To require a 12-month moratorium on the implementation of risk-based premiums for FHA insured mortgages.

FHA MODERNIZATION ACT OF 2007

The ACTING PRESIDENT pro tempore. Under the previous order, the
Senate will proceed to the consideration of S. 2338, which the clerk
will report by title.
The assistant legislative clerk read as follows:

A bill (S. 2338) to modernize and update the National
Housing Act and enable the Federal Housing Administration to
more effectively reach underserved borrowers, and for other
purposes.

[[Page S15581]]

The ACTING PRESIDENT pro tempore. The Senator from New York.
Mr. SCHUMER. Mr. President, parliamentary inquiry: What is the status
of the time situation?
The ACTING PRESIDENT pro tempore. There is 30 minutes of general
debate on the bill, equally divided.
Mr. SCHUMER. Thank you. I yield myself 10 minutes.
The ACTING PRESIDENT pro tempore. The Senator may proceed.
Mr. SCHUMER. Mr. President, over the past few months, as the subprime
crisis has deepened, I have said time and time again we need to act to
help millions of American families at the risk of foreclosure to save
their homes.
Until now, we have been blocked in those efforts, which is
unfortunate. But I do wish to thank my colleague from Oklahoma who, as
always, has agreed to this debate, to a discussion of the issue on the
merits. He wanted a careful look, wanted his voice heard but did not
want to be dilatory for its own sake, and I very much appreciate that.
Now I believe we can move this important legislation forward.
The word ``crisis'' gets tossed around a lot in Washington. But make
no mistake about it, we are in one. Almost a million Americans have
lost their homes due to foreclosure this year alone. It seems each week
foreclosures reach a new alltime high.
Some people stand by and say: Do nothing. The administration has
said: Well, let the market take care of this by itself. They have come
up with various plans where they sort of tie themselves in a pretzel to
avoid any Government involvement.
But the fact is, if we are going to solve this problem, one thing we
do not need is a bailout, but what we need is rational, smart
Government involvement to help those at the bottom work their way out
of this crisis which will, in a certain sense, trickle up and reassure
the credit markets that things are being done and help the entire
economy, because we have a triple whammy in this crisis that spreads
outward. First are the more than 2 million homes that could be
foreclosed upon in the next year and a half, 2 years. Second are
declining housing prices. Because even if you paid your mortgage
completely or have never missed a payment and are still paying it, if
there are foreclosures in your community or foreclosures even in the
country, housing prices decline.
That hurts all of us and hurts the economy then, in the third level,
in two ways. One, there is a dampening effect on consumer spending,
and, two, there are the credit markets, which are right now frozen.
If people cannot borrow, whether they be companies or individuals, it
puts a real damper on the economy. The only way out of this is smart
Government involvement--not solely. We need the private sector. But
when the administration says they are never, ever going to get the
Government involved, they have ideological blinders on, they are in an
ideological straitjacket, they hurt those who will be foreclosed, they
hurt all homeowners, and they hurt the general economy.

If you talk to people in this country, even conservative Republican
business leaders agree we need some careful, rational Government
involvement, not a bailout. That is what we are trying to do this
morning. The costs of inaction are high. The Joint Economic Committee
estimated the spillover from the subprime foreclosure crisis could
exceed $100 billion for homeowners, their neighbors, and the local tax
base.
On top of the subprime losses, the continuing housing slump could be
a massive blow to the economy. Economists estimate a 10-percent decline
in housing prices could lead to a $2.3 trillion economic loss at a time
when our country cannot afford it.
This legislation is the perfect example of the kind of help Americans
are looking for. It is moderate, it is thoughtful, and it is directed
at the problem.
First, I wish to thank the two sponsors of this legislation, Senator
Dodd and Senator Shelby, as well as my colleagues on the Banking
Committee, where this passed 20 to 1, for their support.
It is definitely and desperately needed. It has the support of the
administration, one of the few areas where the administration has
looked at some kind of moderate Government help. The FHA Modernization
Act revitalizes an important Government agency that for years, until
the rise of unscrupulous subprime lenders, helped thousands of families
across the country achieve the American dream, and now in these
troubled times, it can be a source of salvation for those families who
were tricked into unaffordable loans.
The bill makes a number of important changes to the FHA program, many
of which will make it more competitive with subprime lenders, assure
its financial help, and protect borrowers who were taken advantage of.
First, and especially in high-cost States such as mine in New York
and my colleague across the river in New Jersey, who will speak shortly
on this measure, this is vital. For years, this program has been hard
to use in our home State. When you go to a place such as Long Island,
where the average home price is over $400,000, more than half the
population cannot use FHA. That was never the intent.
The bill also allows FHA to accept lower downpayments. It makes it
more attractive to borrowers who could otherwise turn to an
irresponsible subprime broker for their loan.
This does entail some additional risk, but the legislation strikes a
safe, responsible balance between increasing FHA's competitiveness with
those lenders without endangering the program's bottom line.
Finally, the bill expands the eligibility for counseling under the
FHA program.
We desperately need counselors. There is another piece of legislation
still being blocked by my colleagues on the other side of the aisle,
sponsored by the Senator from Pennsylvania, Mr. Casey, and the Senator
from Ohio, Mr. Brown, and myself, aided by the help of Senator Murray,
which will put $200 million into counseling. That is being blocked.
This bill at least will allow the FHA to give counseling to a certain
number of people. It is an improvement that not only helps borrowers by
letting more of them preserve their homes, but it reduces losses to the
insurance funds, which is good for taxpayers as well.
This bill is not a panacea. It is, frankly, a small step--much needed
but a small step. There are many more things that have to be done:
Money for those who need help in counseling; making sure there is
credit for mortgages available, which involves using the agencies, the
GSEs such as Fannie and Freddie. Congressman Frank and I have
legislation to deal with that. We also need a protector for the future.
Legislation Senator Dodd has offered and I have cosponsored and worked
with him on for many months would actually prevent this from happening
in the future by regulating the small group of mortgage brokers who are
unscrupulous, as well as the mortgage lenders, almost all of them
nonbanks.
We still have a long way to go, but my hope is, given the magnitude
of the crisis, that this first step will not be the last and that this
first step represents a coming together of those who are not
ideologues, those of us who say, yes, the Government needs to be
involved in a smart, careful, and focused way. If that can happen, we
cannot solve the subprime crisis, make it go away, but we can greatly
mitigate the damage that occurs. We can reassure the markets finally
that someone is in charge. The administration is trying to be involved
but because of the ideological handcuffs, no Government involvement,
and some of their plans get laughed at, and many of their plans are not
taken seriously--just about all of them--because they won't deal with
the magnitude of the crisis. You have to deal with it head-on.
I am hopeful this is a good first step that will pave the way to
other larger and even more necessary steps. I thank Senator Dodd,
Senator Shelby, Senator Coburn, and my colleagues on the Banking
Committee for their active support and guidance with this legislation.
I reserve the remainder of my time.
The ACTING PRESIDENT pro tempore. Who yields time?
The Senator from Florida.
Mr. MARTINEZ. Mr. President, may I learn the current time agreement?
The ACTING PRESIDENT pro tempore. The Senator from New York has

[[Page S15582]]

15 minutes, with 6 minutes remaining. The Senator from Florida has 15
minutes, if he is controlling the time.
Mr. MARTINEZ. I yield myself 5 minutes.
Mr. President, I join with the Senator from New York in speaking
about this important step we are taking to deal with a serious crisis
that America and, frankly, the world is facing with credit. It is
particularly important that we think about the many Americans who today
feel threatened in their homes as they face the potential prospect of
losing their homes because of the current situation. We have a partial
answer to this large problem. It isn't the whole answer, but it is a
very good first step. It is an important first step that is going to
help a number of families stay in their homes.
When I had the privilege of serving as Secretary of Housing and Urban
Development, one of the hallmarks of our time was the attempt to put
more and more American families into home ownership. It is the
culmination of the American dream. That dream today is seriously
threatened. The FHA Modernization Act before the Senate is a strong
first step in the direction of fixing the problem.
By the summer of 2010, about 600,000 people with subprime loans are
expected to lose their homes because they will not be able to make
their higher monthly payment. These are people who got into an
adjustable rate mortgage, and each and every year or perhaps two or
three times a year that mortgage resets at a higher payment and a
higher rate. The way to avert that is to allow these folks to find
another financing vehicle, and the FHA is the answer.
HUD estimates that more than 200,000 first-time home buyers and
current homeowners who need access to capital could obtain FHA-insured
mortgages next year if Congress expedites passage of this legislation.
That, combined with the administration's FHA Secure Program, will help
more than a quarter million Americans avoid foreclosure and stay in
their homes. The administration already has implemented a program
called HOPE Now. That also is helping about 80,000 Americans to remain
in their homes.
The fact is, this is a timely piece of legislation, one that enjoys
bipartisan support and one in keeping with the wonderful tradition the
FHA has had in the home-ownership story of America.
FHA began in 1934. Since that time, it has always operated in the
black by collecting insurance premiums on the mortgages it insures and
never burdening the taxpayers with any Government subsidy, and it has
managed to help countless millions of Americans reach the dream of that
first home.
While I was HUD Secretary, we recognized that FHA was falling behind
in market share because it had not been modernized. The rules had not
been keeping up with changes in the marketplace. This is a tremendous
first step. It is a step that is long overdue and one I am proud to see
come about.
I know some have concerns about the issue of reverse mortgages. I
believe that is an issue which also falls well within the purview of
FHA and can be safely done, well managed, and, in fact, should not be
an impediment to this legislation moving forward.
I don't want to take any more of the time. I believe it is very
important that, working together, all of us will move this bill to
fruition, helping hundreds of thousands of American families who have
tasted the dream of home ownership to maintain the dream, stay in their
homes, and work through the FHA program so they can then refinance
their mortgages into mortgages they can live with.
I thank Chairman Dodd and Ranking Member Shelby and others on the
Banking Committee who have worked so hard to make this moment a
reality. I am proud of any role I might have played in it because I
think it is truly touching at the heart of where so many American
families are today. They have had the dream of home ownership. Let's
keep more and more American families in their homes, continuing that
dream.
(At the request of Mr. Reid, the following statement was ordered to
be printed in the Record.)
<bullet> Mrs. BOXER. Mr. President, I would like the record to reflect
that I would have voted in favor of the FHA Modernization Act today.
California has been at the epicenter of the current foreclosure
crisis, and this bill will provide new, safe, and secure financing
opportunities both for homeowners currently trapped in abusive loans
that are scheduled to reset at rates they no longer can afford, as well
as for future borrowers seeking alternatives to the risky and exotic
loans that many turned to or were steered toward in the absence of a
viable FHA product.
Among its most important features, the bill would raise the current
limit on loans the FHA will insure from $362,000 to $417,000. In
California, where the third quarter median home price was over
$568,000, the ability to access FHA loans has virtually disappeared.
According to the Department of Housing and Urban Development,
California, which previously led the Nation in FHA loan usage, has seen
its FHA loan volume drop from 109,074 in 2001 to just 2,599 in 2006, a
decline of 98 percent and a loss of $13.6 billion.
While the increase in the loan limit provided by this bill will
provide welcome relief, the House version goes even farther, permitting
the FHA to insure mortgages equal to 125 percent of the median area
home price or 175 percent of the Freddie Mac conforming loan limit,
whichever is lower. The House bill also would give the Secretary of
Housing and Urban Development the authority to raise the new insurance
limit by as much as $100,000 ``if market conditions warrant.'' For
California and other high cost areas, this increase would further
enable borrowers to avoid the type of nontraditional and frequently
abusive loans that have gotten us into our current mess, and I will be
urging conferees to support the higher limits.
Today, however, it is important to recognize the significant step
that the Senate has taken in overwhelmingly passing this bill as we
seek to restore stability to the housing market and bring assistance to
the more than 2 million Americans at risk of losing their
homes.<bullet>
Mrs. FEINSTEIN. Mr. President, I am pleased that the Senate
overwhelmingly passed the Federal Housing Administration, FHA,
Modernization Act today. This bill would make much-needed improvements
to this important program to give more homebuyers the option to get a
FHA government-backed loan instead of the more risky products that have
contributed to the current mortgage crisis.
The FHA program is critical to insuring home mortgages for low and
middle income borrowers that are unable to obtain financing from
conventional mortgage lenders. However, over the past decade, FHA has
been priced out of the market.
In California alone, FHA loans have dropped from 109,074 in 2000 to
just 2,599 in 2006--resulting in a decline of 98 percent in 6 years.
Furthermore, the current crisis in the subprime lending market has
put more than 500,000 American homeowners into foreclosure this year.
My State of California has been especially hit hard.
More than 50,000 California homes went into foreclosure in just the
month of October. This equates to one foreclosure filing for every 258
households in the state--about double the national foreclosure rate.
The bill passed by the Senate today takes an important step to help
American families who face the threat of losing their homes and those
who want to buy a new home with a safe and affordable mortgage--it
modernizes the FHA program and expands the financing options available
to homebuyers.
Specifically, this bill would:
Increase the maximum size of mortgages that FHA can insure in
expensive housing areas to $417,000 from the current level of $362,790.
This increase in the loan limit is a step in the right direction, but
more needs to be done. It is my hope that the final bill signed by the
President further increases the loan limit to over $500,000, as
included in the House-passed version of the FHA bill.
This is essential so that more homebuyers in states like California,
where the average cost of a home is over $490,000, can be helped.
Reduce the downpayment requirement to 1.5 percent from the current
requirement of 3 percent under the FHA program--allowing FHA to compete
with subprime lenders.

[[Page S15583]]

Require the secretary of the Housing and Urban Development, HUD, and
the FHA Commissioner to work with the mortgage industry and non-profit
organizations to improve the FHA loss mitigation process so more
troubled homeowners can keep their homes.
Increase consumer protections by requiring the secretary of HUD to
prohibit unfair or deceptive practices that may be used with FHA-
insured manufactured housing loans.
Improve housing counseling assistance by creating a pre-purchase
counseling pilot program to test the effectiveness of various
counseling options.
It also expands the eligibility for post-purchase counseling for low
and moderate income homeowners who are having trouble making their
mortgage payments.
It is crucial that we help make homeownership more affordable and
accessible to American families and provide relief to those facing the
threat of losing their homes.
The Senate's approval of this legislation today is an important step
to help achieve this.
Thank you very much.
Mr. President, I yield the floor.
I yield the floor.
The ACTING PRESIDENT pro tempore. Who yields time?
The Senator from New York.

Amendment No. 3853

Mr. SCHUMER. Mr. President, under the order governing this bill, I
call up the Dodd-Shelby amendment and ask unanimous consent that it be
adopted.
The ACTING PRESIDENT pro tempore. The clerk will report.
The assistant legislative clerk:

The Senator from New York [Mr. Schumer], for Mr. Dodd and
Mr. Shelby, proposes an amendment numbered 3853.

Mr. SCHUMER. I ask unanimous consent that reading of the amendment be
dispensed with.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
The amendment is as follows:

(Purpose: To require a 12-month moratorium on the implementation of
risk-based premiums for FHA insured mortgages)

At the end of title I, insert the following:

SEC. 123. MORATORIUM ON IMPLEMENTATION OF RISK-BASED
PREMIUMS.

For the 12-month period beginning on the date of enactment
of this Act, the Secretary of Housing and Urban Development
shall not enact, execute, or take any action to make
effective the planned implementation of 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 the insurance
contract represents, as such planned implementation was set
forth in the Notice published in the Federal Register on
September 20, 2007 (Vol. 72, No. 182, Page 53872).

The ACTING PRESIDENT pro tempore. Without objection, the amendment is
agreed to.
The amendment (No. 3853) was agreed to.
Mr. SCHUMER. I move to reconsider the vote and to lay that motion on
the table.
The motion to lay on the table was agreed to.
Mr. SCHUMER. I yield 5 minutes to my distinguished colleague from New
Jersey, a member of the Banking Committee who has worked long and hard
on the subprime issue.
Mr. MENENDEZ. Mr. President, I thank my distinguished colleague from
New York for his leadership, along with the chairman of the full
committee and the ranking member, on this issue of the FHA. It is
something I have been advocating for quite some time.
In March of this year, at some of the first hearings of the Banking
Committee about what we were envisioning as it related to the subprime
crisis, I said that we were going to be facing a tsunami of
foreclosures. Some people said that was an overestimation.
Unfortunately, we have not even seen the full effect of that tsunami as
we have hundreds of thousands of mortgages reset every quarter for the
next 2 years, and at the rate of default and foreclosures, the numbers
will grow dramatically. Of course, that has a consequence to all of
those American families for which the American dream becomes the
American nightmare. It has a consequence to neighborhoods and
communities where those properties, if they go into foreclosure, have a
negative effect on the values of the adjoining properties and,
obviously, on those communities as it relates to the consequence of
property values that continue to take a nosedive. Therefore, it has an
enormous impact on the lives of people across our country. It also has
a very significant impact as it relates to the economy of our Nation.
I am glad, working in the committee, that we are here today to pass
this important bill, the FHA Modernization Act. We clearly need to pass
FHA reform.
I spoke then about the need to raise the FHA loan limits in order to
give borrowers more options. In my State of New Jersey, which is not
unique, 13 of the 21 counties are at or over the FHA ceiling of
$362,000, and 75 percent of New Jerseyans live in these 13 counties.
Unless this bill passes, the FHA means absolutely nothing for the
overwhelming part of the 9 million people who live in New Jersey as a
vehicle, an opportunity to achieve home ownership and to be good
borrowers, people who work hard, obey the rules, follow the law, serve
in their communities, worship, but ultimately would not have the
wherewithal to pay but for the type of loans the FHA can guarantee.
I believe, in the wake of the tsunami of foreclosures, these are
critical options to new homeowners and maybe even to some who will
ultimately refinance. The legislation before us today will bring more
attractive FHA mortgages into the subprime marketplace so borrowers
looking to refinance or first-time homeowners have a realistic
opportunity to choose an FHA loan instead of a risky mortgage.
I knew then what I know now. This legislation is long overdue.
Homeowners need more options than just the subprime market. That is why
I am pleased we will be finally passing this critical bill. I hope we
give it a very strong sendoff from the Senate. I know this is something
for which we are in agreement with the administration. It should
receive broad bipartisan support. It is only one of many tools
necessary to deal with the challenges the Nation faces on the subprime
and the crisis of foreclosures, but it is an important one.
I urge its passage and yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from New Hampshire.
Mr. GREGG. Mr. President, I support this FHA initiative. As the
Senator from New Jersey so appropriately noted, this is another tool
which is absolutely critical in this area, as is an amendment which I
have pending to the farm bill which, regrettably, as a result of last
night's cloture motion, will be ruled nongermane and therefore will not
be allowed to be brought up. This amendment says essentially that if a
person's home is foreclosed on, they don't then get hit with an IRS tax
lien for the amount of the foreclosure which is not recovered. In other
words, if you own a home and, regrettably, you can't meet your payments
because of a subprime event, and your loan was, say, $100,000, and they
foreclose, take it away from you, and then they sell your home but they
don't get $100,000--let's say they get $50,000 of that loan paid--you
get hit with a tax bill for the additional $50,000. Or if there is a
restructuring, where the lenders actually rewrite your loan so you can
make your payments, and that represents a writedown in the value of the
loan, you get hit with a tax bill.

So the irony of the event is, it is pretty devastating to people.
First, their home gets taken. Then the IRS agent shows up and gives
them a tax bill and hits them with a tax lien. That, obviously, is not
fair, and it is not appropriate. It is a quirk of our Internal Revenue
law. This amendment would eliminate that. It would eliminate that
event.
I do think it is important. I think it is an important element of
moving forward in a way that tries to work us through this subprime
meltdown which is having a deleterious effect on our economy and,
obviously, is having a very tremendous personal impact on people who
are affected by the interest rates on their loans jumping to a point
where they can no longer pay them.
So I regret this amendment was ruled out of order for all intents and
purposes by the cloture motion. I believe there was very strong
bipartisan support. In fact, I have not met anybody so far who is
opposed to this concept. I hope it can be included in a final package,
either under unanimous consent or because nobody objects to it, or,
alternatively, that the Finance Committee,

[[Page S15584]]

which I know is working on this issue, can come forward and offer a
unanimous consent request to move this free standing.
I think it is important we do it now. I do not think we can wait.
These loans are being foreclosed on now. The people who are getting hit
with these tax liens are getting these liens today. So it is very
important we move promptly.
So I wished to highlight this issue also as one of the issues which
is raised relative to resolving this question or at least mitigating
the question of how we deal with this subprime meltdown.
I yield the floor.
The ACTING PRESIDENT pro tempore. Who yields time?
The Senator from Florida.
Mr. MARTINEZ. Mr. President, how much time is remaining?
The ACTING PRESIDENT pro tempore. The Senator from Florida has 7
minutes 14 seconds; the Senator from New York has 1 minute 28 seconds
remaining.
The Senator from New York.
Mr. SCHUMER. Mr. President, I would like to yield 5 minutes to my
colleague and friend--our majority whip--from Illinois, Mr. Durbin, our
remaining time on this and then 5 minutes from the time against the
Coburn amendment.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
The Senator from Florida.
Mr. MARTINEZ. Mr. President, from our side I would like to yield to
Senator Isakson from Georgia 5 minutes of the remaining 7 minutes.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
The assistant majority leader is recognized.
Mr. DURBIN. Thank you, Mr. President. I will defer to the Senator
from Georgia if he wants to speak at this moment.
Mr. ISAKSON. I will be happy to.
The ACTING PRESIDENT pro tempore. The Senator from Georgia is
recognized.
Mr. ISAKSON. Mr. President, I rise to commend the authors of this
legislation on what they have done. This is an outstanding piece of
work. I spent 33 years of my life in the single family housing
business. When I got started in 1967, I cut my teeth selling houses on
FHA and VA loans. For all those years--and it has now been 40 years--
the FHA and VA have served the United States of America well.
The first thing the American public needs to understand is the
current mortgage crisis in America is not an FHA problem, from a
standpoint of poor underwriting or poor loans. FHA does a good job of
underwriting, a good job of servicing, a good job of appraising. They
have good standards.
The subprime market problem is an irresponsible lending practice in
the conventional market, particularly when it comes to the
underwriting. However, because that crisis does exist, FHA is going to
be looked to as the savior in many cases. As conventional capital
restricts and credit is reduced, it is going to be more important than
ever for the FHA to be able to meet those demands.
But during the deliberations of this and during the writing of this
bill, Senator Shelby and Senator Dodd did some great things the
American public needs to understand. They realized one of the problems
in the subprime markets was they were starting to make 100 percent
loans--interest only--for 3 or 4 years, with a bullet at the end.
This bill specifically ensures that every FHA loan, every FHA loan
that is made will have at least a downpayment of 1.5 percent. So there
is not going to be any 100 percent lending. You will have some skin in
the game.
Statistically, you always know in the housing business when a
borrower has to put equity in a house, it is an insurance policy that
loan is going to be paid. That is the insurance that ensures FHA they
have a very low risk on the taxpayers' money.

Secondly, this recognizes the rising values in America and raises the
cap on the amount of an FHA loan that can be made. This is going to
allow FHA to meet a lot of demand that is going to be created by
failures in the subprime market.
Another point on the subprime market is, FHA loans have not ever
been, nor are they now, subprime loans. They are intended to be loans
for those entering the housing system of the United States of America.
My dear friend, the Senator from Oklahoma, is going to offer an
amendment later on which I will comment on for a second. He and I have
had some discussions on it.
There is a section of the bill that deals with what is known as
reverse mortgages, and probably most people in here would not know what
that is. But basically that means, if you pay for your house and you
get in your senior years and you want to draw on the equity and value
of that house, then you can take out a mortgage against your house, and
instead of making payments every month to pay it off, you receive
payments every month up to a percentage of the appraised value of the
property.
So for people reaching their latter years or their senior years, who
need to be able to supplement their income to exist, they can use the
equity in that house to continue to have an income and a cash flow.
FHA can make that loan and insure it. So can the conventional
markets. The question the Senator from Oklahoma has is whether the FHA
should raise the limit on the number of those loans it makes, which is
at $275,000 right now. Talking to FHA, they are at that cap.
There is a provision in the bill that calls on CBO to make a study to
determine what that cap should be. But in the meantime, we should not
be capping the number of loans. So the bill is appropriate to raise the
cap, and it is appropriate to call for the study. I reluctantly oppose
the amendment, but I do so mainly because I wish to ensure every
American senior who has paid for their home, who has it mortgage free,
has the opportunity to leverage that home to have income in their later
years, safe and secure by the underwriting process of the FHA.
But I conclude with the way I began: This is a great bill for the
United States of America. It is not a reaction to bad practices on the
part of FHA, but it is a reaction to say that because of our good
practices, because of the capital that is available because of FHA, it
is important for us to recognize the demand that will come to us as a
byproduct of the subprime market.
I commend Senator Crapo, Senator Shelby, Senator Dodd, Senator
Schumer, and all those who have worked on it, and I commend it to my
colleagues for a favorable vote.
I yield back.
The ACTING PRESIDENT pro tempore. The assistant majority leader is
recognized.
Mr. DURBIN. Mr. President, first, I wish to thank my colleague,
Senator Schumer from New York, for his leadership on this issue and
Senator Martinez of Florida and Senator Carper, who played an important
role in making certain this bill came to the floor. It is timely. It is
important.
Back the late 1920s, the United States faced an overwhelming housing
crisis. The values of homes were plummeting, and the availability of
credit to buy homes was in jeopardy. At that time, President Franklin
Roosevelt and others stepped in, in 1932 and beyond, to make a massive
commitment to restoring the American dream for thousands, if not
millions, of American families.
One of the means by which it was restored was the creation of the
Federal Housing Administration. This Government agency stepped into the
process of mortgages and said: We will provide backing and guarantee
and assurance it is safe to buy a home, and it is safe to loan the
money.
That started to restore the confidence of the American consumers in
our housing market--a confidence which led to the dramatic expansion of
home ownership in America, the expansion of personal wealth, as
families invested in their homes and saw their assets grow, and then
the investment of the growth of America's communities, neighborhoods,
and towns. It is part of the American dream.
Not a single one of us will forget the first home we ever purchased.
Moving from being a renter to a homeowner is a watershed in anyone's
life. Your feeling about where you live and what you want to put into
where you live changes when you become a homeowner.
Now we are involved in another housing crisis. It is a crisis which
many

[[Page S15585]]

want to minimize. But they should not. The fact that 2.2 million
Americans face foreclosure is not just your neighbor's misfortune, it
is a misfortune for your neighborhood. It is a misfortune for our
Nation.
That is why this bill is so important. We are trying to find ways to
bring that same type of confidence and liquidity back into the housing
market. That is why this bill is timely and should be passed on an
emergency basis.
When the Federal Housing Administration, the FHA, steps up and
increases the loan limits, it means it is a realistic appraisal of
today's housing market, so they are relevant to the needs of average
families who pay higher costs now for housing than they did a few years
ago. When we reduce the downpayments, it means some families will have
their chance to move into a home even earlier in their earning years,
rather than waiting and renting and perhaps missing that opportunity.
I am heartened by the fact that this bill includes counseling--not
only counseling for the purchase of a home but counseling when a family
is troubled and worried about whether they can continue to make their
mortgage payments.
All of these are moves in the right direction. I can tell you many
think this housing crisis is an isolated crisis in America. It is not.
Mr. President, 2.2 million foreclosures will lead to the reduction in
value of 44 million single family residences, condos, and other units
of home ownership. Forty-four million homes will lose value because of
foreclosures. I have seen it on the West Side of Chicago, where
gentrificaton and modernization have taken neighborhoods that were
nothing more than vacant lots and turned them into town homes and row
houses that are worth hundreds of thousands of dollars. Now one of the
houses on the block is boarded up, facing foreclosure and an auction,
realizing at the auction the asking price is likely to be at least 20
percent to 30 percent lower than the value that was originally assessed
on the home. That means every home in the neighborhood takes a hit.

What does it mean when 44 million homes lose value in America? It
means 1 out of 3 homeowners in America will see a decline in the value
of their home. It is not just the house you are living in, it is also
the most important asset in most family's lives. That is why this bill
is needed. That is why we need to move forward as quickly as possible.
Let me say, even with this bill, even with Secretary Paulson's
proposal 2 weeks ago, these are modest steps that need to be built
upon. It is not enough. It is good. I want to see it move. It is
important. We need to do more. This housing crisis has become an
economic crisis in America, and we need to face it squarely. Franklin
Roosevelt did in the 1930s. We need to do that today.
Let me add a word too. I want to change the bankruptcy law so a
family facing foreclosure, going into bankruptcy, has one last chance
in the bankruptcy court to renegotiate the terms of their mortgage. You
can do that today if you take a vacation home into your bankruptcy or
your family farm into a bankruptcy. But the law prohibits the
renegotiation of the terms of your mortgage for your principal
residence. That makes no sense whatsoever. A foreclosure can cost the
parties involved up to $50,000. The ultimate sale of the home, after
foreclosure, can bring maybe 70 percent or 80 percent of the actual
value of the home. Now what we need to do is look at a comprehensive
approach to deal with the housing crisis which threatens our economy.
I urge strong support for this legislation.
I yield the floor.
The ACTING PRESIDENT pro tempore. Who yields time?
Mr. MARTINEZ. Mr. President, could I inquire as to the remaining
time?
The ACTING PRESIDENT pro tempore. There is 3 minutes remaining for
general debate on the bill on the Republican side.
Mr. MARTINEZ. Mr. President, I yield 2 minutes on the bill itself
from the time remaining to the Senator from Colorado.
The ACTING PRESIDENT pro tempore. The Senator from Colorado.
Mr. ALLARD. Mr. President, I thank the Senator from Florida for
yielding me the time. I will make my comments very briefly.
First of all, I rise in support of this FHA reform package. I do not
think this is the time for us to take choices away from homeowners and
consumers. This helps provide additional choices for homeowners with
some safeguards.
The FHA reverse mortgage program contains some important safeguards
for borrowers such as mandatory counseling and limits on fees that can
be charged. For those very rare instances in which reverse mortgages
were used as part of a predatory or fraudulent scheme, I support
vigorous enforcement against the perpetrators. The problem is with the
perpetrators, not with the reverse mortgage program.
The bill also provides some provisions restricting seller-financed
home equity plans. There are some provisions which I think are good.
There are provisions for the energy efficiency mortgages. I am cochair
on the Renewable Energy and Efficiency Caucus, and I want to seek every
opportunity we can to have structures that promote energy efficiency. I
think that is a good part of the bill. I thank Chairman Dodd and
Senator Shelby, as well as Senator Martinez and Senator Schumer, for
their work on this bill. I am pleased this reform package also includes
title I manufactured housing, which is something I have worked on with
Senator Bayh.

So there are some important reforms to be offered on this bill, and I
think they are offering opportunities for affordable home ownership. So
I am rising in support of this particular piece of legislation.
I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Florida is
recognized.
Mr. MARTINEZ. Mr. President, with the remaining time, I simply wanted
to say I think it is wonderful when we come together, Republicans and
Democrats, to tackle one of America's problems. The subprime crisis,
the loss of home ownership by so many American families, the threat of
it, is particularly an acute problem at this time in our history. It is
good that in this season of Christmas we have made a downpayment on
this problem. The Government will not be able to fix all of the
problems out there in the credit community; however, this is a good
step, a good first step, and a good bipartisan step.
Senator Shelby, the ranking member of the subcommittee, has played an
integral part of us getting to this point today, and I thank him.
I yield back the remainder of my time.
Mr. SHELBY. Mr. President, I join my colleagues in urging passage of
S. 2338, the FHA Modernization Act of 2007.
The Banking Committee has invested a considerable amount of effort
and time to reach agreement on this bill.
Legislating can be a difficult process that requires not only
patience but also a willingness to compromise. The Banking Committee
has been able to compromise in a way that achieves a balanced bill.
The bill makes the necessary changes to the FHA program so that it
can meet the needs of today's mortgage marketplace. The bill also
provides protections for the American taxpayer who ultimately bears the
financial risks of the program.
The end of a legislative session on the eve of an election year can
be a very difficult time to reach consensus on just about anything.
When we are able to come together, it is incumbent upon us to seize
that opportunity and move forward.
With that in mind, I commend Chairman Dodd's efforts to craft a
bipartisan bill and I encourage all my colleagues, on both sides of the
Hill, to support final passage of S. 2338 as passed by the Senate.
The ACTING PRESIDENT pro tempore. All time for general debate has
expired.
The Senator from Oklahoma is recognized.

Amendment No. 3854

Mr. COBURN. Mr. President, I call up amendment No. 3854 and ask for
its immediate consideration.
The ACTING PRESIDENT pro tempore. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Oklahoma [Mr. Coburn] proposes an
amendment numbered 3854.

[[Page S15586]]

Mr. COBURN. I ask unanimous consent that the reading of the amendment
be dispensed with.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
The amendment is as follows:

amendment no. 3854

(Purpose: To ensure the cap on Home Equity Conversion Mortgages is not
permanently eliminated before a study regarding program costs and
credits is submitted to Congress)

On page 20, between lines 18 and 19, insert the following:
(e) Effective Date.--The amendment made by subsection
(a)(2)(A) shall not take effect until the study and report
required under subsection (d) has been submitted to Congress.

Mr. COBURN. Mr. President, I don't disagree we have to take action to
help those people who are in a bind now based on both the economics, as
well as probably a pretty severe bubble that has occurred. The real
fact is some people are going to lose their homes. I have agreed to
this debate, not because I was trying to stop all of the FHA
modernization, but because I am markedly concerned that in this
component what we are doing has nothing to do with the crisis that we
see today, but, in fact, will put the next two generations in
obligation for a sum somewhere between $50 billion and $60 billion in
terms of reverse mortgages.
Now, the question I would ask, which has not been asked, is where are
the metrics to measure the market forces in reverse mortgages in this
country? There are none. As a matter of fact, this bill looks at that
by asking for a study. But the other intent of the bill is that we ask
for a study, but we eliminate the cap which the study is supposed to
help us determine.
There are some other concerns the American taxpayer should have, one
of which is FHA has what is called a qualified audit. They have two
material weaknesses we wouldn't accept from any other corporation in
this country in which we would entrust our money or invest our assets.
When they are audited, there are two material weaknesses in their
ability to control what they are doing, measure what they are doing,
and assess what they are doing. We ought to be concerned about that.
We are simply asking with this amendment that before we raise the cap
on the noncritical area in the home mortgage market, we, in fact, study
to know what we are doing. The idea for the study is great, but the
study is going to have limited value if, in fact, we move all reverse
mortgages to the Government. That is going to be the ultimate impact of
this bill.
The crisis is in the mortgage industry, not the reverse mortgage
industry. But we are applying and using that crisis to absolutely
ensure that in the future, our children are going to be hooked for the
guarantee for all of the reverse mortgages in this country. We are
going to limit the private reinsurance equity reverse mortgage in this
country by what we do.
I think the other thing we ought to think about as we do this is some
``what-ifs.'' What if we don't get a good handle on this subprime
credit and the debt situation that is going on? What if we end up
becoming the true guarantor of all of these loans? What if they get to
the point where they can't be repaid? It is not going to be the
Presiding Officer and me who are going to pay this; it is going to be
the next couple of generations.
So this amendment is just designed for prudence. It says, if we are
going to study this, let's study it and then make a decision. There is
no credible source that says there is a shortage of access of credit
for reverse mortgages in this country. It is not in the committee
report. It is not in the report. So why are we doing this? Because it
works and because people--we are doing it because that is the way
everybody will go if you can get a Government-guaranteed loan. The
banks make more money on it. It is easier--you evidently have to
qualify, but conventional reverse mortgages will go out the window. So
what have we done with that? We have shifted the risk for all of the
reverse mortgages in this country to our kids. If that was where we had
a crisis, then I would be in agreement that maybe we should go there,
but that is not where it is.
What we are attempting to do with the FHA Modernization Act is to
help those who are in a crisis now. Probably, had we done this 3 years
ago, many of the people who are in subprime loans would have been in
FHA, and we wouldn't see the extent of the crisis we have today.
So what I would ask is that our colleagues stop for a minute and say:
Do we really want at this time to do this? I understand that I am going
to be opposed on this by members of the Banking Committee, but I would
ask them to show me the data that says there truly is a dent in this
aspect of the reverse mortgage market.
Mr. President, I reserve the remainder of my time.
The ACTING PRESIDENT pro tempore. Who yields time?
Mr. SCHUMER. Mr. President, I yield 7 minutes to the distinguished
Senator from Maryland.
The ACTING PRESIDENT pro tempore. The Senator from Maryland is
recognized for 7 minutes.
Mr. CARDIN. Mr. President, I rise to speak on behalf of thousands of
families in my home State of Maryland.
For them, the American dream has turned into a nightmare.
I am referring to the phenomenon called the ``credit crunch,'' the
``mortgage meltdown,'' or the ``subprime crisis.''
Regardless of which name we choose to attach to it, the situation
threatens to upend the financial stability of individual homeowners and
neighborhoods.
The latest projections show that, nationwide, millions of Americans
may lose their homes, and the ripple effect on our economy will be felt
by all.
There may be no more powerful symbol of the American dream than home
ownership.
For most American families, their largest asset is their home, and it
serves as their primary tool for building wealth.
Buying a home ranks among the top motivations for saving. Owning a
home gives a family a stake in their communities. It provides a hedge
against an inflationary rental market; it provides tax benefits; it
provides a source of revenue for emergency expenses, and it provides
security in old age.
In our communities, higher levels of home ownership improve the
appearance and stability of neighborhoods, and result in better
schools, more civic participation, and lower crime rates.
Many public and private entities have committed their energies to
increasing home ownership. Much progress had been made, with the rates
of home ownership among every racial and ethnic group of Americans
reaching new highs every year since 1995.
That is precisely why the crisis that is spreading through our Nation
is so alarming.
The Mortgage Bankers Association has just released its National
Delinquency Survey for the second quarter of 2007. Rates of mortgage
delinquency have reached their highest point in twenty years.
Foreclosure rates are at the highest level ever.
It is now estimated that up to 2.2 million Americans who took out
subprime mortgages between 1998 and 2006 could lose their homes during
the next 2 to 3 years.
As the fallout from this situation continues, we are learning more
and more about the factors leading to the crisis. One key factor is the
category of loans known as ``subprime.''
Subprime loans usually have interest rates 3 percentage points or
more higher than prime loans, which are typically offered to applicants
with credit scores of 650 or higher. Subprimes can be either ``fixed
rate'' loans, where payments stay the same over the life of the loan,
or they can be adjustable rate mortgages, known as ARMs.
ARMs come in many forms: some begin with very low ``teaser'' rates
that then rise steadily as prime interest rates increase. Others, such
as 2/28 loans, offer very low rates for a brief period, and then reset
sharply higher, regardless of the prime interest rate, for the
remaining term of the loan. Many borrowers choosing those loans were
told that because their homes were certain to increase in value, they
would be able to refinance later and get better terms before their
interest rates rose.
They assumed that the rapid escalation of prices that occurred in the
first part of this decade would continue. I have heard from borrowers
who took out 2/28 or 3/27 loans erroneously believing that as long as
prime interest

[[Page S15587]]

rates remained low, their own mortgage rates would also. They are now
facing huge increases in their monthly payments, some as much as 40
percent higher.
Some borrowers are also facing foreclosure because they could not
afford the third or fourth year payments, and were not able to
refinance because of missed payments or because the value of their home
was less than the outstanding debt. Many regret ever purchasing a home
and blame themselves for entering into a raw deal. But a 2005 Federal
Trade Commission study showed that many borrowers did not understand
the costs and terms of their own recently obtained mortgages. Many had
loans that were significantly more costly than they believed, or
contained significant restrictions, such as prepayment penalties, of
which they were unaware.
For a while, as problems became evident in other areas of the county,
such as Florida and Nevada, analysts said that the Washington
metropolitan area and the surrounding region would not be affected.
They said that the presence of the Federal Government as a major
employer and associated contracting opportunities would prop up housing
prices and sustain the market. It didn't turn out that way. This area
is now very much affected by the mortgage mess. Northern Virginia is
experiencing some of the sharpest declines in home values in the
Nation.
The Mortgage Bankers Association has reported that 24 States have
already seen decreased revenues directly attributable to changes in the
housing sector. This is for two reasons: first declining home values
have led to reduced property tax revenues. Second, fewer sales have
resulted in lower revenues from transfer taxes--the fees that are paid
when homeownership is transferred from sellers to buyers.
Maryland is one of those 24 States. Let's look at what is happening
in Maryland.
The top chart shows the percentage of loans that are seriously
delinquent in Maryland and in the United States. Seriously delinquent
loans are more than 3 months delinquent or in the process of
foreclosure. The percentage of prime loans is relatively small--under 2
percent. But in the subprime category, the rates are much higher--for
fixed rate loans, it is more than 4 percent in Maryland and nearly 6
percent nationwide. For subprime ARMs, it is nearly 8 percent in
Maryland and more than 12 percent nationwide.
This tells us that nearly 1 in 15 Maryland mortgage holders with a
subprime loan are in imminent danger of losing their homes. For
borrowers with subprime adjustable rate mortgages, the rate rises to
nearly 1 in 10.
The bottom chart shows how the situation has worsened over the past 3
years in Maryland with respect to delinquent loans. These are loans
that are 30 to 60 days past due with no payments being made. Since the
fourth quarter of 2004, the rate of delinquent prime loans has
increased marginally from 1.7 percent to 2.06 percent. But the rate of
delinquent subprime loans has increased by more than 50 percent--from
8.56 percent at the end of 2004 to 13.76 percent today.
If no comprehensive plan is put into effect to address this problem,
these loans will become seriously delinquent and lead to foreclosure.
Foreclosures affect entire neighborhoods, as the repossessed homes
often stay vacant for extended periods. Some are boarded up, the lawns
go untended, the neighborhoods become undesirable places to live, and
the value of the surrounding homes is depressed.
According to the Center for Responsible Lending, in 2005 and 2006,
186,000 subprime loans were issued in Maryland. They accounted for
nearly one-third of all home loans originated in the State during those
2 years. It is projected now that because of ballooning interest rates
that borrowers will not be able to afford, more than 38,300 Maryland
homes will be lost to foreclosure.
This phenomenon is hitting hardest in the communities least able to
weather the storm. Some groups--African Americans, Latinos, and the
elderly--are disproportionately affected.
In recent years, minorities have markedly increased their rates of
homeownership, helping to increase wealth and improve economic
stability.
These gains are now very much at risk.
This is because statistics show that nationwide in 2005, more than 54
percent of loans to African Americans and 46 percent of loans to
Latinos were subprime loans.
But minorities did not necessarily receive subprime loans because of
lower credit scores or lower incomes. Five years ago, the Center for
Community Change, a nonprofit consumer advocacy group, issued a report
entitled, ``Risk or Race?'' It demonstrated that subprime lenders
target minority communities and that African Americans and Latinos pay
higher loan rates than Whites with similar incomes.
When it comes to buying a home, when incomes and credit scores were
the same, African Americans were 3.2 times more likely than Whites to
get a higher rate loan. Latinos were 2.7 times more likely to get a
higher rate loan.
When it comes to refinancing, African Americans were 2.3 times more
likely than Whites to get a higher rate loan, and Latinos were 1.6
times more likely.
Here's something that is even more surprising: the disparity between
Whites and minorities increases as incomes rise. Minorities with higher
incomes are more likely than those with lower incomes to be offered a
higher rate loan.
So minorities are more likely to have subprime loans, and subprime
loans are more likely to go into foreclosure, now at alarming rates.
On average, minority households have median net worth that is less
than one-tenth that of White households. Of the wealth that African
Americans and Latinos possess, two-thirds is in home equity. So the
mortgage crisis is placing not just homes, but also the economic
stability of minority communities, in serious jeopardy.
This crisis will have a profoundly negative effect on the future of
these communities.
An article earlier this week in the Washington Post featured Caprise
Coppedge, who works as a housing counselor at United Communities
Against Poverty in Capitol Heights, MD. Capitol Heights sits right on
the border between Washington, DC, and Maryland in Prince George's
County. Ms. Coppedge spoke of the increased volume of people coming to
her for relief, most directly as a result of mortgage problems. She
said that her caseload of people who need help with mortgage payments
has increased from one person a week to three a day. She said,
``There's been a shockingly sharp increase of people in need of help in
the past 6 months. It's unreal.'' Last year, her caseload consisted
primarily of renters behind in their payments, and the rare homeowner
who fell behind in payments had experienced job loss or some other
infrequent event.
She continued, ``Then in midsummer, we felt the tide turning. People
started trickling in. First they came in to express concern about their
loans and gathered information. Then by September, everything picked up
speed and suddenly, people were telling us they were behind on their
mortgages.''
The Post reported that in Prince George's County, 127 out of every
10,000 homes are in foreclosure. It is the highest rate in Maryland and
one of the highest in the region. There are now approximately 57,000
subprime loans being serviced in Prince George's County--41 percent of
all loans in the county. Federal Reserve Data compiled by the Consumer
Federation of America showed that 43 percent of people buying homes in
Prince George's County in 2005 used high-cost loans, compared with 20
percent in the region overall.
Similar trends are evident in Baltimore City and Montgomery County.
These are the areas that have the most to lose as the subprime crisis
deepens.
Prince George's County Executive Jack Johnson has pledged $10 million
in foreclosure assistance to help keep people in their homes. This
effort will help many families, but the magnitude of the problem
demands resources that only the Federal Government can bring to bear.
Finally, there is another set of statistics that should raise the
antenna of every Senator. Conventional thought has always held that
your credit score affects your mortgage rate.

[[Page S15588]]

For fixed-rate loans, the highest FICO scores translate to the lowest
interest rates and the lowest monthly payments. However, Fannie Mae, a
government-sponsored loan buyer, has estimated that up to half of
subprime borrowers actually had credit ratings that could have
qualified them for prime rates. Another study by First American Loan
Performance, a San Francisco research firm, says that this proportion
reached 61 percent in 2006.
How could this have happened? There are many factors involved: I will
mention just a few: lack of consumer education; the brokerage industry;
the advertising industry; and predatory lending, which I have already
discussed.
First, the lack of consumer education: a Mortgage Banker Association
survey from 10 years ago indicated that nearly one-third of homebuyers
never met with anyone except their real estate agent when they bought a
home. The numbers may have changed somewhat, but the extent of the
current crisis suggests that the picture may have not changed much.
A more recent borrower survey by the Mortgage Bankers found that half
of borrowers who had purchased a home in the previous 12 months
couldn't recall the terms of their mortgage.
Second is the brokerage industry: There is a term called ``yield-
spread-premium,'' or YSP. Simply put, it is the amount that mortgage
brokers are paid by lenders for originating a loan.
Some brokers have reportedly received up to 5 points for every
subprime loan they originate--that works out to $10,000 on a $200,000
mortgage. On a prime loan, the margin is about one percent, or $2,000.
The Wall Street Journal reported that a March 2007 rate sheet from New
Century Financial Corporation told brokers they could earn a ``yield
spread premium'' equal to 2 percent of the loan if the borrower's
interest rate was an extra 1.25 percentage points higher than the
listed rates.
The tiny print at the bottom of the document read, ``For Wholesale
Use only. Not for distribution to the general public.'' New Century
Financial is now in bankruptcy protection and no longer issuing
subprime loans.
Where do the extra payments to the broker come from? They are
financed by charging the borrower a higher rate. So the monetary
incentives are in place for brokers to steer would-be borrowers to the
riskiest and most costly loans. About 70 percent of subprime loans are
originated by mortgage brokers who get paid with these YSPs.
Third, even with the intense media attention paid to this crisis, you
can still open any newspaper and see advertisements for new housing
developments. The developers are offering balloon mortgages that are
more likely to lead to foreclosure for many borrowers. Also in many
community papers you will find ads from subprime lenders touting how
borrowers can get loans with no documentation of income, no down
payments, and little or no credit history.
The crisis is national and we need a national response. The President
and Treasury Secretary Paulson have put forth a proposal that is
voluntary and, by many estimates, will help only about one in five of
the subprime borrowers whose rates are set to increase over the next
year. It is limited to borrowers who took out loans only since 2005 and
only those with lower credit scores who are up-to-date on their
payments.
Residents of heavily affected counties in Maryland and many other
counties across the Nation would no doubt say that a more comprehensive
and inclusive solution is required. Several bills have been introduced
in the House and Senate, including S. 2338, the FHA Modernization Act,
which we are considering today. This measure will increase the FHA's
loan limits for single families to 100 percent of the median home price
in an area, up from 95 percent, and it will reduce the FHA's down
payment requirements from three to 1.5 percent. This bill will also
authorize $200 million for foreclosure-prevention counseling for low-
and moderate-income homeowners who are having trouble making their
mortgage payments. I support the reforms included in this bill and I
look forward to working with my colleagues on additional solutions.
We must work to repair the damage that has been done, and change the
laws so that prospective homebuyers can secure affordable and fair
loans. People in our communities are looking to us for leadership and
we must provide it. The sooner we act, the more families' dreams will
be preserved.
Mr. President, I yield the floor.
The ACTING PRESIDENT pro tempore. Who yields time?
The Senator from Florida is recognized.
Mr. MARTINEZ. Mr. President, we have reached an understanding to use
the remaining time. At this time, I yield, in opposition to the
amendment, 8 minutes to Senator Crapo.
The ACTING PRESIDENT pro tempore. Off whose time?
Mr. MARTINEZ. Off the time in opposition.
The ACTING PRESIDENT pro tempore. Is there objection?
Without objection, it is so ordered.
Mr. MARTINEZ. It will go back to the remaining speakers on the
Democratic side.
Mr. CRAPO. Mr. President, I rise in opposition to the Coburn
amendment. This amendment calls into question how we are going to
modernize the FHA reversion mortgage program, often called the HECM, or
home equity conversion mortgage program. I have long been a supporter
of the program, and I have worked with a number of members of the
Banking Committee, a bipartisan group, to remove the volume limit on
the amount of reverse mortgages the FHA may insure. I especially thank
the other Senators who have worked on this: Senators Dodd, Shelby,
Reed, and Allard.
I understand the concerns my colleague from Oklahoma is raising about
the need to further understand and be able to evaluate the development
of the reverse mortgage industry.
Although I support the report that is in the bill that will help us
to do that, it is very important to understand why this amendment is
the wrong approach to getting a better handle on understanding reverse
mortgages.
There has been a cap imposed on the number of reverse mortgages that
can be issued by the FHA and by HUD. That cap has already been reached.
So if we don't lift the cap while we are conducting the study, the
program essentially terminates.
The reason we must not allow that to happen is the very reason the
Senator from Oklahoma has been talking about: We need to have further
ability to study and evaluate this program and refine its
effectiveness. That is what the study is in place for. We need a
program for the study to continue to be effective.
What does the report that we included in the bill do? It requires
that the GAO help Congress analyze and determine the effects of
limiting the amounts of the costs or fees under the program from the
amounts charged under the program as of the date of enactment. It goes
through a number of requirements; for example, requiring that we focus
on the cost to mortgagors for participating in the program, the
financial soundness of the program, the availability of credit under
the program, the cost to the elderly homeowners under the program,
particularly evaluating mortgage insurance premiums charged under the
program, the upfront fees, and the margin rates charged under the
program.
I went through that on purpose because I think it is important that
we understand there are issues here about reverse mortgages that we are
studying. But the issues right now focus most significantly on making
sure that the elderly who are participating in this program don't pay
significantly high or overly high upfront fees.
The program is very successful in terms of protecting the taxpayer.
Over the next 5 years, it is estimated that not only will this program
not cost the taxpayers any money, it is estimated to generate about
$1.5 billion in revenues to the Treasury over the next 5 years because
of the fees that are being charged as these mortgages are entered.
I think it is important to note, because it is going to be critical
for the future of this program, and understand what the level of these
should be, what the level of the mortgage premium should be, and have
the ability to work effectively as we move forward in refining the
program.
A reverse mortgage is a unique loan that enables a senior to remain
in their

[[Page S15589]]

home and to remain financially independent by converting part of the
equity in their home into tax-free income, without having to sell the
home, give up title, or take on a new monthly mortgage payment.
The reverse mortgage is aptly named because the payment stream is
reversed. Instead of making monthly payments to the lender, as one
would do with a regular mortgage, the lender makes payments to the
homeowner.
This HECM program was created to serve our seniors who are ``cash
poor'' but ``equity rich.'' They need to have a cashflow and they have
significant equity in their home that they have built up over the
years. The majority of the recipients are elderly widows. The funds
from a reverse mortgage can be used for anything, such as daily living
expenses, home repairs or modifications, health care expenses,
prescription drugs, in-home care, existing debts, prevention of
foreclosure, or any other needs that the elderly may have.
As reverse mortgages have become more understood and the real-life
success stories have been told, this HECM program has grown. There is a
significantly increased interest in it. Clearly, this sector of
industry is going to continue to grow as baby boomers get older and the
consumers' acceptance and understanding of the program increases.
Increased lender participation led to competition that has already
resulted in mortgage fee reductions across the country.
The point I am leading to here is simply this: This is a program we
must not stop dead in its tracks by simply reimposing the cap. It is
critical that the legislation we put together that lists the cap, while
we are conducting this study, makes sure that we better understand how
to approach defining the level of support for the program and that it
is able to continue. Rather, what the amendment would do is simply
reimpose the cap and essentially stop the program. There would be
nothing further to study then, because the program would be ended.
I think we can all agree we need to develop these kinds of unique and
helpful programs for those in our country who have reached the point in
their lives where they have significant equity but don't have the
cashflow they need to meet their critical life needs. This program is
one that helps them in a way that preserves their dignity, their
ability to live in their own home, and assures that they have an
opportunity for a cashflow that will enable them to live out their
lives in a way that doesn't put them in a position of constantly
wondering how they are going to make next month's payments.
With that, I yield back the remainder of my time.
The ACTING PRESIDENT pro tempore. Who yields time?
Mr. SCHUMER. Mr. President, I yield 3 minutes to the Senator from
Missouri.
Mrs. McCASKILL. Mr. President, I am very interested in this
legislation. I do support the bill. I think the reverse mortgage is an
important tool for many elderly in order to live out their days with
basic needs.
However, this week, with the assistance and support of Senator Kohl,
the chairman of the Aging Committee, I was given the opportunity to
chair a hearing on reverse mortgages, where, frankly, I was shocked to
learn some of the predatory practices that are going on. Senator Crapo
is exactly right; there are, in fact, mostly elderly widows who are
accessing these reverse mortgages. That is why it is so important that
we protect them with counseling and with aggressive oversight and that
the predatory marketing that is now beginning to go on is brought to a
close.
I will give some examples. Some very bad companies are now
advertising: Come sell reverse mortgages and, by the way, you can
double your commission if you sell an annuity at the right time.
We heard testimony from a family where, in fact, an elderly widow who
had a home equity line of credit had money in the bank, was brought
into the confidence of a salesman, who then ended up selling her a
reverse mortgage she didn't need and a deferred annuity she didn't
need, and she was over 80 years old. It was a tragedy. We have to make
sure the counseling being given--by the way, the counseling being given
now is being paid for by the lending industry, because HUD only gave $3
million for counseling--$3 million. We are talking about a program that
will generate about $1.7 billion under this bill for the Federal
Government, and more than $3 million is needed to help the elderly
widows understand what is going on. $3 million is outrageous.
There is a piece of legislation I will introduce, along with Senator
Kohl, that I will, I hope, have an opportunity to add to this bill
before it gets to the President. It is going to do some important
things. It is going to raise the amount of money for counseling to
cover the need, only about $24 million a year. It is going to make sure
that counseling is independent and that, in fact, these people getting
the counseling are assessed as to whether they are suitable for a
reverse mortgage. Many of the elderly are not suitable for it, and they
are going to get themselves into a trap they cannot get out of.
The other thing is making sure that we build a wall between the
deferred annuity salesman and the people who are selling reverse
mortgages. It is unconscionable that these salesmen might prey on these
elderly people and sell them complicated financial products they don't
need.
I support the bill. I think the amendment Senator Coburn offered--I
get what he is trying to do and I appreciate it. I think we need to
pass this bill with these important safeguards in place, it is my hope
they are added before the President signs.
The ACTING PRESIDENT pro tempore. Who yields time?
The Senator from Oklahoma is recognized.
Mr. COBURN. Mr. President, it is interesting. I will ask a couple of
questions. Where is the study that shows the Federal Government ought
to be in the reverse mortgage market? It is not there. Where is the
study that shows what will happen to the private mortgage market? It is
not there. So what we are doing is moving all reverse mortgages and the
obligations thereof to our kids.
We ought to let private markets work some. We ought to create that
ability. We are going to eliminate that ability. There is no question
that reverse mortgages are advantageous for a lot of people. As you
heard, there are going to be people preying on widows out there,
saying: Here is the FHA, and I can sell you this annuity if you want to
reverse mortgage your home. There is not going to be any balance on
that.
So we are going to shift an entire industry, which should be private,
with FHA reserve, for those who need it to help them, to the
Government. The long-term consequence by the auditors' report is that
it is going to be $45 billion that is going to get shifted to debt to
our kids. That is the exposure there.
I am not against reverse mortgages. I am not against us trying to do
everything we can in terms of the real crisis out there, which is
associated with the subprime mortgages. This is a totally different
category. What we are doing is expanding a program, unlimited. What if
the GAO report comes back and says you should not do that, there is a
market out there? Every banker in this country, if you give them an
option of a conventional mortgage or an FHA-guaranteed mortgage, is
going to go to the FHA. What will happen? There is a lower
qualification for it. They make more money off of it. Consequently, we
are going to direct a whole industry into a Government-backed program
by what we are doing in this bill.
I am not even opposed to reverse mortgages through FHA. I am opposed
to us overreacting and creating only one market, taking the private
market totally out of it and putting our kids on the hook for it.
Nobody answered the questions about FHA in their audit. No large
corporation would still be on the New York Stock Exchange, NASDAQ, or
any other exchange, if they had three significantly qualified areas to
their financial statements. They have two of the three that are
material weaknesses, inability to even watch the programs we have. We
are going to ignore all that today. I understand that. We are going to
ignore the fact that there are no metrics, no study to tell us what we
are doing is right. But we are going to do it.
Somebody has to protect and think about the future. So this amendment
is common sense. It says, wait--we can

[[Page S15590]]

wait a short period of time; it will not take GAO all that long. What
is the pressure on this? The pressure is the money generation. We are
going to collect $1.5 billion from these same elderly people in
insurance, who are going to be scammed by people who will sell them
annuities. So they are going to get less money out of their reverse
mortgage than they would have gotten in the private sector. They are
going to get less. And then we are going to say we did something.

I am surprised it has not been raised, but what we are doing is a
credit card scam. We are being the credit card scam. We are going to
enable people to get scammed. We don't know what we are doing. The
study is important to do.
I will work with the authors of the bill to raise the cap somewhat,
but to raise it unlimited, never to have a cap regardless of what the
GAO report says? When are we going to come back and fix it? What if
they say: You shouldn't be doing this; maybe this ought to be in the
private market. There isn't a need for our children to take on the
additional risk of these reverse mortgages.
What are we going to do? There is no mechanism for what we are doing
in the FHA Modernization Act if that comes to fruition. The reason for
the amendment is to pause and ask the question: Where are the metrics
that say we need to do it? Where is the market failure that says the
Federal Government ought to be doing it?
This was a pilot. We are now converting a pilot into a full-grown
program. Shouldn't we know what we are doing? Shouldn't we assess
whether there is a true market failure in reverse mortgages before we
do this? No. 2, shouldn't we consider some of the safeguards for a lot
of the people who are going to be taken advantage of through this
program? Finally, No. 3, with our debt growing $1 million a minute,
$1.3 billion a day--and every child now who is born in this country is
inheriting $400,000 in unfunded liabilities--do we have an obligation
to be maybe a little more prudent and say: Wait a minute, let's fix the
subprime, but let's be more prudent on this issue until we really know
what we are doing.
I understand it is a good idea. For me, it will be great when I
retire. I probably will do a reverse mortgage. But we don't know what
the markets are. We don't know where they are. And we don't know the 5-
year future right now, especially given the subprime crisis in front of
us, and we are going to add more to that?
What if somebody comes to their elderly mother and says: I want you
to do a reverse mortgage on your home so I cannot default on my private
one? Is that why we are doing this? Or what if somebody says: I want to
sell you the best thing you ever had; I am going to give you an
annuity. Sounds good. You have a home, you are an elderly female, no
husband, and you buy it, only to find out later you could have bought
an annuity that would have given you $300 or $400 more a month if you
had been in the private market with checks and balances rather than be
scammed.
I ask unanimous consent to have printed in the Record a summary of
the independent auditors' report--Urbach Kahn & Werlin--from this past
year on the Federal Housing Administration.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Independent Auditors' Report

Inspector General--United States Department of Housing and
Urban Development
Commissioner--Federal Housing Administration
We have audited the accompanying consolidated balance
sheets of the Federal Housing Administration (FHA), a wholly
owned government corporation within the United States
Department of Housing and Urban Development (HUD), as of
September 30, 2007 and 2006, and the related consolidated
statements of net cost, changes in net position, and the
combined statements of budgetary resources (Principal
Financial Statements) for the years then ended. The objective
of our audits was to express an opinion on these financial
statements. In connection with our audits, we also considered
FHA's internal control over financial reporting and tested
FHA's compliance with laws and regulations that could have a
direct and material effect on its financial statements.

Summary

We concluded that FHA's Principal Financial Statements are
presented fairly, in all material respects, in conformity
with accounting principles generally accepted in the United
States of America.
Our consideration of internal control over financial
reporting resulted in the following matters being identified
as significant deficiencies: A risk assessment and systems
development plan are needed for FHA's Home Equity Conversion
Mortgage systems and transaction controls; HECM credit
subsidy cash flow model needs improvement; and FHA system
security controls need to be strengthened.
We consider the first two findings to be material
weaknesses. We found no reportable instances of noncompliance
with laws and regulations.
This report (including Appendices A through D) discusses:
(1) these conclusions and our conclusions relating to other
information presented in the Annual Management Report, (2)
management's responsibilities, (3) our objectives, scope and
methodology, (4) management's response and our evaluation of
their response, and (5) the current status of prior year
findings and recommendations.

Mr. COBURN. Mr. President, I remind my colleagues, the FHA has
significant problems if they cannot pass an audit. That has not been
addressed in this bill at all in terms of the audit defects FHA has.
I reserve the remainder of my time and ask how much time is
remaining?
The ACTING PRESIDENT pro tempore. The Senator from Oklahoma has 17
minutes remaining. Opponents to the Coburn amendment have 9 minutes
remaining.
Mr. SCHUMER. Mr. President, I yield 4 minutes to a distinguished
member of the Banking Committee, the Senator from Delaware.
The ACTING PRESIDENT pro tempore. The Senator from Delaware is
recognized.
Mr. CARPER. Mr. President, I thank the Senator for his leadership on
this issue to bring us to this day and my friend from Oklahoma who
offered the amendment before us. He raises a good point, and it is one
that should be addressed in the conference to follow. My hope is that
some of the concerns he raised will be addressed. I don't know that his
amendment will be approved today, but the points he made are not
without value.
We have had FHA for 70 years. The reason we have it is because in the
Great Depression, we realized we needed to encourage home ownership in
this country, and we still do. For many years, FHA was the go-to guy,
if you will, for folks who had marginal credit, maybe were not
homeowners, were first-time homeowners and they needed help to get them
in position to qualify for loans and become homeowners.
There are all kinds of virtues that flow from home ownership. I will
not get into them all. They are many and valid.
In recent years, we have seen people who normally would have gone to
the FHA, first-time home buyers or people with marginal credit, to get
a guaranteed home loan--in recent years, instead of 15 percent of
American loans being purchased through FHA mortgage, we see the trend
down. Today, it is roughly 5 percent. That difference is 10 percent of
the people. A lot of people have gone to subprime lenders. A lot have
gone to mortgages that, frankly, in the long run don't make sense. They
might get a teaser rate the first couple of years of 3 or 4 percent and
then see the rate go up to 7 percent, 8 percent, or 10 percent and find
themselves in a mortgage vehicle they cannot get out of because there
is no ability to escape.
We need to get that 5 percent of loans, home mortgages guaranteed by
FHA, back up closer to 15 percent. We are not going to do it with the
FHA of the 20th century. We have to bring the FHA into the 21st
century. That is what we do with this legislation. We bring it into the
era in which we live today.
I wish to mention a couple of the changes that are made possible with
this legislation. Among them is loan limits. Today, it is about
$365,000. They are going to go up to roughly $415,000 to reflect the
change in the marketplace.
The downpayment FHA required of home buyers for years is 3 percent.
If you buy a home for $200,000, the downpayment is $6,000. We cut that
in half to 1.5 percent. So the downpayment for a $200,000 house will be
about $3,000 to make home ownership within reach.
Also, the legislation removes the caps on reversible mortgages from
currently $150,000 to really to no cap. We are going to consider that
and we

[[Page S15591]]

should consider that in conference, I hope with the input from the GAO.
Finally, the bill creates--and I think this is important and speaks
to the concern raised by Senator McCaskill--it creates a prepurchasing
counseling program.
I am convinced it is not strong enough. Senator McCaskill authored
legislation--and I suppose some of us will join her in sponsoring that
legislation--to strengthen this provision to make sure, if you or I
qualify through FHA, we want to make sure the folks going to the FHA
making that loan are getting the kind of counseling they need and not
somebody who is there to set them up and take advantage of them.
This is not the only step we need to take to get us through the
subprime lending morass for home mortgages. The Paulson freeze
announced last week is a good idea. Interest rates would be frozen for
5 years for folks in these adjustable rate mortgages that are about to
reset and raise the rates. That is a good first step. This is a good
second step.
A good third step is to ban predatory lending practices. Legislation
passed the House and is about to be considered in the Senate.
Last point. This is what Senator Schumer and I are interested in: GSA
reform. That is the last piece. It would include a low-income
affordable home program too.
The ACTING PRESIDENT pro tempore. The Senator's time has expired. Who
yields time?
Mr. SCHUMER. I yield 3 minutes to someone who has been a genuine
leader on this issue, a cosponsor of this legislation--just like you
and me, Mr. President--on subprime counseling, the Senator from
Pennsylvania, Mr. Casey.
The ACTING PRESIDENT pro tempore. The Senator from Pennsylvania is
recognized.
Mr. CASEY. Mr. President, I thank Senator Schumer for his leadership
on these issues. I rise today, like so many this morning, to talk about
something we refer to by way of acronym. In case someone is just tuning
in, when we are talking about FHA, we are talking about the Federal
Housing Administration. We are talking about home ownership, the dream
of home ownership which is so much a part of the American dream, and
today we have an opportunity to pass legislation, a modernization bill
for the FHA, which will reform FHA lending programs to make them a more
viable alternative for borrowers looking to purchase or to refinance a
home.
By way of history, back in the depths and the darkness of the
Depression in 1934, a single-family FHA mortgage insurance program was
created to help spur the housing market and increase home ownership--
just what we are trying to do today in 2007. FHA made the low-
downpayment, 30-year fixed-rate loan the standard product of the United
States and has traditionally played a role in providing home purchase
financing to minority, first-time, and lower income home buyers.
This bill does a number of things. We have heard them, but I will go
through the list again briefly.

First, increasing loan limits. This is so important at this present
time to help the middle class of America.
Second, this legislation streamlines the borrowing process to make it
faster and more efficient. Everyone here has been through the process
of borrowing money. It is complicated enough. Anything we can do to
streamline that will help consumers and future homeowners.
Third, it increases prepurchase counseling for borrowers so they know
how much they can afford before they buy a home. This is a part of the
subprime crisis. Not nearly enough attention and resources are
dedicated to counseling. This legislation helps in the context of the
FHA counseling homeowners.
Finally, it improves and expands the availability of reverse
mortgages so that older citizens can stay in their homes longer and
safely tap into the equity they built up in their home.
I don't need to go into the details of the subprime crisis; we all
know about it. Senators Brown, Schumer, and I authored legislation, the
Borrowers Protection Act. We also have money in the budget the
President is talking about vetoing, $200 million for counseling. It
will be a big mistake for the President to do that. But this
modernization bill of our housing programs is focused on home-ownership
preservation and providing borrowers with responsible, stable
alternatives to subprime mortgages.
We know we need other alternatives. Right now, the credit markets
across the country and across the world remain tight, and even
borrowers with good credit are having a hard time borrowing. So this
bill provides realistic alternatives for hundreds of thousands of
borrowers right at the time they need it.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Carper). The Senator's time has expired.
Who yields time?
Mr. SCHUMER. Mr. President, does my colleague from Oklahoma wish to
speak?
The PRESIDING OFFICER. Those in favor of the amendment have 17
minutes. Those opposed have 1\1/2\ minutes.
Mr. SCHUMER. Mr. President, may I ask unanimous consent to borrow a
minute and a half from my colleague from Oklahoma?
Mr. COBURN. In my normal magnanimous state, I would normally be happy
to do that and will do that.
Mr. SCHUMER. I yield 3 minutes to the Senator from Ohio.
Mr. BROWN. Mr. President, I thank Senator Schumer, and I thank
Senator Coburn for always being generous with his time. I thank the
Senator from Delaware.
Over the past few years, our country's problem has not been lack of
credit; it has been too much bad credit, too many unscrupulous
opportunists looking to take advantage of a situation. Nowhere is that
more true than in the State of Ohio. As State and Federal regulators
ignored the problems, predatory lending mushroomed. We have the highest
rate of foreclosed homes in the country. Whole neighborhoods have been
devastated because of foreclosures. It is not an isolated event. When
homes are foreclosed, they affect the value of homes nearby, the crime
rate, city tax revenues--the entire fabric of Slavic Village, Garfield
Heights or Cincinnati or all over the State. These communities stretch
across my State. Of the 30 cities hardest hit in the Nation, 6 are in
Ohio.
By providing loans program at a fair price, the FHA program can give
tens of thousands of families an alternative to the decidedly unfair
loans they are caught in today. We need to act quickly, as Senator
Schumer and Senator Martinez said. We need to work out our differences
with the House. We need to get this legislation to the President.
Every day in Akron, Cincinnati, Cleveland, Dayton, Columbus, and
Toledo, in addition to smaller cities in Ohio, 200 families in Ohio
lose their homes. Every month, thousands and thousands of these
predatory loans are resetting at rates that will quickly become
unaffordable to more and more families.
This legislation, needless to say, is only part of the solution. We
need to do several things. We need to ensure that additional resources
for counseling, as Senator Casey and Senator Schumer worked so hard on
and that were included in the housing appropriations bills, are signed
into law. We need to enact reasonable protection for borrowers so they
are not preyed upon when it comes time to refinance loans. We need to
change policies, as Senator Gregg, Senator Stabenow, and Senator
Voinovich said, so families forced to sell their homes at a loss do not
find themselves slapped with a tax bill. We need to change our
bankruptcy laws, as Senator Durbin advocated, so that homeowners have
the same rights in bankruptcy as vacation homeowners do. And we need to
champion the interests of homeowners.
Next week, the Federal Reserve will consider and I hope adopt rules
to strengthen the protection against deceptive mortgage lending
practices. I commend Senators Dodd, Shelby, Schumer, Casey, and all
those who have worked hard on this legislation and want to take further
steps to deal with this problem better than we have.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. COBURN. Mr. President, how much time remains?
The PRESIDING OFFICER. There is 16 minutes remaining.
Mr. COBURN. Mr. Speaker, I yield 3 minutes to Senator Martinez in
opposition to my amendment.

[[Page S15592]]

Mr. MARTINEZ. Mr. President, I thank the Senator from Oklahoma for
being magnanimous even with his own colleagues. I appreciate it very
much.
I understand the concerns of the Senator from Oklahoma. Anytime we
are looking at an expansion of a Federal Government program, it gives
one pause. Having been the Secretary of HUD, I understand that. But I
must say it is important for folks to understand when we talk about any
burden on the Federal Government, this is a program that is an
insurance program, and since 1934 has never lost a dime of the American
taxpayers' money. In fact, it has a surplus today of over $20 billion.
What they do at FHA is look at the risk in the mortgage. Then they
will insure it accordingly and the mortgagee pays a premium
accordingly. The same takes place in the reverse mortgage. HUD
facilitates a larger reverse mortgage program through the FHA's home
equity conversion mortgage, which is an industry leader, accounting for
90 percent of all reverse mortgages. So when we talk about the private
sector, today, out of 14 million mortgage transactions in 2006, only
100,000 were reverse mortgages, of which 90 percent were handled by the
FHA. That has the Good Housekeeping Seal of approval.
The problems the Senator from Oklahoma talks about occur on that 10
percent in the private market. The HUD-insured, FHA-run HECM Program is
one that allows a certain amount of comfort to those elderly who seek
to have a reverse mortgage. There have been instances of predatory
practices. Although these have generally not been a problem with the
HUD mortgages, we always must be vigilant of those, and I support
efforts to try to curtail any predatory practices.
What we are looking to do is make positive changes that will enhance
the product availability but, more importantly, lower the cost going
forward to America's elderly who seek to use this program. It will help
us to better understand the evolving financial needs of seniors. I am
proud this bipartisan legislation is something that will help America's
seniors.
Reverse mortgage programs are an important tool used by many
Floridians. In fact, in the last fiscal year alone, Florida witnessed a
116-percent increase in the number of reverse mortgages, and these
products continue to increase in popularity. Congress has the
responsibility to ensure that our elderly are properly protected but
still give them every opportunity to be able to make good personal
financial decisions for themselves.
Now, my dear friend from Oklahoma has raised concerns, but the growth
of this program is projected to be only 109,000 from 100,000 in the
year 2007; and in 2008, 166,000. So there is going to be a gradual
growth of this program.
Mr. President, how much time do I have remaining?
The ACTING PRESIDENT pro tempore. The Senator's 3 minutes has
expired, but the Senator from Oklahoma controls 12 minutes 30 seconds.
Mr. COBURN. Mr. President, I yield the Senator an additional 1
minute.
Mr. MARTINEZ. I thank the Chair, and I thank the Senator from
Oklahoma for his courtesy.
Mr. President, I just want to point out that the study the Senator
talks about is an important study, and it is a part of what this bill
contains. However, the study will be useful to us once the program has
been expanded and we have the opportunity to see what the experience is
on the program. So rather than not study it, it is going to study it,
but it has to study it in the future based on the growth and expansion
of the program because for the past we have the statistical data
available and the history of this program. The bottom line on the audit
issue, which I know is a concern, is the historical data will give us a
fuller understanding of what the experience is, rather than the
management assumptions that are made through the current audit.
Mr. President, I think this is a good program for America's seniors.
The concerns raised by the Senator from Oklahoma are valid and should
be kept in mind, but we should vote for this good amendment today.
The ACTING PRESIDENT pro tempore. The Senator's time has expired. Who
yields time?
Mr. COBURN. Mr. President, I will note for my colleagues' benefit
that I do not plan to ask for a recorded vote on this amendment. I also
will not demand a recorded vote on the bill itself, so colleagues would
not have to come to the floor.
Let me summarize. What we are trying to do with FHA modernization is
good. We have a crisis. There is no crisis in reverse mortgages. As a
matter of fact, there is not hardly any private sector anymore. The
reverse mortgages that are growing, I would advise the Senator from
Florida, are growing at 60 percent a year at FHA. That is not slow
growth. If we take 60 percent a year over the next 10 years, instead of
109,000, we will have 800,000. So that is why GAO estimates that we are
talking about $56 billion in new obligations that our kids are going to
have to come up with if anything happens.
So, again, nobody has answered the question: Is there a crisis in
reverse mortgages? There is not. Nobody has answered the question:
Where are the metrics in terms of the marketplace, saying there is not
adequate credit out there in the private marketplace, not guaranteed by
our children? We are not going to guarantee it, our children are.
Nobody has answered those two questions. And nobody has said: Here is
what the data shows on the market now that we are going to do 130,000-
plus, I believe, this year, and how does that impact with the total
number of mortgages that are out there this year in the very difficult
market that we find ourselves in with the tight credit.
So I would ask for a voice vote on this amendment, and then I will
not object to a voice vote or a consent after that on the underlying
bill.
Mr. President, I yield the remainder of my time.
The ACTING PRESIDENT pro tempore. The question is on agreeing to the
amendment.
The amendment (No. 3854) was rejected.
Mr. SCHUMER. Mr. President, I suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Mr. REID. Mr. President, it is my understanding that the time has
expired on the debate relating to this matter, the FHA Modernization
Act.
The ACTING PRESIDENT pro tempore. The majority leader is correct.
Mr. REID. I will use my leader time to speak, and I rise to express
my optimism for the bill we are about to pass--and it will pass--and my
appreciation that we have reached the point that we can get this done
for the American people.
Mr. President, every day the mortgage crisis grows worse. We have
reached a point where hundreds of families have either lost their homes
or may lose them, and soon that will be in the tens of thousands. As
bad as the crisis is now, there is reason to believe we are only in the
early stages.
Some may say: If a borrower gets into financial trouble, it is their
obligation, and their obligation alone, to find a way out. But that
isn't the way it works. The cost of a foreclosed home has an impact on
all of us--not just the borrower but all of us. Families lose the roof
over their heads and the equity they have gained. Neighborhoods suffer
the loss of property values. Cities and towns lose taxes. Lenders and
their shareholders lose too. And it is no exaggeration to say the
entire national economy is put at risk.
We are seeing those effects in Nevada, with the number of
foreclosures since August of 2006 up by more than 200 percent, and
another 21,000 homes at risk by 2009. We have been working hard to
alleviate this problem at home. Last month, I organized a roundtable
discussion in Reno with lenders, mortgage services, housing counseling
agencies, and other Federal and local officials. And we followed that
up with mobile resource centers to bring foreclosure information into
the neighborhoods where people need them.
Taking these steps is a crucial part of the solution, but we need new
laws at the Federal level to give lenders the tools and flexibility to
help people find ways to keep their homes. As grim as things look
today, they could get far worse. That is why it is important we act
now.

[[Page S15593]]

I am glad to see my Republican colleagues have finally heard the call
and joined us to support this legislation. Let's be clear. The
Government can't solve this problem alone, but we certainly can help.
When this bill becomes law, it will accomplish two main things: It will
increase FHA loan limits on both the high and low ends, and it will
reduce downpayment requirements. The result will be better loan options
for families who are having trouble keeping up with their exploding
mortgage payments resulting from teaser rate mortgages. They will have
the option of refinancing through an FHA bank loan, with the peace of
mind that comes with it.
For future home buyers, a fully backed FHA loan with honest, upfront
terms, will help prevent a crisis like we now face and ensure that more
American families will experience all the safety, comfort, and
stability that comes with home ownership. The past decade has seen
remarkable growth in American home ownership. What is more, these gains
have been enjoyed from coast to coast and among groups that have
traditionally been shut out. The bill we are about to pass will help
ensure this progress continues. It is an accomplishment for the Senate
and an important step forward for the American people.
Finally, Mr. President, during this vote I hope we can clear a
consent request that I will offer to go forward on the Defense
authorization bill. It is late in the year, and the President can't pay
the troops the pay raise they deserve until we pass this bill. Waiting
until next week will not do the trick. We must finish this today.
I certainly hope we can work this out in the next few minutes to go
forward on this as soon as we complete this bill. Senator Levin and
Senator Warner have worked very hard on this legislation, as have many
others, and I hope we can move forward on it very quickly.
The ACTING PRESIDENT pro tempore. All time is expired.
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed for a third reading and was read
the third time.
The ACTING PRESIDENT pro tempore. The bill having been read the third
time, the question is on the passage of the bill, as amended.
Mr. SCHUMER. Mr. President, I ask for the yeas and nays.
The ACTING PRESIDENT pro tempore. Is there a sufficient second?
There appears to be a sufficient second.
The clerk will call the roll.
The legislative clerk called the roll.
Mr. DURBIN. I announce that the Senator from Delaware (Mr. Biden),
the Senator from California (Mrs. Boxer), the Senator from New York
(Mrs. Clinton), the Senator from Connecticut (Mr. Dodd), and the
Senator from Illinois (Mr. Obama) are necessarily absent.
Mr. LOTT. The following Senator is necessarily absent: the Senator
from Arizona (Mr. McCain).
The PRESIDING OFFICER (Ms. Klobuchar). Are there any other Senators
in the Chamber desiring to vote?
The result was announced--yeas 93, nays 1, as follows:

[Rollcall Vote No. 432 Leg.]

YEAS--93

Akaka
Alexander
Allard
Barrasso
Baucus
Bayh
Bennett
Bingaman
Bond
Brown
Brownback
Bunning
Burr
Byrd
Cantwell
Cardin
Carper
Casey
Chambliss
Coburn
Cochran
Coleman
Collins
Conrad
Corker
Cornyn
Craig
Crapo
DeMint
Dole
Domenici
Dorgan
Durbin
Ensign
Enzi
Feingold
Feinstein
Graham
Grassley
Gregg
Hagel
Harkin
Hatch
Hutchison
Inhofe
Inouye
Isakson
Johnson
Kennedy
Kerry
Klobuchar
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
Martinez
McCaskill
McConnell
Menendez
Mikulski
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Pryor
Reed
Reid
Roberts
Rockefeller
Salazar
Sanders
Schumer
Sessions
Shelby
Smith
Snowe
Specter
Stabenow
Stevens
Sununu
Tester
Thune
Vitter
Voinovich
Warner
Webb
Whitehouse
Wyden

NAYS--1

Kyl

NOT VOTING--6

Biden
Boxer
Clinton
Dodd
McCain
Obama
The bill (S. 2338), as amended, was passed, as follows:

S. 2338

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``FHA
Modernization Act of 2007''.
(b) Table of Contents.--The table of contents for this Act
is as follows:

Sec. 1. Short title and table of contents.

TITLE I--BUILDING AMERICAN HOMEOWNERSHIP

Sec. 101. Short title.
Sec. 102. Maximum principal loan obligation.
Sec. 103. Cash investment requirement and prohibition of seller-funded
downpayment assistance.
Sec. 104. Mortgage insurance premiums.
Sec. 105. Rehabilitation loans.
Sec. 106. Discretionary action.
Sec. 107. Insurance of condominiums.
Sec. 108. Mutual Mortgage Insurance Fund.
Sec. 109. Hawaiian home lands and Indian reservations.
Sec. 110. Conforming and technical amendments.
Sec. 111. Insurance of mortgages.
Sec. 112. Home equity conversion mortgages.
Sec. 113. Energy efficient mortgages program.
Sec. 114. Pilot program for automated process for borrowers without
sufficient credit history.
Sec. 115. Homeownership preservation.
Sec. 116. Use of FHA savings for improvements in FHA technologies,
procedures, processes, program performance, staffing, and
salaries.
Sec. 117. Post-purchase housing counseling eligibility improvements.
Sec. 118. Pre-purchase homeownership counseling demonstration.
Sec. 119. Fraud prevention.
Sec. 120. Limitation on mortgage insurance premium increases.
Sec. 121. Savings provision.
Sec. 122. Implementation.
Sec. 123. Moratorium on implementation of risk-based premiums.

TITLE II--MANUFACTURED HOUSING LOAN MODERNIZATION

Sec. 201. Short title.
Sec. 202. Purposes.
Sec. 203. Exception to limitation on financial institution portfolio.
Sec. 204. Insurance benefits.
Sec. 205. Maximum loan limits.
Sec. 206. Insurance premiums.
Sec. 207. Technical corrections.
Sec. 208. Revision of underwriting criteria.
Sec. 209. Prohibition against kickbacks and unearned fees.
Sec. 210. Leasehold requirements.

TITLE I--BUILDING AMERICAN HOMEOWNERSHIP

SEC. 101. SHORT TITLE.

This title may be cited as the ``Building American
Homeownership Act of 2007''.

SEC. 102. MAXIMUM PRINCIPAL LOAN OBLIGATION.

Paragraph (2) of section 203(b)(2) of the National Housing
Act (12 U.S.C. 1709(b)(2)) is amended--
(1) by amending subparagraphs (A) and (B) to read as
follows:
``(A) not to exceed the lesser of--
``(i) in the case of a 1-family residence, the median 1-
family house price in the area, as determined by the
Secretary; and in the case of a 2-, 3-, or 4-family
residence, the percentage of such median price that bears the
same ratio to such median price as the dollar amount
limitation in effect under section 305(a)(2) of the Federal
Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)) for
a 2-, 3-, or 4-family residence, respectively, bears to the
dollar amount limitation in effect under such section for a
1-family residence; or
``(ii) the dollar amount limitation determined under such
section 305(a)(2) for a residence of the applicable size;

except that the dollar amount limitation in effect for any
area under this subparagraph may not be less than the greater
of (I) the dollar amount limitation in effect under this
section for the area on October 21, 1998, or (II) 65 percent
of the dollar limitation determined under such section
305(a)(2) for a residence of the applicable size; and
``(B) not to exceed 100 percent of the appraised value of
the property.''; and
(2) in the matter following subparagraph (B), by striking
the second sentence (relating to a definition of ``average
closing cost'') and all that follows through ``section
3103A(d) of title 38, United States Code.''.

SEC. 103. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF
SELLER-FUNDED DOWNPAYMENT ASSISTANCE.

Paragraph 9 of section 203(b) of the National Housing Act
(12 U.S.C. 1709(b)(9)) is amended to read as follows:
``(9) Cash investment requirement.--
``(A) In general.--A mortgage insured under this section
shall be executed by a mortgagor who shall have paid, in
cash, on account of the property an amount equal to not less
than 1.5 percent of the appraised value of the property or
such larger amount as the Secretary may determine.
``(B) Family members.--For purposes of this paragraph, the
Secretary shall consider as cash or its equivalent any
amounts borrowed from a family member (as such term is

[[Page S15594]]

defined in section 201), subject only to the requirements
that, in any case in which the repayment of such borrowed
amounts is secured by a lien against the property, that--
``(i) such lien shall be subordinate to the mortgage; and
``(ii) the sum of the principal obligation of the mortgage
and the obligation secured by such lien may not exceed 100
percent of the appraised value of the property.
``(C) Prohibited sources.--In no case shall the funds
required by subparagraph (A) consist, in whole or in part, of
funds provided by any of the following parties before,
during, or after closing of the property sale:
``(i) The seller or any other person or entity that
financially benefits from the transaction.
``(ii) Any third party or entity that is reimbursed,
directly or indirectly, by any of the parties described in
clause (i).''.

SEC. 104. MORTGAGE INSURANCE PREMIUMS.

Section 203(c)(2) of the National Housing Act (12 U.S.C.
1709(c)(2)) is amended--
(1) in the matter preceding subparagraph (A), by striking
``or of the General Insurance Fund'' and all that follows
through ``section 234(c),,''; and
(2) in subparagraph (A)--
(A) by striking ``2.25 percent'' and inserting ``3
percent''; and
(B) by striking ``2.0 percent'' and inserting ``2.75
percent''.

SEC. 105. REHABILITATION LOANS.

Subsection (k) of section 203 of the National Housing Act
(12 U.S.C. 1709(k)) is amended--
(1) in paragraph (1), by striking ``on'' and all that
follows through ``1978''; and
(2) in paragraph (5)--
(A) by striking ``General Insurance Fund'' the first place
it appears and inserting ``Mutual Mortgage Insurance Fund'';
and
(B) in the second sentence, by striking the comma and all
that follows through ``General Insurance Fund''.

SEC. 106. DISCRETIONARY ACTION.

The National Housing Act is amended--
(1) in subsection (e) of section 202 (12 U.S.C. 1708(e))--
(A) in paragraph (3)(B), by striking ``section 202(e) of
the National Housing Act'' and inserting ``this subsection'';
and
(B) by redesignating such subsection as subsection (f);
(2) by striking paragraph (4) of section 203(s) (12 U.S.C.
1709(s)(4)) and inserting the following new paragraph:
``(4) the Secretary of Agriculture;''; and
(3) by transferring subsection (s) of section 203 (as
amended by paragraph (2) of this section) to section 202,
inserting such subsection after subsection (d) of section
202, and redesignating such subsection as subsection (e).

SEC. 107. INSURANCE OF CONDOMINIUMS.

(a) In General.--Section 234 of the National Housing Act
(12 U.S.C. 1715y) is amended--
(1) in subsection (c), in the first sentence--
(A) by striking ``and'' before ``(2)''; and
(B) by inserting before the period at the end the
following: ``, and (3) the project has a blanket mortgage
insured by the Secretary under subsection (d)''; and
(2) in subsection (g), by striking ``, except that'' and
all that follows and inserting a period.
(b) Definition of Mortgage.--Section 201(a) of the National
Housing Act (12 U.S.C. 1707(a)) is amended--
(1) before ``a first mortgage'' insert ``(A)'';
(2) by striking ``or on a leasehold (1)'' and inserting
``(B) a first mortgage on a leasehold on real estate (i)'';
(3) by striking ``or (2)'' and inserting ``, or (ii)''; and
(4) by inserting before the semicolon the following: ``, or
(C) a first mortgage given to secure the unpaid purchase
price of a fee interest in, or long-term leasehold interest
in, real estate consisting of a one-family unit in a
multifamily project, including a project in which the
dwelling units are attached, or are manufactured housing
units, semi-detached, or detached, and an undivided interest
in the common areas and facilities which serve the project''.
(c) Definition of Real Estate.--Section 201 of the National
Housing Act (12 U.S.C. 1707) is amended by adding at the end
the following new subsection:
``(g) The term `real estate' means land and all natural
resources and structures permanently affixed to the land,
including residential buildings and stationary manufactured
housing. The Secretary may not require, for treatment of any
land or other property as real estate for purposes of this
title, that such land or property be treated as real estate
for purposes of State taxation.''.

SEC. 108. MUTUAL MORTGAGE INSURANCE FUND.

(a) In General.--Subsection (a) of section 202 of the
National Housing Act (12 U.S.C. 1708(a)) is amended to read
as follows:
``(a) Mutual Mortgage Insurance Fund.--
``(1) Establishment.--Subject to the provisions of the
Federal Credit Reform Act of 1990, there is hereby created a
Mutual Mortgage Insurance Fund (in this title referred to as
the `Fund'), which shall be used by the Secretary to carry
out the provisions of this title with respect to mortgages
insured under section 203. The Secretary may enter into
commitments to guarantee, and may guarantee, such insured
mortgages.
``(2) Limit on loan guarantees.--The authority of the
Secretary to enter into commitments to guarantee such insured
mortgages shall be effective for any fiscal year only to the
extent that the aggregate original principal loan amount
under such mortgages, any part of which is guaranteed, does
not exceed the amount specified in appropriations Acts for
such fiscal year.
``(3) Fiduciary responsibility.--The Secretary has a
responsibility to ensure that the Mutual Mortgage Insurance
Fund remains financially sound.
``(4) Annual independent actuarial study.--The Secretary
shall provide for an independent actuarial study of the Fund
to be conducted annually, which shall analyze the financial
position of the Fund. The Secretary shall submit a report
annually to the Congress describing the results of such study
and assessing the financial status of the Fund. The report
shall recommend adjustments to underwriting standards,
program participation, or premiums, if necessary, to ensure
that the Fund remains financially sound.
``(5) Quarterly reports.--During each fiscal year, the
Secretary shall submit a report to the Congress for each
calendar quarter, which shall specify for mortgages that are
obligations of the Fund--
``(A) the cumulative volume of loan guarantee commitments
that have been made during such fiscal year through the end
of the quarter for which the report is submitted;
``(B) the types of loans insured, categorized by risk;
``(C) any significant changes between actual and projected
claim and prepayment activity;
``(D) projected versus actual loss rates; and
``(E) updated projections of the annual subsidy rates to
ensure that increases in risk to the Fund are identified and
mitigated by adjustments to underwriting standards, program
participation, or premiums, and the financial soundness of
the Fund is maintained.

The first quarterly report under this paragraph shall be
submitted on the last day of the first quarter of fiscal year
2008, or on the last day of the first full calendar quarter
following the enactment of the Building American
Homeownership Act of 2007, whichever is later.
``(6) Adjustment of premiums.--If, pursuant to the
independent actuarial study of the Fund required under
paragraph (4), the Secretary determines that the Fund is not
meeting the operational goals established under paragraph (7)
or there is a substantial probability that the Fund will not
maintain its established target subsidy rate, the Secretary
may either make programmatic adjustments under this title as
necessary to reduce the risk to the Fund, or make appropriate
premium adjustments.
``(7) Operational goals.--The operational goals for the
Fund are--
``(A) to minimize the default risk to the Fund and to
homeowners by among other actions instituting fraud
prevention quality control screening not later than 18 months
after the date of enactment of the Building American
Homeownership Act of 2007; and
``(B) to meet the housing needs of the borrowers that the
single family mortgage insurance program under this title is
designed to serve.''.
(b) Obligations of Fund.--The National Housing Act is
amended as follows:
(1) Homeownership voucher program mortgages.--In section
203(v) (12 U.S.C. 1709(v))--
(A) by striking ``Notwithstanding section 202 of this
title, the'' and inserting ``The''; and
(B) by striking ``General Insurance Fund'' the first place
such term appears and all that follows through the end of the
subsection and inserting ``Mutual Mortgage Insurance Fund.''.
(2) Home equity conversion mortgages.--Section 255(i)(2)(A)
of the National Housing Act (12 U.S.C. 1715z-20(i)(2)(A)) is
amended by striking ``General Insurance Fund'' and inserting
``Mutual Mortgage Insurance Fund''.
(c) Conforming Amendments.--The National Housing Act is
amended--
(1) in section 205 (12 U.S.C. 1711), by striking
subsections (g) and (h); and
(2) in section 519(e) (12 U.S.C. 1735c(e)), by striking
``203(b)'' and all that follows through ``203(i)'' and
inserting ``203, except as determined by the Secretary''.

SEC. 109. HAWAIIAN HOME LANDS AND INDIAN RESERVATIONS.

(a) Hawaiian Home Lands.--Section 247(c) of the National
Housing Act (12 U.S.C. 1715z-12(c)) is amended--
(1) by striking ``General Insurance Fund established in
section 519'' and inserting ``Mutual Mortgage Insurance
Fund''; and
(2) in the second sentence, by striking ``(1) all
references'' and all that follows through ``and (2)''.
(b) Indian Reservations.--Section 248(f) of the National
Housing Act (12 U.S.C. 1715z-13(f)) is amended--
(1) by striking ``General Insurance Fund'' the first place
it appears through ``519'' and inserting ``Mutual Mortgage
Insurance Fund''; and
(2) in the second sentence, by striking ``(1) all
references'' and all that follows through ``and (2)''.

SEC. 110. CONFORMING AND TECHNICAL AMENDMENTS.

(a) Repeals.--The following provisions of the National
Housing Act are repealed:
(1) Subsection (i) of section 203 (12 U.S.C. 1709(i)).
(2) Subsection (o) of section 203 (12 U.S.C. 1709(o)).
(3) Subsection (p) of section 203 (12 U.S.C. 1709(p)).

[[Page S15595]]

(4) Subsection (q) of section 203 (12 U.S.C. 1709(q)).
(5) Section 222 (12 U.S.C. 1715m).
(6) Section 237 (12 U.S.C. 1715z-2).
(7) Section 245 (12 U.S.C. 1715z-10).
(b) Definition of Area.--Section 203(u)(2)(A) of the
National Housing Act (12 U.S.C. 1709(u)(2)(A)) is amended by
striking ``shall'' and all that follows and inserting ``means
a metropolitan statistical area as established by the Office
of Management and Budget;''.
(c) Definition of State.--Section 201(d) of the National
Housing Act (12 U.S.C. 1707(d)) is amended by striking ``the
Trust Territory of the Pacific Islands'' and inserting ``the
Commonwealth of the Northern Mariana Islands''.

SEC. 111. INSURANCE OF MORTGAGES.

Subsection (n)(2) of section 203 of the National Housing
Act (12 U.S.C. 1709(n)(2)) is amended--
(1) in subparagraph (A), by inserting ``or subordinate
mortgage or'' before ``lien given''; and
(2) in subparagraph (C), by inserting ``or subordinate
mortgage or'' before ``lien''.

SEC. 112. HOME EQUITY CONVERSION MORTGAGES.

(a) In General.--Section 255 of the National Housing Act
(12 U.S.C. 1715z-20) is amended--
(1) in subsection (b)(2), insert `` `real estate,' '' after
`` `mortgagor','';
(2) in subsection (g)--
(A) by striking the first sentence; and
(B) by striking ``established under section 203(b)(2)'' and
all that follows through ``located'' and inserting
``limitation established under section 305(a)(2) of the
Federal Home Loan Mortgage Corporation Act for a 1-family
residence'';
(3) in subsection (i)(1)(C), by striking ``limitations''
and inserting ``limitation''; and
(4) by adding at the end the following new subsection:
``(o) Authority To Insure Home Purchase Mortgage.--
``(1) In general.--Notwithstanding any other provision of
this section, the Secretary may insure, upon application by a
mortgagee, a home equity conversion mortgage upon such terms
and conditions as the Secretary may prescribe, when the home
equity conversion mortgage will be used to purchase a 1- to
4-family dwelling unit, one unit of which that the mortgagor
will occupy as a primary residence, and to provide for any
future payments to the mortgagor, based on available equity,
as authorized under subsection (d)(9).
``(2) Limitation on principal obligation.--A home equity
conversion mortgage insured pursuant to paragraph (1) shall
involve a principal obligation that does not exceed the
dollar amount limitation determined under section 305(a)(2)
of the Federal Home Loan Mortgage Corporation Act for a 1-
family residence.''.
(b) Mortgages for Cooperatives.--Subsection (b) of section
255 of the National Housing Act (12 U.S.C. 1715z-20(b)) is
amended--
(1) in paragraph (4)--
(A) by inserting ``a first or subordinate mortgage or
lien'' before ``on all stock'';
(B) by inserting ``unit'' after ``dwelling''; and
(C) by inserting ``a first mortgage or first lien'' before
``on a leasehold''; and
(2) in paragraph (5), by inserting ``a first or subordinate
lien on'' before ``all stock''.
(c) Limitation on Origination Fees.--Section 255 of the
National Housing Act (12 U.S.C. 1715z-20), as amended by the
preceding provisions of this section, is further amended--
(1) by redesignating subsections (k), (l), and (m) as
subsections (l), (m), and (n), respectively; and
(2) by inserting after subsection (j) the following new
subsection:
``(k) Limitation on Origination Fees.--The Secretary shall
establish limits on the origination fee that may be charged
to a mortgagor under a mortgage insured under this section,
which limitations shall--
``(1) equal 1.5 percent of the maximum claim amount of the
mortgage unless adjusted thereafter on the basis of--
``(A) the costs to the mortgagor; and
``(B) the impact of such fees on the reverse mortgage
market;
``(2) be subject to a minimum allowable amount;
``(3) provide that the origination fee may be fully
financed with the mortgage;
``(4) include any fees paid to correspondent mortgagees
approved by the Secretary; and
``(5) have the same effective date as subsection (o)(2)
regarding the limitation on principal obligation.''.
(d) Study Regarding Program Costs and Credit
Availability.--
(1) In general.--The Comptroller General of the United
States shall conduct a study regarding the costs and
availability of credit under the home equity conversion
mortgages for elderly homeowners program under section 255 of
the National Housing Act (12 U.S.C. 1715z-20) (in this
subsection referred to as the ``program'').
(2) Purpose.--The purpose of the study required under
paragraph (1) is to help Congress analyze and determine the
effects of limiting the amounts of the costs or fees under
the program from the amounts charged under the program as of
the date of the enactment of this Act.
(3) Content of report.--The study required under paragraph
(1) should focus on--
(A) the cost to mortgagors of participating in the program;
(B) the financial soundness of the program;
(C) the availability of credit under the program; and
(D) the costs to elderly homeowners participating in the
program, including--
(i) mortgage insurance premiums charged under the program;
(ii) up-front fees charged under the program; and
(iii) margin rates charged under the program.
(4) Timing of report.--Not later than 12 months after the
date of the enactment of this Act, the Comptroller General
shall submit a report to the Committee on Banking, Housing,
and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives setting
forth the results and conclusions of the study required under
paragraph (1).

SEC. 113. ENERGY EFFICIENT MORTGAGES PROGRAM.

Section 106(a)(2) of the Energy Policy Act of 1992 (42
U.S.C. 12712 note) is amended--
(1) by amending subparagraph (C) to read as follows:
``(C) Costs of improvements.--The cost of cost-effective
energy efficiency improvements shall not exceed the greater
of--
``(i) 5 percent of the property value (not to exceed 5
percent of the limit established under section 203(b)(2)(A))
of the National Housing Act (12 U.S.C. 1709(b)(2)(A); or
``(ii) 2 percent of the limit established under section
203(b)(2)(B) of such Act.''; and
(2) by adding at the end the following:
``(D) Limitation.--In any fiscal year, the aggregate number
of mortgages insured pursuant to this section may not exceed
5 percent of the aggregate number of mortgages for 1- to 4-
family residences insured by the Secretary of Housing and
Urban Development under title II of the National Housing Act
(12 U.S.C. 1707 et seq.) during the preceding fiscal year.''.

SEC. 114. PILOT PROGRAM FOR AUTOMATED PROCESS FOR BORROWERS
WITHOUT SUFFICIENT CREDIT HISTORY.

(a) Establishment.--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:

``SEC. 257. PILOT PROGRAM FOR AUTOMATED PROCESS FOR BORROWERS
WITHOUT SUFFICIENT CREDIT HISTORY.

``(a) Establishment.--The Secretary shall carry out a pilot
program to establish, and make available to mortgagees, an
automated process for providing alternative credit rating
information for mortgagors and prospective mortgagors under
mortgages on 1- to 4-family residences to be insured under
this title who have insufficient credit histories for
determining their creditworthiness. Such alternative credit
rating information may include rent, utilities, and insurance
payment histories, and such other information as the
Secretary considers appropriate.
``(b) Scope.--The Secretary may carry out the pilot program
under this section on a limited basis or scope, and may
consider limiting the program to first-time homebuyers.
``(c) Limitation.--In any fiscal year, the aggregate number
of mortgages insured pursuant to the automated process
established under this section may not exceed 5 percent of
the aggregate number of mortgages for 1- to 4-family
residences insured by the Secretary under this title during
the preceding fiscal year.
``(d) Sunset.--After the expiration of the 5-year period
beginning on the date of the enactment of the Building
American Homeownership Act of 2007, the Secretary may not
enter into any new commitment to insure any mortgage, or
newly insure any mortgage, pursuant to the automated process
established under this section.''.
(b) GAO Report.--Not later than the expiration of the two-
year period beginning on the date of the enactment of this
title, the Comptroller General of the United States shall
submit to the Congress a report identifying the number of
additional mortgagors served using the automated process
established pursuant to section 257 of the National Housing
Act (as added by the amendment made by subsection (a) of this
section) and the impact of such process and the insurance of
mortgages pursuant to such process on the safety and
soundness of the insurance funds under the National Housing
Act of which such mortgages are obligations.

SEC. 115. HOMEOWNERSHIP PRESERVATION.

The Secretary of Housing and Urban Development and the
Commissioner of the Federal Housing Administration, in
consultation with industry, the Neighborhood Reinvestment
Corporation, and other entities involved in foreclosure
prevention activities, shall--
(1) develop and implement a plan to improve the Federal
Housing Administration's loss mitigation process; and
(2) report such plan to the Committee on Banking, Housing,
and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives.

SEC. 116. USE OF FHA SAVINGS FOR IMPROVEMENTS IN FHA
TECHNOLOGIES, PROCEDURES, PROCESSES, PROGRAM
PERFORMANCE, STAFFING, AND SALARIES.

(a) Authorization of Appropriations.--There is authorized
to be appropriated for each of fiscal years 2008 through
2012, $25,000,000, from negative credit subsidy for the
mortgage insurance programs under title II of the National
Housing Act, to the Secretary of Housing and Urban
Development

[[Page S15596]]

for increasing funding for the purpose of improving
technology, processes, program performance, eliminating
fraud, and for providing appropriate staffing in connection
with the mortgage insurance programs under title II of the
National Housing Act.
(b) Certification.--The authorization under subsection (a)
shall not be effective for a fiscal year unless the Secretary
of Housing and Urban Development has, by rulemaking in
accordance with section 553 of title 5, United States Code
(notwithstanding subsections (a)(2), (b)(B), and (d)(3) of
such section), made a determination that--
(1) premiums being, or to be, charged during such fiscal
year for mortgage insurance under title II of the National
Housing Act are established at the minimum amount sufficient
to--
(A) comply with the requirements of section 205(f) of such
Act (relating to required capital ratio for the Mutual
Mortgage Insurance Fund); and
(B) ensure the safety and soundness of the other mortgage
insurance funds under such Act; and
(2) any negative credit subsidy for such fiscal year
resulting from such mortgage insurance programs adequately
ensures the efficient delivery and availability of such
programs.
(c) Study and Report.--The Secretary of Housing and Urban
Development shall conduct a study to obtain recommendations
from participants in the private residential (both single
family and multifamily) mortgage lending business and the
secondary market for such mortgages on how best to update and
upgrade processes and technologies for the mortgage insurance
programs under title II of the National Housing Act so that
the procedures for originating, insuring, and servicing of
such mortgages conform with those customarily used by
secondary market purchasers of residential mortgage loans.
Not later than the expiration of the 12-month period
beginning on the date of the enactment of this Act, the
Secretary shall submit a report to the Congress describing
the progress made and to be made toward updating and
upgrading such processes and technology, and providing
appropriate staffing for such mortgage insurance programs.

SEC. 117. POST-PURCHASE HOUSING COUNSELING ELIGIBILITY
IMPROVEMENTS.

Section 106(c)(4) of the Housing and Urban Development Act
of 1968 (12 U.S.C. 1701x(c)(4)) is amended:
(1) in subparagraph (C)--
(A) in clause (i), by striking ``; or'' and inserting a
semicolon;
(B) in clause (ii), by striking the period at the end and
inserting a semicolon; and
(C) by adding at the end the following:
``(iii) a significant reduction in the income of the
household due to divorce or death; or
``(iv) a significant increase in basic expenses of the
homeowner or an immediate family member of the homeowner
(including the spouse, child, or parent for whom the
homeowner provides substantial care or financial assistance)
due to--

``(I) an unexpected or significant increase in medical
expenses;
``(II) a divorce;
``(III) unexpected and significant damage to the property,
the repair of which will not be covered by private or public
insurance; or
``(IV) a large property-tax increase; or'';

(2) by striking the matter that follows subparagraph (C);
and
(3) by adding at the end the following:
``(D) the Secretary of Housing and Urban Development
determines that the annual income of the homeowner is no
greater than the annual income established by the Secretary
as being of low- or moderate-income.''.

SEC. 118. PRE-PURCHASE HOMEOWNERSHIP COUNSELING
DEMONSTRATION.

(a) Establishment of Program.--For the period beginning on
the date of enactment of this Act and ending on the date that
is 3 years after such date of enactment, the Secretary of
Housing and Urban Development shall establish and conduct a
demonstration program to test the effectiveness of
alternative forms of pre-purchase homeownership counseling
for eligible homebuyers.
(b) Forms of Counseling.--The Secretary of Housing and
Urban Development shall provide to eligible homebuyers pre-
purchase homeownership counseling under this section in the
form of --
(1) telephone counseling;
(2) individualized in-person counseling;
(3) web-based counseling;
(4) counseling classes; or
(5) any other form or type of counseling that the Secretary
may, in his discretion, determine appropriate.
(c) Size of Program.--The Secretary shall make available
the pre-purchase homeownership counseling described in
subsection (b) to not more than 3,000 eligible homebuyers in
any given year.
(d) Incentive to Participate.--The Secretary of Housing and
Urban Development may provide incentives to eligible
homebuyers to participate in the demonstration program
established under subsection (a). Such incentives may include
the reduction of any insurance premium charges owed by the
eligible homebuyer to the Secretary.
(e) Eligible Homebuyer Defined.--For purposes of this
section an ``eligible homebuyer'' means a first-time
homebuyer who has been approved for a home loan with a loan-
to-value ratio between 97 percent and 98.5 percent.
(f) Report to Congress.--The Secretary of Housing and Urban
Development shall report to the Committee on Banking,
Housing, and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representative--
(1) on an annual basis, on the progress and results of the
demonstration program established under subsection (a); and
(2) for the period beginning on the date of enactment of
this Act and ending on the date that is 5 years after such
date of enactment, on the payment history and delinquency
rates of eligible homebuyers who participated in the
demonstration program.

SEC. 119. FRAUD PREVENTION.

Section 1014 of title 18, United States Code, is amended in
the first sentence--
(1) by inserting ``the Federal Housing Administration''
before ``the Farm Credit Administration''; and
(2) by striking ``commitment, or loan'' and inserting
``commitment, loan, or insurance agreement or application for
insurance or a guarantee''.

SEC. 120. LIMITATION ON MORTGAGE INSURANCE PREMIUM INCREASES.

(a) In General.--Notwithstanding any other provision of
law, including any provision of this Act and any amendment
made by this Act--
(1) for the period beginning on the date of the enactment
of this Act and ending on October 1, 2009, the premiums
charged for mortgage insurance under multifamily housing
programs under the National Housing Act may not be increased
above the premium amounts in effect under such program on
October 1, 2006, unless the Secretary of Housing and Urban
Development determines that, absent such increase, insurance
of additional mortgages under such program would, under the
Federal Credit Reform Act of 1990, require the appropriation
of new budget authority to cover the costs (as such term is
defined in section 502 of the Federal Credit Reform Act of
1990 (2 U.S.C. 661a) of such insurance; and
(2) a premium increase pursuant to paragraph (1) may be
made only if not less than 30 days prior to such increase
taking effect, the Secretary of Housing and Urban
Development--
(A) notifies the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Financial Services
of the House of Representatives of such increase; and
(B) publishes notice of such increase in the Federal
Register.
(b) Waiver.--The Secretary of Housing and Urban Development
may waive the 30-day notice requirement under subsection
(a)(2), if the Secretary determines that waiting 30-days
before increasing premiums would cause substantial damage to
the solvency of multifamily housing programs under the
National Housing Act.

SEC. 121. SAVINGS PROVISION.

Any mortgage insured under title II of the National Housing
Act before the date of enactment of this title shall continue
to be governed by the laws, regulations, orders, and terms
and conditions to which it was subject on the day before the
date of the enactment of this title.

SEC. 122. IMPLEMENTATION.

The Secretary of Housing and Urban Development shall by
notice establish any additional requirements that may be
necessary to immediately carry out the provisions of this
title. The notice shall take effect upon issuance.

SEC. 123. MORATORIUM ON IMPLEMENTATION OF RISK-BASED
PREMIUMS.

For the 12-month period beginning on the date of enactment
of this Act, the Secretary of Housing and Urban Development
shall not enact, execute, or take any action to make
effective the planned implementation of 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 the insurance
contract represents, as such planned implementation was set
forth in the Notice published in the Federal Register on
September 20, 2007 (Vol. 72, No. 182, Page 53872).

TITLE II--MANUFACTURED HOUSING LOAN MODERNIZATION

SEC. 201. SHORT TITLE.

This title may be cited as the ``FHA Manufactured Housing
Loan Modernization Act of 2007''.

SEC. 202. PURPOSES.

The purposes of this title are--
(1) to provide adequate funding for FHA-insured
manufactured housing loans for low- and moderate-income
homebuyers during all economic cycles in the manufactured
housing industry;
(2) to modernize the FHA title I insurance program for
manufactured housing loans to enhance participation by Ginnie
Mae and the private lending markets; and
(3) to adjust the low loan limits for title I manufactured
home loan insurance to reflect the increase in costs since
such limits were last increased in 1992 and to index the
limits to inflation.

SEC. 203. EXCEPTION TO LIMITATION ON FINANCIAL INSTITUTION
PORTFOLIO.

The second sentence of section 2(a) of the National Housing
Act (12 U.S.C. 1703(a)) is amended--
(1) by striking ``In no case'' and inserting ``Other than
in connection with a manufactured home or a lot on which to
place such a home (or both), in no case''; and

[[Page S15597]]

(2) by striking ``: Provided, That with'' and inserting ``.
With''.

SEC. 204. INSURANCE BENEFITS.

(a) In General.--Subsection (b) of section 2 of the
National Housing Act (12 U.S.C. 1703(b)), is amended by
adding at the end the following new paragraph:
``(8) Insurance benefits for manufactured housing loans.--
Any contract of insurance with respect to loans, advances of
credit, or purchases in connection with a manufactured home
or a lot on which to place a manufactured home (or both) for
a financial institution that is executed under this title
after the date of the enactment of the FHA Manufactured
Housing Loan Modernization Act of 2007 by the Secretary shall
be conclusive evidence of the eligibility of such financial
institution for insurance, and the validity of any contract
of insurance so executed shall be incontestable in the hands
of the bearer from the date of the execution of such
contract, except for fraud or misrepresentation on the part
of such institution.''.
(b) Applicability.--The amendment made by subsection (a)
shall only apply to loans that are registered or endorsed for
insurance after the date of the enactment of this Act.

SEC. 205. MAXIMUM LOAN LIMITS.

(a) Dollar Amounts.--Paragraph (1) of section 2(b) of the
National Housing Act (12 U.S.C. 1703(b)(1)) is amended--
(1) in clause (ii) of subparagraph (A), by striking
``$17,500'' and inserting ``$25,090'';
(2) in subparagraph (C) by striking ``$48,600'' and
inserting ``$69,678'';
(3) in subparagraph (D) by striking ``$64,800'' and
inserting ``$92,904'';
(4) in subparagraph (E) by striking ``$16,200'' and
inserting ``$23,226''; and
(5) by realigning subparagraphs (C), (D), and (E) 2 ems to
the left so that the left margins of such subparagraphs are
aligned with the margins of subparagraphs (A) and (B).
(b) Annual Indexing.--Subsection (b) of section 2 of the
National Housing Act (12 U.S.C. 1703(b)), as amended by the
preceding provisions of this Act, is further amended by
adding at the end the following new paragraph:
``(9) Annual indexing of manufactured housing loans.--The
Secretary shall develop a method of indexing in order to
annually adjust the loan limits established in subparagraphs
(A)(ii), (C), (D), and (E) of this subsection. Such index
shall be based on the manufactured housing price data
collected by the United States Census Bureau. The Secretary
shall establish such index no later than 1 year after the
date of the enactment of the FHA Manufactured Housing Loan
Modernization Act of 2007.''
(c) Technical and Conforming Changes.--Paragraph (1) of
section 2(b) of the National Housing Act (12 U.S.C.
1703(b)(1)) is amended--
(1) by striking ``No'' and inserting ``Except as provided
in the last sentence of this paragraph, no''; and
(2) by adding after and below subparagraph (G) the
following:
``The Secretary shall, by regulation, annually increase the
dollar amount limitations in subparagraphs (A)(ii), (C), (D),
and (E) (as such limitations may have been previously
adjusted under this sentence) in accordance with the index
established pursuant to paragraph (9).''.

SEC. 206. INSURANCE PREMIUMS.

Subsection (f) of section 2 of the National Housing Act (12
U.S.C. 1703(f)) is amended--
(1) by inserting ``(1) Premium charges.--'' after ``(f)'';
and
(2) by adding at the end the following new paragraph:
``(2) Manufactured Home Loans.--Notwithstanding paragraph
(1), in the case of a loan, advance of credit, or purchase in
connection with a manufactured home or a lot on which to
place such a home (or both), the premium charge for the
insurance granted under this section shall be paid by the
borrower under the loan or advance of credit, as follows:
``(A) At the time of the making of the loan, advance of
credit, or purchase, a single premium payment in an amount
not to exceed 2.25 percent of the amount of the original
insured principal obligation.
``(B) In addition to the premium under subparagraph (A),
annual premium payments during the term of the loan, advance,
or obligation purchased in an amount not exceeding 1.0
percent of the remaining insured principal balance (excluding
the portion of the remaining balance attributable to the
premium collected under subparagraph (A) and without taking
into account delinquent payments or prepayments).
``(C) Premium charges under this paragraph shall be
established in amounts that are sufficient, but do not exceed
the minimum amounts necessary, to maintain a negative credit
subsidy for the program under this section for insurance of
loans, advances of credit, or purchases in connection with a
manufactured home or a lot on which to place such a home (or
both), as determined based upon risk to the Federal
Government under existing underwriting requirements.
``(D) The Secretary may increase the limitations on premium
payments to percentages above those set forth in
subparagraphs (A) and (B), but only if necessary, and not in
excess of the minimum increase necessary, to maintain a
negative credit subsidy as described in subparagraph (C).''.

SEC. 207. TECHNICAL CORRECTIONS.

(a) Dates.--Subsection (a) of section 2 of the National
Housing Act (12 U.S.C. 1703(a)) is amended--
(1) by striking ``on and after July 1, 1939,'' each place
such term appears; and
(2) by striking ``made after the effective date of the
Housing Act of 1954''.
(b) Authority of Secretary.--Subsection (c) of section 2 of
the National Housing Act (12 U.S.C. 1703(c)) is amended to
read as follows:
``(c) Handling and Disposal of Property.--
``(1) Authority of secretary.--Notwithstanding any other
provision of law, the Secretary may--
``(A) deal with, complete, rent, renovate, modernize,
insure, or assign or sell at public or private sale, or
otherwise dispose of, for cash or credit in the Secretary's
discretion, and upon such terms and conditions and for such
consideration as the Secretary shall determine to be
reasonable, any real or personal property conveyed to or
otherwise acquired by the Secretary, in connection with the
payment of insurance heretofore or hereafter granted under
this title, including any evidence of debt, contract, claim,
personal property, or security assigned to or held by him in
connection with the payment of insurance heretofore or
hereafter granted under this section; and
``(B) pursue to final collection, by way of compromise or
otherwise, all claims assigned to or held by the Secretary
and all legal or equitable rights accruing to the Secretary
in connection with the payment of such insurance, including
unpaid insurance premiums owed in connection with insurance
made available by this title.
``(2) Advertisements for proposals.--Section 3709 of the
Revised Statutes shall not be construed to apply to any
contract of hazard insurance or to any purchase or contract
for services or supplies on account of such property if the
amount thereof does not exceed $25,000.
``(3) Delegation of authority.--The power to convey and to
execute in the name of the Secretary, deeds of conveyance,
deeds of release, assignments and satisfactions of mortgages,
and any other written instrument relating to real or personal
property or any interest therein heretofore or hereafter
acquired by the Secretary pursuant to the provisions of this
title may be exercised by an officer appointed by the
Secretary without the execution of any express delegation of
power or power of attorney. Nothing in this subsection shall
be construed to prevent the Secretary from delegating such
power by order or by power of attorney, in the Secretary's
discretion, to any officer or agent the Secretary may
appoint.''.

SEC. 208. REVISION OF UNDERWRITING CRITERIA.

(a) In General.--Subsection (b) of section 2 of the
National Housing Act (12 U.S.C. 1703(b)), as amended by the
preceding provisions of this Act, is further amended by
adding at the end the following new paragraph:
``(10) Financial soundness of manufactured housing
program.--The Secretary shall establish such underwriting
criteria for loans and advances of credit in connection with
a manufactured home or a lot on which to place a manufactured
home (or both), including such loans and advances represented
by obligations purchased by financial institutions, as may be
necessary to ensure that the program under this title for
insurance for financial institutions against losses from such
loans, advances of credit, and purchases is financially
sound.''.
(b) Timing.--Not later than the expiration of the 6-month
period beginning on the date of the enactment of this Act,
the Secretary of Housing and Urban Development shall revise
the existing underwriting criteria for the program referred
to in paragraph (10) of section 2(b) of the National Housing
Act (as added by subsection (a) of this section) in
accordance with the requirements of such paragraph.

SEC. 209. PROHIBITION AGAINST KICKBACKS AND UNEARNED FEES.

Title I of the National Housing Act is amended by adding at
the end of section 9 the following new section:

``SEC. 10. PROHIBITION AGAINST KICKBACKS AND UNEARNED FEES.

``(a) In General.--Except as provided in subsection (b),
the provisions of sections 3, 8, 16, 17, 18, and 19 of the
Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601
et seq.) shall apply to each sale of a manufactured home
financed with an FHA-insured loan or extension of credit, as
well as to services rendered in connection with such
transactions.
``(b) Authority of the Secretary.--The Secretary is
authorized to determine the manner and extent to which the
provisions of sections 3, 8, 16, 17, 18, and 19 of the Real
Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 et
seq.) may reasonably be applied to the transactions described
in subsection (a), and to grant such exemptions as may be
necessary to achieve the purposes of this section.
``(c) Definitions.--For purposes of this section--
``(1) the term `federally related mortgage loan' as used in
sections 3, 8, 16, 17, 18, and 19 of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.)
shall include an FHA-insured loan or extension of credit made
to a borrower for the purpose of purchasing a manufactured
home that the borrower intends to occupy as a personal
residence; and
``(2) the term `real estate settlement service' as used in
sections 3, 8, 16, 17, 18, and 19 of the Real Estate
Settlement Procedures

[[Page S15598]]

Act of 1974 (12 U.S.C. 2601 et seq.) shall include any
service rendered in connection with a loan or extension of
credit insured by the Federal Housing Administration for the
purchase of a manufactured home.
``(d) Unfair and Deceptive Practices.--In connection with
the purchase of a manufactured home financed with a loan or
extension of credit insured by the Federal Housing
Administration under this title, the Secretary shall prohibit
acts or practices in connection with loans or extensions of
credit that the Secretary finds to be unfair, deceptive, or
otherwise not in the interests of the borrower.''.

SEC. 210. LEASEHOLD REQUIREMENTS.

Subsection (b) of section 2 of the National Housing Act (12
U.S.C. 1703(b)), as amended by the preceding provisions of
this Act, is further amended by adding at the end the
following new paragraph:
``(11) Leasehold requirements.--No insurance shall be
granted under this section to any such financial institution
with respect to any obligation representing any such loan,
advance of credit, or purchase by it, made for the purposes
of financing a manufactured home which is intended to be
situated in a manufactured home community pursuant to a
lease, unless such lease--
``(A) expires not less than 3 years after the origination
date of the obligation;
``(B) is renewable upon the expiration of the original 3
year term by successive 1 year terms; and
``(C) requires the lessor to provide the lessee written
notice of termination of the lease not less than 180 days
prior to the expiration of the current lease term in the
event the lessee is required to move due to the closing of
the manufactured home community, and further provides that
failure to provide such notice to the mortgagor in a timely
manner will cause the lease term, at its expiration, to
automatically renew for an additional 1 year term.''.
Mr. REID. Madam President, I move to reconsider the vote and move to
lay that motion on the table.
The motion to lay on the table was agreed to.

____________________