as approved by the Sec-
retary.’’; 
(2) in the matter after and below subparagraph 
(B), by striking the second sentence (relating to a 
definition of ‘‘average closing cost’’) and all that fol-
lows through ‘‘title 38, United States Code’’; and
(3) by striking the last undesignated paragraph 
(relating to counseling with respect to the respon-
sibilities and financial management involved in 
homeownership). 
SEC. 4. EXTENSION OF MORTGAGE TERM. 
Paragraph (3) of section 203(b) of the National 
Housing Act (12 U.S.C. 1709(b)(3)) is amended—
(1) by striking ‘‘thirty-five years’’ and inserting 
‘‘forty years’’; and 
(2) by striking ‘‘(or thirty years if such mort-
gage is not approved for insurance prior to construc-
tion)’’. 
SEC. 5. CASH INVESTMENT REQUIREMENT. 
Paragraph (9) of section 203(b) of the National 
Housing Act (12 U.S.C. 1709(b)(9) is amended by strik-
ing the paragraph designation and all that follows through 
‘‘Provided further, That for’’ and inserting the following: 
‘‘(9) Be executed by a mortgagor who shall 
have paid on account of the property, in cash or its 
equivalent, an amount, if any, as the Secretary may 
determine based on factors determined by the Sec-
retary and commensurate with the likelihood of de-
fault. For’’.
SEC. 6. TEMPORARY REINSTATEMENT OF DOWNPAYMENT 
REQUIREMENT IN EVENT OF INCREASED DE-
FAULTS. 
Section 203(b) of the National Housing Act (12 
U.S.C. 1709(b)) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(10) EFFECT OF INCREASED DEFAULTS.—
‘‘(A) ANNUAL
DETERMINATION.—If, for 
any calendar year described in subparagraph 
(B)(i), the Secretary determines, pursuant such 
subparagraph, that—
‘‘(i) the ratio of the number of mort-
gage insurance claims made during such 
calendar year on mortgages insured under 
this section to the total number of mort-
gages having such insurance in force dur-
ing such calendar year exceeds, by 25 per-
cent or more, such ratio for the 12-month 
period ending on the effective date of this 
Act, or 
‘‘(ii) the ratio of the aggregate re-
maining principal obligation under mort-
gages insured under this section for which 
an insurance claim is made during such 
calendar year to the average, for such cal-
endar year, of the aggregate outstanding
principal obligation under mortgages so in-
sured exceeds, by 25 percent or more, such 
ratio for the 12-month period ending on 
such effective date, 
during the 90-day period beginning upon the 
submission of the report for such calendar year 
under subparagraph (B)(ii) containing such de-
termination, the Secretary may insure a mort-
gage under this section only pursuant to the re-
quirement under subparagraph (C), and the 
Secretary shall, not later than 60 days after 
submission of the report containing such deter-
mination, submit a report to the Congress 
under subparagraph (D) regarding mortgage 
insurance claims during such calendar year. 
‘‘(B) 5 YEARS
OF
ANNUAL
DETERMINA-
TIONS.—
‘‘(i) IN
GENERAL.—The Secretary 
shall, for each of the 5 calendar years com-
mencing after the date of the enactment of 
this Act, compare the ratios referred to in 
subparagraph (A) and make a determina-
tion under such subparagraph. 
‘‘(ii) 
ANNUAL
REPORT
ON
DE-
FAULTS.—Not later than 90 days after the
conclusion of each of the calendar years 
described in clause (i), the Secretary shall 
submit a report to the Congress containing 
the determination of the Secretary under 
such clause with respect to such calendar 
year and setting forth the ratios referred 
to in such clause for such calendar year. 
‘‘(C) REINSTATEMENT OF DOWNPAYMENT 
REQUIREMENT.—The requirement under this 
subparagraph is that paragraph (9) of this sub-
section shall apply as such paragraph was in ef-
fect on the day before the effective date of the 
Expanding American Homeownership Act of 
2006. 
‘‘(D) REPORTS
REGARDING
INCREASED 
DEFAULT RATE.—A report under this subpara-
graph, as required under subparagraph (A), 
shall contain—
‘‘(i) an analysis of mortgage insurance 
claims, made during the calendar year for 
which the report is submitted, on mort-
gages insured under this section; 
‘‘(ii) an analysis of the reasons for the 
increase during such calendar year in the 
applicable ratio or ratios under subpara-
graph (A), including an analysis of the ex-
tent to which such increase is attributable 
to the amendments made by the Expand-
ing American Homeownership Act of 2006; 
‘‘(iii) the effect of such increase on 
the Mutual Mortgage Insurance Fund; 
‘‘(iv) recommendations regarding—
‘‘(I) 
whether 
the 
Congress 
should, to respond to such increase, 
take legislative action (aa) to apply 
paragraph (9) of this subsection as 
such paragraph was in effect on the 
day before the effective date of Ex-
panding 
American 
Homeownership 
Act of 2006, (bb) to apply paragraph 
(2)(A)(ii) by substituting ‘87 percent 
of the dollar amount limitation’ for 
‘the dollar amount limitation’, or (cc) 
both; and 
‘‘(II) whether such provisions 
should be temporary or permanent, 
and, if temporary, the period during 
which such provisions should apply; 
and
‘‘(v) recommendations regarding any 
other administrative, regulatory, legislative, 
or other actions that should be taken to re-
spond to such increase. 
‘‘(E) DEFAULTS IN DISASTER AREAS NOT 
COUNTED FOR 24 MONTHS.—In determining the 
number of mortgage insurance claims made and 
the aggregate remaining principal obligation 
under mortgages for which an insurance claim 
is made for purposes of subparagraph (A) for 
any calendar year, the Secretary shall not take 
into consideration any claim made during such 
period on a mortgage on any property that is 
located in an area for which a major disaster 
was declared pursuant to the Robert T. Staf-
ford Disaster Relief and Emergency Assistance 
Act if such claim was made during the 24-
month period beginning upon such declara-
tion.’’. 
SEC. 7. MORTGAGE INSURANCE PREMIUMS. 
Section 203(c) of the National Housing Act (12 
U.S.C. 1709(c)) is amended—
(1) in paragraph (2), in the matter preceding 
subparagraph (A), by striking ‘‘Notwithstanding’’
and inserting ‘‘Except as provided in paragraph (3) 
and notwithstanding’’; and 
(2) by adding at the end the following new 
paragraph: 
‘‘(3) FLEXIBLE RISK-BASED PREMIUMS.—
‘‘(A) IN GENERAL.—For any mortgage insured 
by the Secretary under this title that is secured by 
a 1- to 4-family dwelling and for which the loan ap-
plication is received by the mortgagee on or after 
October 1, 2006, the Secretary may establish a 
mortgage insurance premium structure involving a 
single premium payment collected prior to the insur-
ance of the mortgage or annual payments (which 
may be collected on a periodic basis), or both, sub-
ject to the limitations in subparagraphs (B) and (C). 
The rate of premium for such a mortgage may vary 
during the mortgage term as long as the basis for 
determining the variable rate is established before 
the execution of the mortgage. The Secretary may 
change a premium structure established under this 
subparagraph but only to the extent that such 
change is not applied to any mortgage already exe-
cuted. 
‘‘(B) 
MAXIMUM
UP-FRONT
PREMIUM 
AMOUNTS.—For any mortgage insured under a pre-
mium structure established pursuant to this para-
graph, the amount of any single premium payment 
authorized by subparagraph (A), if established and 
collected prior to the insurance of the mortgage, 
may not exceed the following amount: 
‘‘(i) Except as provided in clauses (ii) and 
(iii), 3.0 percent of the amount of the original 
insured principal obligation of the mortgage. 
‘‘(ii) If the mortgagor has a credit score 
equivalent to a FICO score of 560 or more and 
has paid on account of the property, in cash or 
its equivalent, at least 3 percent of the Sec-
retary’s estimate of the cost of acquisition (ex-
cluding the mortgage insurance premium paid 
at the time the mortgage is insured), 2.25 per-
cent of the original insured principal obligation 
of the mortgage. 
‘‘(iii) If the annual premium payment is 
equal to the maximum amount allowable under 
clause (i) of subparagraph (C), 1.5 percent of 
the amount of the original insured principal ob-
ligation of the mortgage. 
‘‘(C) MAXIMUM ANNUAL PREMIUM AMOUNTS.—
For any mortgage insured under a premium struc-
ture established pursuant to this paragraph, the
amount of any annual premium payment collected 
may not exceed the following amount: 
‘‘(i) Except as provided in clauses (ii) and 
(iii), 2.0 percent of the remaining insured prin-
cipal obligation of the mortgage. 
‘‘(ii) If the mortgagor is a mortgagor de-
scribed in clause (ii) of subparagraph (B), 0.55 
percent of the remaining insured principal obli-
gation of the mortgage. 
‘‘(iii) If the single premium payment col-
lected at the time of insurance is equal to max-
imum amount allowable under clause (i) of sub-
paragraph (B), 1.0 percent of the remaining in-
sured principal obligation of the mortgage. 
‘‘(D) PAYMENT
INCENTIVE.—Notwithstanding 
subparagraph (C), for any mortgage insured under 
a premium structure established pursuant to this 
paragraph and for which the annual premium pay-
ment exceeds the amount set forth in subparagraph 
(C)(ii), if during the 5-year period beginning upon 
the time of insurance all mortgage insurance pre-
miums for such mortgage have been paid on a timely 
basis, upon the expiration of such period the Sec-
retary shall reduce the amount of the annual pre-
mium payments due thereafter under such mortgage
to an amount equal to the amount set forth in sub-
paragraph (C)(ii). 
‘‘(E) ESTABLISHMENT
AND
ALTERATION
OF 
PREMIUM STRUCTURE.—A premium structure shall 
be established or changed under subparagraph (A) 
only by providing notice to mortgagees and to the 
Congress, at least 30 days before the premium 
structure is established or changed. 
‘‘(F) CONSIDERATIONS FOR PREMIUM STRUC-
TURE.—When establishing a premium structure 
under subparagraph (A) or when changing such a 
premium structure, the Secretary shall consider the 
following: 
‘‘(i) The effect of the proposed premium 
structure on the Secretary’s ability to meet the 
operational goals of the Mutual Mortgage In-
surance Fund as provided in section 202(a). 
‘‘(ii) Underwriting variables. 
‘‘(iii) The extent to which new pricing 
under the proposed premium structure has po-
tential for acceptance in the private market. 
‘‘(iv) The administrative capability of the 
Secretary to administer the proposed premium 
structure.
‘‘(v) The effect of the proposed premium 
structure on the Secretary’s ability to maintain 
the availability of mortgage credit and provide 
stability to mortgage markets.’’. 
SEC. 8. REHABILITATION LOANS. 
Subsection (k) of section 203 of the National Hous-
ing Act (12 U.S.C. 1709(k)) is amended—
(1) in paragraph (1), by striking ‘‘on’’ and all 
that follows through ‘‘1978’’; and 
(2) in paragraph (5)—
(A) by striking ‘‘General Insurance Fund’’ 
the first place it appears and inserting ‘‘Mutual 
Mortgage Insurance Fund’’; and 
(B) in the second sentence, by striking the 
comma and all that follows through ‘‘General 
Insurance Fund’’. 
SEC. 9. DISCRETIONARY ACTION. 
The National Housing Act is amended—
(1) in subsection (e) of section 202 (12 U.S.C. 
1708(e))—
(A) in paragraph (3)(B), by striking ‘‘sec-
tion 202(e) of the National Housing Act’’ and 
inserting ‘‘this subsection’’; and 
(B) by redesignating such subsection as 
subsection (f);
(2) by striking paragraph (4) of section 203(s) 
(12 U.S.C. 1709(s)(4)) and inserting the following 
new paragraph: 
‘‘(4) the Secretary of Agriculture;’’; and 
(3) by transferring subsection (s) of section 203 
(as amended by paragraph (2) of this section) to 
section 202, inserting such subsection after sub-
section (d) of section 202, and redesignating such 
subsection as subsection (e). 
SEC. 10. INSURANCE OF CONDOMINIUMS. 
(a) IN GENERAL.—Section 234 of the National 
Housing Act (12 U.S.C. 1715y) is amended—
(1) in subsection (c)—
(A) in the first sentence—
(i) by striking ‘‘and’’ before ‘‘(2)’’; 
and 
(ii) by inserting before the period at 
the end the following: ‘‘, and (3) the 
project has a blanket mortgage insured by 
the Secretary under subsection (d)’’; and 
(B) in clause (B) of the third sentence, by 
striking ‘‘thirty-five years’’ and inserting ‘‘forty 
years’’; and 
(2) in subsection (g), by striking ‘‘, except 
that’’ and all that follows and inserting a period.
(b) DEFINITION OF MORTGAGE.—Section 201(a) of 
the National Housing Act (12 U.S.C. 1707(a)) is amend-
ed—
(1) in clause (1), by striking ‘‘or’’ and inserting 
a comma; and 
(2) by inserting before the semicolon the fol-
lowing: ‘‘, or (c) a first mortgage given to secure the 
unpaid purchase price of a fee interest in, or long-
term leasehold interest in, a one-family unit in a 
multifamily project, including a project in which the 
dwelling units are attached, semi-detached, or de-
tached, and an undivided interest in the common 
areas and facilities which serve the project’’. 
SEC. 11. MUTUAL MORTGAGE INSURANCE FUND. 
(a) IN GENERAL.—Subsection (a) of section 202 of 
the National Housing Act (12 U.S.C. 1708(a)) is amended 
to read as follows: 
‘‘(a) MUTUAL MORTGAGE INSURANCE FUND.—
‘‘(1) ESTABLISHMENT.—Subject to the provi-
sions of the Federal Credit Reform Act of 1990, 
there is hereby created a Mutual Mortgage Insur-
ance Fund (in this title referred to as the ‘Fund’), 
which shall be used by the Secretary to carry out the 
provisions of this title with respect to mortgages in-
sured under section 203. The Secretary may enter
into commitments to guarantee, and may guarantee, 
such insured mortgages. 
‘‘(2) LIMIT ON LOAN GUARANTEES.—The au-
thority of the Secretary to enter into commitments 
to guarantee such insured mortgages shall be effec-
tive for any fiscal year only to the extent that the 
aggregate original principal loan amount under such 
mortgages, any part of which is guaranteed, does 
not exceed the amount specified in appropriations 
Acts for such fiscal year. 
‘‘(3) FIDUCIARY
RESPONSIBILITY.—The Sec-
retary has a responsibility to ensure that the Mutual 
Mortgage Insurance Fund remains financially sound. 
‘‘(4) 
ANNUAL
INDEPENDENT
ACTUARIAL 
STUDY.—The Secretary shall provide for an inde-
pendent actuarial study of the Fund to be conducted 
annually, which shall analyze the financial position 
of the Fund. The Secretary shall submit a report 
annually to the Congress describing the results of 
such study and assessing the financial status of the 
Fund. The report shall recommend adjustments to 
underwriting standards, program participation, or 
premiums, if necessary, to ensure that the Fund re-
mains financially sound.
‘‘(5) QUARTERLY REPORTS.—During each fiscal 
year, the Secretary shall submit a report to the Con-
gress for each quarter, which shall specify for mort-
gages that are obligations of the Fund—
‘‘(A) the cumulative volume of loan guar-
antee commitments that have been made during 
such fiscal year through the end of the quarter 
for which the report is submitted; 
‘‘(B) the types of loans insured, cat-
egorized by risk; 
‘‘(C) any significant changes between ac-
tual and projected claim and prepayment activ-
ity; 
‘‘(D) projected versus actual loss rates; 
and 
‘‘(E) updated projections of the annual 
subsidy rates to ensure that increases in risk to 
the Fund are identified and mitigated by ad-
justments to underwriting standards, program 
participation, or premiums, and the financial 
soundness of the Fund is maintained. 
The first quarterly report under this paragraph shall 
be submitted on the last day of the first quarter of 
fiscal year 2007, or upon the expiration of the 90-
day period beginning on the date of the enactment
of the Expanding American Homeownership Act of 
2006, whichever is later. 
‘‘(6) ADJUSTMENT OF PREMIUMS.—If, pursu-
ant to the independent actuarial study of the Fund 
required under paragraph (5), the Secretary deter-
mines that the Fund is not meeting the operational 
goals established under paragraph (8) or there is a 
substantial probability that the Fund will not main-
tain its established target subsidy rate, the Secretary 
may either make programmatic adjustments under 
section 203 as necessary to reduce the risk to the 
Fund, or make appropriate premium adjustments. 
‘‘(7) OPERATIONAL
GOALS.—The operational 
goals for the Fund are—
‘‘(A) to charge borrowers under loans that 
are obligations of the Fund an appropriate pre-
mium for the risk that such loans pose to the 
Fund; 
‘‘(B) to minimize the default risk to the 
Fund and to homeowners; 
‘‘(C) to curtail the impact of adverse selec-
tion on the Fund; and 
‘‘(D) to meet the housing needs of the bor-
rowers that the single family mortgage insur-
ance program under this title is designed to 
serve.’’. 
(b) OBLIGATIONS OF FUND.—The National Housing 
Act is amended as follows: 
(1) 
HOMEOWNERSHIP
VOUCHER
PROGRAM 
MORTGAGES.—In 
section 
203(v) 
(12 
U.S.C. 
1709(v))—
(A) by striking ‘‘Notwithstanding section 
202 of this title, the’’ and inserting ‘‘The’’; and 
(B) by striking ‘‘General Insurance Fund’’ 
the first place such term appears and all that 
follows and inserting ‘‘Mutual Mortgage Insur-
ance Fund.’’. 
(2) HOME EQUITY CONVERSION MORTGAGES.—
Section 255(i)(2)(A) of the National Housing Act 
(12 U.S.C. 1715z–20(i)(2)(A)) is amended by strik-
ing ‘‘General Insurance Fund’’ and inserting ‘‘Mu-
tual Mortgage Insurance Fund’’. 
(c) CONFORMING
AMENDMENTS.—The National 
Housing Act is amended—
(1) in section 205 (12 U.S.C. 1711), by striking 
subsections (g) and (h); and 
(2) in section 519(e) (12 U.S.C. 1735c(e)), by 
striking ‘‘203(b)’’ and all that follows through
‘‘203(i)’’ and inserting ‘‘203, except as determined 
by the Secretary’’. 
SEC. 12. HAWAIIAN HOME LANDS AND INDIAN RESERVA-
TIONS. 
(a) HAWAIIAN HOME LANDS.—Section 247(c) of the 
National Housing Act (12 U.S.C. 1715z–12) is amend-
ed—
(1) by striking ‘‘General Insurance Fund estab-
lished in section 519’’ and inserting ‘‘Mutual Mort-
gage Insurance Fund’’; and 
(2) in the second sentence, by striking ‘‘(1) all 
references’’ and all that follows through ‘‘and (2)’’. 
(b) INDIAN RESERVATIONS.—Section 248(f) of the 
National Housing Act (12 U.S.C. 1715z–13) is amend-
ed—
(1) by striking ‘‘General Insurance Fund’’ the 
first place it appears through ‘‘519’’ and inserting 
‘‘Mutual Mortgage Insurance Fund’’; and 
(2) in the second sentence, by striking ‘‘(1) all 
references’’ and all that follows through ‘‘and (2)’’. 
SEC. 13. CONFORMING AND TECHNICAL AMENDMENTS. 
(a) REPEALS.—The following provisions of the Na-
tional Housing Act are repealed: 
(1) Subsection (i) of section 203 (12 U.S.C. 
1709(i)).
(2) Subsection (o) of section 203 (12 U.S.C. 
1709(o)). 
(3) Subsection (p) of section 203 (12 U.S.C. 
1709(p)). 
(4) Subsection (q) of section 203 (12 U.S.C. 
1709(q)). 
(5) Section 222 (12 U.S.C. 1715m). 
(6) Section 237 (12 U.S.C. 1715z–2). 
(7) Section 245 (12 U.S.C. 1715z–10). 
(b) DEFINITION OF AREA.—Section 203(u)(2)(A) of 
the National Housing Act (12 U.S.C. 1709(u)(2)(A)) is 
amended by striking ‘‘shall’’ and all that follows and in-
serting ‘‘means a metropolitan statistical area as estab-
lished by the Office of Management and Budget;’’. 
(c) DEFINITION OF STATE.—Section 201(d) of the 
National Housing Act (12 U.S.C. 1707(d)) is amended by 
striking ‘‘the Trust Territory of the Pacific Islands’’ and 
inserting ‘‘the Commonwealth of the Northern Mariana 
Islands’’. 
SEC. 14. HOME EQUITY CONVERSION MORTGAGES. 
(a) IN GENERAL.—Section 255 of the National 
Housing Act (12 U.S.C. 1715z–20) is amended—
(1) in subsection (g)—
(A) by striking the first sentence; and
(B) by striking ‘‘established under section 
203(b)(2)’’ and all that follows through ‘‘lo-
cated’’ and inserting ‘‘limitation established 
under section 305(a)(2) of the Federal Home 
Loan Mortgage Corporation Act for a 1-family 
residence’’; 
(2) in subsection (i)(1)(C), by striking ‘‘limita-
tions’’ and inserting ‘‘limitation’’; and 
(3) by adding at the end the following new sub-
section: 
‘‘(n) AUTHORITY
TO
INSURE
HOME
PURCHASE 
MORTGAGE.—
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision in this section, the Secretary may insure, 
upon application by a mortgagee, a home equity con-
version mortgage upon such terms and conditions as 
the Secretary may prescribe, when the primary pur-
pose of the home equity conversion mortgage is to 
enable an elderly mortgagor to purchase a 1-to 4 
family dwelling in which the mortgagor will occupy 
or occupies one of the units. 
‘‘(2) LIMITATION ON PRINCIPAL OBLIGATION.—
A home equity conversion mortgage insured pursu-
ant to paragraph (1) shall involve a principal obliga-
tion that does not exceed the dollar amount limita-
tion determined under section 305(a)(2) of the Fed-
eral Home Loan Mortgage Corporation Act for a 
residence of the applicable size.’’. 
(b) MORTGAGES
FOR COOPERATIVES.—Subsection 
(b) of section 255 of the National Housing Act (12 U.S.C. 
1715z-20(b)) is amended—
(1) in paragraph (4)—
(A) by inserting ‘‘a first or subordinate 
mortgage or lien’’ before ‘‘on all stock’’; 
(B) by inserting ‘‘unit’’ after ‘‘dwelling’’; 
and 
(C) by inserting ‘‘a first mortgage or first 
lien’’ before ‘‘on a leasehold’’; and 
(2) in paragraph (5), by inserting ‘‘a first or 
subordinate lien on’’ before ‘‘all stock’’. 
(c) STUDY REGARDING MORTGAGE INSURANCE PRE-
MIUMS.—The Secretary of Housing and Urban Develop-
ment shall conduct a study regarding mortgage insurance 
premiums charged under the program under section 255 
of the National Housing Act (12 U.S.C. 1715z-20) for in-
surance of home equity conversion mortgages to analyze 
and determine—
(1) the effects of reducing the amounts of such 
premiums from the amounts charged as of the date 
of the enactment of this Act on—
(A) costs to mortgagors; and 
(B) the financial soundness of the pro-
gram; and 
(2) the feasibility and effectiveness of exempt-
ing, from all the requirements under the program re-
garding payment of mortgage insurance premiums 
(including both up-front or annual mortgage insur-
ance premiums under section 203(c)(2) of such Act), 
any mortgage insured under the program under 
which part or all of the amount of future payments 
made to the homeowner are used for costs of a long-
term care insurance contract covering the mortgagor 
or members of the household residing in the mort-
gaged property. 
Not later than the expiration of the 12-month period be-
ginning on the date of the enactment of this Act, the Sec-
retary shall submit a report to the Congress setting forth 
the results and conclusions of the study. 
SEC. 15. CONFORMING LOAN LIMIT IN DISASTER AREAS. 
Section 203(h) of the National Housing Act (12 
U.S.C. 1709) is amended—
(1) by inserting after ‘‘property’’ the following: 
‘‘plus any initial service charges, appraisal, inspec-
tion and other fees in connection with the mortgage 
as approved by the Secretary,’’;
(2) by striking the second sentence (as added 
by chapter 7 of the Emergency Supplemental Appro-
priations Act of 1994 (Public Law 103–211; 108 
Stat. 12)); and 
(3) by adding at the end the following new sen-
tence: ‘‘In any case in which the single family resi-
dence to be insured under this subsection is within 
a jurisdiction in which the President has declared a 
major disaster to have occurred, the Secretary is au-
thorized, for a temporary period not to exceed 36 
months from the date of such Presidential declara-
tion, to enter into agreements to insure a mortgage 
which involves a principal obligation of up to 100 
percent of the dollar limitation determined under 
section 305(a)(2) of the Federal Home Loan Mort-
gage Corporation Act for a single family residence, 
and not in excess of 100 percent of the appraised 
value of the property plus any initial service charges, 
appraisal, inspection and other fees in connection 
with the mortgage as approved by the Secretary.’’. 
SEC. 16. PARTICIPATION OF MORTGAGE BROKERS AND 
CORRESPONDENT LENDERS. 
(a) DEFINITIONS.—
(1) IN GENERAL.—Section 201 of the National 
Housing Act (12 U.S.C. 1707) is amended—
(A) by striking ‘‘As used in section 203 of 
this title—’’ and inserting ‘‘As used in this title 
and for purposes of participation in insurance 
programs under this title, except as specifically 
provided otherwise, the following definitions 
shall apply:’’; 
(B) by striking subsection (b) and insert-
ing the following: 
‘‘(2) The term ‘mortgagee’ means any of the 
following entities, and its successors and assigns, to 
the extent such entity is approved by the Secretary: 
‘‘(A) A lender or correspondent lender, 
who—
‘‘(i) makes, underwrites, and services 
mortgages; 
‘‘(ii) submits to the Secretary such fi-
nancial audits performed in accordance 
with the standards for financial audits of 
the Government Auditing Standards issued 
by the Comptroller of the United States; 
‘‘(iii) meet the minimum net worth re-
quirement that the Secretary shall estab-
lish; and 
‘‘(iv) complies with such other re-
quirements as the Secretary may establish.
‘‘(B) A correspondent lender who—
‘‘(i) closes a mortgage in its name but 
does not underwrite or service the mort-
gage; 
‘‘(ii) posts a surety bond, in lieu of 
any requirement to provide audited finan-
cial statements or meet a minimum net 
worth requirement, in—
‘‘(I) a form satisfactory to the 
Secretary; and 
‘‘(II) an amount of $75,000, as 
such amount is adjusted annually by 
the Secretary (as determined under 
regulations of the Secretary) by the 
change for such year in the Consumer 
Price Index for All Urban Consumers 
published monthly by the Bureau of 
Labor Statistics of the Department of 
Labor; and 
‘‘(iii) complies with such other re-
quirements as the Secretary may establish. 
‘‘(C) A mortgage broker who—
‘‘(i) closes the mortgage in the name 
of the lender and does not make, under-
write, or service the mortgage;
‘‘(ii) is licensed, under the laws of the 
State in which the property that is subject 
to the mortgage is located, to act as a 
mortgage broker in such State; 
‘‘(iii) posts a surety bond in accord-
ance with the requirements of subpara-
graph (B)(ii); and 
‘‘(iv) complies with such other re-
quirements as the Secretary may establish. 
‘‘(3) The term ‘mortgagor’ includes the original 
borrower under a mortgage and the successors and 
assigns of the original borrower.’’; 
(C) in subsection (a), by redesignating 
clauses (1) and (2) as clauses (A) and (B) re-
spectively; and 
(D) by redesignating subsections (a), (c), 
(d), (e), and (f) as paragraphs (1), (4), (5), (6), 
and (7), respectively, and realigning such para-
graphs two ems from the left margin. 
(2) MORTGAGEE REVIEW.—Section 202(c)(7) of 
the National Housing Act (12 U.S.C. 1708(c)(7)) is 
amended—
(A) in subparagraph (A), by inserting ‘‘, as 
defined in section 201,’’ after ‘‘mortgagee’’; 
(B) by striking subparagraph (B); and
(C) by redesignating subparagraphs (C) 
and (D) as subparagraphs (B) and (C), respec-
tively. 
(3) MULTIFAMILY
RENTAL
HOUSING
INSUR-
ANCE.—Section 207(a)(2) of the National Housing 
Act (12 U.S.C. 1713(a)(2)) is amended by striking 
‘‘means the original lender under a mortgage, and 
its successors and assigns, and’’ and inserting ‘‘has 
the meaning given such term in section 201, except 
that such term also’’. 
(4) WAR HOUSING INSURANCE.—Section 601(b) 
of the National Housing Act (12 U.S.C. 1736(b)) is 
amended by striking ‘‘includes the original lender 
under a mortgage, and his successors and assigns 
approved by the Secretary’’ and inserting ‘‘has the 
meaning given such term in section 201’’. 
(5) ARMED SERVICES HOUSING MORTGAGE IN-
SURANCE.—Section 801(b) of the National Housing 
Act (12 U.S.C. 1748(b)) is amended by striking ‘‘in-
cludes the original lender under a mortgage, and his 
successors and assigns approved by the Secretary’’ 
and inserting ‘‘has the meaning given such term in 
section 201’’. 
(6) GROUP
PRACTICE
FACILITIES
MORTGAGE 
INSURANCE.—Section 1106(8) of the National
Housing Act (12 U.S.C. 1749aaa-5(8)) is amended 
by striking ‘‘means the original lender under a mort-
gage, and his or its successors and assigns, and’’ 
and inserting ‘‘has the meaning given such term in 
section 201, except that such term also’’. 
(b) ELIGIBILITY FOR INSURANCE.—
(1) TITLE I.—Paragraph (1) of section 8(b) of 
the National Housing Act (12 U.S.C. 1706c(b)(1)) 
is amended—
(A) by striking ‘‘, and be held by,’’; and 
(B) by striking ‘‘as responsible and able to 
service the mortgage properly’’. 
(2) SINGLE
FAMILY
HOUSING
MORTGAGE
IN-
SURANCE.—Paragraph (1) of section 203(b) of the 
National Housing Act (12 U.S.C. 1709(b)(1)) is 
amended—
(A) by striking ‘‘, and be held by,’’; and 
(B) by striking ‘‘as responsible and able to 
service the mortgage properly’’. 
(3) SECTION
221
MORTGAGE
INSURANCE.— 
Paragraph (1) of section 221(d) of the National 
Housing Act (12 U.S.C. 1715l(d)(1)) is amended—
(A) by striking ‘‘ and be held by’’; and 
(B) by striking ‘‘as responsible and able to 
service the mortgage properly’’.