IB 
Union Calendar No. 582 
110TH CONGRESS 
2D SESSION 
H. R. 6694 
[Report No. 110–905] 
To revise the requirements for seller-financed downpayments for mortgages 
for single-family housing insured by the Secretary of Housing and Urban 
Development under title II of the National Housing Act and to authorize 
risk-based insurance premiums for certain mortgagors under such mort-
gages. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 31, 2008 
Mr. AL GREEN of Texas (for himself, Mr. GARY G. MILLER of California, Ms. 
WATERS, and Mr. SHAYS) introduced the following bill; which was re-
ferred to the Committee on Financial Services 
OCTOBER 2, 2008 
Additional sponsors: Mr. SIRES, Ms. MATSUI, Mr. TERRY, Mr. CARDOZA, Ms. 
LEE, Mr. TIBERI, Ms. EDDIE BERNICE JOHNSON of Texas, Mr. WILSON 
of Ohio, Mr. CLAY, Mr. CLEAVER, Mr. CARSON, Mr. ROTHMAN, Mr. 
PASCRELL, Ms. WASSERMAN SCHULTZ, Mr. BACA, Mr. DANIEL E. LUN-
GREN of California, Mr. LARSEN of Washington, Ms. ZOE LOFGREN of 
California, Mr. SHIMKUS, Mr. WALSH of New York, Mr. GORDON of Ten-
nessee, Mr. LINCOLN DIAZ-BALART of Florida, Ms. SUTTON, Mr. TOWNS, 
and Mr. BERMAN 
OCTOBER 2, 2008 
Reported from the Committee on Financial Services with an amendment 
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[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 July 31, 2008] 
A BILL 
To revise the requirements for seller-financed downpayments 
for mortgages for single-family housing insured by the 
Secretary of Housing and Urban Development under title 
II of the National Housing Act and to authorize risk- 
based insurance premiums for certain mortgagors under 
such 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 ‘‘FHA Seller-Financed 
Downpayment Reform and Risk-Based Pricing Authoriza-
tion Act of 2008’’. 
SEC. 2. FHA SELLER-FINANCED DOWNPAYMENT PROGRAM. 
Paragraph (9) of section 203(b) of the National Hous-
ing Act (12 U.S.C. 1709(b)(9)) is amended— 
(1) in subparagraph (C), by striking ‘‘In no case 
shall the funds required by subparagraph (A)’’ and 
inserting the following: ‘‘Except in the case of a mort-
gage described in subparagraph (D), the funds re-
quired by subparagraph (A) shall not’’; and 
(2) by adding at the end the following new sub-
paragraphs: 
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‘‘(D) 
EXCEPTIONS
TO
PROHIBITED 
SOURCES.—A mortgage described in this sub-
paragraph is any of the following mortgages: 
‘‘(i) A mortgage under which the mort-
gagor has a credit score equivalent to a 
FICO score of 680 or greater. 
‘‘(ii) A mortgage under which— 
‘‘(I) the mortgagor has a credit 
score equivalent to a FICO score of at 
least 620 but less than 680; and 
‘‘(II) mortgage insurance pre-
miums charged are established— 
‘‘(aa) at levels necessary, but 
no higher than needed, to allow 
such class of loans to be insured 
without resulting in a need for an 
appropriation for a credit sub-
sidy, which may exceed the max-
imum amount permitted under 
section 203(c)(2)(B); 
‘‘(bb) in the case of the single 
premium collected at the time of 
insurance, in an amount not ex-
ceeding 3.0 percent of the amount 
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of the original principal obliga-
tion of the mortgage; and 
‘‘(cc) in the case of the an-
nual premium for a mortgage 
under which the mortgagor has a 
credit score equivalent to a FICO 
score of at least 640 but less than 
680, in an amount not exceeding 
1.25 percent of the remaining in-
sured principal balance (exclud-
ing the portion of the remaining 
balance attributable to the pre-
mium collected at the time of in-
surance and without taking into 
account delinquent payments or 
prepayments). 
‘‘(iii) For mortgages insured in fiscal 
year 2010 or thereafter, a mortgage under 
which the mortgagor has a credit score 
equivalent to a FICO score of 619 or less, 
but only if the Secretary certifies that such 
loans can be insured without resulting in a 
need for an appropriation for a credit sub-
sidy. For such mortgages, the Secretary 
may charge premiums at levels authorized 
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under items (bb) and (cc) of clause (ii)(II) 
and may establish a credit or FICO score 
limitation or impose such other require-
ments as are necessary to meet the condi-
tions for certification under this clause. 
‘‘(E) REQUIREMENTS
FOR
DOWNPAYMENT 
ASSISTANCE
ENTITIES.—Any 
entity 
partici-
pating in a program that provides downpayment 
assistance for a mortgage described in subpara-
graph (D) pursuant to the exception under sub-
paragraph (C), which programs shall include 
programs of governmental agencies and private 
nonprofit organizations, shall, before the closing 
for the loan involved in the mortgage in connec-
tion with which such assistance is provided— 
‘‘(i) offer to make available, to the 
mortgagor, counseling regarding the respon-
sibilities and financial management in-
volved in homeownership; 
‘‘(ii) if such offer is accepted by the 
mortgagor, make such counseling available 
for the mortgagor; and 
‘‘(iii) in the case of any such entity 
that is a private nonprofit organization, 
implement a conflict of interest policy that 
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prohibits directors, officers, employees, and 
immediate family members from receiving 
financial benefits from any entity that is 
providing the program with goods or serv-
ices other than the homeownership assist-
ance program entity itself or its wholly 
owned affiliate. 
‘‘(F) CIVIL MONEY PENALTIES FOR IMPROP-
ERLY INFLUENCING APPRAISALS.—The Secretary 
may impose a civil money penalty, in the same 
manner and to the same extent as for a violation 
under section 536, for compensating, instructing, 
inducing, coercing, or intimidating any person 
who conducts an appraisal of the property to be 
subject to a mortgage described in subparagraph 
(D) and under which any part of the funds re-
quired by subparagraph (A) are provided to a 
party described in subparagraph (C), or at-
tempting to compensate, instruct, induce, coerce, 
or intimidate such a person, for the purpose of 
causing the appraised value assigned to the 
property under the appraisal to be based on any 
other factor other than the independent judgment 
of such person exercised in accordance with ap-
plicable professional standards.’’. 
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SEC. 3. LIMITATIONS ON RISK-BASED PRICING. 
Section 203(c) of the National Housing Act (12 U.S.C. 
1709(c)) is amended by adding at the end the following new 
paragraphs: 
‘‘(3) LIMITATIONS
ON
RISK-BASED
PRICING.— 
Except as provided in paragraph (4), the Secretary 
of Housing and Urban Development shall not take 
any action on or after October 1, 2008, to implement 
or carry out— 
‘‘(A) risk-based premiums, which are de-
signed for mortgage lenders to offer borrowers an 
FHA-insured product that provides a range of 
mortgage insurance premium pricing, based on 
the risk that the insurance contract represents, 
as set forth in the Notice published in the Fed-
eral Register on May 13, 2008 (Vol. 73, No. 93, 
Pages 27703 through 27711) (effective July 14, 
2008); or 
‘‘(B) any other risk-based premium product 
related to the insurance of any mortgage on a 
single family residence under this title, where the 
premium price for such new product is based in 
whole or in part on a borrower’s Decision Credit 
Score, as that term is defined in the Notice re-
ferred to in subparagraph (A), or any successor 
thereto. 
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‘‘(4) FLEXIBLE
RISK-BASED
PREMIUMS.—Not-
withstanding paragraph (3) of this subsection and 
section 2133 of the FHA Modernization Act of 2008 
(Public Law 110–289): 
‘‘(A) AUTHORITY.—In the case only of a 
mortgage under which the mortgagor has a credit 
score equivalent to a FICO score of less than 600, 
the Secretary may establish a mortgage insur-
ance premium structure involving a single pre-
mium payment collected prior to the insurance 
of the mortgage or annual payments (which may 
be collected on a periodic basis), or both, under 
which the rate of premiums for such a mortgage 
may vary according to the credit risk associated 
with the mortgagor and the rate of any annual 
premium for such a mortgage may vary accord-
ing to such credit risk during the mortgage term 
as long as the basis for determining the variable 
rate is established before the execution of the 
mortgage. The Secretary may change a premium 
structure established under this subparagraph 
but only to the extent that such change is not ap-
plied to any mortgage already executed. 
‘‘(B) ESTABLISHMENT AND ALTERATION OF 
PREMIUM
STRUCTURE.—A premium structure 
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shall be established or changed under subpara-
graph (A) only by providing notice to mortga-
gees and to the Congress, at least 30 days before 
the premium structure is established or changed. 
‘‘(C) ANNUAL
REPORT
REGARDING
PRE-
MIUMS.—The Secretary shall submit a report to 
the Congress annually setting forth the rate 
structures and rates established and altered pur-
suant to this paragraph during the preceding 12- 
month period and describing how such rates were 
determined. 
‘‘(D) 
CONSIDERATIONS
FOR
PREMIUM 
STRUCTURE.—When establishing and collecting 
premiums for mortgages insured under a pre-
mium structure established under this para-
graph, the Secretary shall consider the following: 
‘‘(i) The effect of the proposed pre-
miums or structure on the Secretary’s abil-
ity to meet the operational goals of the Mu-
tual Mortgage Insurance Fund as provided 
in section 202(a). 
‘‘(ii) Underwriting variables. 
‘‘(iii) The extent to which new pricing 
under the proposed premiums or structure 
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has potential for acceptance in the private 
market. 
‘‘(iv) The administrative capability of 
the Secretary to administer the proposed 
premiums or structure. 
‘‘(v) The effect of the proposed pre-
miums or structure on the Secretary’s abil-
ity to maintain the availability of mortgage 
credit and provide stability to mortgage 
markets. 
‘‘(E) AUTHORITY TO BASE PREMIUM PRICES 
ON PRODUCT RISK.— 
‘‘(i) AUTHORITY.—In establishing pre-
mium rates under this title, the Secretary 
may provide for variations in such rates ac-
cording to the credit risk associated with the 
type of mortgage product that is being in-
sured under this title, which may include 
providing that premium rates differ between 
fixed-rate mortgages and adjustable-rate 
mortgages insured pursuant to section 251, 
between mortgages for condominiums and 
mortgages for other interests in properties, 
between mortgages having different ratios of 
the principal obligation under the mortgage 
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to the appraised value of the property, and 
between such other products as the Sec-
retary considers appropriate. 
‘‘(F) PAYMENT INCENTIVES.— 
‘‘(i) 
AUTHORITY.—With 
respect 
to 
mortgages for which insured the Secretary 
is authorized to establish a premium struc-
ture under this paragraph, the Secretary 
shall provide that the payment incentive 
under subparagraph (ii) applies upon the 
expiration of the 5-year period beginning 
upon the time of insurance of such a mort-
gage, and the Secretary may provide that 
the payment incentive under clause (ii) ap-
plies upon the expiration of the 3-year pe-
riod beginning upon the time of insurance 
of such a mortgage. The Secretary may 
limit such discretionary authority to mort-
gages prepaid or paid in full during the 2- 
year period beginning 3 years after the time 
of insurance of such a mortgage. 
‘‘(ii) PAYMENT
INCENTIVE.—In the 
case of any mortgage to which the payment 
incentive under this subparagraph applies, 
if, during the period referred to in clause 
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wise may be established and collected 
notwithstanding such subparagraph. 
‘‘(G) OPTION
FOR
HIGHER
ANNUAL
PRE-
MIUM
IN
LIEU
OF
HIGHER
UP-FRONT
PRE-
MIUM.—In the case only of mortgages for which 
the Secretary is authorized to establish a pre-
mium structure under this paragraph, notwith-
standing paragraph (2)(B) of this subsection, the 
Secretary may establish and collect, for a period 
not exceeding the first 5 years of the term of the 
mortgage, annual premium payments in an 
amount not exceeding 0.75 percent of the re-
maining insured principal balance of the mort-
gage (excluding the portion of the remaining bal-
ance attributable to the premium collected under 
paragraph (2)(A) and without taking into ac-
count delinquent payments or prepayments), ex-
cept that— 
‘‘(i) the Secretary may utilize such au-
thority only for such classes of mortgagors 
that the Secretary determines would other-
wise be subject to a single premium pay-
ment collected at the time of insurance ex-
ceeding 2.25 percent of the amount of the 
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original insured principal obligation of the 
mortgage; and 
‘‘(ii) for such mortgages, the Secretary 
may not establish or collect a single pre-
mium payment collected at the time of in-
surance exceeding 2.25 percent of such 
original insured principal obligation.’’. 
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Union Calendar No. 582 
110TH CONGRESS 
2D SESSION 
H. R. 6694 
[Report No. 110–905] 
A BILL 
To revise the requirements for seller-financed 
downpayments for mortgages for single-family 
housing insured by the Secretary of Housing and 
Urban Development under title II of the Na-
tional Housing Act and to authorize risk-based 
insurance premiums for certain mortgagors 
under such mortgages. 
OCTOBER 2, 2008 
Reported from the Committee on Financial Services with 
an amendment 
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