SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘FHA Seller-Financed 
Downpayment Reform and Risk-Based Pricing Authoriza-
tion Act of 2008’’. 
SEC. 2. FHA SELLER-FINANCED DOWNPAYMENT PROGRAM. 
Paragraph (9) of section 203(b) of the National 
Housing Act (12 U.S.C. 1709(b)(9)) is amended— 
(1) in subparagraph (C), by striking ‘‘In no 
case shall the funds required by subparagraph (A)’’ 
and inserting the following: ‘‘Except in the case of 
a mortgage described in subparagraph (D), the 
funds required by subparagraph (A) shall not’’; 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(D) 
EXCEPTIONS
TO
PROHIBITED 
SOURCES.—A mortgage described in this sub-
paragraph is any of the following mortgages: 
‘‘(i) A mortgage under which the 
mortgagor has a credit score equivalent to 
a FICO score of 680 or greater. 
‘‘(ii) A mortgage under which— 
‘‘(I) the mortgagor has a credit 
score equivalent to a FICO score of at 
least 620 but less than 680; and 
‘‘(II) mortgage insurance pre-
miums charged are established— 
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‘‘(aa) at levels necessary to 
allow such class of loans to be in-
sured without resulting in a need 
for an appropriation for a credit 
subsidy; 
‘‘(bb) in the case of the sin-
gle premium collected at the time 
of insurance, in an amount not 
exceeding 3.0 percent of the 
amount of the original principal 
obligation of the mortgage; and 
‘‘(cc) in the case of the an-
nual premium, in an amount not 
exceeding 1.25 percent of the re-
maining insured principal balance 
(excluding the portion of the re-
maining balance attributable to 
the premium collected at the time 
of insurance and without taking 
into account delinquent payments 
or prepayments). 
‘‘(iii) For mortgages insured in fiscal 
year 2010 or thereafter, a mortgage under 
which the mortgagor has a credit score 
equivalent to a FICO score of 619 or less, 
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but only if the Secretary certifies that such 
loans can be insured without resulting in a 
need for an appropriation for a credit sub-
sidy. For such mortgages, the Secretary 
may charge premiums at levels authorized 
under items (bb) and (cc) of clause (ii)(II) 
and may establish a credit or FICO score 
limitation or impose such other require-
ments as are necessary to meet the condi-
tions for certification under this clause. 
‘‘(E) REQUIREMENTS FOR DOWNPAYMENT 
ASSISTANCE
ENTITIES.—Any entity partici-
pating in a program that provides downpay-
ment assistance for a mortgage described in 
subparagraph (D) pursuant to the exception 
under subparagraph (C), which programs shall 
include programs of governmental agencies and 
private nonprofit organizations, shall, before the 
closing for the loan involved in the mortgage in 
connection with which such assistance is pro-
vided— 
‘‘(i) offer to make available, to the 
mortgagor, counseling regarding the re-
sponsibilities and financial management in-
volved in homeownership; 
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‘‘(ii) if such offer is accepted by the 
mortgagor, make such counseling available 
for the mortgagor; and 
‘‘(iii) in the case of any such entity 
that is a private nonprofit organization, 
implement a conflict of interest policy that 
prohibits directors, officers, employees, and 
immediate family members from receiving 
financial benefits from any entity that is 
providing the program with goods or serv-
ices other than the homeownership assist-
ance program entity itself or its wholly 
owned affiliate.’’. 
SEC. 3. AUTHORIZATION FOR RISK-BASED PRICING. 
Section 2133 of the FHA Modernization Act of 2008 
is amended by adding at the end the following new sub-
section: 
‘‘(c) AUTHORIZATION FOR RISK-BASED PRICING.— 
‘‘(1) 
AUTHORITY.—Notwithstanding 
sub-
sections (a) and (b), the Secretary of Housing and 
Urban Development may implement a risk-based 
premium product for borrowers with lower credit or 
FICO scores, to facilitate the availability of insur-
ance for mortgages for such borrowers, through the 
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establishment and collection of adequate premiums 
to cover the risks of such loans. 
‘‘(2) REFUND
OF
PREMIUMS.—The Secretary 
shall provide for a refund of a portion or all of the 
higher premiums paid at the time of insurance by 
borrowers with lower credit or FICO scores as a re-
sult of risk-based pricing pursuant to this sub-
section, except that such refund shall be limited to 
only borrowers with a history of at least a specified 
number of years of on-time mortgage payments. 
Such refund shall be made upon payment in full of 
the obligation of the mortgage.’’. 
Æ 
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