I 
112TH CONGRESS 
1ST SESSION H. R. 1977 
To improve the financial safety and soundness of the FHA mortgage 
insurance program. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 24, 2011 
Ms. WATERS (for herself, Mr. FRANK of Massachusetts, and Mr. GUTIERREZ) 
introduced the following bill; which was referred to the Committee on Fi-
nancial Services 
A BILL 
To improve the financial safety and soundness of the FHA 
mortgage insurance program. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘FHA Reform Act of 2011’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title and table of contents. 
Sec. 2. Indemnification by mortgagees. 
Sec. 3. Delegation of insuring authority. 
Sec. 4. Authority to terminate mortgagee origination and underwriting ap-
proval. 
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Sec. 5. Deputy Assistant Secretary of FHA for Risk Management and Regu-
latory Affairs. 
Sec. 6. Review of mortgagee performance. 
Sec. 7. Coordination with State regulatory agencies. 
Sec. 8. Reporting of mortgagee actions taken against other mortgagees. 
Sec. 9. Review of downpayment requirements. 
Sec. 10. Authorization to participate in the origination of FHA-insured loans. 
Sec. 11. Default and origination information by loan servicer and originating 
direct endorsement lender. 
Sec. 12. Third party servicer outreach. 
Sec. 13. Maximum mortgage amount limits for multifamily housing. 
Sec. 14. Mortgage insurance premium refunds. 
SEC. 2. INDEMNIFICATION BY MORTGAGEES. 
Section 202 of the National Housing Act (12 U.S.C. 
1708) is amended by adding at the end the following new 
subsection: 
‘‘(i) INDEMNIFICATION BY MORTGAGEES.— 
‘‘(1) IN GENERAL.—If the Secretary determines 
that a mortgage executed by a mortgagee approved 
by the Secretary under the direct endorsement pro-
gram or insured by a mortgagee pursuant to the del-
egation of authority under section 256 was not origi-
nated or underwritten in accordance with the re-
quirements established by the Secretary, and the 
Secretary pays an insurance claim with respect to 
the mortgage within a reasonable period specified by 
the Secretary, the Secretary may require the mort-
gagee approved by the Secretary under the direct en-
dorsement program or the mortgagee delegated au-
thority under section 256 to indemnify the Secretary 
for the loss. 
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‘‘(2) 
FRAUD
OR
MISREPRESENTATION.—If 
fraud or misrepresentation was involved in connec-
tion with the origination or underwriting, the Sec-
retary may require the mortgagee approved by the 
Secretary under the direct endorsement program or 
the mortgagee delegated authority under section 256 
to indemnify the Secretary for the loss regardless of 
when an insurance claim is paid. 
‘‘(3) REQUIREMENTS AND PROCEDURES.—The 
Secretary shall issue regulations establishing appro-
priate requirements and procedures governing the 
indemnification of the Secretary by the mortgagee.’’. 
SEC. 3. DELEGATION OF INSURING AUTHORITY. 
Section 256 of the National Housing Act (12 U.S.C. 
1715z–21) is amended— 
(1) by striking subsection (c); 
(2) in subsection (e), by striking ‘‘, including’’ 
and all that follows through ‘‘by the mortgagee’’; 
and 
(3) by redesignating subsections (d) and (e) as 
subsections (c) and (d), respectively. 
SEC. 4. AUTHORITY TO TERMINATE MORTGAGEE ORIGINA-
TION AND UNDERWRITING APPROVAL. 
Section 533 of the National Housing Act (12 U.S.C. 
1735f–11) is amended— 
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(1) in the first sentence of subsection (b), by in-
serting ‘‘or areas or on a nationwide basis’’ after 
‘‘area’’ each place such term appears; and 
(2) in subsection (c), by striking ‘‘(c)’’ and all 
that follows through ‘‘The Secretary’’ in the first 
sentence of paragraph (2) and inserting the fol-
lowing: 
‘‘(c) TERMINATION
OF MORTGAGEE ORIGINATION 
AND UNDERWRITING APPROVAL.— 
‘‘(1) TERMINATION
AUTHORITY.—If the Sec-
retary determines, under the comparison provided in 
subsection (b), that a mortgagee has a rate of early 
defaults and claims that is excessive, the Secretary 
may terminate the approval of the mortgagee to 
originate or underwrite single family mortgages for 
any area, or areas, or on a nationwide basis, not-
withstanding section 202(c) of this Act. 
‘‘(2) PROCEDURE.—The Secretary’’. 
SEC. 5. DEPUTY ASSISTANT SECRETARY OF FHA FOR RISK 
MANAGEMENT AND REGULATORY AFFAIRS. 
(a) ESTABLISHMENT OF POSITION.—Subsection (b) 
of section 4 of the Department of Housing and Urban De-
velopment Act (42 U.S.C. 3533(b)) is amended— 
(1) by inserting ‘‘(1)’’ after ‘‘(b)’’; and 
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(2) by adding at the end the following new 
paragraph: 
‘‘(2) There shall be in the Department, within the 
Federal Housing Administration, a Deputy Assistant Sec-
retary for Risk Management and Regulatory Affairs, who 
shall be appointed by the Secretary and shall be respon-
sible to the Federal Housing Commissioner for all matters 
relating to managing and mitigating risk to the mortgage 
insurance funds of the Department and ensuring the per-
formance of mortgages insured by the Department.’’. 
(b) TERMINATION.—Upon the appointment and con-
firmation of the initial Deputy Assistant Secretary for 
Risk Management and Regulatory Affairs pursuant to sec-
tion 4(b)(2) of the Department of Housing and Urban De-
velopment Act, as amended by subsection (a) of this sec-
tion, the position of chief risk officer within the Federal 
Housing Administration, filled by appointment by the 
Federal Housing Commissioner, is abolished. 
SEC. 6. REVIEW OF MORTGAGEE PERFORMANCE. 
Section 533 of the National Housing Act (12 U.S.C. 
1735f–11) is amended— 
(1) in subsection (a), by inserting after the pe-
riod at the end the following: ‘‘For purposes of this 
subsection, the term ‘early default’ means a default 
that occurs within 24 months after a mortgage is 
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