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TheWeekInCongress.com (TM) Week Ending September 21, 2007
H.R.1852 To modernize and update the National Housing Act and enable the Federal Housing Administration to use risk-based pricing to more effectively reach underserved borrowers, and for other purposes.
Improving Federal mortgage assistance to underserved borrowers is the key to the bill’s intent and it does so through an amendment to the National Housing Act that governs such activities.
One congressional finding in particular applies to the current US housing market and that is a history of continued mortgage lending during economic downturns when private mortgagers found risk to be too high. Specifically, when the expected drop in housing prices meet an increase in interest rates, homebuyers need the less expensive, safer financing that the FHA mortgage insurance offers.
The bill aims to provide more flexibility to the FHA to insure housing loans for low- and moderate-income buyers during the economic cycles, modernize the FHA single family program by better reflecting enhancements in loan-level risk assessments and changes to the mortgage market and adjust loan limits for the single family program to reflect rising house prices and the increasing costs of new construction.
Here is general information:
The bill:
Increases FHA single family mortgage loan limits; Extends the maximum loan term on FHA single family loans from 35 to 40 years; Simplifies the FHA single family statutory loan-to-value (LTV) limits to permit loans up to 97.75% of appraised value plus the upfront mortgage premium; Defines zero- and lower down payment borrowers as first-time homebuyers who do not comply with the 97.75 LTV limit or the 3% cash down requirement; Defines a standard risk borrower as having a 560 or higher FICO score and a Higher risk borrower as one with a FICO below 560 and directs HUD to underwrite Higher risk borrowers. Higher risk upfront cap is raised to 3%; HUD is authorized to require pre-purchase counseling for zero and lower down payment borrowers and higher risk borrowers; HUD must report annually on rates of default and foreclosure of zero and lower down payment borrowers; Permits an increase in single family loan limits up to 35% if a portion of the space will be used for a licensed child care facility; Future condominium loans will limit financing for multifamily blanket mortgages on FHA insured condominium projects; Requires HUD to guarantee that the Mutual Mortgage Insurance Fund remains solvent; Makes single family mortgages insured on Hawaiian and native American reservations; Eliminates the mortgage volume cap on FHA reverse mortgages; Gives mortgage brokers and correspondent lenders the option of posting a $75,000 surety bond in lieu of the existing net worth and annual audit requirements for participation the the single family loan program; HUD can increase FHA single family loan limits to 100% in presidentially-declared disaster areas; FHA mortgage servicers must make required escrow payments on deadline to avoid penalty, and the penalties may be increased to reimburse borrowers, pay attorney fees; Requires Social Security card with photo ID before FHA can insure a loan to a borrower; Establishes a pilot program to provide alternative credit rating information for borrowers with insufficient credit histories; Increases maximum multifamily loan limits in high cost areas from 140% to 215% of the basic loan limit;
Details on bill specifics can be read below under “MORE INFORMATION”
Sponsor: Rep. Maxine Waters (D-CA-35th) Vote: The bill passed the House 348 to 72 September 17, 2007 RC 876. The Minority motion to recommit the bill failed 209 to 216 RC 875. Cost to the taxpayers: “CBO estimates that enacting H.R. 1852 would increase direct spending by $16 million in 2007. CBO also estimates that implementing H.R. 1852 would result in a net increase in offsetting collections (a credit against discretionary spending) of $313 million in 2008 and $628 million over the 2008-2012 period.”
The Minority motion to recommit Amounts made available pursuant to subparagraph (A) for affordable housing fund referred to in such subparagraph may not be used for, or on behalf of, any individual or household unless the individual provides, or, in the case of a household, all adult members of the household provide, personal identification in one of the following forms: Social Security card State drivers license Passport U.S. Citizenship and Immigration Service ID
The motion sponsor, Rep Price (R-GA) explained the motion, “
Across the country, whether it's Denver, where in 2006 there were an estimated 20,000 illegal
immigrants holding FHA insured loans, or L.A. or Atlanta, where similar activity occurs, illegal
immigrants are being given unprecedented access to taxpayer benefits and taxpayer money.
In many of these cases of FHA loans, the documents submitted with their applications later proved
to be false, resident alien numbers that were never issued, or Social Security numbers belonging to
other people, or W-2 forms that were fabricated. In the case of financial institutions, minimal documents
are required by their regulators to establish a new customer's identity to open accounts.”
“This motion to recommit would require that the Federal official responsible for administering the Housing
Trust Fund ensure that any assistance provided from the Affordable Housing Fund must require that all
adults are legal residents of the United States….Recipients may use one of three different forms of
identification. These forms are considered the most secure types of identification because they're harder
to forge or to duplicate. They're all issued by a government agency which has more checks and balances,
more checks and balances preventing illegal immigrants or criminals or terrorists from obtaining these
documents”
Opponents to the bill noted that the Affordable Housing Trust Fund that the Motion applies to has not yet
be created and, if it is created in the future, there would be plenty of time to offer the motion if the future
bill does not include ID requirements. Further, the motion was offered with the requirement to return the
bill promptly rather than forthwith. The wording would allow for the bill to remain in committee and take
on unlimited amendments, thereby creating a filibuster that could keep the bill off the floor indefinitely,
opposition said.
The Minority motion to recommit the bill failed 209 to 216 RC 875.
Earmark Certification: Hon. BARNEY
FRANK, Hon. SPENCER BACHUS, DEAR GENTLEMEN: I am requesting the legislative language found in Section 28 of H.R. 1852 for the City of Ypsilanti, Michigan in fiscal year 2008. The entity that would benefit from this provision is the City of Ypsilanti, located at City Hall, One South Huron Street, Ypsilanti, MI 48197. The provision would allow HUD to sell the Parkview Apartments, located at 596 S. Hamilton Street, Ypsilanti, Michigan 48197, at a below market rate. I certified that neither I nor my spouse has any financial interested in this project. Sincerely, John D. Dingell, Member of Congress. . ## All Rights Reserved. © 2007 TheWeekInCongress.com(TM) No reproduction, language translation or distribution without written permission from TheWeekInCongress.com.(TM)
MORE INFORMATION CONGRESSIONAL BUDGET OFFICE REPORT PURPOSE, SUMMARY AND BACKGROUND (From the Committee Report) COMMITTEE VOTES ON COMMITTEE AMENDMENTS AMENDMENTS-House
COMMITTEE VOTES ON AMENDMENTS COMMITTEE CONSIDERATIONThe Committee on Financial Services met in open session on May 2, 2007, and on May 3, 2007, ordered H.R. 1852, the Expanding American Homeownership Act of 2007, as amended, favorably reported to the House by a record vote of 45 yeas and 19 nays. COMMITTEE VOTESClause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion to report legislation and amendments thereto. A motion by Mr. Frank to report the bill, as amended, to the House with a favorable recommendation was agreed to by a record vote of 45 yeas and 19 nays (Record vote FC-46). The names of Members voting for and against follow: RECORD VOTE NO. FC-46 ---------------------------------------------------------------------- Representative Aye Nay Present Representative Aye Nay Present ---------------------------------------------------------------------- Mr. Frank X Mr. Bachus X Mr. Kanjorski X Mr. Baker X Ms. Waters X Ms. Pryce (OH) X Mrs. Maloney X Mr. Castle X Mr. Gutierrez X Mr. King (NY) X Ms. Velazquez X Mr. Royce X Mr. Watt X Mr. Lucas X Mr. Ackerman Mr. Paul Ms. Carson X Mr. Gillmor X Mr. Sherman X Mr. LaTourette X Mr. Meeks X Mr. Manzullo X Mr. Moore (KS) X Mr. Jones Mr. Capuano X Mrs. Biggert X Mr. Hinojosa X Mr. Shays X Mr. Clay X Mr. Miller (CA) X Mrs. McCarthy X Mrs. Capito X Mr. Baca X Mr. Feeney X Mr. Lynch X Mr. Hensarling X Mr. Miller (NC) X Mr. Garrett (NJ) X Mr. Scott X Ms. Brown-Waite (FL) X Mr. Green X Mr. Barrett (SC) X Mr. Cleaver X Mr. Gerlach X Ms. Bean X Mr. Pearce Ms. Moore (WI) X Mr. Neugebauer X Mr. Davis (TN) X Mr. Price (GA) X Mr. Sires X Mr. Davis (KY) X Mr. Hodes X Mr. McHenry Mr. Ellison X Mr. Campbell X Mr. Klein X Mr. Putnam X Mr. Mahoney (FL) X Mrs. Bachmann X Mr. Wilson X Mr. Roskam X Mr. Perlmutter X Mr. Marchant X Mr. Murphy X Mr. Donnelly X Mr. Wexler X Mr. Marshall X Mr. Boren X ---------------------------------------------------------------------- The following amendments were disposed of by record votes. The names of Members voting for and against follow: An amendment by Mr. Garrett, No. 9, regarding temporary reinstatement of downpayment and premium requirements in event of increased defaults, was not agreed to by a record vote of 29 yeas and 34 nays (Record vote FC-38): RECORD VOTE NO. FC-38 ---------------------------------------------------------------------- Representative Aye Nay Present Representative Aye Nay Present ---------------------------------------------------------------------- Mr. Frank X Mr. Bachus X Mr. Kanjorski Mr. Baker X Ms. Waters X Ms. Pryce (OH) X Mrs. Maloney X Mr. Castle X Mr. Gutierrez X Mr. King (NY) X Ms. Velazquez Mr. Royce X Mr. Watt X Mr. Lucas X Mr. Ackerman X Mr. Paul Ms. Carson X Mr. Gillmor X Mr. Sherman X Mr. LaTourette X Mr. Meeks X Mr. Manzullo X Mr. Moore (KS) X Mr. Jones X Mr. Capuano X Mrs. Biggert X Mr. Hinojosa X Mr. Shays X Mr. Clay X Mr. Miller (CA) X Mrs. McCarthy X Mrs. Capito X Mr. Baca X Mr. Feeney Mr. Lynch X Mr. Hensarling X Mr. Miller (NC) X Mr. Garrett (NJ) X Mr. Scott X Ms. Brown-Waite (FL) X Mr. Green X Mr. Barrett (SC) X Mr. Cleaver Mr. Gerlach X Ms. Bean X Mr. Pearce X Ms. Moore (WI) X Mr. Neugebauer X Mr. Davis (TN) X Mr. Price (GA) X Mr. Sires X Mr. Davis (KY) X Mr. Hodes X Mr. McHenry X Mr. Ellison X Mr. Campbell Mr. Klein X Mr. Putnam X Mr. Mahoney (FL) X Mrs. Bachmann X Mr. Wilson X Mr. Roskam X Mr. Perlmutter X Mr. Marchant X Mr. Murphy X Mr. Donnelly X Mr. Wexler X Mr. Marshall X Mr. Boren X ---------------------------------------------------------------------- An amendment by Mr. Frank, No. 15, regarding use of FHA savings for costs of mortgage insurance, housing counseling, and affordable housing grant fund, was agreed to by a record vote of 37 yeas and 15 nays (Record vote FC-39): RECORD VOTE NO. FC-39 ---------------------------------------------------------------------- Representative Aye Nay Present Representative Aye Nay Present ---------------------------------------------------------------------- Mr. Frank X Mr. Bachus X Mr. Kanjorski X Mr. Baker X Ms. Waters Ms. Pryce (OH) X Mrs. Maloney X Mr. Castle X Mr. Gutierrez Mr. King (NY) X Ms. Velazquez X Mr. Royce X Mr. Watt X Mr. Lucas X Mr. Ackerman Mr. Paul Ms. Carson X Mr. Gillmor Mr. Sherman X Mr. LaTourette X Mr. Meeks X Mr. Manzullo Mr. Moore (KS) X Mr. Jones Mr. Capuano X Mrs. Biggert X Mr. Hinojosa Mr. Shays Mr. Clay X Mr. Miller (CA) X Mrs. McCarthy X Mrs. Capito X Mr. Baca Mr. Feeney X Mr. Lynch X Mr. Hensarling X Mr. Miller (NC) X Mr. Garrett (NJ) X Mr. Scott X Ms. Brown-Waite (FL) X Mr. Green X Mr. Barrett (SC) X Mr. Cleaver X Mr. Gerlach X Ms. Bean X Mr. Pearce Ms. Moore (WI) X Mr. Neugebauer Mr. Davis (TN) X Mr. Price (GA) X Mr. Sires X Mr. Davis (KY) X Mr. Hodes X Mr. McHenry Mr. Ellison Mr. Campbell X Mr. Klein X Mr. Putnam Mr. Mahoney (FL) X Mrs. Bachmann X Mr. Wilson X Mr. Roskam X Mr. Perlmutter X Mr. Marchant Mr. Murphy Mr. Donnelly X Mr. Wexler X Mr. Marshall X Mr. Boren X ---------------------------------------------------------------------- An amendment by Mrs. Biggert, No. 16, regarding use of FHA savings for Title II single family mortgage insurance programs, was not agreed to by a record vote of 22 yeas and 38 nays (Record vote FC-40): RECORD VOTE NO. FC-40 ---------------------------------------------------------------------- Representative Aye Nay Present Representative Aye Nay Present ---------------------------------------------------------------------- Mr. Frank X Mr. Bachus X Mr. Kanjorski X Mr. Baker X Ms. Waters X Ms. Pryce (OH) X Mrs. Maloney X Mr. Castle X Mr. Gutierrez X Mr. King (NY) X Ms. Velazquez X Mr. Royce X Mr. Watt X Mr. Lucas X Mr. Ackerman Mr. Paul Ms. Carson X Mr. Gillmor Mr. Sherman X Mr. LaTourette X Mr. Meeks X Mr. Manzullo X Mr. Moore (KS) X Mr. Jones Mr. Capuano X Mrs. Biggert X Mr. Hinojosa X Mr. Shays X Mr. Clay X Mr. Miller (CA) X Mrs. McCarthy X Mrs. Capito X Mr. Baca X Mr. Feeney Mr. Lynch X Mr. Hensarling X Mr. Miller (NC) X Mr. Garrett (NJ) X Mr. Scott X Ms. Brown-Waite (FL) X Mr. Green X Mr. Barrett (SC) X Mr. Cleaver X Mr. Gerlach X Ms. Bean X Mr. Pearce Ms. Moore (WI) X Mr. Neugebauer X Mr. Davis (TN) X Mr. Price (GA) X Mr. Sires X Mr. Davis (KY) X Mr. Hodes X Mr. McHenry Mr. Ellison X Mr. Campbell X Mr. Klein X Mr. Putnam Mr. Mahoney (FL) X Mrs. Bachmann X Mr. Wilson X Mr. Roskam X Mr. Perlmutter X Mr. Marchant Mr. Murphy Mr. Donnelly X Mr. Wexler X Mr. Marshall X Mr. Boren X ---------------------------------------------------------------------- An amendment by Mr. Bachus, No. 17, limiting housing fund increases, was not agreed to by a record vote of 26 yeas and 36 nays (Record vote FC-41): RECORD VOTE NO. FC-41 ---------------------------------------------------------------------- Representative Aye Nay Present Representative Aye Nay Present ---------------------------------------------------------------------- Mr. Frank X Mr. Bachus X Mr. Kanjorski X Mr. Baker X Ms. Waters X Ms. Pryce (OH) X Mrs. Maloney X Mr. Castle X Mr. Gutierrez X Mr. King (NY) X Ms. Velazquez X Mr. Royce X Mr. Watt X Mr. Lucas X Mr. Ackerman Mr. Paul Ms. Carson X Mr. Gillmor Mr. Sherman X Mr. LaTourette X Mr. Meeks X Mr. Manzullo X Mr. Moore (KS) X Mr. Jones Mr. Capuano X Mrs. Biggert X Mr. Hinojosa X Mr. Shays Mr. Clay X Mr. Miller (CA) X Mrs. McCarthy X Mrs. Capito X Mr. Baca X Mr. Feeney X Mr. Lynch X Mr. Hensarling X Mr. Miller (NC) X Mr. Garrett (NJ) X Mr. Scott X Ms. Brown-Waite (FL) X Mr. Green X Mr. Barrett (SC) X Mr. Cleaver X Mr. Gerlach X Ms. Bean X Mr. Pearce Ms. Moore (WI) X Mr. Neugebauer X Mr. Davis (TN) X Mr. Price (GA) X Mr. Sires X Mr. Davis (KY) X Mr. Hodes X Mr. McHenry Mr. Ellison X Mr. Campbell X Mr. Klein X Mr. Putnam X Mr. Mahoney (FL) X Mrs. Bachmann X Mr. Wilson X Mr. Roskam X Mr. Perlmutter X Mr. Marchant X Mr. Murphy X Mr. Donnelly X Mr. Wexler X Mr. Marshall X Mr. Boren X ---------------------------------------------------------------------- An amendment by Mr. Price (GA), No. 21, requiring offsets, was not agreed to by a record vote of 27 yeas and 37 nays (Record vote FC-42): RECORD VOTE NO. FC-42 ---------------------------------------------------------------------- Representative Aye Nay Present Representative Aye Nay Present ---------------------------------------------------------------------- Mr. Frank X Mr. Bachus X Mr. Kanjorski X Mr. Baker X Ms. Waters X Ms. Pryce (OH) X Mrs. Maloney X Mr. Castle X Mr. Gutierrez X Mr. King (NY) X Ms. Velazquez X Mr. Royce X Mr. Watt X Mr. Lucas X Mr. Ackerman Mr. Paul Ms. Carson X Mr. Gillmor X Mr. Sherman X Mr. LaTourette X Mr. Meeks X Mr. Manzullo X Mr. Moore (KS) X Mr. Jones Mr. Capuano X Mrs. Biggert X Mr. Hinojosa X Mr. Shays X Mr. Clay X Mr. Miller (CA) X Mrs. McCarthy X Mrs. Capito X Mr. Baca X Mr. Feeney X Mr. Lynch X Mr. Hensarling X Mr. Miller (NC) X Mr. Garrett (NJ) X Mr. Scott X Ms. Brown-Waite (FL) X Mr. Green X Mr. Barrett (SC) X Mr. Cleaver X Mr. Gerlach X Ms. Bean X Mr. Pearce Ms. Moore (WI) X Mr. Neugebauer X Mr. Davis (TN) X Mr. Price (GA) X Mr. Sires X Mr. Davis (KY) X Mr. Hodes X Mr. McHenry Mr. Ellison X Mr. Campbell X Mr. Klein X Mr. Putnam X Mr. Mahoney (FL) X Mrs. Bachmann X Mr. Wilson X Mr. Roskam X Mr. Perlmutter X Mr. Marchant X Mr. Murphy X Mr. Donnelly X Mr. Wexler X Mr. Marshall X Mr. Boren X ---------------------------------------------------------------------- An amendment by Mr. Price (GA), No. 22, regarding protection of senior citizen homeowners, was not agreed to by a record vote of 28 yeas and 36 nays (Record note FC-43): RECORD VOTE NO. FC-43 ---------------------------------------------------------------------- Representative Aye Nay Present Representative Aye Nay Present ---------------------------------------------------------------------- Mr. Frank X Mr. Bachus X Mr. Kanjorski X Mr. Baker X Ms. Waters X Ms. Pryce (OH) X Mrs. Maloney X Mr. Castle X Mr. Gutierrez X Mr. King (NY) X Ms. Velazquez X Mr. Royce X Mr. Watt X Mr. Lucas X Mr. Ackerman Mr. Paul Ms. Carson X Mr. Gillmor X Mr. Sherman X Mr. LaTourette X Mr. Meeks X Mr. Manzullo X Mr. Moore (KS) X Mr. Jones Mr. Capuano X Mrs. Biggert X Mr. Hinojosa X Mr. Shays X Mr. Clay X Mr. Miller (CA) X Mrs. McCarthy X Mrs. Capito X Mr. Baca X Mr. Feeney X Mr. Lynch X Mr. Hensarling X Mr. Miller (NC) X Mr. Garrett (NJ) X Mr. Scott X Ms. Brown-Waite (FL) X Mr. Green X Mr. Barrett (SC) X Mr. Cleaver X Mr. Gerlach X Ms. Bean X Mr. Pearce Ms. Moore (WI) X Mr. Neugebauer X Mr. Davis (TN) X Mr. Price (GA) X Mr. Sires X Mr. Davis (KY) X Mr. Hodes X Mr. McHenry Mr. Ellison X Mr. Campbell X Mr. Klein X Mr. Putnam X Mr. Mahoney (FL) X Mrs. Bachmann X Mr. Wilson X Mr. Roskam X Mr. Perlmutter X Mr. Marchant X Mr. Murphy X Mr. Donnelly X Mr. Wexler X Mr. Marshall X Mr. Boren X ---------------------------------------------------------------------- An amendment by Mr. Garrett, No. 23, regarding suspension of contributions, was not agreed to by a record vote of 28 yeas and 36 nays (Record vote FC-44): RECORD VOTE NO. FC-44 ---------------------------------------------------------------------- Representative Aye Nay Present Representative Aye Nay Present ---------------------------------------------------------------------- Mr. Frank X Mr. Bachus X Mr. Kanjorski X Mr. Baker X Ms. Waters X Ms. Pryce (OH) X Mrs. Maloney X Mr. Castle X Mr. Gutierrez X Mr. King (NY) X Ms. Velazquez X Mr. Royce X Mr. Watt X Mr. Lucas X Mr. Ackerman Mr. Paul Ms. Carson X Mr. Gillmor X Mr. Sherman X Mr. LaTourette X Mr. Meeks X Mr. Manzullo X Mr. Moore (KS) X Mr. Jones Mr. Capuano X Mrs. Biggert X Mr. Hinojosa X Mr. Shays X Mr. Clay X Mr. Miller (CA) X Mrs. McCarthy X Mrs. Capito X Mr. Baca X Mr. Feeney X Mr. Lynch X Mr. Hensarling X Mr. Miller (NC) X Mr. Garrett (NJ) X Mr. Scott X Ms. Brown-Waite (FL) X Mr. Green X Mr. Barrett (SC) X Mr. Cleaver X Mr. Gerlach X Ms. Bean X Mr. Pearce Ms. Moore (WI) X Mr. Neugebauer X Mr. Davis (TN) X Mr. Price (GA) X Mr. Sires X Mr. Davis (KY) X Mr. Hodes X Mr. McHenry Mr. Ellison X Mr. Campbell X Mr. Klein X Mr. Putnam X Mr. Mahoney (FL) X Mrs. Bachmann X Mr. Wilson X Mr. Roskam X Mr. Perlmutter X Mr. Marchant X Mr. Murphy X Mr. Donnelly X Mr. Wexler X Mr. Marshall X Mr. Boren X ---------------------------------------------------------------------- An amendment by Mr. Biggert, No. 24, an amendment in the na- ture of a substitute, was not agreed to by a record vote of 28 yeas and 36 nays (Record vote FC-45): RECORD VOTE NO. FC-45 ---------------------------------------------------------------------- Representative Aye Nay Present Representative Aye Nay Present ---------------------------------------------------------------------- Mr. Frank X Mr. Bachus X Mr. Kanjorski X Mr. Baker X Ms. Waters X Ms. Pryce (OH) X Mrs. Maloney X Mr. Castle X Mr. Gutierrez X Mr. King (NY) X Ms. Velazquez X Mr. Royce X Mr. Watt X Mr. Lucas X Mr. Ackerman Mr. Paul Ms. Carson X Mr. Gillmor X Mr. Sherman X Mr. LaTourette X Mr. Meeks X Mr. Manzullo X Mr. Moore (KS) X Mr. Jones Mr. Capuano X Mrs. Biggert X Mr. Hinojosa X Mr. Shays X Mr. Clay X Mr. Miller (CA) X Mrs. McCarthy X Mrs. Capito X Mr. Baca X Mr. Feeney X Mr. Lynch X Mr. Hensarling X Mr. Miller (NC) X Mr. Garrett (NJ) X Mr. Scott X Ms. Brown-Waite (FL) X Mr. Green X Mr. Barrett (SC) X Mr. Cleaver X Mr. Gerlach X Ms. Bean X Mr. Pearce Ms. Moore (WI) X Mr. Neugebauer X Mr. Davis (TN) X Mr. Price (GA) X Mr. Sires X Mr. Davis (KY) X Mr. Hodes X Mr. McHenry Mr. Ellison X Mr. Campbell X Mr. Klein X Mr. Putnam X Mr. Mahoney (FL) X Mrs. Bachmann X Mr. Wilson X Mr. Roskam X Mr. Perlmutter X Mr. Marchant X Mr. Murphy X Mr. Donnelly X Mr. Wexler X Mr. Marshall X Mr. Boren X ---------------------------------------------------------------------- The following other amendments were also considered by the Committee: An amendment by Mr. Hodes, No. 1, regarding failure to pay amounts from escrow accounts for single family mortgages, was agreed to by a voice vote. An amendment by Mr. Donnelly, No. 2, adding manufactured housing, was agreed to by a voice vote. An amendment by Mr. Donnelly, No. 3, adding the definition of real estate, was agreed to by a voice vote. An amendment by Mrs. McCarthy, No. 4, requiring a mandatory notice, was agreed to by a voice vote. An amendment by Mr. Frank, No. 5, adding participation of mortgage brokers and correspondent lenders, was agreed to, as amended, by a voice vote. An amendment by Mr. Green to the amendment offered by Mr. Frank, No. 5a, adding additional mortgage brokers and correspondent lenders, was agreed to, as modified by unanimous consent, by a voice vote. An amendment by Ms. Waters to the amendment offered by Mr. Frank, No. 5b, inserting mortgage bankers, was agreed to by a voice vote. An amendment by Mrs. Maloney, No. 6, providing insurance for single family homes with licensed day care facilities, was agreed to by a voice vote. An amendment by Mr. Moore of Kansas, No. 7, limiting mortgage insurance premiums was agreed to by a voice vote. An amendment by Mr. Frank, No. 8, clarifying disposition of certain properties, was agreed to by a voice vote. An amendment by Mr. Marshall, No. 10, putting a limitation on origination fees, was agreed to by a voice vote. An amendment by Mrs. Capito, No. 11, requiring acceptable forms of identification for FHA mortgagors, was agreed to by a voice vote. An amendment by Mr. Green, No. 12, establishing a pilot program for automated process for borrowers without sufficient credit history, was agreed to by a voice vote. An amendment by Mrs. Biggert, No. 13, requiring notification and availability to mortgagor, was not agreed to by a voice vote. An amendment by Mr. McHenry, No. 14, requiring mortgage disclosures, was offered and withdrawn. An amendment by Ms. Waters, No. 18, expanding underwriting standards, was agreed to by a voice vote. An amendment by Mr. Miller of California, No. 19, regarding certification requirements, was agreed to by a voice vote. An amendment by Mr. Neugebauer, No. 20, the question was divided: The first part, dealing with authorization of appropriations, was not agreed to by a voice vote. The second part, authorizing a HUD study and report, was agreed to by a voice vote.
PURPOSE, SUMMARY AND BACKGROUND (From the Committee Report) PURPOSE AND SUMMARYH.R. 1852, the `Expanding American Homeownership Act of 2007,' contains a number of provisions designed to expand the use and improve the efficiency of Federal Housing Administration (FHA) insured loan programs. A major focus of the bill is to modernize the FHA Title II single family loan program, through provisions to raise loan limits in high cost areas, to authorize zero downpayment loans, to permit risk-based pricing, and to direct HUD to modify underwriting guidelines in order to serve higher credit risk borrowers. These changes are augmented by disclosure requirements to ensure that borrowers make informed mortgage choices and consumer protections for higher risk borrowers and borrowers with reduced down payments. The bill also makes changes to other FHA loan programs, including FHA reverse mortgage loans, multifamily housing loans, and Section 234 condominium loans. Finally, the bill authorizes use of increased taxpayer profits (negative credit subsidies) resulting from the bill for housing counseling, for FHA information technology, and for affordable housing grant purposes. BACKGROUND AND NEED FOR LEGISLATIONMODERNIZING THE FHA SINGLE FAMILY LOANPROGRAMThe FHA was established in the 1930s to provide a reliable source of affordable long-term amortizing mortgage loans to enable families to become first time homebuyers. Since then, FHA has provided home financing for millions of Americans. It has done so by offering mortgage loans at affordable rates and fees to homebuyers who did not qualify for the most competitive mortgage rates and terms offered by private sector lenders. FHA has also been at the forefront of standardizing financial products, especially for low and moderate income and underserved borrowers. FHA has historically maintained its presence in turbulent mortgage markets and in geographic areas experiencing housing downturns, serving as a source of stability at precisely the time when private sector lenders have pulled back or exited such difficult markets. The hearing on H.R. 1852 raised a number of mortgage issues, including predatory lending practices, risky loan products such as teaser rate loans, and the high rates and costs associated with subprime loans. The hearing cited these types of factors not just as a problem, but also as an opportunity for FHA to reassert its traditional role of meeting unmet mortgage market needs. The distinction was drawn between predatory loan practices and subprime lending. Subprime lending can perform the important task of providing affordable mortgage credit to borrowers with less than perfect credit histories, but who are still creditworthy. Predatory lending occurs when lenders take advantage of the lack of loan opportunities for subprime borrowers to impose excessive rates and fees, prepayment penalties, and reset terms that can result in exorbitant interest rate increases. Witnesses testified that FHA could serve subprime borrowers at more attractive rates and terms than might otherwise be available in the market, while maintaining underwriting standards and fees sufficient to maintain FHA's financial health. As recently as the year 2000, the FHA single family loan program was insuring loans for almost a million families a year and generating profits [`negative credit subsidy'] of over $2 billion a year. Unfortunately, over the last several years, FHA loan volume has fallen significantly. The FHA Commissioner, in his testimony on this bill, identified a number of statutory impediments that have contributed to FHA's declining role in the single family mortgage market. H.R. 1852 makes a number of changes designed to address these impediments, with the goal of increasing FHA participation by private sector loan originators and of increasing loan opportunities for underserved but creditworthy borrowers that would otherwise be shut out of mortgage markets, pay higher rates or be the victims of predatory loan practices. Loan Limits. The bill raises FHA loan limits to expand the availability of FHA loans. By statute, an FHA single family loan cannot exceed the lower of 95 percent of the local area median home price or 87 percent of the national GSE conforming loan limit. In 2007, this means that no FHA loan may exceed $362,790. As a result, FHA is of little or no practical value in higher cost areas where median home prices exceed this limit. The bill would address this limitation by raising the maximum FHA loan limit up to the GSE conforming loan limit (currently $417,000). The bill also makes changes designed to make the program more useful in more moderately priced areas. It raises the local component of the two-part maximum loan limit calculation from 95 percent of the local median home price up to 100 percent of such price, and it raises the current FHA loan floor of 48 percent of the GSE conforming loan limit up to 65 percent of such limit. The bill provides for a more rational process for setting loan limits on FHA single family loans for 2-, 3-, and 4-unit properties. Currently such limits are set by statute at 107, 130, and 150 percent, respectively, of the 1-unit limit in each local area. The bill revises this method to instead calculate such limits by applying the same ratio that 2-, 3-, and 4-unit GSE conforming loan limits bear to the conforming 1-unit limit. The bill additionally permits an increase in FHA single family loan limits of up to 25 percent higher than the customary loan limit for any home which includes space used for a licensed child care facility, subject to the requirement that such increase must be proportional to the amount of space that will be used for the facility. The bill also gives HUD authority to increase FHA single family loan limits up to 100 percent of the appraised value plus closing costs and up to the nationwide GSE conforming loan limit for a period of up to 36 months in Presidentially-declared disaster areas. Down Payment Requirements. The bill simplifies and reduces down payment requirements. By statute, the maximum FHA loan-to-value (LTV) calculation is a complicated one, varying based on factors that include the size of the loan and whether the loan is located in a state with high closing costs. The bill would greatly simplify this basic calculation, while maintaining comparable overall levels, by establishing a maximum loan to value of 97.75 percent of the home price, plus the upfront FHA premium. The bill also retains the current statutory requirement that each borrower must make at least a 3 percent down payment in cash. To better reflect private sector loan practices, the bill also authorizes FHA to reduce down payment requirements, including the authority to offer zero down payment loans. It does so by identifying a separate class of loans for borrowers that do not comply with either the basic LTV or the cash down payment requirement. To cover the increased risk of such lower down payment loans, the maximum upfront FHA premium HUD can charge for such loans is increased from 2.25 percent to 3 percent, and the maximum annual premium that can be charged for such borrowers is raised from .55 to .75 percent. To avoid unfairly imposing fee burdens on borrowers that ultimately meet their loan obligations, the bill includes a `Payment Incentives' provision. This provision requires HUD to reduce annual premiums for borrowers that make 5 years of on-time payments down to the existing statutory maximum of .55 percent in subsequent years. HUD is also authorized to reduce such premiums for borrowers that make three years of on-time payments. Maximum Loan Term. The bill increases the maximum amortization term for FHA single family loans from 35 years to 40 years. This would permit a slight reduction in a borrower's monthly payment. Higher Risk Borrowers. The bill directs HUD to underwrite loans for Higher Risk borrowers than it currently serves, defining this category as borrowers with a FICO-equivalent score of 560 or below. To cover the increased risk of such loans, FHA may charge upfront premiums of up to 3 percent. The bill also includes Payment Incentive annual loan fee reductions for Higher Risk borrowers that make on-time payments, as well as a refund at the time of loan repayment of the higher upfront premium that was charged because the borrower was classified as a Higher Risk borrower. To further expand FHA loan opportunities, the bill requires HUD to carry out a pilot program to establish an automated process to provide alternative credit rating information for borrowers with insufficient credit histories to determine their creditworthiness. The number of such loans is capped at 5 percent of the number of FHA loans insured in the preceding year, and this pilot sunsets after five years. Risk-based Pricing. To provide for more accurate pricing of FHA loans in conjunction with these higher levels of authorized FHA premiums, the bill authorizes `risk-based pricing.' Historically, FHA has charged the same level of premiums for all its borrowers, resulting in cross-subsidization between higher and lower credit risk borrowers. Authority for risk-based pricing is designed to more accurately align fees paid with the loan risk borne by the FHA. It is also designed to retain potential lower risk borrowers who might otherwise forgo FHA loans because the fees are not competitive. However, the bill retains some degree of cross-subsidization, through reasonable fee caps and Payment Incentive provisions. Finally, the bill authorizes risk-based pricing based on the type of loan product. This would permit, for example, higher premiums on riskier Adjustable Rate Mortgages [ARMs] than on fixed rate mortgages. Consumer Protections. To address the increased risks associated with these program changes, the bill includes a number of protections for Higher Risk borrowers and borrowers with zero and lower down payment loans. HUD is given authority to require pre-purchase counseling for such borrowers. If HUD establishes such a requirement, it is intended that it would be established only for riskier classes of borrowers, based on a determination that such a requirement is essential either to mitigate against the risk of such loans, or to ensure that such class of borrower is fully prepared for the risks of buying a home. In addition, FHA mortgage loan originators are required to provide to zero and lower down payment and Higher Risk borrowers a list of local HUD-approved counseling agencies at the time of loan application. And, such borrowers who become 60 days delinquent on their FHA loan must be given notice by a housing counseling entity of the availability of foreclosure prevention counseling. The bill also requires a number of written disclosures, provided either through counseling or at the time of loan application. Such disclosures must include identification of other mortgage loan options, the additional costs associated with lower down payment loans, and the appreciation needed to pay off zero and lower down payment loans, taking into account real estate sales costs. Borrowers must also be given disclosures at loan closing of their Payment Incentive and loss mitigation rights. To track the impact of the bill on the financial soundness of the FHA program, H.R. 1852 requires HUD to report annually on the rates of default and foreclosure of zero and lower down payment and Higher Risk borrowers. HUD is also required to report on loss mitigation actions it has taken. FHA MULTI-FAMILY LOANSFour years ago, Congress raised the maximum loan limit for FHA-insured multi-family loans in high cost areas, but did not provide the increase needed to fully cover construction costs in the nation's highest cost housing markets. The bill would complete this effort, by raising the maximum loan limit in high cost areas from 140 percent of the basic loan limit to 170 percent of such limit, and by raising the maximum loan limit on a case-by-case basis from 170 percent of the basic loan limit to 215 percent of such limit. In addition, the bill would clarify implementation of the 2005 Reconciliation Act provision that prohibits discount loan sales and upfront grants to localities of foreclosed FHA-insured multifamily properties. The bill states that HUD must take into account, consistent with normal appraisal practices, the cost of rehabilitation and maintaining affordability restrictions in establishing the market price to be offered to localities under their statutory first right of refusal to purchase such properties. The bill would also clarify the provision in the 2005 Act grandfathering existing purchase proposals from the prohibition against discount sales. The bill states that this grandfather status would apply to transactions in which HUD received an expression of interest from both a local city and housing authority prior to enactment of the 2005 Act, provided that a disagreement between such two entities was subsequently resolved. FHA REVERSE MORTGAGE LOANSThe bill would permanently eliminate the statutory volume cap on the total number of FHA Home Equity Conversion Mortgage loans [HECMs, also known as reverse mortgage loans] which HUD can insure. Without a removal of this cap, the program could otherwise be forced to be shut down. The bill also decouples FHA reverse mortgage loan limits from the general FHA loan limit calculation which caps limits at the local median home price. Instead, the bill establishes a unified maximum reverse mortgage loan limit equal to the GSE conforming loan limit. This change is made to reflect the fact that reverse mortgage loans are not used to buy a home or refinance a loan, but rather to pay other costs which are not generally tied to home prices (e.g., health care costs). The bill would also set a cap on the maximum loan fee that an FHA reverse mortgage loan originator can charge, setting such cap at 2 percent of the `original principal limit' of the mortgage. Finally, the bill requires HUD to conduct a study to analyze the effects of reducing FHA reverse mortgage premiums on both the cost to borrowers and the financial soundness of the program. USE OF FHA SAVINGS FOR COUNSELING, TECHNOLOGYIMPROVEMENTS, AND AFFORDABLE HOUSING GRANTFUND PURPOSESOver the last five years, FHA has produced over $10 billion in profits to federal taxpayers, as calculated by CBO's determination of negative credit subsidies for all the FHA loan programs. The practice has been to simply return these funds to the Federal treasury. The bill would instead authorize a reinvestment of such profits into both the FHA specifically, and into housing more generally. The bill would calculate the net negative credit subsidies over each of the next five years that are created by the bill's provisions, and would authorize appropriations of such amounts for certain specified purposes. First, funds would be authorized for any credit subsidy appropriation that might be needed to keep the basic FHA single family 203(b) loan program in the black that year (i.e., avoid any credit subsidy appropriation that might be needed). Secondly, $58 million a year would be authorized to bring funding for housing counseling up from the current level of $42 million to $100 million a year. Third, $25 million would be authorized each year for FHA information technology, procedures, and processes. Finally, an authorization is provided for all net negative credit subsidies that remain after such deductions for use as an affordable housing fund, for grants to provide affordable rental housing and homeownership opportunities for low income families. As a further condition no funds may be used in any year for such purpose unless HUD, by rule, makes a determination that FHA premiums being charged that year are sufficient to comply with the Section 205(f) MMIF capital ratio requirement and are also sufficient to ensure the safety and soundness of the other FHA mortgage insurance funds. Moreover, no negative credit subsidies from the Section 203(b) single family loan program may be used for affordable housing fund purposes. HUD is required to conduct a study on how best to update and upgrade FHA procedures, processes, and technologies. The bill also includes a Sense of Congress stating that HUD should use a portion of the funds FHA receives from premiums in excess of what it pays out in claims to upgrade FHA's current technology. FHA is also encouraged to submit a report to Congress detailing the progress it is making towards this goal and any resources it may need to make greater progress. OTHER PROVISIONSThe bill includes a number of provisions designed to enhance pro- gram flexibility, increase mortgage originator participation in FHA loans, limit unnecessary FHA premiums, and protect the financial soundness of FHA. The bill revises the definition of condominium mortgages which may be insured, to provide that condominiums may be in the form of manufactured housing units. The bill also modifies the definition of real estate to permit manufactured homes sited on land under a long term lease to be financed under Title II, even if they are not taxed as real property. The purpose is to permit such FHA loans in states that do not tax such homes as real estate, and therefore do not meet the current HUD definition of real estate for the purpose of insuring FHA Title II loans. The bill also includes a provision to encourage increased participation of mortgage brokers and correspondent lenders in FHA. The current FHA net worth and annual audit requirement is commonly cited as a barrier to increased participation in FHA by mortgage brokers and loan correspondents. The bill gives such entities the option of posting a $75,000 surety bond in lieu of the existing net worth and annual audit requirements. Such authority would expire after five years, unless HUD extends the provision pursuant to a determination that it provides comparable protections or modifies it to provide for comparable protection. The bill also requires GAO to conduct a study and report to Congress within 4 years on the effect of provision. The bill also imposes additional requirements for mortgage brokers participating in FHA loans. Among other things, mortgage brokers are required to safeguard and account for any money handled for the borrower, to follow reasonable and lawful instructions from the borrower, and to act with reasonable skill, care, and diligence. Any mortgage broker found by HUD to have violated these provisions may not originate any FHA-insured loans. The bill includes a provision to bar unnecessary fee hikes in FHA programs. Specifically, it prohibits HUD from increasing any FHA premiums above the level in effect at the beginning of FY 2007 unless HUD determines that such an increase is necessary to avoid a credit subsidy appropriation. This provision is designed to ensure that FHA fees are used solely to cover the risk associated with the loan, and not to supplement general fund revenues. The bill requires FHA mortgage servicers that establish escrow accounts to make required payments by any deadline required to avoid a penalty, unless such servicer was not provided notice of such deadline. HUD is authorized to increase the amount of penalty for servicers that fail to reimburse borrowers per this requirement. The bill also prohibits submission of information by HUD or servicers that is adverse to the credit rating or interest of the borrower, if such information is based on the servicer's failure to make a payment by any deadline. The bill makes a number of changes to provisions of the Credit Reform Act of 1990 which are designed to insure that the Mutual Mortgage Insurance Fund (MMIF) remains financially sound. These include transferring a number of FHA programs into the MMIF, including Section 234 condominium loans, Section 203(k) purchase-rehabilitation loans, reverse mortgage loans, Section 247 loans insured on Hawaiian Home Lands, and Section 248 loans in Indian Reservations. The bill also prohibits HUD from insuring any FHA loan unless the borrower provides personal identification, which may include a Social Security card along with a photo ID issued by the Federal or a state government, a drivers license or ID card issued by a state in accordance with the REAL ID Act of 2005, a passport, and a USCIS photo identification card.
CONRESSIONAL BUDGET OFFICE REPORT H.R. 1852--Expanding American Homeownership Act of 2007 Summary: H.R. 1852 would amend the National Housing Act to authorize the Federal Housing Administration (FHA) to implement a new pricing structure for the mortgage guarantees it offers. This legislation also would remove the statutory limitation on the number of reverse mortgages that FHA can insure and would make other changes to the Home Equity Conversion Mortgage (HECM) program. In addition, this legislation would authorize the appropriation of funds to provide certain borrowers with financial counseling and to establish a new affordable housing fund. Enacting H.R. 1852 would increase direct spending by allowing the Department of Housing and Urban Development (HUD) to sell certain properties at below-market prices without an appropriation of funds to offset any forgone sales proceeds. That provision would modify the cost of some previous and outstanding loan guarantees. As a result, CBO estimates that enacting H.R. 1852 would increase direct spending by $16 million in 2007. CBO also estimates that implementing H.R. 1852 would result in a net increase in offsetting collections (a credit against discretionary spending) of $313 million in 2008 and $628 million over the 2008-2012 period, assuming that appropriation laws necessary to implement the FHA programs and the Mortgage- Backed Securities (MBS) program of the Government National Mortgage Association (GNMA) are enacted. H.R. 1852 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) and would impose no costs on state, local, or tribal governments. Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 1852 is shown in the following table. The cost of this legislation falls within budget functions 370 (mortgage and housing credit) and 600 (income security).
Basis of Estimate: For this estimate, CBO assumes that H.R. 1852 will be enacted before the end of fiscal year 2007, that the amounts necessary to implement the bill will be appropriated for each year, and that appropriation laws necessary to implement the FHA and GNMA programs will be enacted each year. Changes in direct spending Prior to the enactment of the Deficit Reduction Act (DRA) of 2005, HUD often sold foreclosed multifamily properties to state and local governments as part of its right of first refusal program (that is, a noncompetitive program in which HUD negotiated directly with the buyer). Frequently, state and local governments purchased those properties for nominal amounts, such as $1. The DRA bars HUD from taking into account the cost of rehabilitating the foreclosed property and the expense of maintaining existing affordability restrictions on the property (for example, limiting the amount of rent paid by tenants) when setting the price for a noncompetitive property sale. As a result, noncompetitive sales no longer occur. Potential buyers (including state and local governments) have concluded that the price HUD sets for a noncompetitive sale exceeds the amount that bidders would offer in a competitive auction. DRA authorizes HUD to sell foreclosed properties at lower prices only if funds have been appropriated to offset the forgone sales proceeds through 2010. Since the enactment of DRA in 2006, no such appropriations have been provided. Both sections 27 and 28 would result in below-market sales in certain circumstances without further appropriation action. Enacting those sections would increase direct spending because the cash flows associated with some previous and existing loan guarantees would be modified. The cost of a loan modification is estimated on a net-present-value basis and recorded in the year in which the legislation is enacted. CBO estimates that enacting the two sections would result in a cost of $16 million in 2007, as discussed below. Valuation of Multifamily Properties in Noncompetitive Sales by HUD to States and Localities. Section 27 would require HUD to adjust for the cost of rehabilitating and maintaining existing affordability restrictions when appraising foreclosed properties for the purpose of calculating the price for sales to states and localities. CBO expects that this legislation would allow noncompetitive sales to become an attractive alternative to competitive auctions for some state and local governments. Consequently, we estimate that the volume of noncompetitive sales of foreclosed properties would return to levels that existed prior to the enactment of the DRA--about 10 property sales each year. Based on information from HUD, CBO estimates that the price paid in noncompetitive sales prior to enactment of DRA averaged $1.3 million less than the price paid in competitive sales for similar properties. Based on information from HUD, we do not expect that HUD would return to its pre-DRA practice of negotiating sales prices for nominal amounts. However, CBO estimates that it is likely that the sales price in half of the negotiated sales that would occur under H.R. 1852 would be less than the price that would be received in an auction. Consequently, we estimate that, on average, the government would forgo receipts of about $5 million per year--$l million each for about five properties per year that would be sold in noncompetitive sales over the 2008-2010 period. Because enacting this provision would change the expected cash flows associated with the multifamily insurance program, this loss of sales proceeds (which are recoveries on defaulted loans) would be considered a modification of existing federal loan guarantees. Under credit reform procedures, the costs of such modifications are estimated on a net-present-value basis and recorded in the year in which the legislation is enacted. Assuming the bill is enacted late in fiscal year 2007, CBO estimates that enacting this provision would result in an increase in direct spending of $14 million in 2007. (Such estimated costs would be recorded in 2008 if the bill is enacted after September 30, 2007.) Clarification of Disposition of Certain Properties. Section 28 would, under certain circumstances, exempt properties from the sale requirements specified in the DRA. Based on information from HUD, CBO estimates that this provision would affect the sale of one property located in Michigan by allowing its sale to the city government at a price below market value. CBO estimates that the market value of the
property is about $2 million, and that, under current law, it will be sold at a competitive auction; under this provision, the property could instead be sold to the city government for a nominal amount. Because this section would result in a change to the cash flows associated with the original loan guarantee, this loss of receipts would be considered a loan modification. As a result, CBO estimates that enacting this section would increase direct spending by about $2 million in 2007. Spending subject to appropriation CBO estimates that implementing H.R. 1852 would result in an increase in offsetting collections of $313 million in 2008 and $628 million over the 2008-2012 period, assuming enactment of appropriation laws necessary to implement the FHA and GNMA programs. The estimated additional offsetting collections would stem from the authority in H.R. 1852 to expand FHA's HECM loan program and to raise the loan limits for FHA's multifamily program. The latter change also would result in more offsetting collections for GNMA. Additional discretionary costs associated with limiting a planned increase in mortgage insurance fees, providing payment incentives to certain FHA borrowers, and authorizing the appropriation of funds for housing counseling and for a new affordable housing fund would be netted against those new offsetting collections. CBO expects that other provisions of the bill would have no significant budgetary impact over the next 5 years. The major provisions of the bill are discussed below. Table 2 details the components of estimated spending subject to appropriation under H.R. 1852. Amendments to the HECM Loan Insurance Program. HECM loans are considered to be `reverse mortgages' because they enable homeowners who are at least 62 years of age to withdraw some of the equity in their homes in the form of monthly payments, in a lump sum, or through a line of credit. Under current law, FHA is permitted to guarantee up to a cumulative total of 275,000 such loans, although this limitation has been waived through fiscal year 2007. This cap has already been reached this year; consequently, the program will be inactive beginning in 2008 unless the cap is amended. Loan size is tied to loan limits that vary by geographic region, and such loans cannot be used to purchase another home. In addition, the origination fee charged by lenders is calculated as a percentage of the home's value. Enacting this legislation would remove the statutory limitation on the number of loans that could be guaranteed, set a single nationwide limit on the dollar amount of a HECM loan that would be tied to the conforming loan amount, limit the origination fee to 2 percent of the loan amount (subject to a minimum allowable amount), and allow borrowers to use HECM loans to purchase a new home. (Conforming loans have terms and conditions that follow the guidelines set forth by the Government Sponsored Enterprises (GSEs); the conforming loan amount is $417,000.) Implementation of the HECM program, like all of FHA's insurance programs, is contingent on the enactment of appropriation laws that provide annual loan commitment authority. Thus, the estimated budgetary impact o f this proposal is considered to be discretionary, and it is tied to the demand for HECM loans and the estimated subsidy cost of the loan guarantees. Because, under credit reform procedures, guarantees of HECM loans are estimated to have negative subsidies (that is, they earn money for the government), CBO estimates that implementing those amendments would increase offsetting collections by about $2.1 billion over the 2008-2012 period Demand for HECM Loans. According to the National Reverse Mortgage Lenders Association (NRMLA) and other industry experts, the HECM program has risen in popularity in recent years. As more consumers are becoming aware ofthe product, more households are becoming eligible for the program (currently over 17 million households have owners who are age 65 or older, according to census data), and more seniors view the product as an alternative approach to financing home-improvement projects, medical costs, and other needs. In addition, sources in the mortgage industry have observed an increasing demand among seniors for new housing within senior communities. The number of HECM loans insured by FHA more than doubled from 2003 to 2006 (18,000 loans were insured in 2003, compared with 76,000 loans in 2006). Furthermore, based on the number of HECM loans insured as of April 2006, that volume could reach over 100,000 loans by the end of fiscal year 2007. Based on information from FHA, NRMLA, and other industry experts, CBO estimates that setting a single nationwide loan limit and permitting borrowers to use HECM loans to purchase a new home would result in a product that would be more attractive to borrowers and more easily marketed by lenders, resulting in increased demand for HECM loans. On the other hand, the limit on the origination fee could result in a program that is less profitable for certain lenders, causing some to end or limit their participation in the program. A lower origination fee, however, could increase the program's attractiveness to some borrowers, assuming lenders do not increase interest rates significantly to compensate for lower origination fees. Currently, the market for FHA's HECM loans appears to be very robust, and under this bill, FHA would probably insure more than 100,000 loans annually over the next several years. Also, GNMA's recent decision to begin securitizing HECM loans could result in increased activity by lenders, as investors in the secondary mortgage market begin to invest in mortgage-backed securities that include this product. Whether the number of guarantees could exceed 100,000 loans on a continued basis each year would depend on FHA's ability to administer and manage the program in an efficient manner and on the market's response to this bill, especially the change in the origination fee. Based on information from FHA, CBO estimates that the agency could insure about 110,000 loans (with a face value of about $27 billion) in 2008. In subsequent years, we estimate that demand would increase at the estimated rates for appreciation in housing prices--about 2 percent to 4 percent a year. Subsidy Cost. Under current law, FHA guarantees of HECM loans are estimated to result in net offsetting collections to the federal government because guarantee fees for those mortgages are currently estimated to more than offset the costs of expected defaults. For 2008, the Administration's subsidy estimate for HECM guarantees is -1.9 percent. Under the expanded program authorized by H.R. 1852, CBO estimates that the subsidy rate for the HECM loans would be -1.35 percent. This reduction from the estimated rate for 2008 is due to the increased risk FHA would experience under the proposed nationwide loan limitation. With larger loan sizes, the `equity cushion' (that is the difference between the home's value and the potential cost of a claim payment) would decrease, leading to potentially more costly claims for FHA. This estimated subsidy rate of -1.35 percent assumes that the HECM loan program would not be subject to the risk-based pricing structure authorized by the bill and described below. CBO assumes that FHA would continue to charge fixed, up-front, and annual fees for all HECM borrowers, regardless of any specific evaluation of their individual risk of default. CBO estimates that implementing this legislation would result in additional offsetting collections of $370 million in 2008 and $2.1 billion over the 2008-2012 period, contingent on enactment of appropriation bills that would establish the authority to make HECM loan guarantees by specifying annual loan commitment levels. Estimated Impact on Demand for Multifamily Loan Guarantees. GNMA is responsible for guaranteeing securities backed by pools of mortgages that are insured by the federal government. In exchange for a fee charged to lenders or issuers of the securities, GNMA guarantees the timely payments of scheduled principal and interest due on the pooled mortgages that back those securities. Because, under credit reform procedures, the value of the fees collected by GNMA is estimated to exceed the cost of loan defaults in each year, the Administration estimates that the GNMA MBS program will have a subsidy rate of -0.21 percent in 2008, resulting in the net collection of receipts to the federal government. Currently GNMA does not securitize HECM loans; according to GNMA, however, securitization of those loans will begin in 2008 if the program has authority to operate beyond 2007. Under the bill, CBO estimates that in 2008 about 5 percent of the HECM loans would be included in GNMA's MBS program. We estimate that in subsequent years, 10 percent to 20 percent of the HECM loans would be securitized by GNMA. Thus, CBO estimates that those proposed changes to the HECM program would result in additional offsetting collections to GNMA, totaling about $40 million over the 2008-2012 period, assuming appropriation action to establish a dollar limitation for the GNMA securities program. Higher Loan Limits for the Multifamily Program. Under the National Housing Act, FHA is authorized to insure private loans used to finance certain multifamily homes, subject to loan limitations specified in appropriation acts. Section 26 would increase the current limit on the value of individual loans that FHA can guarantee in certain high-cost areas of the country under 12 of its 20 multifamily loan guarantee programs. (High-cost housing markets are designated by FHA and include such cities as Boston, San Francisco, and Los Angeles.) The maximum amount of a loan that FHA can guarantee for multifamily housing depends on the base loan levels established by FHA, which vary by type and size of housing within a project. For example, the base loan limit for each unit of a building with two-bedroom apartments without elevators is roughly $54,000. Currently, in regions designated by FHA as high-cost areas, the base loan limit can be increased by up to 170 percent. Thus, in a high-cost region, the loan limit for each unit in a building with two-bedroom apartments without elevators can be as high as $146,000 (that is, 270 percent of the base limit). Under H.R. 1852, FHA could increase the base loan limit by up to 215 percent in high-cost areas. (In this example, the loan limit for that two-bedroom apartment could be as high as $170,000.) Estimated Impact on Demand for Multifamily Loan Guarantees. The Federal Credit Reform Act of 1990 requires an appropriation of the subsidy costs and administrative costs associated with loan guarantees and direct loans. The subsidy cost is the estimated long-term cost to the government of a loan guarantee or a direct loan, calculated on a net-present-value basis, excluding administrative costs. Under current law, FHA's guarantees of multifamily loans are estimated to result in net offsetting collections (that is, negative outlays) because the Administration estimates that guarantee fees collected on those mortgages will more than offset the costs of expected defaults, calculated on a present-value basis. For 2008, CBO estimates that the weighted average subsidy cost for the multifamily programs subject to the loan limit increases under this legislation is -1.9 percent. This estimate takes into account the prohibition on increases in certain premium fees in section 30 of this legislation. In addition, CBO estimates that, under current law, FHA will insure $4 billion to $5 billion in multifamily loans in 2008. If FHA made more loan guarantees as a result of the higher cap on the value of loans in high-cost areas, the agency would record additional offsetting collections (which would be a reduction in discretionary spending). According to industry experts, the current loan limits constrain new construction and rehabilitation of multifamily housing. Based on information from FHA field offices and realtors in certain high-cost areas, CBO expects that, under H.R. 1852, FHA would insure an additional 35 to 45 loans a year for multifamily projects with a total face value of about $1 billion. We expect that the subsidy rate for those loans over the 2008-2012 period would be similar to the program's estimated rate of -1.9 percent for 2008 under H.R. 1852. Thus, CBO estimates that those additional loan guarantees would increase offsetting collections to FHA (and thus reduce outlays) by about $19 million annually over the 2008-2012 period. Effects on GNMA's Subsidy Costs. Because most FHA multifamily loan guarantees are included in GNMA's MBS program, CBO estimates that raising the loan limit would result in additional GNMA collections of about $2 million a year over the 2008-2012 period. Those savings would affect discretionary spending because, like FHA, GNMA requires appropriation action to establish the total amount of its guarantees. Raising Loan Limits for the Single-Family Program. Section 3 would raise FHA's loan limit--the dollar amount of a mortgage that FHA can insure--for its single-family program from 87 percent of the conforming loan amount to 100 percent of the conforming loan limit in certain geographic regions where the cost of housing is very high. Effectively, this would be a change from insuring loans of $362,790 today to insuring loans of up to $417,000 in certain parts of the country. In less expensive markets, the limit would be raised from 48 percent to 65 percent of the conforming loan limit, or a change from loan guarantees of up to $200,160 to loan guarantees of up to $271,050 under the bill. CBO estimates that implementing this provision would increase loan volume by about 8 percent a year--about $4 billion annually in additional loan guarantees--over the next five years. This increase would stem mostly from increasing the limit in the less expensive housing markets. Despite this estimated increase in loan volume, CBO estimates that no additional offsetting collections would be realized because we expect the subsidy rate for the single-family program to be zero over the next five years. However, because most FHA single-family loan guarantees are included in GNMA's MBS program, CBO estimates that raising the loan limit would result in additional offsetting collections to GNMA of about $45 million over the 2008-2012 period. As mentioned earlier, GNMA requires appropriation action to establish its dollar limitation for the securities program, so those savings would be offsets to discretionary spending. Limit on Increases in Fees for Mortgage Insurance. Currently, FHA has the authority to adjust fees for its mortgage insurance programs through administrative action. Section 30 would prohibit FHA from increasing fees unless the increase is required to maintain the estimated credit subsidy for the program at zero, but not less than zero. According to the Administration, annual fees for new loan guarantees for the apartment development and refinance programs will increase by about 16 basis points beginning in 2008. CBO estimates that those fee increases would affect about $2.6 billion in loan guarantees in 2008 and over $3 billion in loan guarantees annually in subsequent years. Furthermore, we estimate that those fee increases would increase offsetting collections for this program by $192 million over the 2008-2012 period. Thus, prohibiting those fee increases would result in a loss of $192 million in discretionary offsetting collections over the next five years. Cost of Payment Incentives. Section 9 would authorize HUD to provide certain payment incentives to borrowers after three years of timely premium payments; after five years of timely premium payments, FHA would be required to provide payment incentives. Borrowers who have taken out zero down payment loans or who are considered to be a higher risk of default would be eligible for some of those incentives, which include reductions in annual premiums and refunds of up-front premiums upon payment of the full mortgage. CBO estimates that the borrowers of about $7 billion in FHA-guaranteed mortgages made annually would eventually be eligible for certain payment incentives. Furthermore, we estimate that those payment incentives would increase the subsidy rate for the affected loan guarantees by an average of 0.23 percent. Under the Federal Credit Reform Act of 1990, such costs require the appropriation of funds. CBO estimates that appropriations of about $16 million would be required annually over the 2008-2012 period. Section 29, which is discussed below, would authorize appropriations for any credit subsidy required for the single-family loan guarantee program. Additional Authorizations of Appropriations. Section 29 of this legislation would authorize the appropriation of funds for various purposes in amounts that equal the net increase in negative credit subsidy for the FHA programs resulting from this legislation. Such appropriations would be used to provide credit subsidies for the single-family loan guarantee program (to the extent needed), funding for the housing counseling program, funding to support the improvement of FHA's technologies and processes, and funding for an affordable housing fund, which would provide grants to support affordable rental housing and affordable homeownership opportunities for low-income families. Those funds are not authorized to be appropriated each year unless HUD, by rule, determines that FHA premiums being charged that year are sufficient to comply with the Mutual Mortgage Insurance Fund's (MMIFs) capital ratio requirement and are also sufficient to ensure the safety and soundness of other FHA mortgage insurance funds. Based on the amounts CBO estimates for the provisions affecting the HECM and multifamily programs, we estimate that about $2 billion would be authorized to be appropriated over the 2008-2012 period. We further estimate that, over the next five years, implementing these provisions would cost about $80 million for the credit subsidies associated with the payment incentives, $229 million for the housing counseling program, $119 million for FHA program support, and $1 billion for the affordable housing fund. Risk-based Pricing and Flexible Downpayment Requirements. Currently, FHA's single-family loan guarantee program has a flat premium structure under which all borrowers pay the same up-front and annual fees, regardless of the borrower's individual risk of default. According to the FHA, the up-front fee in 2008 is expected to increase from 1.5 percent to 1.66 percent and the annual fee will rise from 0.5 percent to 0.55 percent. Furthermore, the Administration estimates that those fee increases will result in a subsidy rate of zero for the single-family program for 2008. Under this legislation, FHA would have the authority to match the fees it charges with the borrowers' risk of default or the risk associated with a particular loan product, and to offer guarantees for loans with little or no down payment. For certain borrowers and types of loan products, the up-front fee could be as high as 3 percent and the annual fee could be as high as 0.75 percent. CBO estimates that implementing this risk-based pricing proposal would result in a weighted subsidy rate that is about zero. Because the subsidy rate for 2008 is estimated to be zero under current law, CBO expects that FHA would charge rates under H.R. 1852 that would produce a similar result. Intergovernmental and private-sector impact: H.R. 1852 contains no intergovernmental or private-sector mandates as defined in UMRA and would impose no costs on state, local, or tribal governments. Estimate prepared by: Federal costs: Susanne S. Mehlman; impact on state, local, and tribal governments: Teri Gullo; impact on the private sector: Paige Piper/Bach. Estimate spproved by: Robert A. Sunshine, Assistant Director for Budget Analysis
SECTION BY SECTION ANALYSIS Section 1. Short title and table of contents Includes a table of contents and the short title of the bill, which is the `Expanding American Homeownership Act of 2007.' Section 2. Findings and purposes Includes the findings and purposes of the Act. Section 3. Maximum principal loan obligation Increases FHA Section 203(b)(2) single family mortgage loan limits. Under current law, the maximum insurable mortgage loan amount for a Single Family residence is the lesser of (a) 95 percent of the local median home price, or (b) 87 percent of the nationwide GSE conforming loan limit--except that notwithstanding the local median home price determination, there is a national loan floor equal to 48 percent of the nationwide GSE conforming loan limit. This section raises the loan limit to the lesser of: (a) 100 percent of the local median home price, or (b) the nationwide GSE conforming loan limit. It also raises the nationwide loan floor from 48 percent to 65 percent of the GSE conforming limit. In 2007, the nationwide GSE conforming loan limit is $417,000. Under current law, FHA loan limits for 2-, 3- and 4-unit mortgages are statutorily set as 107 percent, 130 percent, and 150 percent of the FHA single family 1-unit median home price, respectively. This section changes this calculation, so that the ratio of loan limits for 2-, 3-, and 4-unit mortgages to the FHA 1-unit mortgage limit is conformed to the same ratios that the GSE conforming loan limits for 2-, 3-, and 4-unit mortgages bear to the GSE conforming 1-unit loan limit. Section 4. Extension of mortgage term Extends the maximum loan term on FHA single family loans from 35 to 40 years. Section 5. Down payment simplification The current loan-to-value (LTV) limit for an FHA single family loan is generally 97.75 percent of a home's appraised value, plus the upfront FHA premium--except that there are separate LTV limits for loans of lower amounts and for loans in states that do not have high closing costs. This section simplifies the FHA single family statutory LTV limits to permit loans up to 97.75 percent of appraised value, plus the upfront FHA mortgage premium. It also creates new statutory authority to waive this limit for `zero- and lower-down payment borrowers,' as are defined in Section 6. Also retains the current statutory 3 percent cash down payment requirement--except for `zero- and lower-down payment borrowers,' as are identified in Section 6. Section 6. Mortgage insurance premiums for zero and lower down payment borrowers Defines `zero- and lower down payment borrowers' as first-time homebuyers who do not comply with either the 97.75 percent LTV limit or the 3 percent cash down requirement, referenced in Section 5. FHA is authorized to charge upfront premiums for such borrowers in an amount up to 3 percent, and annual premiums for such borrowers up to .75 percent of the loan balance. Section 7. Higher risk borrowers Creates a definition of a `Standard Risk' borrower as a borrower with a 560 or higher equivalent FICO score that complies with LTV and 3 percent down payment requirements. Also defines a `Higher Risk' borrower as one with a FICO equivalent score below 560. Directs HUD to underwrite loans for Higher Risk borrowers. Raises the existing statutory upfront cap for Higher Risk borrowers from 2.25 percent to 3 percent, but retains the .55 percent annual premium cap for such borrowers. Section 8. Risk-based premiums Authorizes risk-based premiums for Zero and Lower Down borrowers' and `Higher Risk' borrowers (as defined in Sections 6 and 7). Establishes procedures for HUD to establish and change premiums, including a list of factors to be considered in establishing such premiums. Also authorizes risk-based pricing based on product type--such as fixed rate vs. ARM, and Section 203(b) vs. Section 234 condominium loans. Section 9. Payment incentives Requires HUD to provide `Payment Incentives' for borrowers that make on-time payments for at least the first 5 years of the loan. For zero down borrowers, such Payment Incentives would result in a reduction of annual premiums after such period down to statutory maximum of .55 percent. For higher risk borrowers, Payment Incentives would result in a reduction of annual payments after such period down to the level that would have been charged had they not been higher risk, plus a refund equal to the difference between the higher upfront premium such borrowers paid and the premium paid by Standard Risk Borrowers. HUD is also authorized to offer these Payment Incentives to borrowers after a period of 3 years of on-time payments. Section 10. Borrower protections for higher risk mortgages Authorizes HUD to require pre-purchase counseling for zero and lower down payment borrowers and higher risk borrowers. Requires the mortgagee to provide the borrower at loan application a list of HUD-approved housing counseling agencies in the area. In addition, borrowers who become 60-days delinquent on their loan must be given notice by a housing counseling entity of the availability of foreclosure prevention counseling. Requires borrowers applying for zero down and lower down payment loans to be provided written disclosures, either through counseling or at loan application, regarding other mortgage loan options, the additional costs associated with lower down payment loans and the appreciation needed to pay off the loan, including selling costs. Also at closing, borrowers are to be given disclosures of their payment incentive rights and rights to loss mitigation. Section 11. Annual reports on new programs and loss mitigation Requires HUD to report annually on the rates of default and foreclosure of zero and lower down payment and higher risk borrowers, as well as actions HUD has taken with respect to loss mitigation. Section 12. Insurance for single family homes with licensed child care facilities Permits an increase in FHA single family loan limits of up to 25 percent higher than the customary loan limit or any home which includes space used for a licensed child care facility. Such increase must be proportional to the amount of space that will be used for the child care facility. Section 13. Rehabilitation loans Deletes obsolete language in existing section 203(k)(1) FHA rehabilitation loans. Also makes the Section 203(k) program an obligation of the Mutual Mortgage Insurance Fund (MMIF), instead of its current status as an obligation of the General Insurance Fund. Section 14. Discretionary action Moves existing language contained in section 203(s) of the National Housing Act, dealing with notification requirements about actions taken by the Secretary to suspend or revoke the approval of a mortgagee to participate in FHA programs, to section 202 of the National Housing Act, which contains the basic authority of the Mortgagee Review Board. Section 15. Insurance of condominiums and manufactured housing Establishes a new limitation on the existing Section 234(c) condominium program, to limit such loans in the future to take out financing for multifamily blanket mortgages on FHA insured section 234(d) condominium projects. Contains a conforming amendment to Section 234(c) of the National Housing Act to permit 40 year mortgages. Amends section 201(a) of the National Housing Act to add a definition of condominium mortgage to the definition section, consistent with the intent to insure condominium mortgages under section 203 of the National Housing Act, and to provide that condominiums may be in the form of manufactured housing units. Modifies the definition of real estate to permit manufactured homes to be financed, even though they are not taxed as real property. Section 16. Mutual mortgage insurance fund Clarifies that the MMIF is subject to the provisions of the Credit Reform Act of 1990, and the use of `guarantee' and `commitment to guarantee' reflects that purpose. Directs HUD to ensure that the MMIF remains financially sound. Also requires HUD to provide an independent actuarial report to Congress annually on the financial status of the Fund, and requires HUD to submit a quarterly report on the financial status and soundness of the Fund. Grants HUD the authority to change premiums or underwriting standards if the Fund is at risk in accordance with other sections of this bill. Establishes operational goals for the Fund, which include charging appropriate premiums commensurate with the borrower's risk, minimizing the default risk to the Fund and to homeowners, curtailing the impact of adverse selection on the Fund, and meeting the housing needs of the borrowers that this bill is designed to serve. Makes insured mortgages that are used in conjunction with the Homeownership Voucher program obligations of the MMIF and makes reverse mortgages insured under section 255 of the National Housing Act obligations of the MMIF. Section 17. Hawaiian home land and Indian reservations Makes single family mortgages insured on Hawaiian Home Lands under section 247 of the National Housing Act and single family mortgages insured on Indian Reservations under section 248 of the National Housing Act obligations of the MMIF. Section 18. Conforming and technical amendments Repeals certain obsolete or little used programs and makes two other technical and conforming amendments. The programs repealed include: * Section 203(i) mortgage insurance for outlying areas. * Sections 203(o), (p) and (q) relating to certain mortgage insurance on Indian lands. * Section 222 mortgage insurance for servicemen. The program is not operational and the benefits of mortgage insurance are otherwise available under section 203. * Section 237 special mortgage insurance for low income families. * Section 245 graduated payment mortgage program. Section 19. Home equity conversion mortgages Eliminates the current mortgage volume cap on FHA reverse mortgages [also know as Home Equity Conversion (HECM) mortgages]. Also provides for a uniform nationwide mortgage loan cap on FHA reverse mortgage loans, equal to the GSE conforming loan limit [thus eliminating the local median home price determination otherwise used for Section 203(b) loans]. Requires HUD to establish limits on the origination fee that may be charged for a reverse mortgage loan, which shall equal 2 percent of the original principal limit of the mortgage, be subject to a minimum allowable amount, and provide that the origination fee may be financed by the mortgage. Permits FHA reverse mortgage loans to be used in cooperative units. Requires HUD to conduct a study, to analyze the effects of reducing premiums on both the cost to the borrowers and the financial soundness of the program. Section 20. Participation of mortgage brokers and correspondent lenders Gives mortgage brokers and correspondent lenders the option of posting a $75,000 surety bond in lieu of the existing net worth and annual audit requirements for participation in the FHA single family loan program. Requires GAO to conduct a study and report to Congress within 4 years of the date of enactment on the effect of this change, with respect to extent of increased participation, comparison of defaults, foreclosures, and insurance claims, and HUD supervision of the provision. This option is repealed after five years unless HUD either extends it based on a determination that such alternative treatment provides comparable protection to the existing audit and net worth requirements or modifies it pursuant to a determination published in the Federal Register as HUD considers appropriate to provide for such comparable protection. Imposes additional requirements for mortgage brokers and correspondent lenders participating in FHA loans, including requiring them to safeguard and account for any money handled for the borrower, to follow reasonable and lawful instructions from the borrower, and to act with reasonable skill, care, and diligence. Section 21. Conforming loan limit in disaster areas Gives HUD the authority to increase FHA single family loan limits up to 100 percent of the appraised value plus closing costs and up to the nationwide GSE conforming loan limit for a period of up to 36 months in Presidentially-declared disaster areas. Section 22. Failure to pay amounts from escrow accounts for single family mortgages Requires FHA mortgage servicers that establish escrow accounts to make required payments by any deadline required to avoid a penalty, unless such servicer was not provided notice of such deadline. Authorizes HUD to increase the amount of penalty for servicers that fail to reimburse borrowers, including for attorneys fees incurred by the borrower, within 60 days of the failure to make a payment by a deadline. Also prohibits submission of information by HUD or servicers that is adverse to the credit rating or interest of the borrower, which is based on the servicer's failure to make a payment by any deadline. Section 23. Acceptable identification for FHA mortgagors Prohibits HUD from insuring any FHA loan unless the borrower provides personal identification. Permissible forms of identification include a Social Security card along with a photo ID issued by the Federal or a state government, a drivers license or ID care issued by a state in accordance with the REAL ID Act of 2005, a passport, and a USCIS photo identification card. Section 24. Pilot program for automated process for borrowers without a sufficient credit history Requires HUD to carry out a pilot program to establish an automated process for providing alternative credit rating information for borrowers who have insufficient credit histories for determining their creditworthiness. HUD may not insure a number of mortgages under this pilot which exceeds 5 percent of the aggregate number of FHA insured mortgages in the preceding year. Within 2 years of the bill's enactment, GAO is required to send Congress a report identifying the number of additional borrowers under this pilot and the impact of the pilot on safety and soundness. This pilot sunsets after 5 years of the bill's enactment. Section 25. Sense of Congress regarding technology for financial systems Sense of Congress stating that HUD should use a portion of the funds FHA receives from premiums in excess of what it pays out in claims to upgrade FHA's current technology. FHA is also encouraged to submit a report to Congress detailing the progress it is making towards this goal and any resources it may need to make greater progress. Section 26. Multifamily housing mortgage limits in high cost areas Increases maximum FHA multifamily loan limits in high cost areas from 140 percent of the basic loan limit to 170 percent and raises such maximum loan limits on a case by case basis from 170 percent of the basic limit to 215 percent of such limit. Section 27. Valuation of multifamily properties in noncompetitive sales by HUD to State and localities Requires HUD to take into account the cost of rehabilitation and maintaining existing affordability restrictions when appraising FHA foreclosed multifamily loan properties for the purposes of calculating the sale price under states' and localities' first right of refusal to purchase such properties. Section 28. Clarification of disposition of certain properties Clarifies grandfather provisions relating to continued eligibility for discounted sales under the first right of refusal of foreclosed FHA multifamily properties with respect to the 2005 Deficit Reduction Act which eliminated such discounted sales--by permitting transitions for which HUD received an expression of interest in purchasing a property from both a city government and housing commission of the city, and for which such city government and housing commission have resolved a previous disagreement with respect to disposition of the property. Section 29. Use of FHA savings for costs of mortgage insurance, housing counseling, and affordable housing grant fund Authorizes appropriations, in the amount equal to the net increase in negative credit subsidy created by the bill's provisions, for use as an affordable housing fund, for grants to provide affordable rental housing and homeownership opportunities for low income families--after first deducting all of the following: (1) the amount, if any, needed to avoid a credit subsidy appropriation for the FHA 203(b) single family loan program in that year, (2) the amount needed to increase nationwide funding for housing counseling grants from the current level of $42 million to $100 million a year for each of the next five years, and (3) $25 million each of the next five years to increase funding for improving FHA technology, procedures, processes, and program performance, and salaries. No funds may be expended under this section in any year unless HUD, by rule, makes a determination that FHA premiums being charged that year are sufficient to comply with the Section 205(f) MMIF capital ratio requirement and are also sufficient to ensure the safety and soundness of the other FHA mortgage insurance funds. No negative credit subsidies from the Section 203(b) single family loan program may be used to fund expenditures under this section. HUD shall conduct a study on how best to update and upgrade FHA procedures, processes, and technologies. Section 30. Limitation on mortgage insurance premium increases Prohibits HUD from increasing any FHA premiums above the level in effect at the beginning of FY 2007 unless the HUD Secretary determines that, absent such increase, a program would require a credit subsidy appropriation. Section 31. Savings provision Provides that any mortgage insured before the bill's date of enactment shall continue to be governed by laws, regulations, orders, and terms and conditions that existed prior to the bill's enactment. Section 32. Implementation Requires HUD to establish by notice any additional requirements necessary to carry out the provisions of this bill, which notice shall take immediate effect.
AMENDMENTS-House 1. H.AMDT.794 to H.R.1852 An amendment numbered 2 printed in House Report 110-330 to raise the FHA single family loan limit, by establishing such limit in each area as the lower of (a) 125% of the local median area home price or (b) 175% of the national GSE conforming loan limit; retain the FHA loan floor provision in the reported bill of 65% of the GSE conforming loan limit; and also gives HUD authority to raise these resulting loan limit amounts by up to $100,000 by area and/or by unit size `if market conditions warrant.'. amendment (A001) Agreed to by voice vote. 2. H.AMDT.795 to H.R.1852 An amendment numbered 1 printed in House Report 110-330 to direct the Secretary of the Department of Housing and Urban Development to provide mortgage insurance premium refunds to eligible borrowers of FHA insured loans, which were closed prior to December 8, 2004, but which were not endorsed until December 8, 2004 or after that date, and authorizes such sums as may be necessary for such refunds. amendment (A002) Agreed to by voice vote. 3. H.AMDT.796 to H.R.1852 An amendment numbered 3 printed in House Report 110-330 to allow qualified down payment assistance providers to participate in the FHA Program if certain conditions are satisfied (i.e. no obligation for mortgagor to repay and net worth requirement). The Secretary shall consider as cash or its equivalent any amounts gifted by a family member, the mortgagor's employer or labor union, or a qualified homeownership assistance entity, but only if there is no obligation on the part of the mortgagor to repay the gift. amendment (A003) Agreed to by voice vote. 4. H.AMDT.797 to H.R.1852 An amendment numbered 4 printed in House Report 110-330 to clarify requirements on reverse mortgages for seniors who own permanent
foundation homes on leased land. amendment (A004) Agreed to by voice vote. 5. H.AMDT.798 to H.R.1852 An amendment numbered 5 printed in House Report 110-330 to strike the allowable use of FHA savings for an affordable housing fund.
amendment (A005) Failed by recorded vote: 148 - 280 (Roll no. 873). 6. H.AMDT.799 to H.R.1852 An amendment numbered 6 printed in House Report 110-330 to require the Secretary to ensure that the mortgagor receives counseling at
the time of application. amendment Agreed to by voice vote. 7. H.AMDT.800 to H.R.1852 An amendment in the nature of a substitute numbered 7 printed in House Report 110-330 to reform the Federal Housing Administration's (FHA) single-family mortgage insurance activities and would allow FHA to base each borrower's mortgage insurance premiums on the risk that the borrower poses to the FHA Mortgage Insurance Fund, with slight variations. Under this proposal, mortgage insurance premiums will be based on the borrower's credit history, loan-to-value ratio, debt-to-income ratio, and on FHA's historical experience with similar borrowers. This amendment maintains FHA reserves within the insurance fund to preserve the future
solvency of the FHA program. amendment (A007) Failed by recorded vote: 175 - 252 (Roll no. 874).
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