I
103D CONGRESS
2D SESSION
H. R. 4390
To amend the National Housing Act to reform and simplify the single family
home mortgage insurance program of the Department of Housing and
Urban Development, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 11, 1994
Mr. KLEIN (for himself and Mr. VENTO) introduced the following bill; which
was referred to the Committee on Banking, Finance and Urban Affairs
A BILL
To amend the National Housing Act to reform and simplify
the single family home mortgage insurance program of
the Department of Housing and Urban Development,
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.
This Act may be cited as the ‘‘FHA Reform Act of
1994’’.
SEC. 2. MAXIMUM DOLLAR AMOUNT.
Subparagraph (A) of the first sentence of section
203(b)(2) of the National Housing Act (12 U.S.C.
1709(b)(2)(A)) is amended by striking clause (ii) and all
that follows through ‘‘1992;’’ and inserting the following:
‘‘(ii) 85 percent of the dollar amount
limitation 
determined 
under 
section
305(a)(2) of the Federal Home Loan
Mortgage Corporation Act for a residence
of the applicable size;
except that the applicable dollar amount limita-
tion in effect under this subparagraph (A) for
any area may not be less than the greater of—
‘‘(I) the dollar amount limitation in
effect under this section for the area on
the date of enactment of the FHA Reform
Act of 1994; or
‘‘(II) the applicable average area pur-
chase price determined under section
143(e)(2) of the Internal Revenue Code of
1986, as adjusted by the Secretary to re-
flect a single amount using purchase prices
for residences that have been previously oc-
cupied, and for residences that have not
been so occupied, which amount shall be
adjusted by the Secretary annually on the
basis of the Constant Quality Housing
Price Index;’’.
SEC. 3. MAXIMUM LOAN-TO-VALUE RATIO.
Section 203(b)(2) of the National Housing Act (12
U.S.C. 1709(b)(2)) is amended—
(1) by striking ‘‘(including such initial service
charges, appraisal, inspection, and other fees as the
Secretary shall approve)’’ the first place it appears;
(2) by striking subparagraph (B) of the first
sentence and inserting the following new subpara-
graph:
‘‘(B) except as otherwise provided in this
paragraph (2), not to exceed an amount equal
to the sum of—
‘‘(i) 99 percent of $50,000 of the ap-
praised value of the property, as of the
date the mortgage is accepted for insur-
ance;
‘‘(ii) 96 percent of such value in ex-
cess of $50,000 but not in excess of
$125,000; and
‘‘(iii) 94 percent of such value in ex-
cess of $125,000.’’;
(3) by striking the second sentence of the mat-
ter that follows subparagraph (B) of the first sen-
tence; and
(4) by striking penultimate undesignated para-
graph.
SEC. 4. SINGLE FAMILY RISK-SHARING MORTGAGE INSUR-
ANCE PROGRAM.
(a) IN GENERAL.—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:
‘‘SINGLE FAMILY RISK-SHARING WITH STATE AND LOCAL
AGENCIES
‘‘SEC. 256. (a) AUTHORITY.—Notwithstanding any
other provision of this Act inconsistent with this section,
the Secretary may insure and make commitments to in-
sure under this section mortgages on single family prop-
erties under risk-sharing mortgage insurance programs es-
tablished with 1 or more States or agencies. Only mort-
gages executed in connection with the acquisition of a sin-
gle family property or for the refinancing of a mortgage
insured under this section shall be eligible. Under such
programs, the Secretary shall insure a portion of the mort-
gage and the State or local agency shall insure the remain-
der.
‘‘(b) PURPOSES.—The purposes of the program
under this section are (1) to increase the availability of
single family mortgage financing in areas where there is
need for mortgage insurance under this Act that cannot
be met due to particularly high average median house
prices in the area, and (2) to foster arrangements with
State and local agencies to share the risk of mortgage in-
surance.
‘‘(c) APPLICATIONS.—
‘‘(1) APPROVAL.—The Secretary may approve
an application submitted by a State or local agency
to establish a risk-sharing program under this sec-
tion, based on a determination that the State or
local agency demonstrates that (A) it has the legal
authority under State law and, where applicable,
local law, to participate in the risk-sharing mortgage
insurance program, (B) it has carried out, or has
the potential to carry out, a financially sound, effi-
cient, and effective mortgage insurance program,
and (C) it has the ongoing administrative and finan-
cial capacity necessary to carry out a program under
this section.
‘‘(2) CANCELLATION OF APPROVAL.—For a vio-
lation of requirements and procedures under the
risk-sharing agreement between the State or local
agency and the Secretary or for other good cause,
the Secretary may cancel approval of a State or local
agency under this section by giving notice to the
State or local agency. The cancellation shall be effec-
tive upon receipt of the notice by the agency or at
a later date specified by the Secretary. A decision by
the Secretary to cancel approval shall be final and
conclusive and shall not be subject to judicial review.
‘‘(d) DELEGATION OF AUTHORITY TO INSURE TO
STATE AND LOCAL AGENCIES.—Pursuant to a risk-shar-
ing agreement with a State or local agency, the Secretary
shall delegate the authority to insure and make commit-
ments to insure the portion of mortgages to be insured
by the Secretary under this section to the State or local
agency. The risk-sharing agreement shall contain such
other matters as the Secretary and the State or local agen-
cy agree.
‘‘(e) UNDERWRITING STANDARDS AND LOAN TERMS
AND CONDITIONS.—The State or local agency shall adopt
underwriting standards and loan terms and conditions for
purposes of underwriting loans to be insured under this
section without regard to requirements of this Act other
than this section, section 203(g), and section 203(r)(2),
subject to review and approval by the Secretary.
‘‘(f) MORTGAGE INSURANCE PREMIUMS.—
‘‘(1) REQUIREMENT.—The State or local agen-
cy shall require the payment of mortgage insurance
premiums by mortgagors.
‘‘(2) SHARES.—The Secretary shall establish
policies and procedures for the sharing of premiums
between the Secretary and the State or local agency,
based on the relative risk to, and administrative
costs of, the Secretary and the State or local agency.
The share paid to the Secretary shall not be less
than an amount necessary to cover the risk to, and
administrative costs of, the Secretary.
‘‘(g) 
LIMITATIONS
ON
PRINCIPAL
MORTGAGE
AMOUNT.—
‘‘(1) INSURED PORTION.—The portion of the
mortgage insured under this section by the Sec-
retary may not exceed an amount equal to the lesser
of (A) 80 percent of the appraised value of the prop-
erty, or (B) the maximum amount the Secretary
may insure under section 203(b) of this Act for the
area (but not including any amount for a mortgage
insurance premium).
‘‘(2) TOTAL
PRINCIPAL
AMOUNT.—The total
principal amount of a mortgage insured under this
section by the Secretary and the State or local agen-
cy (A) shall exceed the maximum amount the Sec-
retary may insure under subparagraph (A) of the
first sentence of section 203(b)(2) of this Act for the
area, and (B) may not exceed the conforming loan
limitation determined under section 305(a)(2) of the
Federal Home Loan Mortgage Corporation Act for
a residence of the applicable size, as adjusted annu-
ally.
‘‘(3) LOAN-TO-VALUE
RATIO.—The principal
obligation of a mortgage may not exceed an amount
determined in accordance with subparagraph (B) of
the first sentence of section 203(b)(2) of this Act
plus the mortgage insurance premium.
‘‘(4) 
REFINANCING
MORTGAGES.—Notwith-
standing paragraph (2)(A) or (3), in the case of refi-
nancing of an existing mortgage insured under this
section, the principal obligation of a refinancing
mortgage may not exceed the outstanding principal
balance of the existing mortgage plus any mortgage
insurance premium.
‘‘(h) INSURANCE CLAIMS.—
‘‘(1) PROCEDURE.—In the case of a default and
foreclosure of a mortgage insured under this section,
the mortgagee may file a claim with the State or
local agency for insurance benefits in accordance
with requirements established by the State or local
agency and approved by the Secretary. The agency
shall pay the full amount of the claim owed to the
mortgagee. If the loss on the insured mortgage ex-
ceeds the amount of insurance by the agency, the
Secretary shall reimburse the agency for the dif-
ference.
‘‘(2) GENERAL INSURANCE FUND.—The insur-
ance of a mortgage under this section by the Sec-
retary shall be an obligation of the General Insur-
ance Fund created pursuant to section 519 of this
Act.
‘‘(i) INAPPLICABILITY OF THE ASSIGNMENT PRO-
GRAM.—Section 230 shall not apply to mortgages insured
under the program authorized by this section.
‘‘(j) RESTRICTION
ON GNMA SECURITIZATION.—
The Government National Mortgage Association shall not
securitize any loans insured under this section.
‘‘(k) DEFINITIONS.—As used in this section:
‘‘(1) The term ‘local agency’ means an agency
of a unit of general local government, as defined by
the Secretary, that has the authority to insure mort-
gages and to participate with the Secretary in the
single family risk-sharing program under this sec-
tion, or an agency or instrumentality of a local agen-
cy if the agency or instrumentality has such author-
ity.
‘‘(2) The term ‘State agency’ means an agency
of a State that has the authority to insure mort-
gages and to participate with the Secretary in the
single family risk-sharing program under this sec-
tion, or an agency or instrumentality of a State
agency if the agency or instrumentality has such au-
thority.
‘‘(3) The term ‘single family property’ means a
property upon which there is located a dwelling de-
signed principally for occupancy by 1 family, and in-
cludes a condominium and a cooperative.
‘‘(4) The term ‘State’ means the several States,
the Commonwealth of Puerto Rico, the District of
Columbia, Guam, the Trust Territory of the Pacific
Islands, American Samoa, and the Virgin Islands.’’.
(b) IMPLEMENTATION.—The Secretary of Housing
and Urban Development may implement the program au-
thorized by the amendment made under subsection (a) by
entering into risk-sharing agreements negotiated with
State agencies, notwithstanding any otherwise applicable
requirement for regulations or notice published in the Fed-
eral Register and notwithstanding any otherwise applica-
ble regulations of the Secretary.
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