I
107TH CONGRESS
1ST SESSION
H. R. 3206
To authorize the Government National Mortgage Association to guarantee
securities backed by certain conventional mortgages.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 1, 2001
Mrs. ROUKEMA introduced the following bill; which was referred to the
Committee on Financial Services
A BILL
To authorize the Government National Mortgage Association
to guarantee securities backed by certain conventional
mortgages.
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 ‘‘Home Ownership Ex-
pansion and Opportunities Act of 2001’’.
SEC. 2. CONGRESSIONAL FINDINGS.
The Congress finds that—
(1) expanding home ownership is a national
goal;
zens and private sector financial institutions of the
United States.
SEC. 3. GNMA GUARANTEE OF SECURITIES BACKED BY
CONVENTIONAL MORTGAGES.
(a) GUARANTEE AUTHORITY.—Section 306 of the
National Housing Act (12 U.S.C. 1721) is amended by
adding at the end the following new subsections:
‘‘(h) GUARANTEE OF SECURITIES BACKED BY CON-
VENTIONAL MORTGAGES.—
‘‘(1) IN GENERAL.—The Association may guar-
antee the timely payment of principal of and interest
on such trust certificates and other securities that
are based on or backed by qualifying privately in-
sured mortgages.
‘‘(2) MORTGAGE INSURANCE PREMIUMS.—The
issuer of any trust certificate or security that is
guaranteed by the Association pursuant to this sub-
section shall—
‘‘(A) for primary mortgage insurance, col-
lect from the mortgagor, and remit to the quali-
fied mortgage insurer, such premium or pre-
miums as may be established by the qualified
mortgage insurer in accordance with applicable
Federal or State law; and
‘‘(B) for supplemental mortgage insurance,
pay and remit the premium or premiums to the
Secretary of Housing and Urban Development
from the sums attributable to the difference be-
tween the interest rate of the mortgages in the
particular pool and the interest rate set forth
on the trust certificate or security guaranteed
by the Association based on and backed by such
mortgages, and without additional premium
charge therefor to the mortgagor.
‘‘(3) ORIGINATION, SERVICING, AND DEFAULT
PRACTICES.—
‘‘(A) INAPPLICABILITY
OF
FHA
PRAC-
TICES.—The requirements of the National
Housing Act, and of the Secretary, that apply
to mortgages insured under the National Hous-
ing Act (other than insurance provided under
this subsection) and to the mortgagees that
make and service such mortgages shall not
apply to—
‘‘(i) qualifying privately insured mort-
gages;
‘‘(ii) lenders making qualifying pri-
vately insured mortgages; and
‘‘(iii) issuer of certificates or securities
that are, or will be, based on or backed by
qualifying privately insured mortgages and
guaranteed under this subsection by the
Association.
‘‘(B) DISPOSITION
OF
PROPERTY
UPON
DEFAULT.—Upon default by the mortgagor on
a qualifying privately insured mortgage which
backs, or upon which is based, any trust certifi-
cate or security that is or will be guaranteed
pursuant to this subsection, the property cov-
ered by the mortgage shall be disposed of by
the issuer or the qualified mortgage insurer in
accordance with the applicable issuer’s or insur-
er’s customary policies and procedures.
‘‘(4) EFFECT
OF
HOMEOWNERS
PROTECTION
ACT
OF
1998.—For purposes of the Homeowners
Protection Act of 1998 (12 U.S.C. 4901 et seq.), in
the case of a qualifying privately insured mortgage
against which trust certificates or securities are
issued that are guaranteed pursuant to this
subsection—
‘‘(A) primary mortgage insurance provided
in connection with such mortgage shall not be
considered to be mortgage insurance made
available under the National Housing Act (12
U.S.C. 1701 et seq.); and
‘‘(B) supplemental mortgage insurance
provided in connection with such mortgage shall
be considered to be mortgage insurance made
available under the National Housing Act (12
U.S.C. 1701 et seq.).
‘‘(5) VOLUNTARY PROGRAM PARTICIPATION.—
This subsection may not be construed to require any
issuer to issue any trust certificate or security that
is based on or backed by a trust or pool composed
of qualifying privately insured mortgages.
‘‘(6) NO FEDERAL CONTRACTOR STATUS.—Not-
withstanding any other provision of law, a qualified
mortgage insurer that participates in the program
under this subsection for guarantee of trust certifi-
cates or securities backed by qualifying privately in-
sured mortgages shall not be considered, by virtue of
such participation, as entering into a contract with
any Federal department or agency, participating in
any program or activity that receives Federal finan-
cial assistance, or participating in any program or
activity that is conducted by any Federal depart-
ment or agency. This paragraph may not be con-
strued to deny or otherwise affect the rights of the
Association as the assignee, holder, or beneficiary of
a mortgage insurance contract.
‘‘(7) MINIMUM UNDERWRITING STANDARDS.—
‘‘(A) IN GENERAL.—The Association and
the Secretary shall establish minimum under-
writing standards with respect to certificates
and securities guaranteed under this subsection
that limit the level of risk to the Association
and supplemental insurance provided by the
Secretary.
‘‘(B) FAILURE TO MEET STANDARDS.—If
the issuer of a certificate or security guaranteed
under this subsection does not meet the min-
imum standards established under subpara-
graph (A), the Association and the Secretary
shall assign to the issuer and underwriter any
liability not covered under paragraph (2).
‘‘(8) COMMITMENT AUTHORITY.—
‘‘(A) AGGREGATE
COMMITMENT
LIMIT.—
The aggregate amount of guarantees issued
under this subsection by the Association during
any fiscal year may not exceed an amount equal
to 30 percent of the aggregate amount of guar-
antees authorized, in accordance with section
504(b) of the Congressional Budget Act of
1974, to be made under this section during
such fiscal year.
‘‘(B) AUTHORIZATION OF APPROPRIATIONS
FOR COSTS.—There is authorized to be appro-
priated for the costs (as such term is defined in
section 502 of the Congressional Budget Act of
1974 (2 U.S.C. 661a)) of guarantees under this
subsection such sums as may be necessary for
fiscal year 2002.
‘‘(i) DEFINITIONS.—For purposes of this section:
‘‘(1) CONVENTIONAL
MORTGAGE
LIMIT.—The
term ‘conventional mortgage limit’ means the great-
er of the applicable maximum original principal obli-
gation of conventional mortgages established by—
‘‘(A) the Federal National Mortgage Asso-
ciation, pursuant to section 302(b)(2) of this
Act; or
‘‘(B) the Federal Home Loan Mortgage
Corporation, pursuant to section 305(a)(2) of
the Federal Home Loan Mortgage Corporation
Act (12 U.S.C. 1454(a)(2)).
‘‘(2) COVERAGE PERCENTAGE.—The term ‘cov-
erage percentage’ means, with respect to mortgage
insurance for a mortgage, the percentage of the total
of the outstanding principal balance on the mort-
gage, and accrued interest, advances, and reasonable
expenses related to property preservation and fore-
closure, that is subject to payment in the event of
a claim under the mortgage insurance policy pro-
vided by a qualified mortgage insurer or under the
terms of the mortgage insurance provided by the
Secretary.
‘‘(3) MANDATORY
CANCELLATION
OR
TERMI-
NATION.—The term ‘mandatory cancellation or ter-
mination’ means cancellation or termination of mort-
gage insurance, as provided in section 3 of the
Homeowners Protection Act of 1998 (12 U.S.C.
4902) or by a protected State law (as such term is
defined in section 9 of such Act).
‘‘(4) PRIMARY MORTGAGE INSURANCE.—
‘‘(A) IN
GENERAL.—The term ‘primary
mortgage insurance’ means mortgage insurance
that—
‘‘(i) is issued by a qualified mortgage
insurer;
‘‘(ii) guarantees and insures against
losses on the mortgage, under standard
terms and conditions generally offered in
the private mortgage guaranty insurance
industry;
‘‘(iii) may be canceled or terminated
by the mortgagor, issuer, or qualified
mortgage insurer only pursuant to manda-
tory cancellation or termination; and
‘‘(iv) subject to subparagraph (B), has
a coverage percentage equal to—
‘‘(I) not less than 25 percent, if
the principal-to-value ratio for the
mortgage is greater than 85 percent
and not greater than 90 percent;
‘‘(II) not less than 30 percent, if
the principal-to-value ratio for the
mortgage is greater than 90 percent
and not greater than 95 percent; and
‘‘(III) not less than 35 percent, if
the principal-to-value ratio for the
mortgage is greater than 95 percent.
‘‘(B) ADJUSTMENT
OF
PERCENTAGES.—
The Association may, by notice to its partici-
pating issuers, adjust one or more of the cov-
erage 
percentages 
specified 
subparagraph
(A)(iv) upon a finding that such coverage per-
centage or percentages no longer represent a
coverage equal to the risk associated with mort-
gages in the appropriate principal-to-value
range, as determined by the Association. The
Association may not adjust any coverage per-
centage to a level that, in the absence of the
guarantee by the Association, would not allow
the trust certificates or other securities backed
by the qualifying privately insured mortgage to
be rated in 1 of the 2 highest rating categories
by a nationally recognized statistical rating or-
ganization.
‘‘(5) PRINCIPAL-TO-VALUE
RATIO.—The term
‘principal-to-value ratio’ means the ratio of the origi-
nal outstanding principal balance of a first mortgage
to the value of the property securing the mortgage,
as established at the time of origination by appraisal
or other reliable indicia of property, conducted or
performed not earlier than 6 months prior to the
date of origination and not later than the date of
origination.
‘‘(6) QUALIFIED
MORTGAGE
INSURER.—The
term ‘qualified mortgage insurer’ means a provider
of private mortgage insurance (as such term is de-
fined in section 2 of the Homeowners Protection Act
of 1998 (12 U.S.C. 4901)), that—
‘‘(A) is authorized and licensed by a State
or instrumentality thereof to transact private
mortgage insurance business in the State in
which the provider is transacting such business,
excluding any entity that is exempt from State
licensing requirements;
‘‘(B) is rated in 1 of the 2 highest rating
categories by not less than 1 nationally recog-
nized statistical rating organization; and
‘‘(C) meets such additional qualifications
as may be determined by the Association.
‘‘(7) QUALIFYING PRIVATELY INSURED MORT-
GAGE.—The term ‘qualifying privately insured mort-
gage’ means a first mortgage—
‘‘(A) that is not—
‘‘(i) insured under title II of this Act,
except as specifically provided in this sec-
tion;
‘‘(ii) insured under title V of the
Housing Act of 1949 (42 U.S.C. 1471 et
seq.);
‘‘(iii) insured or guaranteed under
chapter 37 of title 38, United States Code
or the Servicemen’s Readjustment Act of
1944; or
‘‘(iv) made or guaranteed under part
B of title V of the Public Health Service
Act (42 U.S.C. 290bb et seq.);
‘‘(B) that—
‘‘(i) is secured by property comprising
1- to 4-family dwelling units;
‘‘(ii) has a term of not longer than 30
years;
‘‘(iii) has a principal-to-value ratio of
more than 85 percent; and
‘‘(iv) has an original principal obliga-
tion that does not exceed the conventional
mortgage limit;
‘‘(C) not more than one payment of which
has been delinquent by more than 30 days, and
no payment of which has been delinquent by
more than 60 days, during the 12-month period
that ends upon the issuance of a guaranty
under this subsection for a trust certificate or
security based on or backed by the mortgage;
and
‘‘(D) that is covered by primary mortgage
insurance and supplemental mortgage insur-
ance.
‘‘(8) SUPPLEMENTAL MORTGAGE INSURANCE.—
The term ‘supplemental mortgage insurance’ means
mortgage insurance that—
‘‘(A) is issued by the Secretary of Housing
and Urban Development pursuant to the au-
thority under section 203(l);
‘‘(B) guarantees and insures against losses
on the mortgage under such terms and condi-
tions as are reasonably acceptable to the Asso-
ciation;
‘‘(C) becomes effective on the date on
which a guaranty issued under this subsection
for a trust certificate or other security based on
or backed by the mortgage becomes effective;
and
‘‘(D) has a coverage percentage of not
more than 10 percent.’’.
(b) GUARANTY FEE.—Section 306(g)(3)(A) of the
National Housing Act (12 U.S.C. 1721(g)(3)(A)) is
amended—
(1) by inserting ‘‘(i)’’ after ‘‘(A)’’; and
(2) by adding at the end the following new
clause:
‘‘(ii) Notwithstanding clause (i) of this subparagraph
or subparagraph (B), (C), or (E), the Association shall
assess and collect a fee on or with regard to each guaranty
issued under subsection (h) in an amount that is suffi-
cient, as determined by the Secretary of Housing and
Urban Development, to generate revenues from such fees
to the Federal Government in an amount not less than
the cost (as such term is defined in section 502 of the
Congressional Budget Act of 1974 (2 U.S.C. 661a)) of
such guarantees, except that such fee shall not in any case
exceed 8 basis points.’’.
(c) MORTGAGE POOL COMPOSITION.—Section 306 of
the National Housing Act (12 U.S.C. 1721), as amended
by the preceding provisions of this Act, is further amended
by adding at the end the following new subsection:
‘‘(j) MORTGAGE POOL COMPOSITION.—Any trust or
pool that is the basis for or backs any trust certificate
or other security guaranteed under this section may in-
clude only—
‘‘(1) qualifying privately insured mortgages; or
‘‘(2) mortgages described in subsection (g)(1).’’.
SEC. 4. TECHNICAL AND CONFORMING AMENDMENTS.
(a) GUARANTEES.—Section 306(g)(1) of the Na-
tional Housing Act (12 U.S.C. 1721(g)(1)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(g)(1)’’;
(2) in the second sentence—
(A) by striking ‘‘The Association’’ and in-
serting ‘‘Subject to paragraph (3), the Associa-
tion’’; and
(B) by inserting ‘‘or subsection (h)’’ after
‘‘this subsection’’;
(3) in the third sentence, by inserting ‘‘or sub-
section (h)’’ after ‘‘this subsection’’ each place such
term appears;
(4) in the penultimate and last sentences, by in-
serting ‘‘or subsection (h)’’ after ‘‘this subsection’’
each place such term appears;
(5) by striking ‘‘The Association is hereby em-
powered,’’ and all that follows through ‘‘against
which the guaranteed securities are issued.’’; and
(6) by adding at the end the following:
‘‘(B)(i) The Association may, in connection with any
guaranty under this subsection or subsection (h), whether
before or after any default by the issuer or any default
by the qualified mortgage insurer (in the case of securities
based on and backed by qualifying privately insured mort-
gages)—
‘‘(I) provide by contract with the issuer for the
extinguishment, upon default by the issuer, of any
redemption, equitable, legal, or other right, title, or
interest of the issuer in any mortgage or mortgages
constituting the trust or pool against which the
guaranteed securities are issued; or
‘‘(II) provide by contract with the qualified
mortgage insurer for the extinguishment, upon de-
fault by the qualified mortgage insurer, of any re-
demption, equitable, legal, or other right, title, or in-
terest of the qualified mortgage insurer in such
mortgage or mortgages, as well as any related pri-
mary mortgage insurance or supplemental mortgage
insurance coverage or any future premiums and pro-
ceeds related thereto.
‘‘(ii) With respect to any issue of guaranteed
securities—
‘‘(I) in the event of default by the issuer, and
pursuant otherwise to the terms of the contract, the
mortgages that constitute the trust or pool referred
to in clause (i) shall become the absolute property of
the Association, subject only to the unsatisfied rights
of the holders of the securities based on and backed
by that trust or pool; and
‘‘(II) in the event of default by the qualified
mortgage insurer, and pursuant otherwise to the
terms of the contract, any right of the qualified
mortgage insurer with respect to the mortgages that
constitute such trust or pool and any related pri-
mary mortgage insurance or supplemental mortgage
insurance coverage and any future premiums and
proceeds related thereto shall become the absolute
property of the Association, subject only to the
unsatisfied rights of the holders of the securities
based on and backed by such trust or pool and to
the unsatisfied rights of any insured issuer with re-
spect to any mortgage insurance coverage.
‘‘(C) No State, local, or Federal law (except, with re-
spect to guarantees under this subsection, Federal law en-
acted expressly in limitation of this subsection after Octo-
ber 8, 1980, and, with respect to guarantees under sub-
section (h), Federal law enacted expressly in limitation of
subsection (h) after the date of enactment of the Home
Ownership Expansion and Opportunities Act of 2001),
shall preclude or limit the exercise by the Association of—
‘‘(i) its power to contract with the issuer, or the
qualified mortgage insurer on the terms stated in
subparagraph (B);
‘‘(ii) its rights to enforce any such contract with
the issuer or the qualified mortgage insurer; or
‘‘(iii) its ownership rights, as provided in sub-
paragraph (B), with respect to the mortgages consti-
tuting the trust or pool, against which the guaran-
teed securities are issued, and with respect to any
related primary mortgage insurance or supplemental
mortgage insurance coverage and any future pre-
miums and proceeds related thereto.’’.
(b) SUPPLEMENTAL MORTGAGE INSURANCE.—Sec-
tion 203 of the National Housing Act (12 U.S.C. 1709)
is amended by inserting after subsection (k) the following
new subsection:
‘‘(l) SUPPLEMENTAL MORTGAGE INSURANCE
FOR
QUALIFYING
PRIVATELY
INSURED
MORTGAGES.—The
Secretary is authorized to provide supplemental mortgage
insurance (as such term is defined in section 306(i)) in
connection with qualifying privately insured mortgages (as
such term is defined in such section), which shall be an
obligation of the Mutual Mortgage Insurance Fund estab-
lished under section 202.’’.
SEC. 5. GUARANTEE FEE.
Section 972 of the Higher Education Amendments of
1998 (Public Law 105–244; 112 Stat. 1837) is hereby re-
pealed.
SEC. 6. EFFECTIVE DATE.
(a) IN GENERAL.—The Government National Mort-
gage Association shall provide for the initial implementa-
tion of this Act by notice to its participating issuers.
(b) PUBLICATION.—The notice required under sub-
section (a) shall be published not later than 60 days after
the date of the enactment of this Act.
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