LIMITATION ON USE OF SINGLE FAMILY MORTGAGE INSURANCE BY INVESTORS.

SEC. 406. LIMITATION ON USE OF SINGLE FAMILY MORTGAGE INSURANCE BY INVESTORS. (a) In General.— Section 203 of the National Housing Act is amended by inserting the following new subsection before subsection (h): “(g) (1) The Secretary may insure a mortgage under this title that is secured by a 1- to 4-family dwelling, or approve a substitute mortgagor with respect to any such mortgage, only if the mortgagor is to occupy the dwelling as his or her principal residence or as a secondary residence, as determined by the Secretary. “(2) The occupancy requirement established in paragraph (1) shall apply only if the mortgage involves a principal obligation that exceeds, as appropriate, 75 percent of— “(A) the appraised value of the dwelling; “(B) the estimate of the Secretary of the replacement cost of the property; “(C) the sum of the estimates of the Secretary of the cost of repair and rehabilitation and the value of the property before repair and rehabilitation; or “(D) the sum of the estimates of the Secretary of the cost of repair and rehabilitation and the amount (as determined by the Secretary) required to refinance existing indebtedness secured by the property, and, in the case of a property refinanced under section 220(d)(3)(A), any existing indebtedness incurred in connection with improving, repairing, or rehabilitating the property. “(3) The occupancy requirement established in paragraph (1) shall not apply to any mortgagor (or co-mortgagor, as appropriate) that is— “(A) a public entity, as provided in section 214 or 247; “(B) a private nonprofit or public entity, as provided in section 221(h) or 235(j); “(C) an Indian tribe, as provided in section 248; “(D) a serviceperson who is unable to meet such requirement because of his or her duty assignment, as provided in section 216 or subsection (b)(4) or (f) of section 222; or “(E) a mortgagor or co-mortgagor under subsection (k). “(4) For purposes of this subsection, the term ‘substitute mortgagor’ means a person who, upon the release by a mortgagee of a previous mortgagor from personal liability on the mortgage note, assumes such liability and agrees to pay the mortgage debt.”. (b) Conforming Amendments.— (1) Section 203(b)(2) of the National Housing Act is amended— (A) in the first sentence, by striking “(whether” and all that follows through “purposes)”; and (B) in the second sentence, by striking the following: “to be occupied as a principal residence of the owner”. (2) Section 203(b) of the National Housing Act is amended by striking paragraph (8). (3) Section 203(h) of the National Housing Act is amended by striking “is the owner and occupant and”. (4) Section 203(i) of the National Housing Act is amended— (A) by striking the first proviso; and (B) by striking “further” the first place it appears. (5) The first sentence of section 203(o)(2) of the National Housing Act is amended by striking “occupant”. 101 STAT. 1901 (6) The first sentence of section 203(p)(2) of the National Housing Act is amended by striking “owner-occupant” and inserting “owner”. (7) The fourth sentence of section 214 of the National Housing Act is amended by striking the following: “shall be the owner and occupant of the property or”. (8) Section 216 of the National Housing Act is amended— (A) by striking “that the mortgagor be the occupant” and inserting “with respect to the occupancy of the mortgagor”; and (B) by striking “occupy the property” each place it appears and inserting “meet such requirement”. (9) Section 220(d)(3)(A) of the National Housing Act is amended— (A) by inserting “and” at the end of clause (i); (B) by striking clauses (ii) and (iii); (C) in clause (iv), by striking the following: “(except as provided in clause (iii))”; and (D) by redesignating clause (iv) as clause (ii). (10) Section 221(d)(2) of the National Housing Act is amended— (A) by striking the colon at the end of subparagraph (A)(iv) and all that follows through “Provided, further, That” the first place it appears, and inserting “, except that”; (B) by striking “Provided, That (i)” and all that follows through “(1) in” and inserting the following: “Provided, That (i)(1) in”; (C) by striking the penultimate proviso; and (D) in the last proviso, by striking the following: “, if the mortgagor is the owner and an occupant of the property such” and inserting “the”. (11) Section 221(d)(6)(ii) of the National Housing Act is amended by striking the following: “is an owner-occupant of the property and”. (12) The first sentence of section 221(h)(6) of the National Housing Act is amended by striking “and occupied”. (13) Section 221(h)(8) of the National Housing Act is amended by striking the following: “if one of the units is to be occupied by the owner”. (14) Subsections (b)(4) and (f) of section 222 of the National Housing Act are amended by inserting “as a principal residence” after “occupies the property” each place it appears. (15) Section 223(a) of the National Housing Act is amended by inserting after “this Act,” the first place it appears the following: “other than the limitation in section 203(g),”. (16) The first sentence of section 223(e) of the National Housing Act is amended by inserting after “title XI,” the following: “other than the limitation in section 203(g),”. (17) Section 234(c) of the National Housing Act is amended by striking the fourth sentence. (18) Section 235(i)(3)(A) of the National Housing Act is amended by striking the following: “one of the units of which is to be occupied by the owner and . (19) Section 235(j)(6) of the National Housing Act is amended by striking the following: “if one of the units is to be occupied by the owner. 101 STAT. 1902 (c) Repeal of Vacation and Seasonal Home Insurance Program.— Section 203 of the National Housing Act is amended by striking subsection (m). (d) Applicability.— The amendments made by this section shall apply only with respect to— (1) mortgages insured— (A) pursuant to a conditional commitment issued on or after the date of the enactment of this Act; or (B) in accordance with the direct endorsement program (24 CFR 200.163), if the approved underwriter of the mortgagee signs the appraisal report for the property on or after the date of the enactment of this Act; and (2) the approval of substitute mortgagors, referred to in the amendment made by subsection (a), if the original mortgagor was subject to such amendment. (e) Transition Provisions.— Any mortgage insurance provided under title II of the National Housing Act, as it existed immediately before the date of the enactment of this Act, shall continue to be governed (to the extent applicable) by the provisions specified in subsections (a) through (c), as such provisions existed immediately before such date.