SECTION 1. SHORT TITLE.

    This Act may be cited as the ``FHA Seller-Financed Downpayment 
Reform and Risk-Based Pricing Authorization Act of 2008''.

SEC. 2. FHA SELLER-FINANCED DOWNPAYMENT PROGRAM.

    Paragraph (9) of section 203(b) of the National Housing Act (12 
U.S.C. 1709(b)(9)) is amended--
            (1) in subparagraph (C), by striking ``In no case shall the 
        funds required by subparagraph (A)'' and inserting the 
        following: ``Except in the case of a mortgage described in 
        subparagraph (D), the funds required by subparagraph (A) shall 
        not''; and
            (2) by adding at the end the following new subparagraphs:
                    ``(D) Exceptions to prohibited sources.--A mortgage 
                described in this subparagraph is any of the following 
                mortgages:
                            ``(i) A mortgage under which the mortgagor 
                        has a credit score equivalent to a FICO score 
                        of 680 or greater.
                            ``(ii) A mortgage under which--
                                    ``(I) the mortgagor has a credit 
                                score equivalent to a FICO score of at 
                                least 620 but less than 680; and
                                    ``(II) mortgage insurance premiums 
                                charged are established--
                                            ``(aa) at levels necessary, 
                                        but no higher than needed, to 
                                        allow such class of loans to be 
                                        insured without resulting in a 
                                        need for an appropriation for a 
                                        credit subsidy, which may 
                                        exceed the maximum amount 
                                        permitted under section 
                                        203(c)(2)(B);
                                            ``(bb) in the case of the 
                                        single premium collected at the 
                                        time of insurance, in an amount 
                                        not exceeding 3.0 percent of 
                                        the amount of the original 
                                        principal obligation of the 
                                        mortgage; and
                                            ``(cc) in the case of the 
                                        annual premium for a mortgage 
                                        under which the mortgagor has a 
                                        credit score equivalent to a 
                                        FICO score of at least 640 but 
                                        less than 680, in an amount not 
                                        exceeding 1.25 percent of the 
                                        remaining insured principal 
                                        balance (excluding the portion 
                                        of the remaining balance 
                                        attributable to the premium 
                                        collected at the time of 
                                        insurance and without taking 
                                        into account delinquent 
                                        payments or prepayments).
                            ``(iii) For mortgages insured in fiscal 
                        year 2010 or thereafter, a mortgage under which 
                        the mortgagor has a credit score equivalent to 
                        a FICO score of 619 or less, but only if the 
                        Secretary certifies that such loans can be 
                        insured without resulting in a need for an 
                        appropriation for a credit subsidy. For such 
                        mortgages, the Secretary may charge premiums at 
                        levels authorized under items (bb) and (cc) of 
                        clause (ii)(II) and may establish a credit or 
                        FICO score limitation or impose such other 
                        requirements as are necessary to meet the 
                        conditions for certification under this clause.
                    ``(E) Requirements for downpayment assistance 
                entities.--Any entity participating in a program that 
                provides downpayment assistance for a mortgage 
                described in subparagraph (D) pursuant to the exception 
                under subparagraph (C), which programs shall include 
                programs of governmental agencies and private nonprofit 
                organizations, shall, before the closing for the loan 
                involved in the mortgage in connection with which such 
                assistance is provided--
                            ``(i) offer to make available, to the 
                        mortgagor, counseling regarding the 
                        responsibilities and financial management 
                        involved in homeownership;
                            ``(ii) if such offer is accepted by the 
                        mortgagor, make such counseling available for 
                        the mortgagor; and
                            ``(iii) in the case of any such entity that 
                        is a private nonprofit organization, implement 
                        a conflict of interest policy that prohibits 
                        directors, officers, employees, and immediate 
                        family members from receiving financial 
                        benefits from any entity that is providing the 
                        program with goods or services other than the 
                        homeownership assistance program entity itself 
                        or its wholly owned affiliate.
                    ``(F) Civil money penalties for improperly 
                influencing appraisals.--The Secretary may impose a 
                civil money penalty, in the same manner and to the same 
                extent as for a violation under section 536, for 
                compensating, instructing, inducing, coercing, or 
                intimidating any person who conducts an appraisal of 
                the property to be subject to a mortgage described in 
                subparagraph (D) and under which any part of the funds 
                required by subparagraph (A) are provided to a party 
                described in subparagraph (C), or attempting to 
                compensate, instruct, induce, coerce, or intimidate 
                such a person, for the purpose of causing the appraised 
                value assigned to the property under the appraisal to 
                be based on any other factor other than the independent 
                judgment of such person exercised in accordance with 
                applicable professional standards.''.

SEC. 3. LIMITATIONS ON RISK-BASED PRICING.

    Section 203(c) of the National Housing Act (12 U.S.C. 1709(c)) is 
amended by adding at the end the following new paragraphs:
            ``(3) Limitations on risk-based pricing.--Except as 
        provided in paragraph (4), the Secretary of Housing and Urban 
        Development shall not take any action on or after October 1, 
        2008, to implement or carry out--
                    ``(A) risk-based premiums, which are designed for 
                mortgage lenders to offer borrowers an FHA-insured 
                product that provides a range of mortgage insurance 
                premium pricing, based on the risk that the insurance 
                contract represents, as set forth in the Notice 
                published in the Federal Register on May 13, 2008 (Vol. 
                73, No. 93, Pages 27703 through 27711) (effective July 
                14, 2008); or
                    ``(B) any other risk-based premium product related 
                to the insurance of any mortgage on a single family 
                residence under this title, where the premium price for 
                such new product is based in whole or in part on a 
                borrower's Decision Credit Score, as that term is 
                defined in the Notice referred to in subparagraph (A), 
                or any successor thereto.
            ``(4) Flexible risk-based premiums.--Notwithstanding 
        paragraph (3) of this subsection and section 2133 of the FHA 
        Modernization Act of 2008 (Public Law 110-289):
                    ``(A) Authority.--In the case only of a mortgage 
                under which the mortgagor has a credit score equivalent 
                to a FICO score of less than 600, the Secretary may 
                establish a mortgage insurance premium structure 
                involving a single premium payment collected prior to 
                the insurance of the mortgage or annual payments (which 
                may be collected on a periodic basis), or both, under 
                which the rate of premiums for such a mortgage may vary 
                according to the credit risk associated with the 
                mortgagor and the rate of any annual premium for such a 
                mortgage may vary according to such credit risk during 
                the mortgage term as long as the basis for determining 
                the variable rate is established before the execution 
                of the mortgage. The Secretary may change a premium 
                structure established under this subparagraph but only 
                to the extent that such change is not applied to any 
                mortgage already executed.
                    ``(B) Establishment and alteration of premium 
                structure.--A premium structure shall be established or 
                changed under subparagraph (A) only by providing notice 
                to mortgagees and to the Congress, at least 30 days 
                before the premium structure is established or changed.
                    ``(C) Annual report regarding premiums.--The 
                Secretary shall submit a report to the Congress 
                annually setting forth the rate structures and rates 
                established and altered pursuant to this paragraph 
                during the preceding 12-month period and describing how 
                such rates were determined.
                    ``(D) Considerations for premium structure.--When 
                establishing and collecting premiums for mortgages 
                insured under a premium structure established under 
                this paragraph, the Secretary shall consider the 
                following:
                            ``(i) The effect of the proposed premiums 
                        or structure on the Secretary's ability to meet 
                        the operational goals of the Mutual Mortgage 
                        Insurance Fund as provided in section 202(a).
                            ``(ii) Underwriting variables.
                            ``(iii) The extent to which new pricing 
                        under the proposed premiums or structure has 
                        potential for acceptance in the private market.
                            ``(iv) The administrative capability of the 
                        Secretary to administer the proposed premiums 
                        or structure.
                            ``(v) The effect of the proposed premiums 
                        or structure on the Secretary's ability to 
                        maintain the availability of mortgage credit 
                        and provide stability to mortgage markets.
                    ``(E) Authority to base premium prices on product 
                risk.--
                            ``(i) Authority.--In establishing premium 
                        rates under this title, the Secretary may 
                        provide for variations in such rates according 
                        to the credit risk associated with the type of 
                        mortgage product that is being insured under 
                        this title, which may include providing that 
                        premium rates differ between fixed-rate 
                        mortgages and adjustable-rate mortgages insured 
                        pursuant to section 251, between mortgages for 
                        condominiums and mortgages for other interests 
                        in properties, between mortgages having 
                        different ratios of the principal obligation 
                        under the mortgage to the appraised value of 
                        the property, and between such other products 
                        as the Secretary considers appropriate.
                    ``(F) Payment incentives.--
                            ``(i) Authority.--With respect to mortgages 
                        for which insured the Secretary is authorized 
                        to establish a premium structure under this 
                        paragraph, the Secretary shall provide that the 
                        payment incentive under subparagraph (ii) 
                        applies upon the expiration of the 5-year 
                        period beginning upon the time of insurance of 
                        such a mortgage, and the Secretary may provide 
                        that the payment incentive under clause (ii) 
                        applies upon the expiration of the 3-year 
                        period beginning upon the time of insurance of 
                        such a mortgage. The Secretary may limit such 
                        discretionary authority to mortgages prepaid or 
                        paid in full during the 2-year period beginning 
                        3 years after the time of insurance of such a 
                        mortgage.
                            ``(ii) Payment incentive.--In the case of 
                        any mortgage to which the payment incentive 
                        under this subparagraph applies, if, during the 
                        period referred to in clause (i), all mortgage 
                        payments, including insurance premiums, for 
                        such mortgage have been paid on a timely basis, 
                        upon the expiration of such period the 
                        Secretary shall refund to the mortgagor, upon 
                        payment in full of the obligation of the 
                        mortgage, all or a portion of--
                                    ``(I) the amount by which the 
                                single premium payment for such 
                                mortgage collected at the time of 
                                insurance exceeded the amount of the 
                                single premium payment chargeable under 
                                paragraph (2) at the time of insurance 
                                for a mortgage of the same product type 
                                having the same terms, but for which 
                                the mortgagor has a credit score 
                                equivalent to a FICO score of 600 or 
                                more; and
                                    ``(II) in the case only of 
                                mortgages for which annual premiums are 
                                established and collected under 
                                subparagraph (G), the amount by which 
                                the cumulative amount of annual 
                                premiums paid exceeded the amount of 
                                the maximum annual premium that 
                                otherwise may be established and 
                                collected notwithstanding such 
                                subparagraph.
                    ``(G) Option for higher annual premium in lieu of 
                higher up-front premium.--In the case only of mortgages 
                for which the Secretary is authorized to establish a 
                premium structure under this paragraph, notwithstanding 
                paragraph (2)(B) of this subsection, the Secretary may 
                establish and collect, for a period not exceeding the 
                first 5 years of the term of the mortgage, annual 
                premium payments in an amount not exceeding 0.75 
                percent of the remaining insured principal balance of 
                the mortgage (excluding the portion of the remaining 
                balance attributable to the premium collected under 
                paragraph (2)(A) and without taking into account 
                delinquent payments or prepayments), except that--
                            ``(i) the Secretary may utilize such 
                        authority only for such classes of mortgagors 
                        that the Secretary determines would otherwise 
                        be subject to a single premium payment 
                        collected at the time of insurance exceeding 
                        2.25 percent of the amount of the original 
                        insured principal obligation of the mortgage; 
                        and
                            ``(ii) for such mortgages, the Secretary 
                        may not establish or collect a single premium 
                        payment collected at the time of insurance 
                        exceeding 2.25 percent of such original insured 
                        principal obligation.''.
FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 - (Sec. 2) Amends the National Housing Act to make exceptions to the prohibition against mortgage insurance for mortgages involving a downpayment using funds furnished by: (1) the seller or any party that benefits financially from the transaction (seller-financed downpayment); or (2) any third party that is reimbursed by the seller or any such party.

Makes eligible for mortgage insurance, in spite of a seller-financed downpayment, any mortagors with credit scores equivalent to a FICO score of: (1) 680 or more; (2) at least 620 but less than 680; or (3) 619 or less. Prescribes conditions for mortgage insurance in the latter two situations.



Requires entities participating in a governmental or private nonprofit program that provides downpayment assistance for such a mortgage to offer and make available, before loan closing, counseling about the responsibilities and financial management involved in homeownership.

Authorizes the Secretary of Housing and Urban Development to impose civil money penalties for improperly influencing appraisals.

(Sec. 3) Prohibits the Secretary from implementing: (1) risk-based premiums designed for mortgage lenders to offer a Federal Housing Administration (FHA)-insured product that provides a range of mortgage insurance premium pricing based upon a specified risk that the insurance contract represents; or (2) any other risk-based premium product for mortgage insurance on a single family residence where the premium price for such new product is based upon the borrower's Decision Credit Score.

Makes an exception from such prohibition for flexible risk-based premiums. Authorizes the Secretary to establish, for a mortgagor whose FICO credit score is under 600, a mortgage insurance premium structure with a variable rate that reflects the mortgagor's credit risk, if the basis for determining such rate is established before the mortgage is executed.

Requires notice to mortgagees and to Congress before such a premium structure is established or changed.



Requires the Secretary to consider specified factors when premiums are established and collected under a flexible risk-based premium structure.

Authorizes the Secretary to provide for variations in such rates according to the credit risk associated with the type of mortgage product that is being insured.

Requires the Secretary to make payment incentives to a mortgagor, in the form of certain refunds, upon payment in full of timely mortgage payments.

Authorizes the Secretary, for mortgages with a flexible risk-based premium, to establish a higher annual premium in lieu of a higher up-front premium.
{"src": "billsum_test", "title": "To revise the requirements for seller-financed downpayments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act and to authorize risk-based insurance premiums for certain mortgagors under such mortgages."}