HOME EQUITY CONVERSION MORTGAGE INSURANCE DEMONSTRATION.

SEC. 417. HOME EQUITY CONVERSION MORTGAGE INSURANCE DEMONSTRATION. (a) In General.— Title II of the National Housing Act (as amended by section 416 of this Act) is further amended by adding at the end the following new section: “demonstration program of insurance of home equity conversion mortgages for elderly homeowners “Sec. 255. (a) Purpose.— The purpose of this section is to authorize the Secretary to carry out a demonstration program of mortgage insurance designed— “(1) to meet the special needs of elderly homeowners by reducing the effect of the economic hardship caused by the increasing costs of meeting health, housing, and subsistence needs at a time of reduced income, through the insurance of home equity conversion mortgages to permit the conversion of a portion of accumulated home equity into liquid assets; “(2) to encourage and increase the involvement of mortgagees and participants in the mortgage markets in the making and servicing of home equity conversion mortgages for elderly homeowners; and “(3) to require the evaluation of data to determine— “(A) the extent of the need and demand among elderly homeowners for insured and uninsured home equity conversion mortgages; “(B) the types of home equity conversion mortgages that best serve the needs and interests of elderly homeowners, the Federal Government, and lenders; and 101 STAT. 1909 “(C) the appropriate scope and nature of participation by the Secretary in connection with home equity conversion mortgages for elderly homeowners. “(b) Definitions.— For purposes of this section: “(1) The terms ‘elderly homeowner’ and ‘homeowner’ mean any homeowner who is, or whose spouse is, at least 62 years of age or such higher age as the Secretary may prescribe. “(2) The terms ‘mortgage’, ‘mortgagee’, ‘mortgagor’, and ‘State’ have the meanings given such terms in section 201. “(3) The term ‘home equity conversion mortgage’ means a first mortgage which provides for future payments to the homeowner based on accumulated equity and which a housing creditor (as defined in section 803(2) of the GarnSt Germain Institutions Act of 1982) is authorized to make (A) under any law of the United States (other than section 804 of such Act) or applicable agency regulations thereunder; (B) in accordance with section 804 of such Act, notwithstanding any State constitution, law, or regulation; or (C) under any State constitution, law, or regulation. “(c) Insurance Authority.— The Secretary may, upon application by a mortgagee, insure any home equity conversion mortgage eligible for insurance under this section and, upon such terms and conditions as the Secretary may prescribe, make commitments for the insurance of such mortgages prior to the date of their execution or disbursement to the extent that the Secretary determines such mortgages— “(1) have promise for improving the financial situation or otherwise meeting the special needs of elderly homeowners; “(2) will include appropriate safeguards for mortgagors to offset the special risks of such mortgages; and “(3) have a potential for acceptance in the mortgage market. “(d) Eligibility Requirements.— To be eligible for insurance under this section, a mortgage shall— “(1) have been made to a mortgagee approved by the Secretary as responsible and able to service the mortgage properly; “(2) have been executed by a mortgagor who— “(A) qualifies as an elderly homeowner; “(B) has received adequate counseling by a third party (other than the lender) as provided in subsection (0; and “(C) meets any additional requirements prescribed by the Secretary; “(3) be secured by a dwelling that is designed principally for a 1-family residence and is occupied by the mortgagor and that has a value not to exceed the maximum dollar amount established by the Secretary under section 203(b)(2) for a 1-family residence; “(4) provide that prepayment, in whole or in part, may be made without penalty at any time during the period of the mortgage; “(5) provide for a fixed or variable interest rate or future sharing between the mortgagor and the mortgagee of the appreciation in the value of the property, as agreed upon by the mortgagor and the mortgagee; “(6) contain provisions for satisfaction of the obligation satisfactory to the Secretary; “(7) provide that the homeowner shall not be liable for any difference between the net amount of the remaining indebted-101 STAT. 1910ness of the homeowner under the mortgage and the amount recovered by the mortgagee from— “(A) the foreclosure sale; or “(B) the insurance benefits paid pursuant to subsection (i)(1)(C); and “(8) contain such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, default reserve, delinquency charges, foreclosure proceedings, anticipation of maturity, additional and secondary liens, and other matters as the Secretary may prescribe. “(e) Disclosures by Mortgagee.— The Secretary shall require each mortgagee of a mortgage insured under this section to make available to the homeowner— “(1) at the time of the loan application, a written list of the names and addresses of third-party information sources who are approved by the Secretary as responsible and able to provide the information required by subsection (f); “(2) at least 10 days prior to loan closing, a statement explaining the homeowner’s rights, obligations, and remedies with respect to temporary absences from the home, late payments, and payment default by the lender, all conditions requiring satisfaction of the loan obligation, and any other information that the Secretary may require; and “(3) on an annual basis (but not later than January 31 of each year), a statement summarizing the total principal amount paid to the homeowner under the loan secured by the mortgage, the total amount of deferred interest added to the principal, and the outstanding loan balance at the end of the preceding year. “(f) Information Services for Mortgagors.— The Secretary shall provide or cause to be provided by entities other than the lender the information required in subsection (d)(2)(B). Such information shall be discussed with the mortgagor and shall include— “(1) options other than a home equity conversion mortgage that are available to the homeowner, including other housing, social service, health, and financial options; “(2) other home equity conversion options that are or may become available to the homeowner, such as sale-leaseback financing, deferred payment loans, and property tax deferral; “(3) the financial implications of entering into a home equity conversion mortgage; “(4) a disclosure that a home equity conversion mortgage may have tax consequences, affect eligibility for assistance under Federal and State programs, and have an impact on the estate and heirs of the homeowner; and “(5) any other information that the Secretary may require. “(g) Limitation on Insurance Authority.— No mortgage may be insured under this section after September 30, 1991, except pursuant to a commitment to insure issued on or before such date. The total number of mortgages insured under this section may not exceed 2,500. In no case may the benefits of insurance under this section exceed the maximum dollar amount established under section 203(b)(2) for a 1-family residence. “(h) Administrative Authority.— The Secretary may— “(1) enter into such contracts and agreements with Federal, State, and local agencies, public and private entities, and such 101 STAT. 1911other persons as the Secretary determines to be necessary or desirable to carry out the purposes of this section; and “(2) make such investigations and studies of data, and publish and distribute such reports, as the Secretary determines to be appropriate. “(i) Protection of Homeowner and Lender.— “(1) Notwithstanding any other provision of law, and in order to further the purposes of the demonstration program authorized in this section, the Secretary shall take any action necessary— “(A) to provide any mortgagor under this section with funds to which the mortgagor is entitled under the insured mortgage or ancillary contracts but that the mortgagor has not received because of the default of the party responsible for payment; “(B) to obtain repayment of disbursements provided under subparagraph (A) from any source; and “(C) to provide any mortgagee under this section with funds not to exceed the limitations in subsection (g) to which the mortgagee is entitled under the terms of the insured mortgage or ancillary contracts authorized in this section. “(2) Actions under paragraph (1) may include— “(A) disbursing funds to the mortgagor or mortgagee from the General Insurance Fund; “(B) accepting an assignment of the insured mortgage notwithstanding that the mortgagor is not in default under its terms, and calculating the amount and making the payment of the insurance claim on such assigned mortgage; “(C) requiring a subordinate mortgage from the mortgagor at any time in order to secure repayments of any funds advanced or to be advanced to the mortgagor; “(D) requiring a subrogation to the Secretary of the rights of any parties to the transaction against any defaulting parties; and “(E) imposing premium charges. “(j) Safeguard To Prevent Displacement of Homeowner.— The Secretary may not insure a home equity conversion mortgage under this section unless such mortgage provides that the homeowner’s obligation to satisfy the loan obligation is deferred until the home-owner’s death, the sale of the home, or the occurrence of other events specified in regulations of the Secretary. For purposes of this subsection, the term ‘homeowner’ includes the spouse of a homeowner. “(k) Reports to Congress.— “(1) The Secretary shall, not later than September 30, 1989, submit an interim report to Congress describing— “(A) design and implementation of the demonstration; “(B) number and types of reverse mortgages written to date; “(C) profile of participant homeowner-borrowers, including incomes, home equity, and regional distribution; and “(D) problems encountered in implementation, including impediments associated with State or Federal laws or regulations governing taxes, insurance, securities, public benefits, banking, and any other problems in implementation that the Secretary encounters. 101 STAT. 1912 “(2) Not later than March 30, 1992, the Secretary shall submit to Congress a preliminary evaluation of the program authorized in this section. Such evaluation shall include an updated report on the matters referred to in paragraph (1) and shall in addition— “(A) describe the types of mortgages appropriate for inclusion in such program; “(B) describe any changes in the insurance programs under this title, or in other Federal regulatory provisions, determined to be appropriate; “(C) describe any risk created under such mortgages to mortgagors and mortgagees or the insurance programs under this title, and whether the risk is adequately covered by the premiums under the insurance programs; “(D) evaluate whether such program has improved the financial situation or otherwise met the special needs of participating elderly homeowners; “(E) evaluate whether such program has included appropriate safeguards for mortgagors to offset the special risks of such mortgages; and “(F) evaluate whether home equity conversion mortgages have a potential for acceptance in the mortgage markets. “(3) The preliminary evaluation shall incorporate comments and recommendations solicited by the Secretary from the Board of Governors of the Federal Reserve System, the Secretary of Health and Human Services, the Federal Council on Aging, Federal Home Loan Bank Board, the Comptroller of the Currency, and the National Credit Union Administration Board regarding any of the matters referred to in paragraph (1) or (2). “(4) Following submission of the preliminary evaluation, the Secretary shall, on a biennial basis, submit to the Congress an updated report and evaluation covering the period since the most recent report under this subsection and shall include analysis of the repayment of the home equity conversion mortgages under this demonstration during such period.”. (b) Regulations.— The Secretary of Housing and Urban Development shall— (1) not later than 6 months after the date of enactment of this Act, consult with lenders, insurers, and organizations and individuals with expertise in home equity conversion in developing proposed regulations implementing section 254 of the National Housing Act; and (2) not later than 9 months after the date of the enactment of this Act, issue proposed regulations implementing section 254 of the National Housing Act.