109th CONGRESS
1st Session
S. 2123
To modernize the manufactured housing loan insurance program under
title I of the National Housing Act.
IN THE SENATE OF THE UNITED STATES
December 16, 2005
Mr. ALLARD (for himself, Mr. BAYH, and Mr. MARTINEZ) introduced the following
bill; which was read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
A BILL
To modernize the manufactured housing loan insurance program under
title I of the National Housing Act.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `FHA Manufactured Housing Loan Modernization
Act of 2005'.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings- The Congress finds that--
(1) manufactured housing plays a vital role in providing housing for low-
and moderate-income families in the United States;
(2) the FHA title I insurance program for manufactured home loans traditionally
has been a major provider of mortgage insurance for home-only transactions;
(3) the manufactured housing market is in the midst of a prolonged downturn
which has resulted in a severe contraction of traditional sources of private
lending for manufactured home purchases;
(4) during past downturns the FHA title I insurance program for manufactured
homes has filled the lending void by providing stability until the private
markets could recover;
(5) in 1992, during the manufactured housing industry's last major recession,
over 30,000 manufactured home loans were insured under title I;
(6) in 2004, fewer than 2,000 manufactured housing loans were insured
under title I;
(7) the dramatic reduction in the use of the title I program is due primarily
to certain structural problems of the program, which have resulted in
refusal by the Government National Mortgage Association (Ginnie Mae) to
accept new participants into the program since 1989, contributing to higher
loan costs and fewer loan originators;
(8) the loan limits for title I manufactured housing loans have not been
adjusted for inflation since 1992; and
(9) these problems with the title I program have resulted in an atrophied
market for manufactured housing loans, leaving American families who have
the most difficulty achieving homeownership without adequate financing
options for home-only manufactured home purchases.
(b) Purposes- The purposes of this Act 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;
(3) to adjust the artificially 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; and
(4) to ensure that the title I manufactured housing loan insurance program
requires no credit subsidy from the Federal Government.
SEC. 3. 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 by striking `In no case' and inserting the following:
`Other than in connection with a manufactured home or a lot on which to
place such a home (or both), in no case'.
SEC. 4. LOAN-TO-VALUE RATIO AND DOWNPAYMENT REQUIREMENT.
Section 2(b) of the National Housing Act (12 U.S.C. 1703(b)) is amended
by adding at the end the following new paragraph:
`(8) Loan-to-value and downpayment limitations on manufactured housing loans-
No insurance may 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 in connection with a manufactured home or a lot on which
to place a manufactured home (or both) unless such loan or advance of credit,
or any loan or advance of credit represented by such an obligation--
`(A) involves a principal obligation not exceeding the sum of--
`(i) the amount of the mortgage insurance premium paid by the borrower
at the time that the loan, advance of credit, or purchase is made; and
`(ii) 95 percent of the appraised value of the manufactured home or
lot on which to place a manufactured home (or both) for which the loan
or advance of credit is made; and
`(B) is made to a borrower who has paid in cash or its equivalent, on
account of the manufactured home or lot on which to place a manufactured
home (or both) for which the loan or advance of credit is made, at least
3 percent of the Secretary's estimate of the costs of acquisition, alteration,
improvements, lot preparation, or other eligible activity for which the
loan or advance of credit was made (excluding the amount of the mortgage
insurance premium paid by the borrower at the time that the loan or advance
of credit is made).'.
SEC. 5. INSURANCE BENEFITS.
Section 2(b) of the National Housing Act (12 U.S.C. 1703(b)), as amended
by section 4, is further amended by adding at the end the following new
paragraph:
`(9) Insurance benefits for manufactured housing loans-
`(A) IN GENERAL- 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 before or after the date of the enactment
of the FHA Manufactured Housing Loan Modernization Act of 2005 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) LOSSES- With respect only to 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 Secretary shall otherwise provide for the payment
of insurance benefits under the provisions of this section for losses
on such loans, advances, or purchases according to the same terms, conditions,
procedures, and requirements applicable under section 204 to a mortgage
insured under section 203 covering a manufactured home (and the site on
which it is located).'.
SEC. 6. MAXIMUM LOAN LIMITS.
(a) Dollar Amounts- Section 2(b)(1) of the National Housing Act (12 U.S.C.
1703(b)(1)) is amended--
(1) in subparagraph (A)(ii), by striking `$17,500' and inserting `$24,500';
(2) in subparagraph (C) by striking `$48,600' and inserting `$68,040';
(3) in subparagraph (D) by striking `$64,800' and inserting `$90,720';
(4) in subparagraph (E) by striking `$16,200' and inserting `$22,680';
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).
(1) METHOD OF INDEXING- Section 206A of the National Housing Act (12 U.S.C.
1712a) is amended--
(i) by redesignating paragraphs (1) through (7) as paragraphs (2)
through (8), respectively; and
(ii) by inserting before paragraph (2) (as so redesignated) the following
new paragraph:
`(1) subparagraphs (A)(ii), (C), (D), and (E) of section 2(b)(1) (12 U.S.C.
1703(b)(1));'.
(2) 2004 AND 2005 ADJUSTMENTS- Not later than 30 days after the date of
the enactment of this Act, the Federal Reserve Board shall calculate the
adjustments for 2004 and 2005 pursuant to paragraph (1) of section 206A(a)
of the National Housing Act (12 U.S.C. 1712a(a)(1)), as added by the amendment
made by paragraph (1) of this subsection, and shall notify the Secretary
of Housing and Urban Development pursuant to subsection (b) of such section
206A. Such adjustments shall take effect upon the date of such notification.
(3) TECHNICAL AND CONFORMING CHANGES- Section 2(b)(1) of the National
Housing Act (12 U.S.C. 1703(b)(1)), as amended by subsection (a), is further
amended--
(A) by striking `No' and inserting `Except as provided in the last sentence
of this paragraph and in paragraph (8), no'; and
(B) by adding after and below subparagraph (G) the following flush language:
`The Secretary shall, by regulation, increase the dollar amount limitations
in subparagraphs (A)(ii), (C), (D), and (E) (as such limitations may have
been adjusted in accordance with section 206A of this Act).'.
SEC. 7. INSURANCE PREMIUMS.
Section 2(f) of the National Housing Act (12 U.S.C. 1703(f)) is amended--
(1) by inserting `(1) IN GENERAL- ' 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.'.
SEC. 8. REVISION OF UNDERWRITING CRITERIA.
(a) In General- Section 2(b) 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.
END
