< Back to H.R. 4390 (103rd Congress, 1993–1994)

Text of the FHA Reform Act of 1994

This bill was introduced on May 11, 1994, in a previous session of Congress, but was not enacted. The text of the bill below is as of May 11, 1994 (Introduced).

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HR 4390 IH

103d CONGRESS

2d Session

H. R. 4390

To amend the National Housing Act to reform and simplify the single family home mortgage insurance program of the Department of Housing and Urban Development, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

May 11, 1994

Mr. KLEIN (for himself and Mr. VENTO) introduced the following bill; which was referred to the Committee on Banking, Finance and Urban Affairs


A BILL

To amend the National Housing Act to reform and simplify the single family home mortgage insurance program of the Department of Housing and Urban Development, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘FHA Reform Act of 1994’.

SEC. 2. MAXIMUM DOLLAR AMOUNT.

    Subparagraph (A) of the first sentence of section 203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)(A)) is amended by striking clause (ii) and all that follows through ‘1992;’ and inserting the following:

          ‘(ii) 85 percent of the dollar amount limitation determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for a residence of the applicable size;

        except that the applicable dollar amount limitation in effect under this subparagraph (A) for any area may not be less than the greater of--

          ‘(I) the dollar amount limitation in effect under this section for the area on the date of enactment of the FHA Reform Act of 1994; or

          ‘(II) the applicable average area purchase price determined under section 143(e)(2) of the Internal Revenue Code of 1986, as adjusted by the Secretary to reflect a single amount using purchase prices for residences that have been previously occupied, and for residences that have not been so occupied, which amount shall be adjusted by the Secretary annually on the basis of the Constant Quality Housing Price Index;’.

SEC. 3. MAXIMUM LOAN-TO-VALUE RATIO.

    Section 203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)) is amended--

      (1) by striking ‘(including such initial service charges, appraisal, inspection, and other fees as the Secretary shall approve)’ the first place it appears;

      (2) by striking subparagraph (B) of the first sentence and inserting the following new subparagraph:

        ‘(B) except as otherwise provided in this paragraph (2), not to exceed an amount equal to the sum of--

          ‘(i) 99 percent of $50,000 of the appraised value of the property, as of the date the mortgage is accepted for insurance;

          ‘(ii) 96 percent of such value in excess of $50,000 but not in excess of $125,000; and

          ‘(iii) 94 percent of such value in excess of $125,000.’;

      (3) by striking the second sentence of the matter that follows subparagraph (B) of the first sentence; and

      (4) by striking penultimate undesignated paragraph.

SEC. 4. SINGLE FAMILY RISK-SHARING MORTGAGE INSURANCE PROGRAM.

    (a) IN GENERAL- Title II of the National Housing Act (12 U.S.C. 1707 et seq.) is amended by adding at the end the following new section:

‘SINGLE FAMILY RISK-SHARING WITH STATE AND LOCAL AGENCIES

    ‘SEC. 256. (a) AUTHORITY- Notwithstanding any other provision of this Act inconsistent with this section, the Secretary may insure and make commitments to insure under this section mortgages on single family properties under risk-sharing mortgage insurance programs established with 1 or more States or agencies. Only mortgages executed in connection with the acquisition of a single family property or for the refinancing of a mortgage insured under this section shall be eligible. Under such programs, the Secretary shall insure a portion of the mortgage and the State or local agency shall insure the remainder.

    ‘(b) PURPOSES- The purposes of the program under this section are (1) to increase the availability of single family mortgage financing in areas where there is need for mortgage insurance under this Act that cannot be met due to particularly high average median house prices in the area, and (2) to foster arrangements with State and local agencies to share the risk of mortgage insurance.

    ‘(c) APPLICATIONS-

      ‘(1) APPROVAL- The Secretary may approve an application submitted by a State or local agency to establish a risk-sharing program under this section, based on a determination that the State or local agency demonstrates that (A) it has the legal authority under State law and, where applicable, local law, to participate in the risk-sharing mortgage insurance program, (B) it has carried out, or has the potential to carry out, a financially sound, efficient, and effective mortgage insurance program, and (C) it has the ongoing administrative and financial capacity necessary to carry out a program under this section.

      ‘(2) CANCELLATION OF APPROVAL- For a violation of requirements and procedures under the risk-sharing agreement between the State or local agency and the Secretary or for other good cause, the Secretary may cancel approval of a State or local agency under this section by giving notice to the State or local agency. The cancellation shall be effective upon receipt of the notice by the agency or at a later date specified by the Secretary. A decision by the Secretary to cancel approval shall be final and conclusive and shall not be subject to judicial review.

    ‘(d) DELEGATION OF AUTHORITY TO INSURE TO STATE AND LOCAL AGENCIES- Pursuant to a risk-sharing agreement with a State or local agency, the Secretary shall delegate the authority to insure and make commitments to insure the portion of mortgages to be insured by the Secretary under this section to the State or local agency. The risk-sharing agreement shall contain such other matters as the Secretary and the State or local agency agree.

    ‘(e) UNDERWRITING STANDARDS AND LOAN TERMS AND CONDITIONS- The State or local agency shall adopt underwriting standards and loan terms and conditions for purposes of underwriting loans to be insured under this section without regard to requirements of this Act other than this section, section 203(g), and section 203(r)(2), subject to review and approval by the Secretary.

    ‘(f) MORTGAGE INSURANCE PREMIUMS-

      ‘(1) REQUIREMENT- The State or local agency shall require the payment of mortgage insurance premiums by mortgagors.

      ‘(2) SHARES- The Secretary shall establish policies and procedures for the sharing of premiums between the Secretary and the State or local agency, based on the relative risk to, and administrative costs of, the Secretary and the State or local agency. The share paid to the Secretary shall not be less than an amount necessary to cover the risk to, and administrative costs of, the Secretary.

    ‘(g) LIMITATIONS ON PRINCIPAL MORTGAGE AMOUNT-

      ‘(1) INSURED PORTION- The portion of the mortgage insured under this section by the Secretary may not exceed an amount equal to the lesser of (A) 80 percent of the appraised value of the property, or (B) the maximum amount the Secretary may insure under section 203(b) of this Act for the area (but not including any amount for a mortgage insurance premium).

      ‘(2) TOTAL PRINCIPAL AMOUNT- The total principal amount of a mortgage insured under this section by the Secretary and the State or local agency (A) shall exceed the maximum amount the Secretary may insure under subparagraph (A) of the first sentence of section 203(b)(2) of this Act for the area, and (B) may not exceed the conforming loan limitation determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for a residence of the applicable size, as adjusted annually.

      ‘(3) LOAN-TO-VALUE RATIO- The principal obligation of a mortgage may not exceed an amount determined in accordance with subparagraph (B) of the first sentence of section 203(b)(2) of this Act plus the mortgage insurance premium.

      ‘(4) REFINANCING MORTGAGES- Notwithstanding paragraph (2)(A) or (3), in the case of refinancing of an existing mortgage insured under this section, the principal obligation of a refinancing mortgage may not exceed the outstanding principal balance of the existing mortgage plus any mortgage insurance premium.

    ‘(h) INSURANCE CLAIMS-

      ‘(1) PROCEDURE- In the case of a default and foreclosure of a mortgage insured under this section, the mortgagee may file a claim with the State or local agency for insurance benefits in accordance with requirements established by the State or local agency and approved by the Secretary. The agency shall pay the full amount of the claim owed to the mortgagee. If the loss on the insured mortgage exceeds the amount of insurance by the agency, the Secretary shall reimburse the agency for the difference.

      ‘(2) GENERAL INSURANCE FUND- The insurance of a mortgage under this section by the Secretary shall be an obligation of the General Insurance Fund created pursuant to section 519 of this Act.

    ‘(i) INAPPLICABILITY OF THE ASSIGNMENT PROGRAM- Section 230 shall not apply to mortgages insured under the program authorized by this section.

    ‘(j) RESTRICTION ON GNMA SECURITIZATION- The Government National Mortgage Association shall not securitize any loans insured under this section.

    ‘(k) DEFINITIONS- As used in this section:

      ‘(1) The term ‘local agency’ means an agency of a unit of general local government, as defined by the Secretary, that has the authority to insure mortgages and to participate with the Secretary in the single family risk-sharing program under this section, or an agency or instrumentality of a local agency if the agency or instrumentality has such authority.

      ‘(2) The term ‘State agency’ means an agency of a State that has the authority to insure mortgages and to participate with the Secretary in the single family risk-sharing program under this section, or an agency or instrumentality of a State agency if the agency or instrumentality has such authority.

      ‘(3) The term ‘single family property’ means a property upon which there is located a dwelling designed principally for occupancy by 1 family, and includes a condominium and a cooperative.

      ‘(4) The term ‘State’ means the several States, the Commonwealth of Puerto Rico, the District of Columbia, Guam, the Trust Territory of the Pacific Islands, American Samoa, and the Virgin Islands.’.

    (b) IMPLEMENTATION- The Secretary of Housing and Urban Development may implement the program authorized by the amendment made under subsection (a) by entering into risk-sharing agreements negotiated with State agencies, notwithstanding any otherwise applicable requirement for regulations or notice published in the Federal Register and notwithstanding any otherwise applicable regulations of the Secretary.