(B) by striking ‘‘established under section 
203(b)(2)’’ and all that follows through ‘‘located’’ 
and inserting ‘‘limitation established under sec-
tion 305(a)(2) of the Federal Home Loan Mort-
gage 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 MORT-
GAGE.— 
‘‘(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 en-
able an elderly mortgagor to purchase a 1-to 4 family 
dwelling in which the mortgagor will occupy or occu-
pies one of the units. 
‘‘(2) LIMITATION ON PRINCIPAL OBLIGATION.—A 
home equity conversion mortgage insured pursuant to 
paragraph (1) shall involve a principal obligation 
that does not exceed the dollar amount limitation de-
termined under section 305(a)(2) of the Federal Home 
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Loan Mortgage Corporation Act for a residence of the 
applicable size.’’. 
(b) 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 insur-
ance 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 program; 
and 
(2) the feasibility and effectiveness of exempting, 
from all the requirements under the program regard-
ing payment of mortgage insurance premiums (in-
cluding both up-front or annual mortgage insurance 
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 
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members of the household residing in the mortgaged 
property. 
Not later than the expiration of the 12-month period begin-
ning on the date of the enactment of this Act, the Secretary 
shall submit a report to the Congress setting forth the results 
and conclusions of the study. 
SEC. 14. 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 Appropria-
tions 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 declaration, 
to enter into agreements to insure a mortgage which 
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involves a principal obligation of up to 100 percent 
of the dollar limitation determined under section 
305(a)(2) of the Federal Home Loan Mortgage Cor-
poration 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 mort-
gage as approved by the Secretary.’’. 
SEC. 15. 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 inserting 
the following: 
‘‘(2) The term ‘mortgagee’ means any of the fol-
lowing entities, and its successors and assigns, to the 
extent such entity is approved by the Secretary: 
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‘‘(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 establish; 
and 
‘‘(iv) complies with such other require-
ments as the Secretary may establish. 
‘‘(B) A correspondent lender who— 
‘‘(i) closes a mortgage in its name but 
does not underwrite or service the mortgage; 
‘‘(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 
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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 require-
ments as the Secretary may establish. 
‘‘(C) A mortgage broker who— 
‘‘(i) closes the mortgage in the name of 
the lender and does not make, underwrite, 
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 mort-
gage broker in such State; 
‘‘(iii) posts a surety bond in accord-
ance with the requirements of subparagraph 
(B)(ii); and 
‘‘(iv) complies with such other require-
ments as the Secretary may establish. 
‘‘(3) The term ‘mortgagor’ includes the original 
borrower under a mortgage and the successors and as-
signs of the original borrower.’’; 
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(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 subpargraphs (C) and 
(D) as subparagraphs (B) and (C), respectively. 
(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 
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under a mortgage, and his successors and assigns ap-
proved 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 IN-
SURANCE.—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 mortgage, 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’’. 
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(2) SINGLE FAMILY HOUSING MORTGAGE INSUR-
ANCE.—Paragraph (1) of section 203(b) of the Na-
tional Housing Act (12 U.S.C. 1709(b)(1)) is amend-
ed 
(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.— Para-
graph (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’’. 
(4) HOME EQUITY CONVERSION MORTGAGE IN-
SURANCE.—Paragraph (1) of section 255(d) of the 
National Housing Act (12 U.S.C. 1715z–20(d)(1)) is 
amended by striking ‘‘as responsible and able to serv-
ice the mortgage properly’’. 
(5) WAR
HOUSING
MORTGAGE
INSURANCE.— 
Paragraph (1) of section 603(b) of the National Hous-
ing Act (12 U.S.C. 1738(b)(1)) is amended— 
(A) by striking ‘‘, and be held by,’’; and 
(B) by striking ‘‘as responsible and able to 
service the mortgage properly’’. 
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(6) WAR HOUSING MORTGAGE INSURANCE FOR 
LARGE-SCALE HOUSING PROJECTS.—Paragraph (1) of 
section 611(b) of the National Housing Act (12 U.S.C. 
1746(b)(1)) is amended— 
(A) by striking ‘‘ and be held by’’; and 
(B) by striking ‘‘as responsible and able to 
service the mortgage properly’’. 
(7) GROUP PRACTICE FACILITY MORTGAGE IN-
SURANCE.—Section 1101(b)(2) of the National Hous-
ing Act (12 U.S.C. 1749aaa(b)(2)) is amended— 
(A) by striking ‘‘ and held by’’; and 
(B) by striking ‘‘as responsible and able to 
service the mortgage properly’’. 
(8) NATIONAL DEFENSE HOUSING INSURANCE.— 
Paragraph (1) of section 903(b) of the National Hous-
ing Act (12 U.S.C. 1750b(b)(1)) is amended— 
(A) by striking ‘‘, and be held by,’’; and 
(B) by striking ‘‘as responsible and able to 
service the mortgage properly’’. 
SEC. 16. SENSE OF CONGRESS REGARDING TECHNOLOGY 
FOR FINANCIAL SYSTEMS. 
(a) CONGRESSIONAL FINDINGS.—The Congress finds 
the following: 
(1) The Government Accountability Office has 
cited the FHA single family housing mortgage insur-
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ance program as a ‘‘high-risk’’ program, with a pri-
mary reason being non-integrated and out-dated fi-
nancial management systems. 
(2) The ‘‘Audit of the Federal Housing Adminis-
tration’s Financial Statements for Fiscal Years 2004 
and 2003’’, conducted by the Inspector General of the 
Department of Housing and Urban Development re-
ported as a material weakness that ‘‘HUD/FHA’s 
automated data processing [ADP] system environ-
ment must be enhanced to more effectively support 
FHA’s business and budget processes’’. 
(3) Existing technology systems for the FHA 
program have not been updated to meet the latest 
standards of the Mortgage Industry Standards Main-
tenance Organization and have numerous deficiencies 
that lenders have outlined. 
(4) Improvements to technology used in the FHA 
program will— 
(A) allow the FHA program to improve the 
management of the FHA portfolio, garner great-
er efficiencies in its operations, and lower costs 
across the program; 
(B) result in efficiencies and lower costs for 
lenders participating in the program, allowing 
them to better use the FHA products in extend-
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ing homeownership opportunities to higher credit 
risk or lower-income families, in a sound man-
ner 
(5) The Mutual Mortgage Insurance Fund oper-
ates without cost to the taxpayers and generates reve-
nues for the Federal Government. 
(b) SENSE OF CONGRESS.—It is the sense of the Con-
gress that— 
(1) the Secretary of Housing and Urban Devel-
opment should use a portion of the funds received 
from premiums paid for FHA single family housing 
mortgage insurance that are in excess of the amounts 
paid out in claims to substantially increase the fund-
ing for technology used in such FHA program; 
(2) the goal of this investment should be to bring 
the technology used in such FHA program to the level 
and sophistication of the technology used in the con-
ventional mortgage lending market, or to exceed such 
level; and 
(3) the Secretary of Housing and Urban Devel-
opment should report to the Congress not later than 
180 days after the date of the enactment of this Act 
regarding the progress the Department is making to-
ward such goal and if progress is not sufficient, the 
resources needed to make greater progress. 
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SEC. 17. SAVINGS PROVISION. 
Any mortgage insured under title II of the National 
Housing Act before the date of enactment of this title shall 
continue to be governed by the laws, regulations, orders, and 
terms and conditions to which it was subject on the day 
before the date of the enactment of this Act. 
SEC. 18. IMPLEMENTATION. 
The Secretary of Housing and Urban Development 
shall by notice establish any additional requirements that 
may be necessary to immediately carry out the provisions 
of this title. The notice shall take effect upon issuance. 
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Union Calendar No. 340 
109TH CONGRESS 
2D SESSION 
H. R. 5121 
[Report No. 109–589] 
A BILL 
To modernize and update the National Housing Act 
and enable the Federal Housing Administration 
to use risk-based pricing to more effectively reach 
underserved borrowers, and for other purposes. 
JULY 20, 2006 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
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