REQUIREMENTS FOR FHA-APPROVED MORTGAGEES.

SEC. 203. REQUIREMENTS FOR FHA-APPROVED MORTGAGEES.(a) Mortgagee Review Board.—(1) In general.—Section 202(c)(2) of the National Housing Act (12 U.S.C. 1708(c)) is amended—(A) in subparagraph (E), by inserting “and” after the semicolon;(B) in subparagraph (F), by striking “; and” and inserting “or their designees.”; and(C) by striking subparagraph (G).(2) Prohibition against limitations on mortgagee review board’s power to take action against mortgagees.—Section 202(c) of the National Housing Act (12 U.S.C. 1708(c)) is amended by adding at the end the following new paragraph:“(9) Prohibition against limitations on mortgagee review board’s power to take action against mortgagees.—No State or local law, and no Federal law (except a Federal law enacted expressly in limitation of this subsection after the effective date of this sentence), shall preclude or limit the exercise by the Board of its power to take any action authorized under paragraphs (3) and (6) of this subsection against any mortgagee.”.(b) Limitations on Participation and Mortgagee Approval and Use of Name.—Section 202 of the National Housing Act (12 U.S.C. 1708) is amended—(1) by redesignating subsections (d), (e), and (f) as subsections (e), (f), and (g), respectively;(2) by inserting after subsection (c) the following new subsection:“(d) Limitations on Participation in Origination and Mortgagee Approval.—“(1) Requirement.—Any person or entity that is not approved by the Secretary to serve as a mortgagee, as such term is defined in subsection (c)(7), shall not participate in the origination of an FHA-insured loan except as authorized by the Secretary.123 STAT. 1644“(2) Eligibility for approval.—In order to be eligible for approval by the Secretary, an applicant mortgagee shall not be, and shall not have any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the applicant mortgagee who is—“(A) currently suspended, debarred, under a limited denial of participation (LDP), or otherwise restricted under part 25 of title 24 of the Code of Federal Regulations, 2 Code of Federal Regulations, part 180 as implemented by part 2424, or any successor regulations to such parts, or under similar provisions of any other Federal agency;“(B) under indictment for, or has been convicted of, an offense that reflects adversely upon the applicant’s integrity, competence or fitness to meet the responsibilities of an approved mortgagee;“(C) subject to unresolved findings contained in a Department of Housing and Urban Development or other governmental audit, investigation, or review;“(D) engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility;“(E) convicted of, or who has pled guilty or nolo contendre to, a felony related to participation in the real estate or mortgage loan industry—“(i) during the 7-year period preceding the date of the application for licensing and registration; or“(ii) at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering;“(F) in violation of provisions of the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any applicable provision of State law; or“(G) in violation of any other requirement as established by the Secretary.“(3) Rulemaking and implementation.—The Secretary shall conduct a rulemaking to carry out this subsection. The Secretary shall implement this subsection not later than the expiration of the 60-day period beginning upon the date of the enactment of this subsection by notice, mortgagee letter, or interim final regulations, which shall take effect upon issuance.”; and(3) by adding at the end the following new subsection:“(h) Use of Name.—The Secretary shall, by regulation, require each mortgagee approved by the Secretary for participation in the FHA mortgage insurance programs of the Secretary—“(1) to use the business name of the mortgagee that is registered with the Secretary in connection with such approval in all advertisements and promotional materials, as such terms are defined by the Secretary, relating to the business of such mortgagee in such mortgage insurance programs; and“(2) to maintain copies of all such advertisements and promotional materials, in such form and for such period as the Secretary requires.”.(c) Payment for Loss Mitigation.—Section 204(a)(2) of the National Housing Act (12 U.S.C. 1710(a)(2)) is amended—(1) by inserting “or faces imminent default, as defined by the Secretary” after “default”;123 STAT. 1645(2) by inserting “support for borrower housing counseling, partial claims, borrower incentives, preforeclosure sale,” after “loan modification,”; and(3) by striking “204(a)(1)(A)” and inserting “subsection (a)(1)(A) or section 230(c)”.(d) Payment of FHA Mortgage Insurance Benefits.—(1) Additional loss mitigation actions.—Section 230(a) of the National Housing Act (12 U.S.C. 1715u(a)) is amended—(A) by inserting “or imminent default, as defined by the Secretary” after “default”;(B) by striking “loss” and inserting “loan”;(C) by inserting “preforeclosure sale, support for borrower housing counseling, subordinate lien resolution, borrower incentives,” after “loan modification,”;(D) by inserting “as required,” after “deeds in lieu of foreclosure,”; and(E) by inserting “or section 230(c),” before “as provided”.(2) Amendment to partial claim authority.—Section 230(b) of the National Housing Act (12 U.S.C. 1715u(b)) is amended to read as follows:“(b) Payment of Partial Claim.—“(1) Establishment of program.—The Secretary may establish a program for payment of a partial claim to a mortgagee that agrees to apply the claim amount to payment of a mortgage on a 1- to 4-family residence that is in default or faces imminent default, as defined by the Secretary.“(2) Payments and exceptions.—Any payment of a partial claim under the program established in paragraph (1) to a mortgagee shall be made in the sole discretion of the Secretary and on terms and conditions acceptable to the Secretary, except that—“(A) the amount of the payment shall be in an amount determined by the Secretary, not to exceed an amount equivalent to 30 percent of the unpaid principal balance of the mortgage and any costs that are approved by the Secretary;“(B) the amount of the partial claim payment shall first be applied to any arrearage on the mortgage, and may also be applied to achieve principal reduction;“(C) the mortgagor shall agree to repay the amount of the insurance claim to the Secretary upon terms and conditions acceptable to the Secretary;“(D) the Secretary may permit compensation to the mortgagee for lost income on monthly payments, due to a reduction in the interest rate charged on the mortgage;“(E) expenses related to the partial claim or modification may not be charged to the borrower;“(F) loans may be modified to extend the term of the mortgage to a maximum of 40 years from the date of the modification; and“(G) the Secretary may permit incentive payments to the mortgagee, on the borrower’s behalf, based on successful performance of a modified mortgage, which shall be used to reduce the amount of principal indebtedness.“(3) Payments in connection with certain activities.—The Secretary may pay the mortgagee, from the appropriate 123 STAT. 1646 insurance fund, in connection with any activities that the mortgagee is required to undertake concerning repayment by the mortgagor of the amount owed to the Secretary.”.(3) Assignment.—Section 230(c) of the National Housing Act (12 U.S.C. 1715u(c)) is amended—(A) by inserting “(1)” after “(c)”;(B) by redesignating paragraphs (1), (2), and (3) as subparagraphs (A), (B), and (C), respectively;(C) in paragraph (1)(B) (as so redesignated)—(i) by redesignating subparagraphs (A), (B), and (C) as clauses (i), (ii), and (iii), respectively;(ii) in the matter preceding clause (i) (as so redesignated), by striking “under a program under this subsection” and inserting “under this paragraph”; and(iii) in clause (i) (as so redesignated), by inserting “or facing imminent default, as defined by the Secretary” after “default”;(D) in paragraph (1)(C) (as so redesignated), by striking “under a program under this subsection” and inserting “under this paragraph”; and(E) by adding at the end the following:“(2) Assignment and loan modification.—“(A) Authority.—The Secretary may encourage loan modifications for eligible delinquent mortgages or mortgages facing imminent default, as defined by the Secretary, through the payment of insurance benefits and assignment of the mortgage to the Secretary and the subsequent modification of the terms of the mortgage according to a loan modification approved by the mortgagee.“(B) Payment of benefits and assignment.—In carrying out this paragraph, the Secretary may pay insurance benefits for a mortgage, in the amount determined in accordance with section 204(a)(5), without reduction for any amounts modified, but only upon the assignment, transfer, and delivery to the Secretary of all rights, interest, claims, evidence, and records with respect to the mortgage specified in clauses (i) through (iv) of section 204(a)(1)(A).“(C) Disposition.—After modification of a mortgage pursuant to this paragraph, the Secretary may provide insurance under this title for the mortgage. The Secretary may subsequently—“(i) re-assign the mortgage to the mortgagee under terms and conditions as are agreed to by the mortgagee and the Secretary;“(ii) act as a Government National Mortgage Association issuer, or contract with an entity for such purpose, in order to pool the mortgage into a Government National Mortgage Association security; or“(iii) re-sell the mortgage in accordance with any program that has been established for purchase by the Federal Government of mortgages insured under this title, and the Secretary may coordinate standards for interest rate reductions available for loan modification with interest rates established for such purchase.“(D) Loan servicing.—In carrying out this paragraph, the Secretary may require the existing servicer of a mortgage assigned to the Secretary to continue servicing the 123 STAT. 1647 mortgage as an agent of the Secretary during the period that the Secretary acquires and holds the mortgage for the purpose of modifying the terms of the mortgage, provided that the Secretary compensates the existing servicer appropriately, as such compensation is determined by the Secretary consistent, to the maximum extent possible, with section 203(b). If the mortgage is resold pursuant to subparagraph (C)(iii), the Secretary may provide for the existing servicer to continue to service the mortgage or may engage another entity to service the mortgage.”.(4) Implementation.—The Secretary of Housing and Urban Development may implement the amendments made by this subsection through notice or mortgagee letter.(e) Change of Status.—The National Housing Act is amended by striking section 532 (12 U.S.C. 1735f–10) and inserting the following new section:“SEC. 532. CHANGE OF MORTGAGEE STATUS.“(a) Notification.—Upon the occurrence of any action described in subsection (b), an approved mortgagee shall immediately submit to the Secretary, in writing, notification of such occurrence.“(b) Actions.—The actions described in this subsection are as follows:“(1) The debarment, suspension or a Limited Denial of Participation (LDP), or application of other sanctions, other exclusions, fines, or penalties applied to the mortgagee or to any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the mortgagee pursuant to applicable provisions of State or Federal law.“(2) The revocation of a State-issued mortgage loan originator license issued pursuant to the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any other similar declaration of ineligibility pursuant to State law.” .(f) Civil Money Penalties.—Section 536 of the National Housing Act (12 U.S.C. 1735f–14) is amended—(1) in subsection (b)—(A) in paragraph (1)—(i) in the matter preceding subparagraph (A), by inserting “or any of its owners, officers, or directors” after “mortgagee or lender”;(ii) in subparagraph (H), by striking “title I” and all that follows through “under this Act.” and inserting “title I or II of this Act, or any implementing regulation, handbook, or mortgagee letter that is issued under this Act.”; and(iii) by inserting after subparagraph (J) the following:“(K) Violation of section 202(d) of this Act (12 U.S.C. 1708(d)).“(L) Use of ‘Federal Housing Administration’, ‘Department of Housing and Urban Development’, ‘Government National Mortgage Association’, ‘Ginnie Mae’, the acronyms ‘HUD’, ‘FHA’, or ‘GNMA’, or any official seal or logo of the Department of Housing and Urban Development, except as authorized by the Secretary.”;123 STAT. 1648(B) in paragraph (2)—(i) in subparagraph (B), by striking “or” at the end;(ii) in subparagraph (C), by striking the period at the end and inserting “; or”; and(iii) by adding at the end the following new subparagraph:“(D) causing or participating in any of the violations set forth in paragraph (1) of this subsection.”; and(C) by amending paragraph (3) to read as follows:“(3) Prohibition against misleading use of federal entity designation.—The Secretary may impose a civil money penalty, as adjusted from time to time, under subsection (a) for any use of ‘Federal Housing Administration’, ‘Department of Housing and Urban Development’, ‘Government National Mortgage Association’, ‘Ginnie Mae’, the acronyms ‘HUD’, ‘FHA’, or ‘GNMA’, or any official seal or logo of the Department of Housing and Urban Development, by any person, party, company, firm, partnership, or business, including sellers of real estate, closing agents, title companies, real estate agents, mortgage brokers, appraisers, loan correspondents, and dealers, except as authorized by the Secretary.”; and(2) in subsection (g), by striking “The term” and all that follows through the end of the sentence and inserting “For purposes of this section, a person acts knowingly when a person has actual knowledge of acts or should have known of the acts.”.(g) Expanded Review of FHA Mortgagee Applicants and Newly Approved Mortgagees.—Not later than the expiration of the 3-month period beginning upon the date of the enactment of this Act, the Secretary of Housing and Urban Development shall—(1) expand the existing process for reviewing new applicants for approval for participation in the mortgage insurance programs of the Secretary for mortgages on 1- to 4-family residences for the purpose of identifying applicants who represent a high risk to the Mutual Mortgage Insurance Fund; and(2) implement procedures that, for mortgagees approved during the 12-month period ending upon such date of enactment—(A) expand the number of mortgages originated by such mortgagees that are reviewed for compliance with applicable laws, regulations, and policies; and(B) include a process for random reviews of such mortgagees and a process for reviews that is based on volume of mortgages originated by such mortgagees.