I 
109TH CONGRESS 
1ST SESSION H. R. 3043 
To authorize the Secretary of Housing and Urban Development to carry 
out a pilot program to insure zero-downpayment mortgages for one- 
unit residences. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 23, 2005 
Mr. TIBERI (for himself and Mr. SCOTT of Georgia) introduced the following 
bill; which was referred to the Committee on Financial Services 
A BILL 
To authorize the Secretary of Housing and Urban Develop-
ment to carry out a pilot program to insure zero-down-
payment 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 
Pilot Program Act of 2005’’. 
SEC. 2. PILOT PROGRAM FOR INSURANCE FOR ZERO-DOWN-
PAYMENT MORTGAGES. 
(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 subsection: 
‘‘(l) ZERO-DOWNPAYMENT MORTGAGES PILOT PRO-
GRAM.— 
‘‘(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 in-
clude— 
‘‘(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 re-
stricted to members of such corporation and in
which the purchase of such stock or member-
ship entitles the purchaser to the permanent oc-
cupancy 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 in-
surance under this subsection, a mortgage shall 
involve a principal obligation in an amount not 
in excess of 100 percent of the appraised value 
of the property plus any initial service charges, 
appraisal, inspection and other fees in connec-
tion with the mortgage as approved by the Sec-
retary. 
‘‘(B) INAPPLICABILITY OF OTHER LOAN- 
TO-VALUE
REQUIREMENTS.—A mortgage in-
sured under this subsection shall not be subject 
to subparagraph (B) of paragraph (2) of sub-
section (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 
mortgagor shall be a first-time homebuyer. The 
program for mortgage insurance under this 
subsection shall be considered a Federal pro-
gram to assist first-time homebuyers for pur-
poses of section 956 of the Cranston-Gonzalez 
National Affordable 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 
mortgagee) who is approved by the Sec-
retary, with respect to the responsibilities 
and financial management involved in 
homeownership. Such counseling shall be 
provided 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 mort-
gage insured under this subsection 
must appreciate 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
RESI-
DENCES.—In the case of a mortgage in-
volving a 2- or 3-family residence, such 
counseling shall include (in addition to the 
information required under clause (ii)) in-
formation regarding real estate property 
management. 
‘‘(5) OPTION
FOR
NOTICE
OF
FORECLOSURE 
PREVENTION 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 no-
tice 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 
mortgagor is so delinquent and of how to con-
tact the mortgagor. Such notice may only be
provided once with respect to each delinquency 
period for a mortgage. 
‘‘(C) NOTICE TO MORTGAGOR.—Upon no-
tice from a mortgagee that a mortgagor is 60 
days delinquent with respect to payments due 
under the mortgage, the housing counseling en-
tity shall at the earliest time practicable notify 
the mortgagor of such delinquency, that the en-
tity makes available foreclosure prevention 
counseling that may assist the mortgagor in re-
solving the delinquency, and of how to contact 
the entity to arrange for such counseling. 
‘‘(D) ABILITY TO CURE.—Failure to pro-
vide 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 mort-
gage. Insurance provided under this subsection 
may not be terminated and penalties for such 
failure may not be prospectively or retroactively 
imposed if such failure is corrected in accord-
ance with this subparagraph.
‘‘(E) PENALTIES FOR FAILURE TO PRO-
VIDE AGREEMENT.—The Secretary may estab-
lish and impose appropriate penalties for failure 
of a mortgagee to provide the optional written 
agreement required under subparagraph (A). 
‘‘(F) LIMITATION ON LIABILITY OF MORT-
GAGEE.—A mortgagee shall not incur any li-
ability 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 pur-
poses of this paragraph, the term ‘delinquency 
period’ means, with respect to a mortgage, a 
period that begins upon the mortgagor becom-
ing 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 oth-
erwise 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 program performance for mortgages insured 
under this subsection and make any necessary ad-
justments, which may include altering mortgage in-
surance premiums subject to subsection (c)(2), ad-
justing underwriting standards, and limiting the 
availability of mortgage insurance under this sub-
section, to ensure that the Mutual Mortgage Insur-
ance Fund shall continue to generate a negative 
credit subsidy. 
‘‘(8) UNDERWRITING.—For a mortgage to be 
eligible for insurance under this subsection: 
‘‘(A) IN GENERAL.—The mortgagor’s cred-
it 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 
Scorecard, or a similar standardized credit scor-
ing system approved by the Secretary, and in 
accordance with procedures established by the 
Secretary. 
‘‘(B) MULTI-UNIT
PROPERTIES.—In the 
case of a mortgage involving a property upon 
which there is located a dwelling that is de-
signed principally for a 2- or 3-family residence, 
the mortgagor meets such additional under-
writing standards as the Secretary may estab-
lish. 
‘‘(9) APPROVAL OF MORTGAGEES.—To be eligi-
ble for insurance under this subsection, a mortgage 
shall have been made to a mortgagee that meets 
such criteria as the Secretary shall establish to en-
sure that mortgagees meet appropriate standards for 
participation in the program authorized under this 
subsection. 
‘‘(10) DISCLOSURE OF INCREMENTAL COSTS.— 
‘‘(A) 
REQUIRED
DISCLOSURE.—For 
a 
mortgage to be eligible for insurance under this 
subsection, the mortgagee shall provide to the 
mortgagor, at the time of the application for 
the loan involved in the mortgage, a written dis-
closure, as the Secretary shall require, that 
specifies the effective cost to a mortgagor of
borrowing the amount by which the maximum 
amount that could be borrowed under a mort-
gage 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 determined by the Secretary. Such 
cost shall be expressed 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 ac-
tions for the purpose of providing an alternative 
to foreclosure to the same extent as is required 
of other mortgages insured under this title pur-
suant to the regulations issued under section 
230(a). 
‘‘(B) ANNUAL
REPORTING.—Not later 
than 90 days after the end of each fiscal year, 
the Secretary shall submit a report to the Con-
gress that compares the rates of default and 
foreclosure during such fiscal year for mort-
gages insured under this subsection, for single- 
family mortgages insured under this title (other 
than under this subsection), and for mortgages 
for housing purchased with assistance provided 
under the downpayment 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) PILOT PROGRAM LIMITATIONS.— 
‘‘(A) ANNUAL.—In any fiscal year, the ag-
gregate number of mortgages insured under 
this subsection may not exceed 10 percent of 
the aggregate number of mortgages and loans 
insured by the Secretary under this title during 
the preceding fiscal year. 
‘‘(B) TERM OF PROGRAM.—The aggregate 
number or mortgages insured under this sub-
section may not exceed 50,000. 
‘‘(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, 2010, ex-
cept that the Secretary may endorse or insure any 
mortgage that was duly executed before such date. 
‘‘(16) GAO REPORTS.—The Comptroller Gen-
eral of the United States shall submit a report to 
the Congress not later than 2 years after the date 
of the enactment 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 
National Housing Act (12 U.S.C. 1709(c)(2)(A)) is 
amended by striking ‘‘In’’ and inserting ‘‘Except with re-
spect 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 amend-
ed by striking ‘‘and 203(i)’’ and inserting ‘‘, 203(i), and 
203(l)’’. 
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