FHA Downpayment Simplification Act of 2002
PL 107-326 (S.2239), enacted 12/04/2002

116 STAT. 2792 
PUBLIC LAW 107-326—DEC. 4, 2002 
Public Law 107-326 
107th Congress 
An Act 
Dec. 4, 2002 
To amend the National Housing Act to simplify the downpayment requirements 
[S 2239] 
^°^ FHA mortgage insurance for single family homebuyers. 
Be it enacted 
by the Senate 
and House of Representatives 
of 
FHA 
the United States of America in Congress 
assembled, 
Downpasrment 
Simplification 
SECTION 1. SHORT TITLE. 
^\jSC noi 
'^^^ ^^^ "^^y ^^ cited as the "FHA Downpayment Simplification 
note. 
Act of 2002". 
SEC. 2. DOWNPAYMENT SIMPLIFICATION. 
Section 203 of the National Housing Act (12 U.S.C. 1709) 
is amended— 
(1) in subsection (b)— 
(A) by striking "shall—" and inserting "shall comply 
with the following:"; 
(B) in paragraph (2)— 
(i) in subparagraph (A), in the matter that precedes 
clause (ii), by moving the margin 2 ems to the right; 
(ii) in the undesignated matter immediately fol-
lowing subparagraph (B)(iii)— 
(I) by striking the second £ind third sentences 
of such matter; 
(II) by striking the seventh sentence (relating 
to principal obligation) and all that follows through 
the end of the ninth sentence (relating to charges 
and fees); and 
(III) by striking the eleventh sentence (relating 
to disclosure notice) and edl that follows through 
the end of the last undesignated 
paragraph 
(relating to disclosure notice requirements); and 
(iii) by striking subparagraph (B) and inserting 
the following: 
"(B) not to exceed an amount equal to the sum o
f
— 
"(i) the amount of the mortgage insurance pre-
mium paid at the time the mortgage is insured; and 
"(ii) in the case o
f
— 
"(I) a mortgage for a property with 
an 
appraised value equal to or less than $50,000, 
98.75 percent of the appraised value of the prop-
erty; 
"(II) a mortgage for a property with Ein 
appraised value in excess of $50,000 but not in 
excess of $125,000, 97.65 percent of the appraised 
value of the property; 
PUBLIC LAW 107-326—DEC. 4, 2002 
116 STAT. 2793 
"(III) a mortgage for a property with an 
appraised value in excess of $125,000, 97.15 per-
cent of the appraised value of the property; or 
"(IV) notwithstanding subclauses (II) and (III), 
a mortgage for a property with an appraised value 
in excess of $50,000 that is located in an area 
of the State for which the average closing cost 
exceeds 2.10 percent of the average, for the State, 
of the sale price of properties located in the State 
for which mortgages have been executed, 97.75 
percent of the appraised value of the property."; 
(C) by transferring and inserting the text of paragraph 
(10)(B) after the period at the end of the first sentence 
of the undesignated paragraph that immediately follows 
paragraph (2)(B) (relating to the definition of "area"); and 
(D) by striking paragraph (10); and 
(2) by inserting after subsection (e), the following: 
"(f) DISCLOSURE OF OTHER MORTGAGE PRODUCTS.— 
"(1) IN GENERAL.—In conjunction with any loan insured 
under this section, an original lender shall provide to each 
prospective borrower a disclosure notice that provides a 1-
page analysis of mortgage products offered by that lender and 
for which the borrower would qualify. 
"(2) NOTICE.—^The notice required under paragraph (1) 
shall include— 
"(A) a generic analysis comparing the note rate (and 
associated interest payments), insurance premiums, and 
other costs and fees that would be due over the life of 
the loan for a loan insured by the Secretary under sub-
section (b) with the note rates, insurance premiums (if 
applicable), and other costs and fees that would be expected 
to be due if the mortgagor obtained instead other mortgage 
products offered by the lender and for which the borrower 
would qualify with a similar loan-to-value ratio in connec-
tion with a conventional mortgage (as that term is used 
in section 305(a)(2) of the Federal Home Loan Mortgage 
Corporation Act (12 U.S.C. 1454(a)(2)) or section 302(b)(2) 
of the Federal National Mortgage Association Charter Act 
(12 U.S.C. 1717(b)(2)), as applicable), assuming prevailing 
interest rates; and 
"(B) a statement regarding when the requirement of 
the mortgagor to pay the mortgage insurance premiums 
for a mortgage insured under this section would terminate, 
or a statement that the requirement shall terminate only 
if the mortgage is refinanced, paid off, or otherwise termi-
nated.". 
SEC. 3. CONFORMING AMENDMENTS. 
Section 245 of the National Housing Act (12 U.S.C. 1715z-
10) is amended— 
(1) in subsection (a), by striking ", or if the mortgagor" 
and all that follows through "case of veterans"; and 
(2) in subsection (b)(3), by striking ", or, if the" and all 
that follows through "for veterans,". 
SEC. 4. REPEAL OF GNMA GUARANTEE FEE INCREASE. 
Section 972 of the Higher Education Amendments of 1998 
(Public Law 105-244; 112 Stat. 1837) is hereby repealed. 
12 USC 1721 and 
note. 
116 STAT. 2794 
PUBLIC LAW 107-326—DEC. 4, 2002 
SEC. 5. INDEXING OF FHA MULTIFAMILY HOUSING LOAN LIMITS. 
(a) The National Housing Act (12 U.S.C. 1701 et seq.) is 
amended by inserting after section 206 the following new section 
206A (12 U.S.C. 1712A): 
12 use 1712a. 
"SEC. 206A. INDEXING OF FHA MULTIFAMILY HOUSING LOAN LIMITS. 
"(a) METHOD OF INDEXING.—The dollar amounts set forth in— 
"(1) section 207(c)(3)(A) (12 U.S.C. 1713(c)(3)(A)); 
"(2) section 213(b)(2)(A) (12 U.S.C. 1715e(b)(2)(A)); 
"(3) 
section 
220(d)(3)(B)(iii)(I) 
(12 
U.S.C. 
1715k(d)(3)(B)(iii)(I)); 
"(4) section 221(d)(3)(ii)(I) (12 U.S.C. 17151(d)(3)(ii)(I)); 
"(5) section 221(d)(4)(ii)(I) (12 U.S.C. 17151(d)(4)(ii)(I)); 
"(6) section 231(c)(2)(A) (12 U.S.C. 1715v(c)(2)(A)); and 
"(7) section 234(e)(3)(A) (12 U.S.C. 1715y(e)(3)(A)); 
(collectively hereinafter referred to as the "Dollar Amounts") shall 
be adjusted annually (commencing in 2004) on the effective date 
of the Federal Reserve Board's adjustment of the $400 figure in 
the Home Ownership and Equity Protection Act of 1994 (HOEPA). 
The adjustment of the Dollar Amounts shall be calculated using 
the percentage change in the Consumer Price Index for All Urban 
Consumers (CPI-U) as applied by the Federal Reserve Board for 
purposes of the above-described HOEPA adjustment. 
Federal Register, 
"(b) NOTIFICATION.—^The Federal Reserve Board on a timely 
publication. 
basis shall notify the Secretary, or his designee, in writing of 
the adjustment described in subsection (a) and of the effective 
date of such adjustment in order to permit the Secretary to under-
take publication in the Federal Register of corresponding adjust-
ments to the Dollar Amounts. The dollar amount of any adjustment 
shall be rounded to the next lower dollar.". 
(b) TECHNICAL 
AND 
CONFORMING CHANGES.—(1) Section 
207(c)(3) of the National Housing Act (12 U.S.C. 1713(c)(3)) is 
amended— 
(A) by inserting "(A)" after "(3)"; 
(B) by striking "and accept that the Secretary through 
and including "in this paragraph" and inserting in lieu thereof: 
"(B) the Secretary may, by regulation, increase any 
of the dollar amount limitations in subparagraph (A) (as 
such limitations may have been adjusted in accordance 
with section 206A of this Act)". 
(2) Section 213(b)(2) of the National Housing Act (12 U.S.C. 
1715e(b)(2)) is amended— 
(A) by inserting "(A)" following "(2)"; 
(B) by striking ": Provided further. That" the first time 
that it occurs, through and including "contained in this para-
graph" and inserting in lieu thereof: "; (B)(i) the Secretary 
may, by regulation, increase any of the dollar amount limita-
tions in subparagraph (A) (as such limitations may have been 
adjusted in accordance with section 206A of this Act)"; 
(C) by striking ": Provided further. That" the second time 
it occurs and inserting in lieu thereof: "; and (ii)"; 
(D) by striking ": And provided further. That" and inserting 
in lieu thereof: "; and (iii)"; 
(E) by striking "with this subsection without regard to 
the preceding proviso" at the end of that subsection and 
inserting in lieu thereof: "with this subparagraph (B)(i).". 
PUBLIC LAW 107-326—DEC. 4, 2002 
116 STAT. 2795 
(3) Section 220(d)(3)(B)(iii) of the National Housing Act (12 
U.S.C. 1715k(d)(3)(B)(iii)) is amended— 
(A) by inserting "(I)" following "(iii)"; 
(B) by striking "design; and except that" and inserting 
in lieu thereof: "design; and (II)"; 
(C) by striking "any of the foregoing dollar amount limita-
tions contained in this clause" and inserting in lieu thereof: 
"any of the dollar amount limitations in subparagraph (B)(iii)(I) 
(as such limitations may have been adjusted in accordance 
with section 206A of this Act)"; 
(D) by striking ": Provided, That" through and including 
"proviso" and inserting in lieu thereof: "with respect to dollar 
amount 
limitations 
applicable 
to 
rehabilitation 
projects 
described in subclause (II), the Secretary may, by regulation, 
increase the dollar amount limitations contained in subpara-
graph (B)(iii)(I) (as such limitations may have been adjusted 
in accordance with section 206A of this Act)"; 
(E) by striking ": Provided further" 
and inserting in lieu 
thereof: "; (III)"; 
(F) by striking "subparagraph" in the second proviso and 
inserting in lieu thereof "subparagraph (B)(iii)(I)"; 
(G) in the last proviso, by striking ": And provided 
further, 
That" and all that follows through and including "this clause" 
and inserting in lieu thereof: "; (IV) with respect to rehabilita-
tion projects involving not more than five family units, the 
Secretary may further increase any of the dollsir limitations 
which would otherwise apply to such projects". 
(4) Section 221(d)(3)(ii) of the National Housing Act (12 U.S.C. 
17151(d)(3)(ii)) is amended— 
(A) by inserting "(I)" following "(ii)"; 
(B) by striking "; and except that" and all that follows 
through and including "in this clause" and inserting in lieu 
thereof: "; (II) the Secretary may, by regulation, increase any 
of the dollar amount limitations in subclause (I) (as such limita-
tions may have been adjusted in accordance with section 206A 
of this Act)". 
(5) Section 221(d)(4)(ii) of the National Housing Act (12 U.S.C. 
17151(d)(4)(ii)) is amended— 
(A) by inserting "(I)" following "(ii)"; 
(B) by striking "; and except that" and all that follows 
through and including "in this clause" and inserting in lieu 
thereof: "; (II) the Secretary may, by regulation, increase any 
of the dollar limitations in subclause (I) (as such limitations 
may have been adjusted in accordance with section 206A of 
this Act)". 
(6) Section 231(c)(2) of the National Housing Act (12 U.S.C. 
1715v(c)(2)) is amended— 
(A) by inserting "(A)" following "(2)"; 
(B) by striking "; and except that" and all that follows 
through and including "in this paragraph" and inserting in 
lieu thereof: "; (B) the Secretary may, by regulation, increase 
any of the dollar limitations in subparagraph (A) (as such 
limitations may have been adjusted in accordance with section 
206AofthisAct)"; 
(C) by striking ": Provided, That" and all that follows 
through and including "of this section" and inserting in lieu 
thereof: "; (C) the Secretary may, by regulation, increase any 
116 STAT. 2796 
PUBLIC LAW 107-326—DEC. 4, 2002 
of the dollar limitations in subparagraph (A) (as such limita-
tions may have been adjusted in accordance with section 206A 
of this Act)". 
(7) Section 234(e)(3) of the National Housing Act (12 U.S.C. 
1715y(eX3)) is amended— 
(A) by inserting "(A)" following "(3)"; 
(B) by replacing "$38,025" with "$42,048"; "$42,120" with 
"$48,481"; "$50,310" with "$58,469"; "$62,010" with "$74,840"; 
"$70,200" with "$83,375"; "$43,875" with "$44,250"; "$49,140" 
with "$50,724"; "$60,255" with "$61,680"; "$75,465" with 
"$79,793"; and "$85,328" with "$87,588"; 
(C) by striking "; except that each" and all that follows 
through and including "contained in this paragraph" and 
inserting in lieu thereof: "; (B) the Secretary may, by regulation, 
increase any of the dollar limitations in subparagraph (A) (as 
such limitations may have been adjusted in accordance with 
section 206A of this Act)". 
Approved December 4, 2002. 
LEGISLATIVE HISTORY—S. 2239: 
CONGRESSIONAL RECORD, Vol. 148 (2002): 
Oct. 17, considered and passed Senate. 
Nov. 14, considered and passed House.