needed to handle the increased loan volume resulting 
from the program; 
(9) to sunset the program when it is no longer 
needed; and 
(10) to study the need for and efficacy of an 
auction or bulk refinancing mechanism to facilitate 
more expeditious refinancing of larger volumes of ex-
isting mortgages that are at risk for foreclosure into 
FHA-insured mortgages. 
SEC. 3. INSURANCE OF HOMEOWNERSHIP RETENTION 
MORTGAGES. 
(a) MORTGAGE INSURANCE PROGRAM.—Title II of 
the National Housing Act (12 U.S.C. 1707 et seq.) is 
amended by adding at the end the following new section: 
‘‘SEC. 257. INSURANCE OF HOMEOWNERSHIP RETENTION 
MORTGAGES. 
‘‘(a) OVERSIGHT BOARD.— 
‘‘(1) ESTABLISHMENT.—There is hereby estab-
lished the Refinance Program Oversight Board (in 
this section referred to as the ‘Oversight Board’). 
‘‘(2) MEMBERSHIP.—The Oversight Board shall 
consist of the following members or their designees: 
‘‘(A) The Secretary of the Treasury. 
‘‘(B) The Secretary of Housing and Urban 
Development. 
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‘‘(C) The Chairman of the Board of Gov-
ernors of the Federal Reserve System. 
‘‘(3) NO
ADDITIONAL
COMPENSATION.—Mem-
bers of the Oversight Board shall receive no addi-
tional pay by reason of service on the Oversight 
Board. 
‘‘(4) RESPONSIBILITIES.—The Oversight Board 
shall be responsible for establishing program and 
oversight requirements for the program under this 
section, which shall include— 
‘‘(A) detailed program requirements under 
subsection (c); 
‘‘(B) flexible underwriting criteria under 
subsection (d); 
‘‘(C) a mortgage premium structure under 
subsection (e); 
‘‘(D) a reasonable fee and rate limitation 
under subsection (f); 
‘‘(E) enhancement of FHA capacity under 
subsection (h), including oversight of such ac-
tivities and personnel as may be contracted for 
as provided therein; 
‘‘(F) monitoring of underwriting risk 
under subsection (i); and 
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‘‘(G) such additional requirements as may 
be necessary and appropriate to oversee and im-
plement the program. 
‘‘(5) USE OF RESOURCES.—In carrying out its 
functions under this section, the Oversight Board 
may utilize, with their consent and to the extent 
practical, the personnel, services, and facilities of the 
Department of the Treasury, the Department of 
Housing and Urban Development, the Board of Gov-
ernors of the Federal Reserve System, the Federal 
Reserve Banks, and other Federal agencies, with or 
without reimbursement therefore. 
‘‘(b) AUTHORITY.— 
‘‘(1) IN GENERAL.—The Secretary shall, sub-
ject only to the absence of qualified requests for in-
surance under this section and to the limitations 
under subsection (g) of this section and section 
531(a), make commitments to insure and insure any 
mortgage covering a 1- to 4-family residence that is 
made for the purpose of paying or prepaying out-
standing obligations under an existing mortgage or 
mortgages on the residence if the mortgage being in-
sured under this section meets the requirements of 
this section, as established by the Oversight Board, 
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and of section 203, except as modified by this sec-
tion. 
‘‘(2) ESTABLISHMENT
AND
IMPLEMENTATION 
OF
PROGRAM
REQUIREMENTS.—The 
Oversight 
Board shall establish program requirements and 
standards under this section and the Secretary shall 
implement such requirements and standards. The 
Oversight Board and the Secretary may establish 
and implement any requirements or standards 
through interim guidance and mortgagee letters. 
‘‘(c) REQUIREMENTS.—To be eligible for insurance 
under this section, a mortgage shall comply with all of 
the following requirements: 
‘‘(1) OWNER-OCCUPIED PRINCIPAL RESIDENCE 
REQUIREMENT.—The residence to be covered by the 
mortgage insured under this section shall be occu-
pied by the mortgagor as the principal residence of 
the mortgagor. 
‘‘(2) LACK
OF
CAPACITY
TO
PAY
EXISTING 
MORTGAGE OR MORTGAGES.— 
‘‘(A) 
BORROWER
CERTIFICATION.—The 
mortgagor shall provide a certification to the 
originator of the mortgage that the mortgagor 
has not intentionally defaulted on the existing 
mortgage or mortgages. 
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‘‘(B) CURRENT
BORROWER
DEBT-TO-IN-
COME RATIO.—As of March 1, 2008, the mort-
gagor shall have had a ratio of mortgage debt 
to income, taking into consideration all existing 
mortgages at such time, greater than 35 per-
cent, except that the Oversight Board may de-
crease such percentage for all mortgagors or 
identifiable classes of mortgagors if the Over-
sight Board considers such decrease necessary 
or appropriate to make eligible for the program 
those mortgagors who cannot reasonably afford 
their existing mortgage loan or loans but who 
would be able to afford the new mortgage under 
the program under this section. 
‘‘(C) 
LOSS
MITIGATION
RESPONSIBIL-
ITIES.—This section may not be construed to 
alter or in any way affect the responsibilities of 
any party (including the mortgage servicer) to 
engage in any or all loan modification or other 
loss mitigation strategies to maximize value to 
investors as established by any applicable con-
tract. 
‘‘(3) ELIGIBILITY OF MORTGAGES BY DATE OF 
ORIGINATION.—The existing senior mortgage shall 
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have been originated on or before December 31, 
2007. 
‘‘(4) MAXIMUM
LOAN-TO-VALUE
RATIO
FOR 
NEW
LOANS.—The mortgage being insured under 
this section shall involve a principal obligation (in-
cluding such initial service charges, appraisal, in-
spection, and other fees as the Secretary shall ap-
prove and including the mortgage insurance pre-
mium paid pursuant to subsection (e)(1)) in an 
amount not to exceed 90 percent of the current ap-
praised value of the property. Section 203(d) shall 
not apply to mortgages insured under this section. 
‘‘(5) REQUIRED WAIVER OF PREPAYMENT PEN-
ALTIES AND FEES.—All penalties for prepayment of 
the existing mortgage or mortgages, and all fees and 
penalties related to default or delinquency on all ex-
isting mortgages or mortgages, shall be waived or 
forgiven. 
‘‘(6) REQUIRED LOAN REDUCTION.— 
‘‘(A) 
REDUCTION
OF
INDEBTEDNESS 
UNDER
EXISTING
SENIOR
MORTGAGE.—The 
amount of indebtedness on the existing mort-
gage or mortgages on the residence shall have 
been substantially reduced by such percentage 
as the Oversight Board or Secretary may re-
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proceeds of the insured loan as payment in 
full of all indebtedness under all existing 
mortgages, and all encumbrances related 
to such mortgages shall be removed. The 
Oversight Board may take such actions as 
the Oversight Board considers necessary or 
appropriate to facilitate coordination and 
agreement between the holders of the exist-
ing senior mortgage and any existing sub-
ordinate mortgages, taking into consider-
ation the subordinate lien status of such 
subordinate mortgages, to comply with the 
requirement under this subparagraph. 
‘‘(ii) 
TREATMENT
OF
MULTIPLE 
MORTGAGE LIENS.—In addition to clause 
(i), the Oversight Board shall adopt one of 
the following approaches for all mortgages 
or such classes of mortgages as the Over-
sight Board may determine and may, from 
time to time, reconsider: 
‘‘(I) FIXED
PRICE.—As a re-
quirement for participating in this 
program, all existing lien holders will 
agree to not provide any payment to 
subordinate lien holders other than 
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such payment in accordance with a 
formula established by the Oversight 
Board as set forth in clause (iii); ex-
cept that the Oversight Board may es-
tablish a short period within which 
first and subordinate lien holders may 
negotiate to extinguish all subordinate 
liens for compensation that may be 
different from the amount determined 
under such formula set forth in clause 
(iii). 
‘‘(II) 
SHARED
EQUITY.—The 
Oversight Board may require the 
mortgagor under a mortgage insured 
under this section to agree to share a 
portion of any future equity in the 
mortgaged property with holders of 
existing subordinate mortgages, in ac-
cordance with a formula for such 
shared equity established by the Over-
sight Board as set forth in clause (iii), 
except that payments of such shared 
equity may be made only after the 
Secretary recovers all amounts owed 
to the Secretary with respect to such 
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mortgage pursuant to the program 
under this section (including amounts 
owed pursuant to paragraph (8)). 
‘‘(iii) FORMULA.—In determining a 
formula for determining any payments to 
subordinate lien holders pursuant to sub-
clauses (I) and (II) of clause (ii), and in 
any reconsideration of such formula as the 
Oversight Board may from time to time 
undertake, the Oversight Board shall take 
into consideration the current market value 
of such liens. In no case may a formula 
provide for the payment of more than 1 
percent of the current appraised value of 
the mortgaged property to a subordinate 
lien holder if the outstanding balance owed 
to more senior lien holders is equal to or 
exceeds such current appraised value. 
‘‘(iv) VOLUNTARY
PROGRAM.—This 
subparagraph may not be construed to re-
quire any holder of any existing mortgage 
to participate in the program under this 
section generally, or with respect to any 
particular loan. 
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‘‘(v) SOURCE OF PAYMENTS FOR SUB-
ORDINATE LOANS.—Any amounts paid to 
holders of any existing subordinate mort-
gages in connection with the origination 
and insurance of a mortgage under this 
section shall derive only from— 
‘‘(I) the holder of the existing 
senior mortgage; or 
‘‘(II) in the case only of the 
shared equity approach under clause 
(ii)(II), the mortgagor under the 
mortgage insured under this section 
‘‘(7) REQUIRED
REDUCTION
OF
DEBT
SERV-
ICE.—The debt service payments due under the 
mortgage insured under this section shall be in an 
amount that is substantially reduced from the debt 
service payments due under the existing mortgage or 
mortgages, which reduction may be achieved through 
a reduction of indebtedness, a reduction in the inter-
est rate being paid, or an extension of the term of 
the mortgage, or any combination thereof. 
‘‘(8) FINANCIAL RECOVERY TO FEDERAL GOV-
ERNMENT THROUGH EXIT PREMIUM.— 
‘‘(A) SUBORDINATE LIEN.—The mortgage 
shall provide that the Secretary shall retain a 
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lien on the residence involved, which shall be 
subordinate to the mortgage insured under this 
section but senior to all other mortgages on the 
residence that may exist at any time, and which 
shall secure the repayment of the amount due 
under subparagraph (D). 
‘‘(B) NO INTEREST OR PAYMENT DURING 
MORTGAGE.—The amount secured by the lien 
retained by the Secretary pursuant to subpara-
graph (A) shall not bear interest and shall not 
be repayable to the Secretary except as pro-
vided in subparagraph (D) of this paragraph. 
‘‘(C) NET PROCEEDS AVAILABLE FOR EXIT 
PREMIUM.—Upon the sale, refinancing, or other 
disposition of the residence covered by a mort-
gage insured under this section, any proceeds 
resulting from such disposition that remain 
after deducting the remaining insured principal 
balance of the mortgage insured under this sec-
tion shall be available to meet the obligation 
under subparagraph (D). 
‘‘(D) EXIT
PREMIUM.—Upon any refi-
nancing of the mortgage insured under this sec-
tion or any sale or disposition of the residence 
covered by the mortgage, the Secretary shall, 
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subject to the availability of sufficient net pro-
ceeds described in subparagraph (C), receive 
the greater of— 
‘‘(i) 3 percent of the amount of the 
original insured principal obligation of the 
mortgage; or 
‘‘(ii) a percentage of the portion of 
the net proceeds described in subparagraph 
(C), which shall be— 
‘‘(I) in the case of any refi-
nancing, sale, or disposition occurring 
during the first year of the term of 
the mortgage, 100 percent of such net 
proceeds; 
‘‘(II) in the case of any refi-
nancing, sale, or disposition occurring 
during the second year of the term of 
the mortgage, 80 percent; 
‘‘(III) in the case of any refi-
nancing, sale, or disposition occurring 
during the third year of the term of 
the mortgage, 60 percent; 
‘‘(IV) in the case of any refi-
nancing, sale, or disposition occurring 
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‘‘(1) ensure that each mortgagor under a mort-
gage insured under this section has a reasonable ex-
pectation of repaying the mortgage, taking into con-
sideration the mortgagor’s income, assets, liabilities, 
payment history, and other applicable criteria, but 
which shall not result in a denial of insurance solely 
on the basis of the mortgagor’s current FICO or 
other credit scores, or any delinquency or default by 
the mortgagor under the existing mortgage or mort-
gages; 
‘‘(2) subject to the provisions of paragraph (1) 
and except as provided in paragraph (3), permit a 
total debt-to-income ratio of up to 43 percent; 
‘‘(3) subject to the provisions of paragraph (1), 
permit a total debt-to-income ratio of more than 43 
percent, but not more than 50 percent, if the mort-
gagor has made, on a timely basis before the en-
dorsement of the mortgage insured under this sec-
tion, not less than six months of payments in an 
amount not less than the amount of the monthly 
payment due under the mortgage to be insured 
under this section; except that the Oversight Board 
may increase the maximum percentage under this 
paragraph for a class of borrowers, who will be sub-
ject to such additional requirements as the Oversight 
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Board shall establish, to not more than 55 percent 
upon making a finding that such increase is nec-
essary to achieve the purposes of this section and 
can be accomplished under reasonable underwriting 
standards; and the holder of the existing senior 
mortgage shall exercise forbearance with respect to 
such mortgage during the period in which such pay-
ments are made; and 
‘‘(4) provide for the underwriter of the insured 
loan to provide such representations and warranties 
as the Oversight Board considers necessary or ap-
propriate for the Secretary to enforce compliance 
with all underwriting and appraisal standards of the 
program. 
‘‘(e) PREMIUMS.—For each mortgage insured under 
this section, the Oversight Board shall establish and the 
Secretary shall collect— 
‘‘(1) at the time of insurance, a single premium 
payment in an amount equal to 3.0 percent of the 
amount of the original insured principal obligation of 
the mortgage, which shall be paid from the proceeds 
of the mortgage being insured under this section, 
through the reduction of the amount of indebtedness 
on the existing senior mortgage required under sub-
section (c)(6)(A); 
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‘‘(2) in addition to the premium under para-
graph (1), annual premium payments in an amount 
equal to 1.50 percent of the remaining insured prin-
cipal balance of the mortgage; and 
‘‘(3) an exit premium in the amount determined 
under subsection (c)(8), but which shall not be less 
than 3.0 percent of the original insured principal ob-
ligation of the mortgage, subject only to the avail-
ability of sufficient net proceeds from sale, refi-
nancing, or other disposition of the property, as de-
termined in subsection (c)(8). 
‘‘(f) ORIGINATION FEES AND MORTGAGE RATE.— 
The Oversight Board shall establish and the Secretary 
shall implement a reasonable limitation on origination fees 
for mortgages insured under this section and shall estab-
lish procedures to ensure that interest rates on such mort-
gages shall be commensurate with market rate interest 
rates on such types of loans. 
‘‘(g) LIMITATION ON AGGREGATE INSURANCE AU-
THORITY.—The aggregate original principal obligation of 
all mortgages insured under this section may not exceed 
$300,000,000,000. 
‘‘(h) ENHANCEMENT
OF FHA CAPACITY.—Under 
the direction of the Oversight Board, the Secretary shall 
take such actions as may be necessary to— 
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‘‘(1) contract for the establishment of under-
writing criteria, automated underwriting systems, 
pricing standards, and other factors relating to eligi-
bility for mortgages insured under this section; 
‘‘(2) contract for independent quality reviews of 
underwriting, including appraisal reviews and fraud 
detection, of mortgages insured under this section or 
pools of such mortgages; and 
‘‘(3) increase personnel of the Department as 
necessary to process or monitor the processing of 
mortgages insured under this section. 
‘‘(i) MONITORING OF UNDERWRITING RISK.— 
‘‘(1) MONITORING
OF
DESIGNATED
UNDER-
WRITERS.—The Oversight Board and the Secretary 
shall monitor independent quality reviews as estab-
lished pursuant to subsection (h)(2) to— 
‘‘(A) determine compliance of designated 
underwriters with underwriting standards; 
‘‘(B) determine rates of delinquency, 
claims rates, and loss rates of designated un-
derwriters; and 
‘‘(C) terminate eligibility of designated un-
derwriters that do not meet minimum perform-
ance standards as the Oversight Board may es-
tablish and the Secretary implements. 
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‘‘(2) REPORTS
BY
OVERSIGHT
BOARD.—The 
Oversight Board shall submit monthly reports to the 
Congress identifying the progress of the program for 
mortgage insurance under this section, which shall 
contain the following information for each month: 
‘‘(A) The number of new mortgages in-
sured under this section, including the location 
of the properties subject to such mortgages by 
census tract. 
‘‘(B) The aggregate principal obligation of 
new mortgages insured under this section. 
‘‘(C) The average amount by which the in-
debtedness on existing mortgages is reduced in 
accordance with subsection (c)(6). 
‘‘(D) The average amount by which the 
debt service payments on existing mortgages is 
reduced in accordance with subsection (c)(7). 
‘‘(E) The amount of premiums collected 
for insurance of mortgages under this section. 
‘‘(F) The claim and loss rates for mort-
gages insured under this section. 
‘‘(G) The race, ethnicity, gender, and in-
come of the mortgagors, aggregated by geo-
graphical areas at least as specific as census 
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tracts, except where necessary to protect pri-
vacy of the borrower. 
‘‘(H) Any other information that the Over-
sight Board considers appropriate. 
‘‘(3) REPORT BY INSPECTOR GENERAL.—The 
Inspector General of the Department of Housing 
and Urban Development shall conduct an annual 
audit of the program for mortgage insurance under 
this section to determine compliance with this sec-
tion and program rules. 
‘‘(j) GNMA COMMITMENT AUTHORITY.— 
‘‘(1) GUARANTEES.—The Secretary shall take 
such actions as may be necessary to ensure that se-
curities based on and backed by a trust or pool com-
posed of mortgages insured under this section are 
available to be guaranteed by the Government Na-
tional Mortgage Association as to the timely pay-
ment of principal and interest. 
‘‘(2) GUARANTEE
AUTHORITY.—To carry out 
the purposes of section 306 of the National Housing 
Act (12 U.S.C. 1721), the Government National 
Mortgage Association may enter into new commit-
ments to issue guarantees of securities based on or 
backed by mortgages insured under this section, not 
exceeding $300,000,000,000. The amount of author-
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‘‘(m) SUNSET.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the authority of the Secretary to make 
any new commitment to insure any mortgage under 
this section shall terminate upon the expiration of 
the 2-year period beginning on the date of the enact-
ment of the FHA Housing Stabilization and Home-
ownership Retention Act of 2008. 
‘‘(2) EXTENSIONS.—The Oversight Board may, 
not more than four times, extend the authority to 
enter into new commitments to insure mortgages 
under this section beyond the date specified in para-
graph (1), except that each such extension shall— 
‘‘(A) be effective only if, before the pro-
gram terminates pursuant to paragraph (1) or 
any previous extension pursuant to this para-
graph, the Oversight Board— 
‘‘(i) certifies the need for such exten-
sion in writing to the Congress; and 
‘‘(ii) causes notice of such extension 
to be published in the Federal Register no 
later than the beginning of the 3-month 
period that ends upon the scheduled termi-
nation date of the program; and 
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‘‘(B) be for a period of not more than 6 
months. 
‘‘(n) AUTHORIZATIONS OF APPROPRIATIONS.—There 
is authorized to be appropriated for each of fiscal years 
2008 and 2009— 
‘‘(1) $200,000,000 for providing counseling re-
garding loss mitigation for mortgagors with 1- to 4- 
family residences, including determining eligibility 
for the program under this section, with grants to 
be administered through the Neighborhood Reinvest-
ment Corporation, except that— 
‘‘(A) not less than 15 percent of the funds 
made available pursuant to this paragraph shall 
be provided to counseling organizations that 
target counseling services regarding loss mitiga-
tion to minority and low-income homeowners or 
provide such services in neighborhoods with 
high concentrations of minority and low-income 
homeowners; and 
‘‘(B) $30,000,000 of the funds made avail-
able pursuant to this paragraph shall be used 
by the Neighborhood Reinvestment Corporation 
(referred to in this subparagraph as the ‘NRC’) 
to make grants to counseling intermediaries ap-
proved by the Department of Housing and 
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Urban Development or the NRC to hire attor-
neys to assist homeowners who have legal issues 
related to home ownership preservation, home 
foreclosure prevention, tenancy associated with 
home foreclosure, delinquency or short sale; 
such attorneys shall be capable of assisting 
homeowners of owner-occupied homes with 
mortgages in default, in danger of default, or 
subject to or at risk of foreclosure and who 
have legal issues that cannot be handled by 
counselors already employed by such inter-
mediaries; of the amount provided under this 
subparagraph, the NRC shall give priority con-
sideration to counseling intermediaries and 
legal organizations that (i) provide legal assist-
ance in the 100 metropolitan statistical areas 
(as defined by the Director of the Office of 
Management and Budget) with the highest 
home foreclosure rates, and (ii) have the capac-
ity to begin using the financial assistance with-
in 90 days after receipt of the assistance; and 
‘‘(2) $150,000,000 for costs of activities under 
subsection (h).’’. 
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(b) SPECIAL RISK INSURANCE FUND.—Section 238 
of the National Housing Act (12 U.S.C. 1715z–3) is 
amended— 
(1) in subsection (a)(1), by striking ‘‘or 243’’ 
each place such term appears and inserting ‘‘243, or 
257’’; and 
(2) in subsection (b), by striking ‘‘and 243’’ 
each place such term appears and inserting ‘‘243, 
and 257’’. 
SEC. 4. STUDY OF AUCTION OR BULK REFINANCE PRO-
GRAM. 
(a) STUDY.—The Board of Governors of the Federal 
Reserve System (in this section referred to as the ‘‘Board 
of Governors’’), in consultation with other members of the 
Oversight Board established by section 257(a) of the Na-
tional Housing Act (as added by the amendment made by 
section 3(a) of this Act), shall conduct a study of the need 
for and efficacy of an auction or bulk refinancing mecha-
nism to facilitate refinancing of existing residential mort-
gages that are at risk for foreclosure into mortgages in-
sured under the mortgage insurance program under title 
II of the National Housing Act. The study shall identify 
and examine various options for mechanisms under which 
lenders and servicers of such mortgages may make bids 
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for forward commitments for such insurance in an expe-
dited manner. 
(b) CONTENT.— 
(1) ANALYSIS.—The study required under sub-
section (a) shall analyze— 
(A) the feasibility of establishing a mecha-
nism that would facilitate the more rapid refi-
nancing of borrowers at risk of foreclosure into 
performing mortgages insured under title II of 
the National Housing Act; 
(B) whether such a mechanism would pro-
vide an effective and efficient mechanism to re-
duce foreclosures on qualified existing mort-
gages; 
(C) whether the use of an auction or bulk 
refinance program is necessary to stabilize the 
housing market and reduce the impact of tur-
moil in that market on the economy of the 
United States; 
(D) whether there are other mechanisms 
or authority that would be useful to reduce 
foreclosure; and 
(E) and any other factors that the Board 
of Governors considers relevant. 
VerDate Aug 31 2005 
22:19 Apr 17, 2008
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