Mortgage Insurance Freedom Act
Officially: “Mortgage Insurance Freedom Act” Read the full text
What it does
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1Short title
This section would let the Act be referred to as the Mortgage Insurance Freedom Act.
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1. Short title This Act may be cited as the Mortgage Insurance Freedom Act .
2Restriction of collection of annual mortgage insurance premiums
This section would amend the part of the National Housing Act that governs annual mortgage insurance premiums on FHA-insured mortgages (section 203(c)(2), 12 U.S.C. 1709(c)(2)). It would make the existing rules that let the Secretary of Housing and Urban Development charge annual premiums subject to a new restriction, and it would add that restriction as a new subparagraph. Under the new restriction, the Secretary could not collect any annual premium on a mortgage at any time the remaining insured loan balance, not counting the part of the balance that comes from the premium charged under a different provision of this same paragraph (subparagraph (A)), is 78 percent or less of whichever is lower: the sale price of the home at the sale connected with the mortgage, or the home's appraised value at the time the mortgage was originated. This 78 percent cutoff would not apply if the capital ratio of the Mutual Mortgage Insurance Fund falls below 2 percent. In that case, the Secretary could keep collecting premiums on any mortgage that was still being charged premiums as of the date the fund's capital ratio fell below 2 percent, even after that mortgage's balance reaches the 78 percent threshold. But for any mortgage on which the Secretary had already stopped collecting premiums before the fund's capital ratio fell below 2 percent, because the balance had already reached the 78 percent threshold, premiums would stay stopped. Within 180 days after this restriction becomes law, the Secretary would have to issue rules to carry it out, including a process that borrowers with mortgages insured under this title could use to show the Secretary that their loan's insured principal balance has reached 78 percent or less of the lower of the sale price or the appraised value described above. The Secretary would also have to carry out outreach and education activities to inform these borrowers about the new restriction on premium collection and about the process they can use to demonstrate that their loan balance qualifies for it. The changes made by this section would apply only to mortgages that the Secretary of Housing and Urban Development endorses for insurance after the date this Act is enacted; mortgages endorsed before that date would not be affected.
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2. Restriction of collection of annual mortgage insurance premiums (a) In general Section 203(c)(2) of the National Housing Act ( 12 U.S.C. 1709(c)(2) ) is amended— (1) in subparagraph (B)— (A) in clause (i), by striking For any and inserting Subject to subparagraph (D), for any ; and (B) in clause (ii), by striking For any and inserting Subject to subparagraph (D), for any ; (2) in subparagraph (C)(i), by striking In addition and inserting Subject to subparagraph (D), in addition ; and (3) by adding at the end the following: (D) Restriction on annual premium collection (i) In general The Secretary may not collect any annual premiums under this paragraph with respect to a mortgage at any time that the remaining insured principal balance (excluding the portion of the remaining balance attributable to the premium collected under subparagraph (A)) is 78 percent or less than the lower of— (I) the sales price of the dwelling at the sale in connection with which the mortgage was made; or (II) the appraised value of the dwelling at the time of the origination of the mortgage. (ii) Exception If the capital ratio of the Mutual Mortgage Insurance Fund falls below 2 percent— (I) clause (i) shall not apply with respect to any mortgage with respect the Secretary was collecting premiums on the date on which the capital ratio of the Mutual Mortgage Insurance Fund fell below 2 percent; and (II) clause (i) shall continue to apply to any mortgage with respect to which the Secretary had stopped collecting premiums under this paragraph before the date on which the capital ratio of the Mutual Mortgage Insurance Fund fell below 2 percent because the remaining insured principal balance met the requirements described in clause (i). (iii) Rulemaking The Secretary shall, not later than 180 days after the enactment of this subparagraph, issue such rules to carry out this subparagraph and such rules shall include a process for mortgagors of mortgages insured under this title to use to demonstrate to the Secretary that the insured principal balance of the mortgage of such mortgagor is 78 percent or less than the lower of— (I) the sales price of the dwelling at the sale in connection with which the mortgage was made; or (II) the appraised value of the dwelling at the time of the origination of the mortgage. (iv) Outreach and education The Secretary shall conduct outreach and educational activities to inform mortgagors of mortgages insured under this title about— (I) the restriction on premium collection imposed by clause (i); and (II) and the processes the mortgagor may use to demonstrate to the Secretary that the insured principal balance of the mortgage of such mortgagor is 78 percent or less than the lower of— (bb) the sales price of the dwelling at the sale in connection with which the mortgage was made; or (cc) the appraised value of the dwelling at the time of the origination of the mortgage. . (b) Applicability The amendments made by subsection (a) shall apply with respect only to mortgages endorsed for insurance by the Secretary of Housing and Urban Development after the date of the enactment of this Act.
Where it is
In the House.