Home Refinancing Assistance Act of 1993 - Amends the National Housing Act to authorize the Secretary of Housing and Urban Development to insure qualifying single family home refinancings.
[Congressional Bills 103th Congress]
[From the U.S. Government Printing Office]
[H.R. 3296 Introduced in House (IH)]
103d CONGRESS
1st Session
H. R. 3296
To amend the National Housing Act to authorize the Secretary of Housing
and Urban Development to insure mortgages given to secure loans that
are made to refinance single family homes having appraised values that
are less than the outstanding principal obligations refinanced.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 15, 1993
Mr. Kennedy 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 authorize the Secretary of Housing
and Urban Development to insure mortgages given to secure loans that
are made to refinance single family homes having appraised values that
are less than the outstanding principal obligations refinanced.
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 ``Home Refinancing Assistance Act of
1993''.
SEC. 2. INSURANCE FOR MORTGAGES TO REFINANCE UNDERWATER MORTGAGES.
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:
``insurance of `underwater' single family mortgages
``Sec. 266. (a) Insurance Authority.--The Secretary may, upon
application by a mortgagee, insure any refinancing mortgage eligible
for insurance under this section to the extent authorized by this
section, upon such terms and conditions as the Secretary may prescribe,
and may make commitments for the insurance of such refinancing
mortgages before the date of the execution of such mortgages.
``(b) Extent of Insurance.--The Secretary may provide insurance
under this section, and make commitments to provide such insurance,
only with respect to the portion of the original principal obligation
(including such initial service charges, appraisal, inspection, and
other fees approved by the Secretary) of an eligible refinancing
mortgage that exceeds 95 percent of the appraised value of the property
subject to the mortgage, as of the date the refinancing mortgage is
accepted for insurance under this section, as determined by the
Secretary.
``(c) Eligibility Requirements.--The Secretary may insure a
refinancing mortgage under this section only if the mortgage complies
with the following requirements:
``(1) Mortgagee.--The refinancing mortgage has been made
to, and held by, a mortgagee approved by the Secretary as
responsible and able to service the mortgage properly.
``(2) Mortgagor.--The mortgagor under the refinancing
mortgage--
``(A) is the mortgagor under the underlying
mortgage being refinanced;
``(B)(i) has made regular payments on a timely
basis on the underlying mortgage (and, if applicable,
any other previous mortgage on the property), as
required by the applicable mortgage agreement, for a
period of not less than 36 months, or (ii) has been
determined under subsection (d) to be an acceptable
credit risk; and
``(C) has a gross income that meets such standards
as the Secretary shall establish under this section to
ensure that the mortgagor will be able (i) to make the
periodic payments required by the mortgage insured
under this section, and (ii) to meet other long-term
obligations of the mortgagor.
``(3) Underlying mortgage.--The proceeds of the refinancing
mortgage are used for satisfaction of the outstanding balance
owed under an underlying mortgage that--
``(A) is a first mortgage on a dwelling that is--
``(i) designed principally for a 1- to 4-
family residence;
``(ii) occupied by the mortgagor under the
refinancing mortgage who is also the mortgagor
under the underlying mortgage; and
``(iii) located in a real estate market
area that the Secretary has determined is no
longer subject to substantially decreasing
property values that will result in an
unreasonable risk of losses to the Federal
Government under mortgage insurance provided
under this section;
``(B) is not delinquent;
``(C) involves an outstanding principal obligation
(including such initial service charges, appraisal,
inspection, and other fees approved by the Secretary)
that exceeds 95 percent of the appraised value of the
property subject to the mortgage, as of the date the
refinancing mortgage is accepted for insurance under
this section, as determined by the Secretary;
``(D) in the case of an underlying mortgage on a
condominium unit in a project that was converted from
rental housing--
``(i) was executed more than 1 year after
the conversion of the project;
``(ii) has as a mortgagor or comortgagor a
tenant of the rental housing; or
``(iii) covers a unit in a project for
which the conversion is sponsored by a bona
fide tenants organization representing a
majority of the households in the project; and
``(E) meets any other requirements as the Secretary
may provide.
``(4) Limitation on amount.--The refinancing mortgage
involves a principal obligation in an amount that does not to
exceed--
``(A) 125 percent of the appraised value of the
property subject to the mortgage; and
``(B) the outstanding balance owed under the
underlying mortgage, plus such initial service charges,
appraisal, inspection, and other fees as the Secretary
shall approve.
``(5) Monthly payment amount.--The amount of each monthly
payment due under the refinancing mortgage is less than that
due under the underlying mortgage for the month in which the
refinancing mortgage is executed.
``(6) Interest.--The refinancing mortgage bears interest at
such rate as may be agreed upon by the mortgagor and the
mortgagee.
``(7) Maturity.--The refinancing mortgage has a maturity
satisfactory to the Secretary that does not, in any event,
exceed 35 years from the date of the beginning of the
amortization of the mortgage, and the Secretary may provide
under this paragraph for limitations on the maturity of
refinancing mortgages based on the unexpired terms of the
underlying mortgages being refinanced.
``(8) Other terms.--The refinancing mortgage has such terms
regarding maturity, amortization, periodic payments and
application of such payments to principal, insurance, repairs,
alterations, payment of taxes, default reserves, delinquency
charges, foreclosure proceedings, anticipation of maturity,
additional and subordinate liens, and other matters as the
Secretary may provide.
``(d) Hardship Provisions.--A mortgagor failing to meet the
requirements of subsection (c)(2)(B)(i) shall be considered to be an
acceptable credit risk for purposes of subsection (c)(2)(B)(ii) if the
Secretary determines that--
``(1) the failure was caused by circumstances beyond the
control of the mortgagor that rendered the mortgagor
temporarily unable to make such regular payments on the
underlying mortgage;
``(2) before such circumstances, the mortgagor had made
regular payments on a timely basis on the underlying mortgage
(and, if applicable, any other previous mortgage on the
property), as required by the applicable mortgage agreement for
such period as the Secretary considers appropriate for purposes
of this subsection;
``(3) the circumstances causing such failure have been
alleviated, or the income of the mortgagor has increased, to
the extent necessary to allow the mortgagor to make regular
payments under the refinancing mortgage; and
``(4) the mortgagor meets such other requirements as the
Secretary may reasonably require to ensure that the mortgagor
will meet the obligations under the refinancing mortgage.
``(e) General Insurance Fund.--The insurance of refinancing
mortgages under this section shall be the obligation of the General
Insurance Fund established under section 519.
``(f) Premiums.--
``(1) Establishment.--The Secretary may fix a premium
charge for the insurance under this section of refinancing
mortgages, which shall be an amount equivalent to a percentage
per annum, determined by the Secretary, of the amount of the
portion of outstanding principal obligation of the refinancing
mortgage that is insured under this section, without taking
into account delinquent payments or prepayments. Any such
premiums received shall be credited to the General Insurance
Fund.
``(2) Manner and timing.--The premium charges shall be
payable by the mortgagee either in cash or in debentures (at
par plus accrued interest) issued by the Secretary as
obligations of the General Insurance Fund, in the manner
prescribed by the Secretary, except that the Secretary may not
require the payment of any such premium charges at the time the
refinancing mortgage is insured. In fixing the premium charges,
the Secretary shall take into consideration the risk involved
in insuring the portion of a mortgage that exceeds the
appraised value of the property subject to the mortgage.
``(3) Acceptance.--If the Secretary finds upon presentation
of a refinancing mortgage for insurance that the mortgage
complies with the provisions of this section, the mortgage may
be accepted for insurance by endorsement or otherwise as the
Secretary may prescribe.
``(4) Refund of unearned premiums.--In the event the
portion of the principal obligation of any refinancing mortgage
insured under this section is paid in full prior to the
maturity date, the Secretary may refund to the mortgagee for
the account of the mortgagor all of the current unearned
premium charges theretofore paid or such portion of the
unearned premiums as the Secretary determines to be equitable.
``(g) Right to Insurance Benefits.--The mortgagee shall be entitled
to receive the benefits of the insurance, in accordance with
regulations prescribed by the Secretary upon--
``(1) the sale of the insured property--
``(A) at foreclosure, if such sale is for at least
the fair market value of the property (with appropriate
adjustments), as determined by the Secretary; or
``(B) by the mortgagor after default, if--
``(i) the sale has been approved by the
Secretary;
``(ii) the mortgagee receives an amount at
least equal to the fair market value of the
property (with appropriate adjustments), as
determined by the Secretary; and
``(iii) the mortgagor has received
appropriate homeownership counseling, as
determined by the Secretary; and
``(2) assignment to the Secretary of all claims of the
mortgagee against the mortgagor or others to any proceeds of
such sale in excess of the amount equal to the portion of the
unpaid principal balance of the loan not insured under this
section that arise out of the mortgage transaction or
foreclosure proceedings, except any claims that have been
released with the consent of the Secretary.
``(h) Payment of Insurance.--
``(1) In general.--Upon the sale of insured property and
assignment of claims referred to in subsection (g), the
obligation of the mortgagee to pay the premium charges for
insurance shall cease and the Secretary shall--
``(A) pay to the mortgagee cash in an amount equal
to the value of the portion of the mortgage insured
under this section, as determined by the Secretary; or
``(B) issue to the mortgagee debentures having a
par value equal to the cash amount under subparagraph
(A).
``(2) Cash payments.--If the insurance payment is made in
cash, there shall be included in the payment an amount
equivalent to the interest that the debentures would have
earned if such payment were made in debentures, computed to a
date established pursuant to regulations issued by the
Secretary.
``(i) Debentures.--
``(1) Execution.--Debentures issued under this section
shall be executed in the name of the General Insurance Fund as
obligor, shall be negotiable, and, if in book entry form,
transferable, in the manner provided by the Secretary in
regulations, and shall be dated as of the date the insured
property is sold under subsection (g) and shall bear interest
from such date.
``(2) Terms.--Debentures issued under this section shall--
``(A) bear interest at a rate, established by the
Secretary pursuant to section 224, payable semiannually
on the 1st day of January and the 1st day of July of
each year;
``(B) have such maturity as the Secretary shall
provide;
``(C) be exempt from taxation as provided in
section 207(i) with respect to debentures issued under
such section;
``(D) be in such form and amounts, subject to such
terms and conditions, and include such provisions for
redemption, if any, as may be prescribed by the
Secretary of Housing and Urban Development, with the
approval of the Secretary of the Treasury, and may be
in book entry or certificated registered form, or such
other form as the Secretary of Housing and Urban
Development may prescribe in regulations;
``(E) be paid out of the General Insurance Fund,
which shall be primarily liable therefor; and
``(F) be fully and unconditionally guaranteed as to
principal and interest by the United States, and, in
the case of debentures issued in certificated
registered form, the guaranty shall be expressed on the
face of the debentures.
``(3) Obligation of treasury.--In the event the General
Insurance Fund fails to pay upon demand, when due, the
principal of or interest on any debentures so guaranteed, the
Secretary of the Treasury shall pay the holders the amount of
the debentures, which is hereby authorized to be appropriated,
and upon such payment the Secretary of the Treasury shall
succeed to all the rights of the holders of such debentures, to
the extent of the amount paid.
``(j) Other Powers of Secretary.--The provisions of subsections
(c), (d), and (h) of section 2 shall apply to refinancing mortgages
insured under this subsection and, for the purposes of this subsection,
references in subsections (c), (d), and (h) of section 2 to `this
section' or `this title' shall be construed to refer to this section.
``(k) Protection of Secretary's Interest.--Notwithstanding any
other provisions of this Act, the Secretary may--
``(1) make expenditures and advances out of funds made
available by this Act to preserve and protect the interest of
the Secretary in any security for, or the lien or priority of
the lien under, any mortgage or other indebtedness insured by
or owing to the Secretary under this section; and
``(2) bid for and purchase at any foreclosure or other sale
or otherwise acquire property pledged, mortgaged, conveyed,
attached, or levied upon to secure the payment of any
indebtedness owing to the Secretary under this section.
The authority conferred by this subsection may be exercised as provided
in the last sentence of section 204(g).
``(l) Refinancing.--A refinancing mortgage insured under this
section may be refinanced and extended in accordance with such terms
and conditions as the Secretary may prescribe, but in no event for an
additional amount or term which exceeds the maximum provided for
pursuant to this subsection.
``(m) Definitions.--For purposes of this section:
``(1) The terms `mortgage', `mortgagee', `mortgagor', and
`first mortgage' have the meanings given such terms in section
201, except that the term `mortgage' includes--
``(A) a first mortgage given to secure the unpaid
purchase price of a fee interest in, or long-term
leasehold interest in, a one-family unit in a
multifamily project, including a project in which the
dwelling units are attached, semi-detached, or
detached, and an undivided interest in the common areas
and facilities which serve the project; and
``(B) a first lien given to secure a loan made to
finance the purchase of stock or membership in a
cooperative ownership housing corporation the permanent
occupancy of the dwelling units of which is restricted
to members of such corporation, where the purchase of
such stock or membership will entitle the purchaser to
the permanent occupancy of one of such units.
``(2) The term `underlying mortgage' means, with respect to
a refinancing mortgage, the first mortgage on the same dwelling
that is subject to the refinancing mortgage.
``(3) The term `refinancing mortgage' means a subordinate
lien on a dwelling securing a loan, the proceeds of which are
used for the satisfaction of advances on, or the unpaid
purchase price, of the dwelling, which are secured by a first
mortgage on the same dwelling.''.
<all>
HR 3296 IH----2
Introduced in House
Introduced in House
Sponsor introductory remarks on measure. (CR E2458)
Referred to the House Committee on Banking, Finance + Urban Affrs.
Referred to the Subcommittee on Housing and Community Development.
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