Second Chance at Homeownership Act of 2012 - Amends the National Housing Act to establish in the Federal Housing Administration (FHA) a Second Chance at Homeownership Program to: (1) create a voluntary FHA program to provide lenders for qualified second-chance borrowers and support long-term, sustainable homeownership; (2) target mortgage assistance to enable families to become homeowners of a one- to four-family principal residence; and (3) ensure the Program remains in effect only for as long as necessary to provide stability to the housing market.
Authorizes the Secretary of Housing and Urban Development (HUD) to insure mortgages meeting specified criteria under the Program.
Defines a "second-chance borrower" as any mortgagor who has not been: (1) the mortgagor under any other mortgage or had any present ownership interest in any residence after January 1, 2011, unless the Secretary makes exceptions for a mortgagor who has inherited a property; (2) delinquent with respect to any of the most recent 12 monthly rental payments due for the rental of the mortgagor's principal residence; or (3) convicted under federal or state law for fraud during the 10-year period before insurance of the mortgage under the Program. Requires the borrower's net worth to be $1 million or less.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4172 Introduced in House (IH)]
112th CONGRESS
2d Session
H. R. 4172
To authorize the Secretary of Housing and Urban Development to insure
mortgages that provide former homeowners who are a reasonable credit
risk a second chance at homeownership.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 8, 2012
Mr. Heck introduced the following bill; which was referred to the
Committee on Financial Services
_______________________________________________________________________
A BILL
To authorize the Secretary of Housing and Urban Development to insure
mortgages that provide former homeowners who are a reasonable credit
risk a second chance at homeownership.
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 ``Second Chance at Homeownership Act
of 2012''.
SEC. 2. SECOND CHANCE AT HOMEOWNERSHIP MORTGAGE INSURANCE PROGRAM.
Title II of the National Housing Act (12 U.S.C. 17) is amended by
adding at the end the following new section:
``SEC. 259. SECOND CHANCE AT HOMEOWNERSHIP PROGRAM.
``(a) Establishment.--There is established in the Federal Housing
Administration a Second Chance at Homeownership Program (in this
section referred to as the `Program').
``(b) Purposes.--The purposes of the Program are--
``(1) to create an FHA program, participation in which is
voluntary on the part of homeowners and eligible lenders, to
provide loans for qualified second-chance borrowers and support
long-term, sustainable homeownership;
``(2) to target mortgage assistance under this section to
enable families to become homeowners of their principal
residence; and
``(3) to ensure the Program remains in effect only for as
long as is necessary to provide stability to the housing
market.
``(c) Establishment and Implementation of Program Requirements.--
``(1) Duties of secretary.--To carry out the purposes of
the Program, the Secretary shall--
``(A) establish requirements and standards for the
program consistent with section 203(b) to the maximum
extent possible; and
``(B) prescribe such regulations and provide such
guidance as may be necessary or appropriate to
implement such requirements and standards.
``(2) Interim guidance and mortgagee letters.--In carrying
out any of the program requirements or standards established
under paragraph (1), the Secretary may issue such interim
guidance and mortgagee letters as the Secretary determines
necessary or appropriate.
``(d) Insurance of Mortgages.--The Secretary may, upon application
of a mortgagee, make commitments to insure or may insure any mortgage
that meets the requirements under subsection (e).
``(e) Requirements of Insured Mortgages.--To be eligible for
insurance under this section, a mortgage shall comply with all of the
following requirements:
``(1) Mortgagor.--The mortgagor under the mortgage may not
have--
``(A) been the mortgagor under any other mortgage
or had any present ownership interest in any residence
after January 1, 2011, except that the Secretary may
provide exceptions to such requirement for any
mortgagor who has inherited a property;
``(B) been delinquent with respect to any of the
most recent 12 monthly rental payments due for the
rental of the mortgagor's principal residence;
``(C) been convicted under Federal or State law for
fraud during the 10-year period ending upon the
insurance of the mortgage under this section; and
``(D) a net worth, as of the date the mortgagor
first applies for a mortgage to be insured under the
Program under this section, that exceeds $1,000,000.
``(2) Acquisition of principal residence.--The mortgagor
shall be made for the purpose of acquiring a 1- to 4-family
residence that--
``(A) is located in the same State as the principal
residence of the mortgagor at the time the mortgage is
executed; and
``(B) shall be occupied by the mortgagor as the
principal residence of the mortgagor.
``(3) Downpayment.--The mortgagor shall have paid on
account of the mortgage, in cash or its equivalent, on account
of the property an amount equal to not less than 5 percent of
the appraised value of the property.
``(4) Maximum loan amount.--The mortgage shall--
``(A) have principal obligation that does not
exceed the dollar amount limitation for a property of
the applicable size that is in effect, for the year in
which the mortgage is executed, under the sixth
sentence of section 305(a)(2) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1454(a)(2)); and
``(B) be payable on a monthly basis in an amount
that--
``(i) is fixed over the entire term of the
mortgage; and
``(ii) does not exceed the average amount
paid by the mortgagor for the most recent 12
monthly rental payments paid by the mortgagor
for the rental of the mortgagor's previous
principal residence.
``(5) Term of mortgage.--The mortgage to be insured shall--
``(A) bear interest at a single rate that is fixed
for the entire term of the mortgage; and
``(B) have a maturity of not less than 30 years
from the date of the beginning of amortization of such
mortgage.
``(6) Appraisals.--Any appraisal conducted in connection
with the mortgage 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(g) of this Act that apply to all loans insured
under this Act; and
``(E) comply with the requirements of subsection
(f) of this section (relating to appraisal
independence).
``(7) Prohibition on second liens.--The mortgagor under the
mortgage may not grant a new second lien on the mortgaged
property during the first 5 years of the term of the mortgage
insured under this section, except as the Secretary determines
to be necessary to ensure the maintenance of property standards
and provided that such new outstanding liens (A) do not reduce
the value of the Government's equity in the borrower's home;
and (B) when combined with the mortgagor's existing mortgage
indebtedness, do not exceed 95 percent of the home's appraised
value at the time of the new second lien.
``(8) Certifications and documentation.--
``(A) Principal residence; no present ownership
interest.--The mortgagor shall provide documentation
satisfactory in the determination of the Secretary to
prove compliance with the requirements under paragraphs
(1)(A) and (2)(B).
``(B) No intentional default or false
information.--The mortgagor shall certify to the
Secretary that the mortgagor--
``(i) has not, during the 10-year period
ending upon the insurance of the mortgage under
this section--
``(I) intentionally defaulted on
any mortgage or any other debt; or
``(II) knowingly or willfully
furnished material information known to
be false for the purpose of obtaining
any mortgage; and
``(ii) is in compliance with the
requirement under paragraph (1)(C) (relating to
convictions for fraud).
``(C) Liability for repayment.--The mortgagor shall
agree in writing that the mortgagor shall be liable to
repay to the Secretary any direct financial benefit
achieved from a mortgage insured under this section
that is derived from misrepresentations made by the
mortgagor in the certifications and documentation
required under this paragraph, subject to the
discretion of the Secretary.
``(D) Documentation and verification of income.--In
complying with the FHA underwriting requirements under
the Program under this section, the mortgagee shall
document and verify the income of the mortgagor or non-
filing status in accordance with procedures and
standards that the Secretary shall establish (provided
that such procedures and standards are consistent with
section 203(b) to the maximum extent possible) which
may include requiring the mortgagee to procure a copy
of the income tax returns from the Internal Revenue
Service, 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 Secretary shall establish.
``(E) Mortgage fraud.--The duty of the mortgagee to
ensure that the mortgagor is in compliance with
paragraph (1)(C) shall be satisfied if the mortgagee
makes a good faith effort to determine that the
mortgagor has not been convicted under Federal or State
law for fraud during the period described in such
paragraph.
``(f) 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, nonpayment
for services rendered, or bribery, the development, reporting,
result, or review of a real estate appraisal sought in
connection with the mortgage.
``(2) 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.
``(g) Standards To Protect Against Adverse Selection.--
``(1) In general.--The Secretary shall, by rule or order,
establish standards and policies to require the underwriter of
a mortgage insured under this section to provide such
representations and warranties as the Secretary considers
necessary or appropriate to enforce compliance with all
underwriting and appraisal standards of the Program.
``(2) Exclusion for violations.--The Secretary shall not
pay insurance benefits to a mortgagee who violates the
representations and warranties, as established under paragraph
(1), or in any case in which a mortgagor fails to make the
first payment on a mortgage insured under this section.
``(3) Other authority.--The Secretary may establish such
other standards or policies as necessary to protect against
adverse selection, including requiring loans identified by the
Secretary as higher risk loans to demonstrate payment
performance for a reasonable period of time before being
insured under the program under this section.
``(h) Premiums.--
``(1) Establishment and collection.--For each mortgage
insured under this section, the Secretary shall establish and
collect--
``(A) at the time of insurance, a single premium
payment in an amount that is at least 100 basis points
greater than the single premium payment that would
otherwise be charged pursuant to section 203(c)(2)(A)
with respect to the mortgage; and
``(B) in addition to the premium required under
paragraph (1), an annual premium in an amount that is
at least 100 basis points greater than the annual
premium payment that would otherwise be charged
pursuant to section 203(c)(2)(B) with respect to the
mortgage.
``(2) Considerations.--In setting the premium under this
subsection, the Secretary shall consider--
``(A) the financial integrity of the Program; and
``(B) the purposes of the Program set forth in
subsection (b).
``(i) Origination Fees and Interest Rate.--The Secretary shall
establish--
``(1) a reasonable limitation on origination fees for
mortgages insured under this section; and
``(2) procedures to ensure that interest rates on such
mortgages shall be commensurate with market rate interest rates
on such types of loans.
``(j) Default.--Any mortgagor who defaults in repayment of a
mortgage insured under this section shall not be eligible for any
mortgage insurance provided by the Secretary for the 10-year period
beginning upon such default.
``(k) 5-Year Phase-In for Equity as a Result of Sale or
Refinancing.--For each mortgage insured under this section, the
Secretary and the mortgagor of such mortgage shall, upon any sale or
disposition of the property to which the mortgage relates, or upon the
subsequent refinancing of such mortgage, be entitled to the following
with respect to any equity created as a direct result of the mortgage
being insured under this section:
``(1) If such sale or refinancing occurs during the period
that begins on the date that such mortgage is insured and ends
1 year after such date of insurance, the Secretary shall be
entitled to 100 percent of such equity.
``(2) If such sale or refinancing occurs during the period
that begins 1 year after such date of insurance and ends 2
years after such date of insurance, the Secretary shall be
entitled to 90 percent of such equity and the mortgagor shall
be entitled to 10 percent of such equity.
``(3) If such sale or refinancing occurs during the period
that begins 2 years after such date of insurance and ends 3
years after such date of insurance, the Secretary shall be
entitled to 80 percent of such equity and the mortgagor shall
be entitled to 20 percent of such equity.
``(4) If such sale or refinancing occurs during the period
that begins 3 years after such date of insurance and ends 4
years after such date of insurance, the Secretary shall be
entitled to 70 percent of such equity and the mortgagor shall
be entitled to 30 percent of such equity.
``(5) If such sale or refinancing occurs during the period
that begins 4 years after such date of insurance and ends 5
years after such date of insurance, the Secretary shall be
entitled to 60 percent of such equity and the mortgagor shall
be entitled to 40 percent of such equity.
``(6) If such sale or refinancing occurs during any period
that begins 5 years after such date of insurance, the Secretary
shall be entitled to 50 percent of such equity and the
mortgagor shall be entitled to 50 percent of such equity.
``(l) Limitation on Aggregate Insurance Authority.--The aggregate
original principal obligation of all mortgages insured under this
section may not exceed $200,000,000,000.
``(m) Reports by Secretary.--The Secretary shall submit monthly
reports to the Congress identifying the progress of the Program, which
shall contain the following information for each month:
``(1) The number of new mortgages insured under this
section, including the location of the properties subject to
such mortgages by census tract.
``(2) The aggregate principal obligation of new mortgages
insured under this section.
``(3) The amount of premiums collected for insurance of
mortgages under this section.
``(4) The claim and loss rates for mortgages insured under
this section.
``(5) Any other information that the Secretary considers
appropriate.
Upon submitting each monthly report required under this subsection, the
Secretary shall make such report publicly available on the World Wide
Web site of the Department of Housing and Urban Development.
``(n) Required Outreach Efforts.--The Secretary shall carry out
outreach efforts to ensure that homeowners, lenders, and the general
public are aware of the opportunities for assistance available under
this section.
``(o) Enhancement of FHA Capacity.--The Secretary shall take such
actions as may be necessary to--
``(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.
``(p) GNMA Commitment Authority.--
``(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
$200,000,000,000. 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.
``(q) Sunset.--The Secretary may not enter into any new commitment
to insure any mortgage pursuant to this section before October 1, 2012
or after September 30, 2015.
``(r) Rule of Construction Relating to Voluntary Nature of
Program.--This section shall not be construed to require that any
financial institution or mortgagee approved by the Secretary under
section 203 as responsible and able to service mortgages responsibly
participate in any activity authorized under this section.
``(s) Rule of Construction Relating to Insurance of Mortgages.--
Except as otherwise provided for in this section or by action of the
Secretary, the provisions and requirements of section 203(b) shall
apply with respect to the insurance of any mortgage under this section.
The Secretary shall conform documents, forms, and procedures for
mortgages insured under this section to those in place for mortgages
insured under section 203(b) to the maximum extent possible consistent
with the requirements of this section.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Referred to the Subcommittee on Insurance, Housing and Community Opportunity.
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