IB 
Union Calendar No. 465
108TH CONGRESS 
2D SESSION 
H. R. 3755
[Report No. 108–748] 
To authorize the Secretary of Housing and Urban Development to insure 
zero-downpayment mortgages for one-unit residences. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 3, 2004
Mr. TIBERI (for himself, Mr. SCOTT of Georgia, Mr. OXLEY, Mr. NEY, Mr. 
TURNER of Ohio, Mr. GREEN of Wisconsin, Mr. KING of New York, Mr. 
RENZI, Mr. LUCAS of Kentucky, and Mr. CLAY) introduced the following 
bill; which was referred to the Committee on Financial Services 
OCTOBER 6, 2004
Additional sponsors: Ms. PRYCE of Ohio, Ms. HART, Mr. OTTER, Mr. 
HINOJOSA, Mr. SHAYS, Mr. FORD, Mr. GRIJALVA, Mr. WILSON of South 
Carolina, Mr. MILLER of Florida, Mr. MICHAUD, Mr. BACHUS, Mr. 
LEWIS of Georgia, Mr. BISHOP of Georgia, Ms. MAJETTE, Mr. OWENS, 
Ms. HARRIS, Mr. PALLONE, Mr. EMANUEL, Mr. MCCOTTER, Mr. 
DELAHUNT, Mrs. MILLER of Michigan, Mr. PASTOR, Mrs. MALONEY, Mr. 
FEENEY, Mr. WOLF, Mr. JEFFERSON, Mr. ROSS, Mrs. EMERSON, Ms. 
BERKLEY, Mr. BRADLEY of New Hampshire, Mr. ABERCROMBIE, Mr. 
ISRAEL, Mr. SULLIVAN, Mr. STENHOLM, Mr. NETHERCUTT, Mr. FILNER, 
Mr. NEUGEBAUER, Mr. GORDON, Mr. ALEXANDER, Mr. FOSSELLA, Mr. 
DAVIS of Alabama, Mr. GONZALEZ, Mr. MANZULLO, Mr. REHBERG, Mr. 
PLATTS, Ms. NORTON, Mr. CHANDLER, Mr. BACA, Mr. MARSHALL, Mr. 
MURPHY, Mrs. MCCARTHY of New York, Mr. SIMMONS, Mr. TERRY, Mr. 
HAYES, Mr. WYNN, Mr. WEINER, Mr. LANGEVIN, and Mrs. KELLY
OCTOBER 6, 2004 
Reported with an amendment, committed to the Committee of the Whole 
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic] 
[For text of introduced bill, see copy of bill as introduced on February 3, 2004] 
A BILL 
To authorize the Secretary of Housing and Urban Develop-
ment to insure zero-downpayment mortgages for one- 
unit residences. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Zero Downpayment Act 
of 2004’’. 
SEC. 2. INSURANCE FOR ZERO-DOWNPAYMENT MORT-
GAGES. 
(a) MORTGAGE INSURANCE AUTHORITY.—Section 203 
of the National Housing Act (12 U.S.C. 1709) is amended 
by inserting after subsection (k) the following new sub-
section: 
‘‘(l) ZERO-DOWNPAYMENT MORTGAGES.— 
‘‘(1) INSURANCE
AUTHORITY.—The Secretary 
may insure, and commit to insure, under this sub-
section any mortgage that meets the requirements of 
this subsection and, except as otherwise specifically 
provided in this subsection, of subsection (b).
‘‘(2) ELIGIBLE SINGLE FAMILY PROPERTY.—To 
be eligible for insurance under this subsection, a 
mortgage shall involve a property upon which there 
is located a dwelling that is designed principally for 
a 1- to 3-family residence and that, notwithstanding 
subsection (g), is to be occupied by the mortgagor as 
his or her principal residence, which shall include— 
‘‘(A) a 1-family dwelling unit in a multi-
family project and an undivided interest in the 
common areas and facilities which serve the 
project; 
‘‘(B) a 1-family dwelling unit of a coopera-
tive housing corporation the permanent occu-
pancy of the dwelling units of which is restricted 
to members of such corporation and in which the 
purchase of such stock or membership entitles the 
purchaser to the permanent occupancy of such 
dwelling unit; and 
‘‘(C) a manufactured home that meets such 
standards as the Secretary has established for 
purposes of subsection (b). 
‘‘(3) MAXIMUM PRINCIPAL OBLIGATION.— 
‘‘(A) LIMITATION.—To be eligible for insur-
ance under this subsection, a mortgage shall in-
volve a principal obligation in an amount not in
excess of 100 percent of the appraised value of 
the property plus any initial service charges, ap-
praisal, inspection and other fees in connection 
with the mortgage as approved by the Secretary. 
‘‘(B) INAPPLICABILITY OF OTHER LOAN-TO- 
VALUE
REQUIREMENTS.—A mortgage insured 
under this subsection shall not be subject to sub-
paragraph (B) of paragraph (2) of subsection (b) 
or to the matter in such paragraph that follows 
such subparagraph. 
‘‘(4) ELIGIBLE
MORTGAGORS.—The mortgagor 
under a mortgage insured under this subsection shall 
meet the following requirements: 
‘‘(A) FIRST-TIME HOMEBUYER.—The mort-
gagor shall be a first-time homebuyer. The pro-
gram for mortgage insurance under this sub-
section shall be considered a Federal program to 
assist first-time homebuyers for purposes of sec-
tion 956 of the Cranston-Gonzalez National Af-
fordable Housing Act (42 U.S.C. 12713). 
‘‘(B) COUNSELING.— 
‘‘(i) REQUIREMENT.—The mortgagor 
shall have received counseling, prior to ap-
plication for the loan involved in the mort-
gage, by a third party (other than the mort-
gagee) who is approved by the Secretary, 
with respect to the responsibilities and fi-
nancial management involved in home-
ownership. Such counseling shall be pro-
vided to the mortgagor on an individual 
basis by a representative of the approved 
third party counseling entity, and shall be 
provided in person to the maximum extent 
practicable. 
‘‘(ii) TOPICS.—Such counseling shall 
include providing to, and discussing with, 
the mortgagor— 
‘‘(I) information regarding home-
ownership options other than a mort-
gage insured under this subsection, 
other zero- or low-downpayment mort-
gage options that are or may become 
available to the mortgagor, the finan-
cial implications of entering into a 
mortgage (including a mortgage in-
sured under this subsection), and any 
other information that the Secretary 
may require; and 
‘‘(II) a document that sets forth 
the amount and the percentage by
which a property subject to a mortgage 
insured under this subsection must ap-
preciate for the mortgagor to recover 
the principal amount of the mortgage, 
the costs financed under the mortgage, 
and the estimated costs involved in 
selling the property, if the mortgagor 
were to sell the property on each of the 
second, fifth, and tenth anniversaries of 
the mortgage. 
‘‘(iii) 2- AND 3-FAMILY RESIDENCES.— 
In the case of a mortgage involving a 2- or 
3-family residence, such counseling shall in-
clude (in addition to the information re-
quired under clause (ii)) information re-
garding real estate property management. 
‘‘(5) OPTION FOR NOTICE OF FORECLOSURE PRE-
VENTION COUNSELING AVAILABILITY.— 
‘‘(A) OPTION.—To be eligible for insurance 
under this subsection, the mortgagee shall pro-
vide mortgagor, at the time of the execution of 
the mortgage, an optional written agreement 
which, if signed by the mortgagor, allows, but 
does not require, the mortgagee to provide notice 
described in subparagraph (B) to a housing
counseling entity that has agreed to provide the 
notice and counseling required under subpara-
graph (C) and is approved by the Secretary. 
‘‘(B) NOTICE
TO
COUNSELING
AGENCY.— 
The notice described in this subparagraph, with 
respect to a mortgage, is notice, provided at the 
earliest time practicable after the mortgagor be-
comes 60 days delinquent with respect to any 
payment due under the mortgage, that the mort-
gagor is so delinquent and of how to contact the 
mortgagor. Such notice may only be provided 
once with respect to each delinquency period for 
a mortgage. 
‘‘(C) NOTICE TO MORTGAGOR.—Upon notice 
from a mortgagee that a mortgagor is 60 days 
delinquent with respect to payments due under 
the mortgage, the housing counseling entity shall 
at the earliest time practicable notify the mort-
gagor of such delinquency, that the entity makes 
available foreclosure prevention counseling that 
may assist the mortgagor in resolving the delin-
quency, and of how to contact the entity to ar-
range for such counseling. 
‘‘(D) ABILITY TO CURE.—Failure to provide 
the optional written agreement required under
subparagraph (A) may be corrected by sending 
such agreement to the mortgagor not later than 
the earliest time practicable after the mortgagor 
first becomes 60 days delinquent with respect to 
payments due under the mortgage. Insurance 
provided under this subsection may not be termi-
nated and penalties for such failure may not be 
prospectively or retroactively imposed if such 
failure is corrected in accordance with this sub-
paragraph. 
‘‘(E) PENALTIES FOR FAILURE TO PROVIDE 
AGREEMENT.—The Secretary may establish and 
impose appropriate penalties for failure of a 
mortgagee to provide the optional written agree-
ment required under subparagraph (A). 
‘‘(F) LIMITATION ON LIABILITY OF MORT-
GAGEE.—A mortgagee shall not incur any liabil-
ity or penalties for any failure of a housing 
counseling entity to provide notice under sub-
paragraph (C). 
‘‘(G) NO PRIVATE RIGHT OF ACTION.—This 
paragraph shall not create any private right of 
action on behalf of the mortgagor. 
‘‘(H) DELINQUENCY PERIOD.—For purposes 
of this paragraph, the term ‘delinquency period’
means, with respect to a mortgage, a period that 
begins upon the mortgagor becoming delinquent 
with respect to payments due under the mortgage 
and ends upon the first subsequent occurrence of 
such payments under the mortgage becoming 
current or the property subject to the mortgage 
being foreclosed or otherwise disposed of. 
‘‘(6) INAPPLICABILITY
OF
DOWNPAYMENT
RE-
QUIREMENT.—A mortgage insured under this sub-
section shall not be subject to paragraph (9) of sub-
section (b) or any other requirement to pay on ac-
count of the property, in cash or its equivalent, any 
amount of the cost of acquisition. 
‘‘(7) MMIF MONITORING.—In conjunction with 
the credit subsidy estimation calculated each year 
pursuant to the Federal Credit Reform Act of 1990 (2 
U.S.C. 661 et seq.), the Secretary shall review the pro-
gram performance for mortgages insured under this 
subsection and make any necessary adjustments, 
which may include altering mortgage insurance pre-
miums subject to subsection (c)(2), adjusting under-
writing standards, and limiting the availability of 
mortgage insurance under this subsection, to ensure 
that the Mutual Mortgage Insurance Fund shall con-
tinue to generate a negative credit subsidy.
‘‘(8) UNDERWRITING.—For a mortgage to be eli-
gible for insurance under this subsection: 
‘‘(A) IN GENERAL.—The mortgagor’s credit 
and ability to pay the monthly mortgage pay-
ments shall have been evaluated using the Fed-
eral Housing Administration’s Technology Open 
To Approved Lenders (TOTAL) Mortgage Score-
card, or a similar standardized credit scoring 
system approved by the Secretary, and in ac-
cordance with procedures established by the Sec-
retary. 
‘‘(B) MULTI-UNIT PROPERTIES.—In the case 
of a mortgage involving a property upon which 
there is located a dwelling that is designed prin-
cipally for a 2- or 3-family residence, the mort-
gagor meets such additional underwriting stand-
ards as the Secretary may establish. 
‘‘(9) APPROVAL OF MORTGAGEES.—To be eligible 
for insurance under this subsection, a mortgage shall 
have been made to a mortgagee that meets such cri-
teria as the Secretary shall establish to ensure that 
mortgagees meet appropriate standards for participa-
tion in the program authorized under this subsection. 
‘‘(10) DISCLOSURE OF INCREMENTAL COSTS.—
‘‘(A) REQUIRED DISCLOSURE.—For a mort-
gage to be eligible for insurance under this sub-
section, the mortgagee shall provide to the mort-
gagor, at the time of the application for the loan 
involved in the mortgage, a written disclosure, as 
the Secretary shall require, that specifies the ef-
fective cost to a mortgagor of borrowing the 
amount by which the maximum amount that 
could be borrowed under a mortgage insured 
under this subsection exceeds the maximum 
amount that could be borrowed under a mortgage 
insured under subsection (b), based on average 
closing costs with respect to such amount, as de-
termined by the Secretary. Such cost shall be ex-
pressed as an annual interest rate over the first 
5 years of a mortgage. 
‘‘(B) COORDINATION.—The disclosure re-
quired under this paragraph may be provided in 
conjunction with the notice required under sub-
section (f). 
‘‘(11) LOSS MITIGATION.— 
‘‘(A) IN
GENERAL.—Upon the default of 
any mortgage insured under this subsection, the 
mortgagee shall engage in loss mitigation actions 
for the purpose of providing an alternative to
foreclosure to the same extent as is required of 
other mortgages insured under this title pursu-
ant to the regulations issued under section 
230(a). 
‘‘(B) ANNUAL REPORTING.—Not later than 
90 days after the end of each fiscal year, the Sec-
retary shall submit a report to the Congress that 
compares the rates of default and foreclosure dur-
ing such fiscal year for mortgages insured under 
this subsection, for single-family mortgages in-
sured under this title (other than under this sub-
section), and for mortgages for housing pur-
chased with assistance provided under the down-
payment assistance initiative under section 271 
of the Cranston-Gonzalez National Affordable 
Housing Act (42 U.S.C. 12821). 
‘‘(12) ADDITIONAL
REQUIREMENTS.—The Sec-
retary may establish any additional requirements for 
mortgage insurance under this subsection as may be 
necessary or appropriate. 
‘‘(13) LIMITATION.—The aggregate number of 
mortgages insured under this subsection in any fiscal 
year may not exceed 10 percent of the aggregate num-
ber of mortgages and loans insured by the Secretary 
under this title during the preceding fiscal year.
‘‘(14) PROGRAM SUSPENSION.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (C), the authority under paragraph (1) to 
insure mortgages shall be suspended if at any 
time the claim rate described in subparagraph 
(B) exceeds 3.5 percent. A suspension under this 
subparagraph shall remain in effect until such 
time as such claim rate is 3.5 percent or less. 
‘‘(B) FHA TOTAL SINGLE-FAMILY ANNUAL 
CLAIM RATE.—The claim rate described in this 
subparagraph, for any particular time, is the 
ratio of the number of claims during the 12 
months preceding such time on mortgages on 1- 
to 4-family residences insured pursuant to this 
title to the number of mortgages on such resi-
dences having such insurance in force at that 
time. 
‘‘(C) APPLICABILITY.—A suspension under 
subparagraph (A) shall not preclude the Sec-
retary from endorsing or insuring any mortgage 
that was duly executed before the date of such 
suspension. 
‘‘(15) SUNSET.—No mortgage may be insured 
under this subsection after September 30, 2009, except
that the Secretary may endorse or insure any mort-
gage that was duly executed before such date. 
‘‘(16) GAO REPORTS.—The Comptroller General 
of the United States shall submit a report to the Con-
gress not later than 2 years after the date of the en-
actment of this subsection, and annually thereafter, 
regarding the performance of mortgages insured under 
this subsection. 
‘‘(17) IMPLEMENTATION.—The Secretary may 
implement this subsection on an interim basis by 
issuing an interim rule, except that the Secretary 
shall solicit public comments upon publication of such 
interim rule and shall issue a final rule imple-
menting this subsection after consideration of the 
comments submitted.’’. 
(b) MORTGAGE INSURANCE PREMIUMS.—The second 
sentence of subparagraph (A) of section 203(c)(2) of the Na-
tional Housing Act (12 U.S.C. 1709(c)(2)(A)) is amended 
by striking ‘‘In’’ and inserting ‘‘Except with respect to a 
mortgage insured under subsection (l), in’’. 
(c) GENERAL INSURANCE FUND.—Section 519(e) of 
the National Housing Act (12 U.S.C. 1735c(e)) is amended 
by striking ‘‘and 203(i)’’ and inserting ‘‘, 203(i), and 
203(l)’’.
Union Calendar No. 465 
108TH CONGRESS 
2D SESSION 
H. R. 3755 
[Report No. 108–748] 
A BILL 
To authorize the Secretary of Housing and Urban 
Development to insure zero-downpayment mort-
gages for one-unit residences. 
OCTOBER 6, 2004 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed