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co.mments
HR 5830
To create a voluntary FHA program that provides mortgage refinancing assistance to allow families to stay in their homes, protect neighborhoods, and help stabilize the housing market.
April 17, 2008
Mr. FRANK of Massachusetts (for himself, Ms. WATERS, Mrs. MALONEY of New York, Mr. WATT, Mr. ACKERMAN, Mr. MEEKS of New York, Mr. CLAY, Mr. LYNCH, Mr. AL GREEN of Texas, Ms. MOORE of Wisconsin, Mr. LINCOLN DAVIS of Tennessee, Mr. HODES, Mr. WILSON of Ohio, Mr. PERLMUTTER, Mr. MURPHY of Connecticut, Mr. DONNELLY, Mr. WEXLER, Mr. SHAYS, Ms. GINNY BROWN-WAITE of Florida, Mr. DINGELL, Ms. SCHAKOWSKY, Mr. LEVIN, Mr. HINCHEY, Mr. FATTAH, Mr. JACKSON of Illinois, Mrs. CHRISTENSEN, Ms. LEE, Mr. WU, Ms. MCCOLLUM of Minnesota, Mr. VAN HOLLEN, Mr. BUTTERFIELD, Mr. COURTNEY, Mr. SESTAK, Mr. SIRES, and Ms. TSONGAS) introduced the following bill; which was referred to the Committee on Financial Services
May 5, 2008
Additional sponsors: Mr. MAHONEY of Florida, Mr. CARSON, Mr. CROWLEY, Mr. HINOJOSA, Mr. LANGEVIN, Mr. CAPUANO, Mr. CUMMINGS, Mr. BACA, and Mr. SHERMAN
May 5, 2008
Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on April 17, 2008]
To create a voluntary FHA program that provides mortgage refinancing assistance to allow families to stay in their homes, protect neighborhoods, and help stabilize the housing market.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE. AND TABLE OF CONTENTS.
Sec. 1. Short title and table of contents.
TITLE I--HOMEOWNERSHIP RETENTION
- Sec. 101. Purposes.Sec. 102. Insurance of homeownership retention mortgages.Sec. 103. Study of Auction or Bulk Refinance Program.Sec. 104. Temporary increase in maximum loan guaranty amount for certain housing loans guaranteed by Secretary of Veterans Affairs.Sec. 105. Study of possible accounting revisions relating to property at risk of foreclosure and the availability of credit for refinancing home mortgages at risk of foreclosure.Sec. 106. GAO study of the effect of tightening credit markets in communities affected by the subprime mortgage foreclosure crises and predatory lending on prospective first-time homebuyers seeking mortgages.
TITLE II--OFFICE OF HOUSING COUNSELING
- Sec. 201. Short title.Sec. 202. Establishment of Office of Housing Counseling.Sec. 203. Counseling procedures.Sec. 204. Grants for housing counseling assistance.Sec. 205. Requirements to use HUD-certified counselors under HUD programs.Sec. 206. Study of defaults and foreclosures.Sec. 207. Definitions for counseling-related programs.Sec. 208. Updating and simplification of mortgage information booklet.
TITLE III--COMBATING MORTGAGE FRAUD
Sec. 301. Authorization of appropriations to combat mortgage fraud.
TITLE I--HOMEOWNERSHIP RETENTION
SEC. 101. PURPOSES.
The purposes of this title are--
(1) to create an FHA program, which is voluntary on the part of borrowers and existing mortgage loan holders, to insure refinance loans for substantial numbers of borrowers at risk of foreclosure, at levels which are reasonably likely to be sustainable through enhanced affordability of debt service;
(2) to provide flexible underwriting for FHA-insured loans under such a program to provide refinancing opportunities under fiscally responsible terms, including higher fees commensurate with higher risk levels, a seasoning requirement for higher debt to income loans, and additional program controls to limit and control risk;
(3) to bar speculators and second home owners from participation in such program;
(4) to require existing mortgage loan holders to take substantial loan writedowns in exchange for having the Federal Government and the borrower assume the ongoing risk of the refinanced loan;
(5) to set a loan-to-value limit on such loans that provides the FHA with an equity buffer against potential loan losses, provides protections against the risk of future home price declines, and creates incentives for borrowers to maintain payments on the loan;
(6) to protect the FHA against losses which may exceed normal FHA loss levels by establishing higher fee levels, including an exit fee and profit sharing during the first five years of the loan, with such higher fee levels effectively being funded through the required lender writedown;
(7) to provide a fair level of incentives for junior lien holders to provide the necessary releases of their lien interests, in order to meet program requirements that all outstanding liens must be extinguished, and thereby permit the refinancing to be completed;
(8) to enhance the administrative capacity of the FHA to carry out its expanded role under the program through establishment of an Oversight Board which adds expertise from the Federal Reserve and the Department of the Treasury, through additional funding to contract out for the provision of any needed expertise in designing program requirements and oversight, and through additional funding to increase FHA personnel resources as needed to handle the increased loan volume resulting from the program;
(9) to sunset the program when it is no longer needed; and
(10) to study the need for and efficacy of an auction or bulk refinancing mechanism to facilitate more expeditious refinancing of larger volumes of existing mortgages that are at risk for foreclosure into FHA-insured mortgages.
SEC. 3 102
(a) Mortgage Insurance Program- Title II of the National Housing Act (
`SEC. 257. INSURANCE OF HOMEOWNERSHIP RETENTION MORTGAGES.
`(a) Oversight Board-
`(1) ESTABLISHMENT- There is hereby established the Refinance Program Oversight Board (in this section referred to as the `Oversight Board').
`(2) MEMBERSHIP- The Oversight Board shall consist of the following members or their designees:
`(A) The Secretary of the Treasury.
`(B) The Secretary of Housing and Urban Development.
`(C) The Chairman of the Board of Governors of the Federal Reserve System.
`(3) NO ADDITIONAL COMPENSATION- Members of the Oversight Board shall receive no additional pay by reason of service on the Oversight Board.
`(4) RESPONSIBILITIES- The Oversight Board shall be responsible for establishing program and oversight requirements for the program under this section, which shall include--
`(A) detailed program requirements under subsection (c);
`(B) flexible underwriting criteria under subsection (d);
`(C) a mortgage premium structure under subsection (e);
`(D) a reasonable fee and rate limitation under subsection (f);
`(E) enhancement of FHA capacity under subsection (
), including oversight of such activities and personnel as may be contracted for as provided therein; h i `(F) monitoring of underwriting risk under subsection (
i); and j); and `(G) such additional requirements as may be necessary and appropriate to oversee and implement the program.
`(5) USE OF RESOURCES- In carrying out its functions under this section, the Oversight Board may utilize, with their consent and to the extent practical, the personnel, services, and facilities of the Department of the Treasury, the Department of Housing and Urban Development, the Board of Governors of the Federal Reserve System, the Federal Reserve Banks, and other Federal agencies, with or without reimbursement therefore.
`(b) Authority-
`(1) IN GENERAL- The Secretary shall, subject only to the absence of qualified requests for insurance under this section and to the limitations under subsection (
) of this section and section 531(a), make commitments to insure and insure any mortgage covering a 1- to 4-family residence that is made for the purpose of paying or prepaying outstanding obligations under an existing mortgage or mortgages on the residence if the mortgage being insured under this section meets the requirements of this section, as established by the Oversight Board, and of section 203, except as modified by this section. g h `(2) ESTABLISHMENT AND IMPLEMENTATION OF PROGRAM REQUIREMENTS- The Oversight Board shall establish program requirements and standards under this section and the Secretary shall implement such requirements and standards. The Oversight Board and the Secretary may establish and implement any requirements or standards through interim guidance and mortgagee letters.
`(c) Requirements- To be eligible for insurance under this section, a mortgage shall comply with all of the following requirements:
`(1) OWNER-OCCUPIED PRINCIPAL RESIDENCE REQUIREMENT- The residence to be covered by the mortgage insured under this section shall be occupied by the mortgagor as the principal residence of the mortgagor
. and the mortgagor shall provide a certification to the originator of the mortgage that such residence to be covered by the mortgage insured under this section is the only residence in which the mortgagor has any present ownership interest. `(2) LACK OF CAPACITY TO PAY EXISTING MORTGAGE OR MORTGAGES-
`(A) BORROWER CERTIFICATION-
`(i) The mortgagor shall provide a certification to the originator of the mortgage that the mortgagor--
`(I) has not intentionally defaulted on the existing mortgage or mortgages. ; and `(II) has not knowingly, or willfully and with actual knowledge furnished material information known to be false for the purpose of obtaining the existing mortgage or mortgages.
`(ii) The mortgagor shall agree in writing that the mortgagor shall be liable to repay the FHA any direct financial benefit achieved from the reduction of indebtedness on the existing mortgage or mortgages on the residence refinanced under this section derived from misrepresentations made in the certifications and documentation required under this subparagraph, subject to the discretion of the Oversight Board.
`(B) CURRENT BORROWER DEBT-TO-INCOME RATIO- As of March 1, 2008, the mortgagor shall have had a ratio of mortgage debt to income, taking into consideration all existing mortgages at such time, greater than 35 percent
, except that the Oversight Board may decrease such percentage for all mortgagors or identifiable classes of mortgagors if the Oversight Board considers such decrease necessary or appropriate to make eligible for the program those mortgagors who cannot reasonably afford their existing mortgage loan or loans but who would be able to afford the new mortgage under the program under this section. . `(C) LOSS MITIGATION RESPONSIBILITIES- This section may not be construed to alter or in any way affect the responsibilities of any party (including the mortgage servicer) to engage in any or all loan modification or other loss mitigation strategies to maximize value to investors as established by any applicable contract.
`(3) ELIGIBILITY OF MORTGAGES BY DATE OF ORIGINATION- The existing senior mortgage shall have been originated on or before December 31, 2007.
`(4) MAXIMUM LOAN-TO-VALUE RATIO FOR NEW LOANS- The mortgage being insured under this section shall involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Secretary shall approve and including the mortgage insurance premium paid pursuant to subsection (e)(1)) in an amount not to exceed 90 percent of the current appraised value of the property. Section 203(d) shall not apply to mortgages insured under this section.
`(5) REQUIRED WAIVER OF PREPAYMENT PENALTIES AND FEES- All penalties for prepayment of the existing mortgage or mortgages, and all fees and penalties related to default or delinquency on all existing mortgages or mortgages, shall be waived or forgiven.
`(6) REQUIRED LOAN REDUCTION-
`(A) REDUCTION OF INDEBTEDNESS UNDER EXISTING SENIOR MORTGAGE- The amount of indebtedness on the existing mortgage or mortgages on the residence shall have been substantially reduced by such percentage as the Oversight Board or Secretary may require, and such reduction shall be at least sufficient to--
`(i) provide for the refinancing of such existing mortgage or mortgages in an amount not greater than 90 percent of the current appraised value of the property involved;
`(ii) pay the full amount of the single premium to be collected pursuant to subsection (e)(1) (which shall be an amount equal to 3.0 percent of the amount of the original insured principal obligation of the mortgage insured under this section and which shall serve as an additional reserve to cover possible loan losses); and
`(iii) pay the full amount of the loan origination fee and any other closing costs, not to exceed 2.0 percent of the amount of the original insured principal obligation of the mortgage insured under this section.
`(B) EXTINGUISHMENT OF DEBT BY REFINANCING-
`(i) REQUIRED AGREEMENT- All existing holders of mortgage liens on the property involved shall agree to accept the proceeds of the insured loan as payment in full of all indebtedness under all existing mortgages, and all encumbrances related to such mortgages shall be removed. The Oversight Board may take such actions as the Oversight Board considers necessary or appropriate to facilitate coordination and agreement between the holders of the existing senior mortgage and any existing subordinate mortgages, taking into consideration the subordinate lien status of such subordinate mortgages, to comply with the requirement under this subparagraph.
`(ii) TREATMENT OF MULTIPLE MORTGAGE LIENS- In addition to clause (i), the Oversight Board shall adopt one of the following approaches for all mortgages or such classes of mortgages as the Oversight Board may determine and may, from time to time, reconsider:
`(I) FIXED PRICE- As a requirement for participating in this program, all existing lien holders will agree to not provide any payment to subordinate lien holders other than such payment in accordance with a formula established by the Oversight Board as set forth in clause (iii); except that the Oversight Board may establish a short period within which first and subordinate lien holders may negotiate to extinguish all subordinate liens for compensation that may be different from the amount determined under such formula set forth in clause (iii).
`(II) SHARED EQUITY- The Oversight Board may require the mortgagor under a mortgage insured under this section to agree to share a portion of any future equity in the mortgaged property with holders of existing subordinate mortgages, in accordance with a formula for such shared equity established by the Oversight Board as set forth in clause (iii), except that payments of such shared equity may be made only after the Secretary recovers all amounts owed to the Secretary with respect to such mortgage pursuant to the program under this section (including amounts owed pursuant to paragraph (8)).
`(iii) FORMULA- In determining a formula for determining any payments to subordinate lien holders pursuant to subclauses (I) and (II) of clause (ii), and in any reconsideration of such formula as the Oversight Board may from time to time undertake, the Oversight Board shall take into consideration the current market value of such liens. In no case may a formula provide for the payment of more than 1 percent of the current appraised value of the mortgaged property to a subordinate lien holder if the outstanding balance owed to more senior lien holders is equal to or exceeds such current appraised value.
`(iv) VOLUNTARY PROGRAM- This subparagraph may not be construed to require any holder of any existing mortgage to participate in the program under this section generally, or with respect to any particular loan.
`(v) SOURCE OF PAYMENTS FOR SUBORDINATE LOANS- Any amounts paid to holders of any existing subordinate mortgages in connection with the origination and insurance of a mortgage under this section shall derive only from--
`(I) the holder of the existing senior mortgage; or
`(II) in the case only of the shared equity approach under clause (ii)(II), the mortgagor under the mortgage insured under this section
`(7) REQUIRED REDUCTION OF DEBT SERVICE- The debt service payments due under the mortgage insured under this section shall be in an amount that is substantially reduced from the debt service payments due under the existing mortgage or mortgages, which reduction may be achieved through a reduction of indebtedness, a reduction in the interest rate being paid, or an extension of the term of the mortgage, or any combination thereof.
`(8) FINANCIAL RECOVERY TO FEDERAL GOVERNMENT THROUGH EXIT PREMIUM-
`(A) SUBORDINATE LIEN- The mortgage shall provide that the Secretary shall retain a lien on the residence involved, which shall be subordinate to the mortgage insured under this section but senior to all other mortgages on the residence that may exist at any time, and which shall secure the repayment of the amount due under subparagraph (D).
`(B) NO INTEREST OR PAYMENT DURING MORTGAGE- The amount secured by the lien retained by the Secretary pursuant to subparagraph (A) shall not bear interest and shall not be repayable to the Secretary except as provided in subparagraph (D) of this paragraph.
`(C) NET PROCEEDS AVAILABLE FOR EXIT PREMIUM- Upon the sale, refinancing, or other disposition of the residence covered by a mortgage insured under this section, any proceeds resulting from such disposition that remain after deducting the remaining insured principal balance of the mortgage insured under this section shall be available to meet the obligation under subparagraph (D).
`(D) EXIT PREMIUM- Upon any refinancing of the mortgage insured under this section or any sale or disposition of the residence covered by the mortgage, the Secretary shall, subject to the availability of sufficient net proceeds described in subparagraph (C), receive the greater of--
`(i) 3 percent of the amount of the original insured principal obligation of the mortgage; or
`(ii) a percentage of the portion of the net proceeds described in subparagraph (C), which shall be--
`(I) in the case of any refinancing, sale, or disposition occurring during the first year of the term of the mortgage, 100 percent of such net proceeds;
`(II) in the case of any refinancing, sale, or disposition occurring during the second year of the term of the mortgage, 80 percent;
`(III) in the case of any refinancing, sale, or disposition occurring during the third year of the term of the mortgage, 60 percent;
and `(IV) in the case of any refinancing, sale, or disposition occurring during the fourth year of the term of the mortgage
, 40 percent;`(V) in the case of any refinancing, sale, ordisposition occurring during the fifth year of the term at any time thereafter, 50 percent;
except that such percentage ofproceeds shall be reduced by all fees themortgage, 20 percent; and Secretary has collected for `(VI) in therefinancing, sale, or disposition case of any mortgage prior to such occurring after the end of the fifth year, 0 percent. . `(E) AUTHORITY TO PROHIBIT NEW SECOND LIENS- The Oversight Board
prohibit borrowers from granting a new second lien on the mortgaged property during the first five years of the term of the mortgage insured under this section, except as the Oversight Board determines to be necessary to ensure the appropriate maintenance of the mortgaged property. may shall `(9) DOCUMENTATION AND VERIFICATION OF INCOME- In complying with the FHA underwriting requirements under the program under this section, the mortgagee under the mortgage shall document and verify the income of the mortgagor
by procuring an Internal Revenue Service transcript of the income tax returns of the mortgagor for the two most recent years for which the filing deadline for such years has passed and by any other method, in accordance with procedures and standards that the Oversight Board or the Secretary shall establish.`(10) FIXED RATE MORTGAGE- The mortgage insured under this section shall bear interest at a single rate that is fixed for the entire term of the mortgage.
`(11) MAXIMUM LOAN AMOUNT- Notwithstanding section 203(b)(2), the mortgage being insured under this section shall involve a principal obligation in an amount that does not exceed the limitation (for a property of the applicable size) on the amount of the principal obligation that would be allowable under the terms of section 202(a) of the Economic Stimulus Act of 2008 if the mortgage were insured pursuant to such section. The limitation on the amount of the principal obligation allowable under such Act shall apply for the purposes of this Act until the termination under subsection (
) of the program under this subsection. m n `(12) INELIGIBILITY FOR FRAUD CONVICTION- The mortgagor shall not have been convicted under Federal or State law for mortgage fraud during the 7-year period ending upon the insurance of the mortgage under this section.
`(13) LENDER REVIEW- The mortgagee under the mortgage shall conduct an electronic database search of the mortgagor's criminal history to determine if the mortgagor has had a conviction described in paragraph (12). The mortgagee may charge the mortgagor a reasonable fee for the actual cost of the search not to exceed a maximum rate established by the Oversight Board. The Oversight Board may provide clarification, if needed, to help mortgagees identify any differences among the States in how they report mortgage fraud convictions. The Oversight Board shall establish procedures sufficient to allow the mortgagor to challenge a mortgagee's determination with respect to paragraph (12) (including to correct inaccuracies resulting from theft of the mortgagor's identity or personally identifiable information).
`(14) APPRAISALS- Any appraisal conducted in connection with a mortgage insured under this section shall--
`(A) be based on the current value of the property; `(B) be conducted in accordance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (
12 U.S.C. 3331 et seq.); `(C) be completed by an appraiser who meets the competency requirements of the Uniform Standards of Professional Appraisal Practice; `(D) be wholly consistent with the appraisal standards, practices, and procedures under section 202(e) of this Act that apply to all loans insured under this Act; and `(E) comply with the requirements of subsection (g) of this section (relating to appraisal independence).`(15) STATEMENT OF LOAN TERMS-
`(A) REQUIREMENT- The mortgagor shall have been provided by the mortgagee, not later than three days after application for the mortgage, a form described in subparagraph (B) appropriately and accurately completed by the mortgagee. `(B) FORM- The form described in this subparagraph shall be a single page, written disclosure regarding the mortgage loan to be insured under this section that, when completed by the mortgagee, sets forth, in accordance with such requirements as the Secretary shall by regulation establish a best possible estimate of-- `(i) the total loan amount under the mortgage; `(ii) the loan-to-value ratio for the mortgage; `(iii) the final maturity date for the mortgage; `(iv) the amount of any prepayment fee to be charged if the mortgage is paid in full before the final maturity date for the mortgage, including the percentages of any net proceeds to be received by the Secretary pursuant to paragraph (8)(D)(ii); `(v) the amount of the exit premium under the mortgage pursuant to subsection (e)(3); `(vi) the interest rate under the mortgage expressed as an annual percentage rate, and the amount of the monthly payment due under such rate; `(vii) the fully indexed rate of interest under the mortgage expressed as an annual percentage rate and the amount of the monthly payment due under such rate; `(viii) the monthly household income of the borrower upon which the mortgage is based; `(ix) the amount of the monthly payment due under the mortgage, and the amount of such initial monthly payment plus monthly amounts due for taxes and insurance on the property for which the mortgage is made, both expressed as a percentage of the monthly household income of the borrower; and `(x) the aggregate amount of settlement charges for all settlement services provided in connection with the mortgage, the amount of such charges that are included in the principal amount and the amount of such charges the borrower must pay at closing, the aggregate amount of mortgagee's fees connection with the mortgage, and the aggregate amount of other fees or required payments in connection with the mortgage.
`(d) Flexible Underwriting Criteria-
`(1) IN GENERAL- The Oversight Board shall establish, and the Secretary acting on behalf of the Oversight Board shall implement, underwriting standards for mortgages insured under this section that--
) ensure that each mortgagor under a mortgage insured under this section has a reasonable expectation of repaying the mortgage, taking into consideration the mortgagor's income, assets, liabilities, payment history, and other applicable criteria, but which shall not result in a denial of insurance solely on the basis of the mortgagor's current FICO or other credit scores, or any delinquency or default by the mortgagor under the existing mortgage or mortgages `(1 `(A ; , or any case filed under title 11, United States Code, by the mortgagor; and
) subject to the provisions of `(2 `(B ), permit a total debt-to-income ratio of up to 43 percent paragraph (1) and except as provided in paragraph (3 subparagraph (A ; .
`(3) s `(2) EXCEPTION-
`(A) IN GENERAL- S ubject to theparagraph (1) provisions of underwriting standards established under permit a total debt-to-income ratio of more than 43 percent, but not more than 50 percent, if the mortgagor has made, on a timely basis before the endorsement of the mortgage insured under this section, not less than six months of payments in an amount not less than the amount of the monthly payment due under the mortgage to be insured under this section , (A) and any additional requirements that the Oversight Board considers appropriate, the Oversight Board shall the ; except that . The holder of the existing senior mortgage shall exercise forbearance with respect to such mortgage during period in which such payments are made. `(B) COMPUTATION OF DEBT-TO-INCOME RATIO- In computing the mortgagor's total debt-to-income ratio for purposes of mortgage qualification under the underwriting standards established pursuant to this section--
`(i) if the mortgagor is a debtor in a case under chapter 13 of title 11, United States Code, payments on recurring debts other than housing expenses shall be based on the amounts being paid on such debts under the mortgagor's confirmed plan under such chapter; and `(ii) if the mortgagor is a debtor in a case under chapter 7 of title 11, United States Code, recurring debts that are to be discharged in that case shall not be considered.
`(3) AUTHORITY- The Oversight Board maythe increase alter under this maximum percentage ratios for a paragraph subsection particular class of borrowers, who will be subject toadditional such requirements asOversight the Boardis necessary shall establish, to not more than 55 percent upon making a finding that such increase determines and appropriate tothe purposes of this achieve fulfill section and can be accomplished under reasonable underwriting standards; and the holder of the existing senior mortgage shall exercise forbearance with respect to such mortgage during the period in which such payments are made; and Act. `(4)
the underwriter of the insured loan to provide such representations and warranties as the Oversight Board considers necessary or appropriate for the Secretary to enforce compliance with all underwriting and appraisal standards of the program. provide for REPRESENTATIONS AND WARRANTIES- The Oversight Board shall require `(e) Premiums- For each mortgage insured under this section, the Oversight Board shall establish and the Secretary shall collect--
`(1) at the time of insurance, a single premium payment in an amount equal to 3.0 percent of the amount of the original insured principal obligation of the mortgage, which shall be paid from the proceeds of the mortgage being insured under this section, through the reduction of the amount of indebtedness on the existing senior mortgage required under subsection (c)(6)(A);
`(2) in addition to the premium under paragraph (1), annual premium payments in an amount equal to 1.50 percent of the remaining insured principal balance of the mortgage; and
`(3) an exit premium in the amount determined under subsection (c)(8), but which shall not be less than 3.0 percent of the original insured principal obligation of the mortgage, subject only to the availability of sufficient net proceeds from sale, refinancing, or other disposition of the property, as determined in subsection (c)(8).
`(f) Origination Fees and Mortgage Rate- The Oversight Board shall establish and the Secretary shall implement a reasonable limitation on origination fees for mortgages insured under this section and shall establish procedures to ensure that interest rates on such mortgages shall be commensurate with market rate interest rates on such types of loans.
`(g)
Appraisal Independence- `(1) PROHIBITIONS ON INTERESTED PARTIES IN A REAL ESTATE TRANSACTION- No mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, nor any other person with an interest in a real estate transaction involving an appraisal in connection with a mortgage insured under this section shall improperly influence, or attempt to improperly influence, through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, non-payment for services rendered, or bribery, the development, reporting, result, or review of a real estate appraisal sought in connection with the mortgage. `(2) EXCEPTIONS- The requirements of paragraph (1) shall not be construed as prohibiting a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, or any other person with an interest in a real estate transaction from asking an appraiser to provide 1 or more of the following services: `(A) Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support an appraisal. `(B) Provide further detail, substantiation, or explanation for the appraiser's value conclusion. `(C) Correct errors in the appraisal report. `(3) CIVIL MONETARY PENALTIES- The Secretary may impose a civil money penalty for any knowing and material violation of paragraph (1) under the same terms and conditions as are authorized in section 536(a) of this Act.
`(h) Limitation on Aggregate Insurance Authority- The aggregate original principal obligation of all mortgages insured under this section may not exceed $300,000,000,000.
) Enhancement of FHA Capacity- Under the direction of the Oversight Board, the Secretary shall take such actions as may be necessary to-- `(h `(i
`(1) contract for the establishment of underwriting criteria, automated underwriting systems, pricing standards, and other factors relating to eligibility for mortgages insured under this section;
`(2) contract for independent quality reviews of underwriting, including appraisal reviews and fraud detection, of mortgages insured under this section or pools of such mortgages; and
`(3) increase personnel of the Department as necessary to process or monitor the processing of mortgages insured under this section.
) Monitoring of Underwriting Risk- `(i `(j
`(1) MONITORING OF DESIGNATED UNDERWRITERS- The Oversight Board and the Secretary shall monitor independent quality reviews as established pursuant to subsection (
h)(2) to-- i)(2) to--
`(A) determine compliance of designated underwriters with underwriting standards;
`(B) determine rates of delinquency, claims rates, and loss rates of designated underwriters; and
`(C) terminate eligibility of designated underwriters that do not meet minimum performance standards as the Oversight Board may establish and the Secretary implements.
`(2) REPORTS BY OVERSIGHT BOARD- The Oversight Board shall submit monthly reports to the Congress identifying the progress of the program for mortgage insurance under this section, which shall contain the following information for each month:
`(A) The number of new mortgages insured under this section, including the location of the properties subject to such mortgages by census tract.
`(B) The aggregate principal obligation of new mortgages insured under this section.
`(C) The average amount by which the indebtedness on existing mortgages is reduced in accordance with subsection (c)(6).
`(D) The average amount by which the debt service payments on existing mortgages is reduced in accordance with subsection (c)(7).
`(E) The amount of premiums collected for insurance of mortgages under this section.
`(F) The claim and loss rates for mortgages insured under this section.
`(G) The race, ethnicity, gender, and income of the mortgagors, aggregated by geographical areas at least as specific as census tracts, except where necessary to protect privacy of the borrower.
`(H) Any other information that the Oversight Board considers appropriate.
`(3) REPORT BY INSPECTOR GENERAL- The Inspector General of the Department of Housing and Urban Development shall conduct an annual audit of the program for mortgage insurance under this section to determine compliance with this section and program rules.
) GNMA Commitment Authority- `(j `(k
`(1) GUARANTEES- The Secretary shall take such actions as may be necessary to ensure that securities based on and backed by a trust or pool composed of mortgages insured under this section are available to be guaranteed by the Government National Mortgage Association as to the timely payment of principal and interest.
`(2) GUARANTEE AUTHORITY- To carry out the purposes of section 306 of the National Housing Act (
12 U.S.C. 1721 ), the Government National Mortgage Association may enter into new commitments to issue guarantees of securities based on or backed by mortgages insured under this section, not exceeding $300,000,000,000. The amount of authority provided under the preceding sentence to enter into new commitments to issue guarantees is in addition to any amount of authority to make new commitments to issue guarantees that is provided to the Association under any other provision of law.
) Special Risk Insurance Fund- The insurance of each mortgage under this section shall be the obligation of the Special Risk Insurance Fund established by section 238. `(k `(l
) Definitions- For purposes of this section, the following definitions shall apply: `(l `(m
`(1) EXISTING MORTGAGE- The term `existing mortgage' means, with respect to a mortgage insured under this section, a mortgage that is to be extinguished, and paid or prepaid, from the proceeds of the mortgage insured under this section.
`(2) EXISTING SENIOR MORTGAGE- The term `existing senior mortgage' means, with respect to a mortgage insured under this section, the existing mortgage that has superior priority.
`(3) EXISTING SUBORDINATE MORTGAGE- The term `existing subordinate mortgage' means, with respect to a mortgage insured under this section, an existing mortgage that has subordinate priority to the existing senior mortgage.
`(m) Sunset- `(n) Sunset-
`(1) IN GENERAL- Except as provided in paragraph (2), the authority of the Secretary to make any new commitment to insure any mortgage under this section shall terminate upon the expiration of the 2-year period beginning on the date of the enactment of the FHA Housing Stabilization and Homeownership Retention Act of 2008.
`(2) EXTENSIONS- The Oversight Board may, not more than four times, extend the authority to enter into new commitments to insure mortgages under this section beyond the date specified in paragraph (1), except that each such extension shall--
`(A) be effective only if, before the program terminates pursuant to paragraph (1) or any previous extension pursuant to this paragraph, the Oversight Board--
`(i) certifies the need for such extension in writing to the Congress; and
`(ii) causes notice of such extension to be published in the Federal Register no later than the beginning of the 3-month period that ends upon the scheduled termination date of the program; and
`(B) be for a period of not more than 6 months.
) Authorizations of Appropriations- There is authorized to be appropriated for each of fiscal years 2008 and 2009-- `(n `(o
`(1) $2
0,000,000 for providing counseling regarding loss mitigation for mortgagors with 1- to 4-family residences, including determining eligibility for the program under this section, with grants to be administered through the Neighborhood Reinvestment Corporation, except that-- 0 1
`(A) not less than 15 percent of the funds made available pursuant to this paragraph shall be provided to counseling organizations that target counseling services regarding loss mitigation to minority and low-income homeowners or provide such services in neighborhoods with high concentrations of minority and low-income homeowners;
and `(B) $3,000,000 of the funds made available pursuant to this paragraph shall be used by the Neighborhood Reinvestment Corporation (referred to in this subparagraph as the `NRC') to make grants to 0 5 and counseling intermediaries approved by the Department of Housing State Urban Development local legal organizations the NRC to hire or attorneys thave o assist homeowners who hat demonstrated legalrelated to home ownership preservation, home foreclosure prevention, issues experience in home foreclosure or eviction law to provide legal assistance and tenancy associated with home foreclosure, delinquency or; such attorneys shall be capable of assisting homeowners short sale to counseling intermediaries that have been approved by the Department of Housing and Urban Development for the purpose of making such grants or contracting for such legal assistance; of the amount provided under this subparagraph, at least 60 percent shall be allocated for legal assistance to low-income homeowners or tenants owner-occupied homes of in or tenants who live in homes with mortgages in default, in danger of default, or subject to or at risk of foreclosureor eviction and who have legal issues that cannot be handled byalready counselors employed byintermediaries; such NRC the amount of in using under this subparagraph, the NRC shall give priority consideration to provided made available and counseling intermediaries State local legal organizationsand attorneys that (i) provide legal assistance in the 100 metropolitan statistical areas (as defined by the Director of the Office of Management and Budget) with the highest home foreclosure rates, and (ii) have the capacity to begin using the financial assistance within 90 days after receipt of the assistance; and s a condition of the receipt of a grant under this subparagraph, the grantee shall submit to NRC information relating to the demographic characteristics of the assisted homeowners or tenants, the dollar amount and terms of the relevant mortgages and the outcome of legal proceedings related to the foreclosure or eviction proceedings, including the resolutions thereof; `(C) some such sums shall be used for such counseling for veterans recently returning from active duty in the Armed Forces;
`(D) the NRC shall give priority consideration for funding with amounts made available pursuant to this paragraph, except for funds made available under subparagraphs (A) and (B), to entities that have an effective plan in place for making contact, including personal contact, with defaulted mortgagors, and such a plan may include use of third parties (including both for-profit and not-for-profit entities) to make personal contact with defaulted mortgagors, or visits to such mortgagors, or both;
`(E) except with respect to funds reserved under subparagraphs (A) and (B), the NRC shall give priority consideration for funding with amounts made available pursuant to this paragraph to entities that have a written plan that has been implemented for providing in-person counseling and for making contact, including personal contact, with defaulted mortgagors, for the purpose of providing counseling or providing information about available counseling, both (i) prior to commencement of any foreclosure proceedings, and (ii) in the event effective in person or phone contact has not been made with such defaulted mortgagors prior thereto, then prior to the conclusion of the foreclosure process; and
`(F) not less than 2 percent of the funds made available pursuant to this paragraph shall be used only for identifying and notifying borrowers under existing mortgages who are eligible under this section for insurance of refinancing mortgages, and in making funds reserved under this subparagraph available for such purpose, the Secretary shall give preference to assistance for programs that have a proven history of outreach within minority communities; and
`(2) $150,000,000 for costs of activities under subsection (
h).'. i). `(p) Audit and Report by Inspector General-
`(1) AUDIT- The Inspector General of the Department of Housing and Urban Development shall conduct an audit of the program for loss mitigation counseling funded with amounts made available under subsection (o)(1) to determine compliance with such subsection. `(2) REPORTS TO CONGRESS- Not later than March 30, 2009, and every calendar quarter thereafter, the Inspector General shall submit to the appropriate committees of the Congress a report summarizing the activities of the Inspector General and the Neighborhood Reinvestment Corporation during the 120-day period ending on the date of such report. Each report shall include, for the period covered by such report, a detailed statement of all obligations, expenditures, and revenues associated with paragraphs (1) and (2) of subsection (o), including-- `(A) obligations and expenditures of appropriated funds; `(B) the number of homeowners eligible in such program; `(C) the number of homeowners participating in such program; `(D) the status of homeowners within such program; `(E) the number of homeowners who have rejected assistance from the Neighborhood Reinvestment Corporation; and `(F) information on participating counseling services.'.
(b) Special Risk Insurance Fund- Section 238 of the National Housing Act (
12 U.S.C. 1715 z-3) is amended--
(1) in subsection (a)(1), by striking `or 243' each place such term appears and inserting `243, or 257'; and
(2) in subsection (b), by striking `and 243' each place such term appears and inserting `243, and 257'.
SEC. 4 103
(a) Study- The Board of Governors of the Federal Reserve System (in this section referred to as the `Board of Governors'), in consultation with other members of the Oversight Board established by section 257(a) of the National Housing Act (as added by the amendment made by section
(b) Content-
(1) ANALYSIS- The study required under subsection (a) shall analyze--
(A) the feasibility of establishing a mechanism that would facilitate the more rapid refinancing of borrowers at risk of foreclosure into performing mortgages insured under title II of the National Housing Act;
(B) whether such a mechanism would provide an effective and efficient mechanism to reduce foreclosures on qualified existing mortgages;
(C) whether the use of an auction or bulk refinance program is necessary to stabilize the housing market and reduce the impact of turmoil in that market on the economy of the United States;
(D) whether there are other mechanisms or authority that would be useful to reduce foreclosure; and
(E) and any other factors that the Board of Governors considers relevant.
(2) DETERMINATIONS- To the extent that the Board of Governors finds that a facility of the type described in paragraph (1) is feasible and useful, the study shall--
(A) determine and identify any additional authority or resources needed to establish and operate such a mechanism;
(B) determine whether there is a need for additional authority with respect to the loan underwriting criteria included in the amendment made by section
(C) determine whether such underwriting criteria should be established on the basis of individual loans, in the aggregate, or otherwise to facilitate the goal of refinancing borrowers at risk of foreclosure into viable loans insured under the National Housing Act.
(c) Report- Not later than the expiration of the 60-day period beginning on the date of the enactment of this Act, the Board of Governors shall submit a report regarding the results of the study conducted under this section to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate. The report shall include a detailed description of the analysis required under subsection (b)(1) and of the determinations made pursuant to subsection (b)(2), and shall include any other findings and recommendations of the Board of Governors pursuant to the study, including identifying various options for mechanisms described in subsection (a).
SEC. 104. TEMPORARY INCREASE IN MAXIMUM LOAN GUARANTY AMOUNT FOR CERTAIN HOUSING LOANS GUARANTEED BY SECRETARY OF VETERANS AFFAIRS.
- Notwithstanding subparagraph (C) of section 3703(a)(1) of title 38, United States Code, for purposes of any loan described in subparagraph (A)(i)(IV) of such section that is originated during the period beginning on the date of the enactment of this Act and ending on December 31, 2008, the term `maximum guaranty amount' shall mean an amount equal to 25 percent of the higher of-- (1) the limitation determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (
SEC. 105. STUDY OF POSSIBLE ACCOUNTING REVISIONS RELATING TO PROPERTY AT RISK OF FORECLOSURE AND THE AVAILABILITY OF CREDIT FOR REFINANCING HOME MORTGAGES AT RISK OF FORECLOSURE.
- (a) Study Required- The Board of Governors of the Federal Reserve System shall conduct a study on mark-to-market accounting standards applicable to depository institutions with respect to their residential mortgages that are at risk of foreclosure, the effects of such accounting standards and capital requirements on a depository institution's capacity to provide refinancing to residential mortgagors that are at risk of foreclosure and to residential mortgagors during periods of market value declines and increased foreclosures, and the feasibility of modifications of such standards, requirements, and regulatory actions during periods of market fluctuation in order to maintain the ability of the institution to continue to carry mortgages on residential property at risk of foreclosure and assure the availability of credit to refinance at-risk residential mortgages. (b) Report Required- The Board of Governors of the Federal Reserve System shall submit a report to the Congress before the end of the 90-day period beginning on the date of the enactment of this Act containing the findings and determinations of the Board with respect to the study conducted under subsection (a) and such administrative and legislative recommendations as the Board may determine to be appropriate.
SEC. 106. GAO STUDY OF THE EFFECT OF TIGHTENING CREDIT MARKETS IN COMMUNITIES AFFECTED BY THE SUBPRIME MORTGAGE FORECLOSURE CRISES AND PREDATORY LENDING ON PROSPECTIVE FIRST-TIME HOMEBUYERS SEEKING MORTGAGES.
The Comptroller General of the United States shall conduct a study to analyze the effects of tightening credit markets on prospective first-time home buyers who reside in selected communities that have been most detrimentally affected by both the current subprime mortgage foreclosure crisis and predatory mortgage lending. Such study shall also analyze the adequacy of financial literacy outreach efforts by agencies of the Federal Government tasked with implementing financial literacy education in such communities and shall assess whether the current funding levels for such efforts are at sufficient levels to reduce the levels of subprime mortgage delinquencies and foreclosures and to increase the level of financial literacy in the selected communities so as to minimize the incidences of predatory mortgage lending. Not later than the expiration of the 6-month period beginning on the date of the enactment of this Act, the Comptroller General shall submit a report to the Congress setting forth the results of the study and including recommendations regarding such funding levels.
TITLE II--OFFICE OF HOUSING COUNSELING
SEC. 201. SHORT TITLE.
This title may be cited as the `Expand and Preserve Home Ownership Through Counseling Act'.
SEC. 202. ESTABLISHMENT OF OFFICE OF HOUSING COUNSELING.
- Section 4 of the Department of Housing and Urban Development Act (
SEC. 203. COUNSELING PROCEDURES.
- (a) In General- Section 106 of the Housing and Urban Development Act of 1968 (
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Self-employed persons need provisions in this bill to ensure they may qualify for FHA loans. The problem with self-employment is that even if a home based business has a mortgage as an expense of the business, and regardless of substantial gross income, only net income is used to qualify for FHA loans. Further, those persons who do not receive W-2's to verify income appear to be excluded from FHA loans in the qualification requirementsm i.e, stated income borrowers. This procedural exclusion stifles the small business owner, and can exclude him/her from home ownership through this home-saving FHA bill.
This proposal is brushing over two key items that seem to make it be a complete failure. One is assuming the current lender will comply to taking a short payoff the other is assuming applicant's debt to income will be that low. Not only are homes in the downward trend of values, credit cards balances are at their all time high. This bill appears it will only benefit the government not the average consumer.
This egregious legislation is going to be a fine addition to the book I am writing. The individuals who supported this bill are going to be 'famous', or rather, infamous. To attempt to assign taxpayers to fund 'new' mortgages for liars is a slap in the face to all citizens (except the liars). It's not about the speculators and second-homeowners, it's about liar buyers, liar lenders, liar builder/lenders. There is no justice for the taxpayer in being forced to pay any more 'bailout' scams without FIRST including fraud investigations upon all borrowers and lenders. Some buyers say 'the lender did the W-2's'. Well, the buyers signed it off. All the money they are proposing here, all that money, and not one of these representatives has the spine to call for fraud investigation first? We're not talking about a big process there. Before they start 'insuring' hundreds of billions I want proof of who lied in each case. When did these people get so lavish with my taxes?
I can't believe I will have to say something nice in my book about George Bush now. My 'review' of him would have been perfectly vile without this. I cannot believe he is one of the only people standing up against this gross, theiving exercise in arrogant ignorance.
Thanks,
CM
This is not an issue of liars. We did not buy our homes hoping that the market would depreciate by half within 2 years as my home did. I didn't lie on my application. I didn't deceive anyone. And no one deceived me. I took a loan to purchase a property. Period the end. How arrogant the anonymous writer is with his/her claims. He/She has no idea what he/she is talking about. I work in the industry and see it every day. Every walk of life. Not investors, but real human beings are losing their dreams and their lives to this horror... Losing their income because the economy is continually weakening. Losing their jobs to foreign soil as thousands did last year... and to 3rd world countries who have access to ALL of our private information with no international laws governing identity theft, or recourse against individuals when it happens... This collapse did not occur because of liars... Check your facts before you spout off. When you have been there, had a single conversation with anyone who has lost their job or home due to dominoe effect of this crisis... (I know 4 people who are either losing or have lost their homes already due to the economic quake) or done your research, then maybe that book will be worth the paper it's going to be printed on... or not...
However I think it is naive of the government to believe the funds allocated could make a dent in the mortgage industries struggles at this point... What happens when the strongest banks in the world collapse due to record losses... CITI has experiences record losses in the billions, and their stock has been reduced to an embarrassment at this point... Bank of America is just realizing the vastness of the bailout they have intiated with Countrywide... Wells Fargo is struggling to figure out what loss mitigation even is... Prime lenders who never thought they needed loss mitigation are scrambling to figure out how to do it because they never believed in the necessity before, never experienced this kind of loss before. Are you aware that for every dollar lent on a home, between .50 and .60 cents are lost on that dollar?! All banks are taking increased losses in the billions quarter over quarter... Everyday I see it. The trickle down effect is emense.
If the government doesn't want to see further colapse, perhaps their proposal would be to back the banks and FORCE the mitigation efforts in reasonable measures rather than asking the banks to take all of the losses and expect to reap the benefit of those losses later? What is the government insuring? The loss is taken by the financial institution which has to agree to the loss... and then somehow magically the government is owed the deficiency balance for the first 5 years until forgiven? How does that keep the banks afloat? Like them or love them, banks are integral to financial security of this nation. Something is rotten in this bill. Why is the government entitled to the deficiency losses of the banks that are owed the money? Who else gets these imaginary dollars? What is missing?
Oh, and in addition, the banking industry has been modifying loans for decades to avoid taking losses and taking homes back. The bank doesn't want your house... They want to be repaid and recover the money they loan. When they can not? They MITIGATE THAT LOSS to decrease it and save the home for the customer as well as for the bottom line. Yes, lending practices were lax, but everyone pays with their health, sanity, dreams, dollars, jobs... everyone pays till a real solutions is met...
Keep in mind; our politicians now has American taxpayers over $56 TRILLION DOLLARS in debt. If you would like to view the fast moving clock, go to: http://www.truthin2008.org
Help, this is all I ask. I am one of those who, in time will lose their home. I was one who gambled that the market would stay up. My gamble lost and now I am trying to find a solution before everything falls apart. The United States is in its worst time. Our dollar amounts to very little in the rest of the world. Our people are becoming homeless because they were lead to believe that the market was still good and they had nothing to worry about. We are fighting a war that we will never win and it's costing us trillions of dollars. Everybody was having too much fun and didn't realize that what goes up must come down. What do we do? There are millions of us that are going to be homeless with our families in tow. Again, I ask for help.
The only way we can stabilize anything in thsi economy is to re-educate consumers on how to use money correctly, cap interest rates on home, car and credit purchases to below 10%, have the government intervene with oil company profits, the government also needs to focus on rebuilding this country with strong values. It has run wild and there is no respect amongst our youth, we lag behind in technology growth, to much outsourcing, not enough jobs, cost of living rising, all this will increase all the negatives.....theft, homelessness, agression, fear, confidence ect...Are we living in HELL? I think we are coming close. This will be a very viscious cycle we will live to see and it will not be pretty. the new president will have lots to do, rebuild relationships destroyed by Bush and his horrible decisions, rebuild the economy, address healthcare, address energy concerns, Global warming....we have waited too long and have spent way to much time on other poeple problems,..get back to basics...focus on the USA and USA only!!! The peolpe here will soon be on those charitable commercials for funds....that's where we are heading. Will we become a third world country?????
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