IIB 
109TH CONGRESS 
2D SESSION 
H. R. 5121 
IN THE SENATE OF THE UNITED STATES 
JULY 26, 2006 
Received; read twice and referred to the Committee on Banking, Housing, and 
Urban Affairs 
AN ACT 
To modernize and update the National Housing Act and 
enable the Federal Housing Administration to use risk- 
based pricing to more effectively reach underserved bor-
rowers, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Expanding American Homeownership Act of 2006’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title and table of contents. 
Sec. 2. Findings and purposes. 
Sec. 3. Maximum principal loan obligation. 
Sec. 4. Extension of mortgage term. 
Sec. 5. Cash investment requirement. 
Sec. 6. Temporary reinstatement of downpayment requirement in event of in-
creased defaults. 
Sec. 7. Mortgage insurance premiums. 
Sec. 8. Rehabilitation loans. 
Sec. 9. Discretionary action. 
Sec. 10. Insurance of condominiums. 
Sec. 11. Mutual Mortgage Insurance Fund. 
Sec. 12. Hawaiian home lands and Indian reservations. 
Sec. 13. Conforming and technical amendments. 
Sec. 14. Home equity conversion mortgages. 
Sec. 15. Conforming loan limit in disaster areas. 
Sec. 16. Participation of mortgage brokers and correspondent lenders. 
Sec. 17. Sense of Congress regarding technology for financial systems. 
Sec. 18. Savings provision. 
Sec. 19. Implementation. 
SEC. 2. FINDINGS AND PURPOSES. 
(a) FINDINGS.—The Congress finds that— 
(1) one of the primary missions of the Federal 
Housing Administration (FHA) single family mort-
gage insurance program is to reach borrowers who 
are underserved, or not served, by the existing con-
ventional mortgage marketplace; 
(2) the FHA program has a long history of in-
novation, which includes pioneering the 30-year self- 
amortizing mortgage and a safe-to-seniors reverse 
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mortgage product, both of which were once thought 
too risky to private lenders; 
(3) the FHA single family mortgage insurance 
program traditionally has been a major provider of 
mortgage insurance for home purchases; 
(4) the FHA mortgage insurance premium 
structure, as well as FHA’s product offerings, 
should be revised to reflect FHA’s enhanced ability 
to determine risk at the loan level and to allow FHA 
to better respond to changes in the mortgage mar-
ket; 
(5) during past recessions, including the oil- 
patch downturns in the mid-1980s, FHA remained 
a viable credit enhancer and was therefore instru-
mental in preventing a more catastrophic collapse in 
housing markets and a greater loss of homeowner 
equity; and 
(6) as housing price appreciation slows and in-
terest rates rise, many homeowners and prospective 
homebuyers will need the less-expensive, safer fi-
nancing alternative that FHA mortgage insurance 
provides. 
(b) PURPOSES.—The purposes of this Act are— 
(1) to provide flexibility to FHA to allow for 
the insurance of housing loans for low- and mod-
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erate-income homebuyers during all economic cycles 
in the mortgage market; 
(2) to modernize the FHA single family mort-
gage insurance program by making it more reflective 
of enhancements to loan-level risk assessments and 
changes to the mortgage market; and 
(3) to adjust the loan limits for the single fam-
ily mortgage insurance program to reflect rising 
house prices and the increased costs associated with 
new construction. 
SEC. 3. MAXIMUM PRINCIPAL LOAN OBLIGATION. 
Paragraph (2) of section 203(b) of the National 
Housing Act (12 U.S.C. 1709(b)(2)) is amended— 
(1) by striking subparagraphs (A) and (B) and 
inserting the following new subparagraphs: 
‘‘(A) not to exceed the lesser of— 
‘‘(i) in the case of a 1-family resi-
dence, the median 1-family house price in 
the area, as determined by the Secretary; 
and in the case of a 2-, 3-, or 4-family res-
idence, the percentage of such median 
price that bears the same ratio to such me-
dian price as the dollar amount limitation 
in effect under section 305(a)(2) of the 
Federal Home Loan Mortgage Corporation 
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Act (12 U.S.C. 1454(a)(2)) for a 2-, 3-, or 
4-family residence, respectively, bears to 
the dollar amount limitation in effect 
under such section for a 1-family resi-
dence; or 
‘‘(ii) the dollar amount limitation de-
termined under such section 305(a)(2) for 
a residence of the applicable size; 
except that the dollar amount limitation in ef-
fect for any area under this subparagraph may 
not be less than the greater of (I) the dollar 
amount limitation in effect under this section 
for the area on October 21, 1998, or (II) 65 
percent of the dollar limitation determined 
under such section 305(a)(2) for a residence of 
the applicable size; and 
‘‘(B) not to exceed 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.’’; 
(2) in the matter after and below subparagraph 
(B), by striking the second sentence (relating to a 
definition of ‘‘average closing cost’’) and all that fol-
lows through ‘‘title 38, United States Code’’; and 
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