12 U.S.C. § 1708 — Federal Housing Administration operations
submitted 92 years ago by ch. 847 to r/title-12-BANKS-AND-BANKING · 4,362 words · no verdicts yet
This section creates and oversees the Mutual Mortgage Insurance Fund and sets reporting and financial-soundness duties for the Secretary. It also creates rules for the Federal Housing Administration Advisory Board, the Mortgagee Review Board, and participation in FHA-insured loan origination.
(a) Mutual Mortgage Insurance Fund. (1) Subject to the Federal Credit* Reform Act of 1990, the Secretary must use the Mutual Mortgage Insurance Fund (the “Fund”) to carry out this subchapter for mortgages insured under section 1709. The Secretary may commit to guarantee and may guarantee those mortgages. (2) In any fiscal year, the Secretary may make guarantee commitments only up to the total original principal amount authorized in that year’s appropriations Acts. (3) The Secretary must keep the Fund financially sound. (4) Each year, an independent actuary must study the Fund’s financial position. The Secretary must report the study’s results and the Fund’s financial status to Congress. The report must recommend changes to underwriting standards, program participation, or premiums when needed to keep the Fund sound. It must also evaluate underwriting quality controls and the accuracy of the information used to underwrite guaranteed loans, including risks tied to the entities or financial institutions that originated or funded the loans, not just borrower information and performance. (5) For each calendar quarter of each fiscal year, the Secretary must report to Congress: (A) the cumulative amount of guarantee commitments made during that fiscal year through the quarter; (B) the insured loan types by risk; (C) significant differences between actual and projected claims and prepayments; (D) projected and actual loss rates; and (E) updated annual subsidy-rate projections, so increases in Fund risk can be identified and reduced through underwriting, participation, or premium changes. The first report is due on the later of the last day of fiscal-year 2008’s first quarter or the last day of the first full calendar quarter after July 30, 2008. (6) If the required actuarial study shows that the Fund is not meeting paragraph (7)’s goals, or probably will not keep its target subsidy rate, the Secretary may make needed program changes to reduce Fund risk or adjust premiums. (7) The Fund’s goals are: (A) minimize default risk to the Fund and homeowners, including by starting fraud-prevention quality-control screening within 18 months after July 30, 2008; and (B) meet the housing needs of borrowers the single-family mortgage-insurance program is designed to serve. (8) The Secretary must (A) send Congress monthly reports on the capital ratio required by section 1711(f)(2), and (B) notify Congress as soon as practicable after the Fund falls below that ratio.
(b) Advisory Board. A Federal Housing Administration Advisory Board must review FHA operations, including the Mortgagee Review Board, and advise the Federal Housing Commissioner on general FHA policies and other matters the Commissioner considers appropriate. Except as this section provides, chapter 10 of title 5 applies. (1) The Board has 15 members with substantial housing and mortgage-lending expertise: (A) 9 appointed by the Secretary; (B) 3 appointed by the Chair and Ranking Minority Member of the Senate subcommittee named in the statute; and (C) 3 appointed by the Chair and Ranking Minority Member of the House subcommittee named in the statute. (2) The membership must include at least: (A) 4 people with distinguished private-sector careers in housing finance, lending, management, development, or insurance; (B) 4 licensed actuaries or recognized experts in actuarial science or housing economics; (C) 4 leaders representing housing consumers; (D) 1 person* with significant, distinguished fair-housing or civil-rights enforcement, advocacy, or legislative experience; and (E) 1 leader representing rural-housing interests. (3) Selection must provide, as far as practicable, geographic representation from every region. (4) No party may have more than 8 members. (5) The Board may not include someone who, during the preceding 24 months, had to register with the Secretary under section 3537b(c) of title 42, or employed someone for a purpose requiring that registration. (6) Of the first appointees, 5 serve 1-year terms and 5 serve 2-year terms. Later successors and all other appointees serve 3-year terms. (7) The Board may confer with, request information from, and recommend actions to the Commissioner. The Commissioner must promptly provide information the Board decides it needs to review FHA activities and policies. (8) By December 31 each year, the Board must report to the Secretary and Congress on FHA activities, including underwriting soundness, information systems, staffing, the Mortgagee Review Board, and FHA’s ability to serve homebuyers and renters. The report must include recommendations and minority views. (9) The Board must meet in Washington, D.C., at least twice a year, or more often if the Commissioner or a majority requests it. It must elect a chair, vice-chair, and secretary and adopt procedures, and may create committees and subcommittees. (10) Subject to section 1006 of title 5, members may be compensated and reimbursed by the Department for travel to meetings. (11) The Board terminates January 1, 1995.
(c) Mortgagee Review Board. (1) FHA has a Mortgagee Review Board. It may reprimand, place on probation, suspend, or withdraw approval of a mortgagee violating FHA requirements or the nondiscrimination requirements of the Equal Credit Opportunity Act, Fair Housing Act, or Executive Order 11063. (2) It consists of the Assistant Secretary of Housing/Federal Housing Commissioner, Department General Counsel, GNMA President, Assistant Secretary for Administration, Assistant Secretary for Fair Housing Enforcement in discrimination cases, and Department Chief Financial Officer, or their designees. (3) When information shows grounds for administrative action, the Board must take one of the following actions: (A) once issue a reprimand explaining the violation and how to correct it; (B) impose probation for up to 6 months and require FHA supervision, periodic reports, or audits; (C) suspend approval for 6 months to 1 year when there is adequate evidence of violations and continued approval would not serve the public or Department, with immediate effect when needed to protect financial interests, extendable by 6 months in the public interest or longer by agreement; during suspension FHA may not commit to insure a mortgage originated by that mortgagee; (D) withdraw approval for a serious or repeated violation for at least 1 year, permanently if the violation was egregious or willful; or (E) settle, including by stopping or correcting a violation, repaying wrongly paid money, collecting money wrongly paid to a third party, indemnifying FHA for improper insurance claims, changing the penalty’s length, or taking other corrective measures acceptable to the Secretary. Material failure to follow a settlement is grounds for suspension or withdrawal. (4) (A) Before action under (B), (C), or (D), the Board must give at least 30 days’ written notice stating the alleged violations and requiring a written reply within 30 days. It may decide without the mortgagee’s comments if no reply arrives. (B) After such action, the Board must promptly state* its nature, length, and reasons in writing. A hearing request within 30 days requires a hearing on the record within 30 days; otherwise the hearing right is waived. (C) If notice does not lead to a hearing, including after a settlement, information about the violation and resolution must be public. (5) The Secretary must publish in the Federal Register the description and cause of administrative action. (6) (A) At the Board’s request, if the Secretary reasonably believes a mortgagee is violating, has violated, or is about to violate a law, rule, regulation, or written condition and the violation could significantly cost the Government or public, the Secretary may issue a temporary cease-and-desist order requiring stopping the violation and affirmative preventive action. It must include charges, take effect when served, and last no more than 30 days while Board proceedings finish unless a court changes it. The Board must offer a prompt hearing on the record, no later than 20 days after service. (B) Within 10 days of service, the mortgagee may ask the proper district court or the District Court for the District of Columbia to enjoin, limit, or suspend the order; that court has jurisdiction. (C) For violating, threatening to violate, or disobeying the order, the Secretary may seek an injunction in the proper district or territorial court, which must issue it if the violation or threat is found. (7) “Mortgagee” means an approved mortgagee; an approved lender or loan correspondent; its branch or subsidiary; and its director*, officer, employee, agent, or other person participating in its affairs. (8) Each year, consulting the Advisory Board, the Board must recommend statutory or regulatory amendments needed for FHA’s long-term financial strength and adequate home-mortgage credit. (9) No State, local, or later Federal law may prevent or limit the Board’s powers under paragraphs (3) and (6), except a Federal law expressly enacted to limit this subsection after this sentence became effective.
(d) Participation and approval. (1) A person or entity not approved by the Secretary as a mortgagee may not help originate an FHA-insured loan except as the Secretary authorizes. (2) An applicant mortgagee is ineligible if it, or any listed officer, partner, director, principal, manager, supervisor, processor, underwriter, or originator, is: (A) suspended, debarred, under an LDP, or similarly restricted under the listed Federal rules or another agency’s similar rules; (B) indicted for, or convicted of, an offense reflecting adversely on integrity, competence, or fitness; (C) subject to unresolved government audit, investigation, or review findings; (D) using imprudent or irresponsible business practices; (E) convicted of, or pleading guilty or nolo contendere to, a felony related to real-estate or mortgage-loan participation; (F) subject to a criminal, civil, or administrative action for fraud, dishonesty, breach of trust, or money laundering; (G) subject to unresolved findings of a violation of FHA requirements; (H) engaged in conduct that violates the Fair Housing Act, Equal Credit Opportunity Act, or Executive Order 11063; or (I) otherwise not fit to be an approved mortgagee. (3) The Secretary must issue regulations allowing suspension, debarment, or withdrawal of approval when an approved mortgagee’s employee or other covered person* engages in conduct described in paragraph (2), and must provide for notice and an opportunity to be heard. (4) A person or entity that is not an approved mortgagee may perform only activities the Secretary authorizes by regulation.
(e) Coordination of GNMA and FHA withdrawal action. (1) When FHA or the Government National Mortgage Association begins proceedings that could withdraw a mortgagee from a program, the agency beginning the proceedings must within 24 hours notify the other agency in writing, give it the factual basis, and, if the mortgagee is withdrawn, publish the decision in the Federal Register. (2) Within 60 days after receiving notice, the other agency must complete its own investigation, tell the first agency in writing its decision and factual basis, and publish a withdrawal decision in the Federal Register. (f) Suspension or revocation notice. When the Secretary suspends or revokes a mortgagee’s approval to participate in a mortgage-insurance program, the Secretary must promptly give notice and reasons to the Secretary of Veterans Affairs; the chief executives of Fannie Mae and Freddie Mac; the Secretary of Agriculture; and, as applicable, the Comptroller of the Currency, Federal Reserve Board, or FDIC Board. (g) Appraisal standards. (1) The Secretary must set uniform standards for appraisals of all FHA-insured property. Competent people whose conduct is effectively supervised must perform them. At minimum, appraisals must follow generally accepted standards, such as standards of the Appraisal Foundation, and must be written, independent, impartial statements by licensed or certified appraisers giving a defined value for an adequately described property on a specific date and supported by relevant market analysis. (2) The Appraisal Subcommittee must include the Secretary or designee. (3) A direct-endorsement mortgagee may choose and contract with an appraiser, including an appraisal company. The appraiser must meet the Secretary’s qualifications, may use assistants under direct supervision, and must personally approve and sign the report. (4) An appraisal-company employee meeting the Secretary’s qualifications and fee-panel standards may receive assignments like other approved appraisers, and the user may contract directly with the company. (5) From July 30, 2008, an appraiser must be licensed or certified in the property’s State; a Federal employee whose main duty is appraisal work and who chooses State licensing needs only one State or territory license for FHA appraisals nationwide. The appraiser must meet the Uniform Standards of Professional Appraisal Practice competency rule before accepting an assignment and have verifiable education in FHA appraisal requirements through an FHA course or an approved third-party course. (h) Use of name. By regulation, the Secretary must require each approved mortgagee to use its Secretary-registered business name in all defined advertisements and promotional materials for these programs and keep copies in the required form and for the required period.
Subject to the provisions of the Federal Credit* Reform Act of 1990 [2 U.S.C. 661 et seq.], there is hereby created a Mutual Mortgage Insurance Fund (in this subchapter referred to as the “Fund”), which shall be used by the Secretary to carry out the provisions of this subchapter with respect to mortgages insured under section 1709 of this title. The Secretary may enter into commitments to guarantee, and may guarantee, such insured mortgages.
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.
The Secretary has a responsibility to ensure that the Mutual Mortgage Insurance Fund remains financially sound.
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. The report shall also include an evaluation of the quality control procedures and accuracy of information utilized in the process of underwriting loans guaranteed by the Fund. Such evaluation shall include a review of the risk characteristics of loans based not only on borrower information and performance, but on risks associated with loans originated or funded by various entities or financial institutions.
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—
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;
the types of loans insured, categorized by risk;
any significant changes between actual and projected claim and prepayment activity;
projected versus actual loss rates; and
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 July 30, 2008, whichever is later.
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 subchapter as necessary to reduce the risk to the Fund, or make appropriate premium adjustments.
The operational goals for the Fund are—
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 July 30, 2008; and
to meet the housing needs of the borrowers that the single family mortgage insurance program under this subchapter is designed to serve.
The Secretary shall—
submit to Congress monthly reports on the capital ratio required under section 1711(f)(2) of this title; and
notify Congress as soon as practicable after the Fund falls below the capital ratio required under section 1711(f)(2) of this title.
There is created a Federal Housing Administration Advisory Board (“Board”) that shall review operation of the Federal Housing Administration, including the activities of the Mortgagee Review Board, and shall provide advice to the Federal Housing Commissioner with respect to the formulation of general policies of the Federal Housing Administration and such other matters as the Federal Housing Commissioner may deem appropriate. The Advisory Board shall, in all other respects, be subject to the provisions of chapter 10 of title 5.
The Advisory Board shall be composed of 15 members to be appointed from among individuals who have substantial expertise and broad experience in housing and mortgage lending of whom—
9 shall be appointed by the Secretary;
3 shall be appointed by the Chairman and Ranking Minority Member of the Subcommittee on Housing and Urban Affairs of the Committee on Banking, Housing, and Urban Affairs of the Senate; and
3 shall be appointed by the Chairman and Ranking Minority Member of the Subcommittee on Housing and Community Development of the Committee on Banking, Finance and Urban Affairs of the House of Representatives.
Membership on the Advisory Board shall include—
not less than 4 persons with distinguished private sector careers in housing finance, lending, management, development or insurance;
not less than 4 persons with outstanding reputations as licensed actuaries, experts in actuarial science, or economics related to housing;
not less than 4 persons with backgrounds of leadership in representing the interests of housing consumers;
not less than 1 person* with significant experience and a distinguished reputation for work in the enforcement, advocacy, or development of fair housing or civil rights legislation; and
not less than 1 person with a background of leadership representing rural housing interests.
Members of the Advisory Board shall be selected to ensure, to the greatest extent practicable, geographical representation or every region of the country.
Not more than 8 members of the Advisory Board may be from any one political party.
Membership of the Advisory Board shall not include any person who, during the previous 24-month period, was required to register with the Secretary under section 3537b(c) 1 of title 42 or employed a person for purposes that required such person to so register.
Of the members of the Advisory Board first appointed, 5 shall have terms of l year, and 5 shall have terms of 2 years. Their successors and all other appointees shall have terms of 3 years.
The Advisory Board is empowered to confer with, request information of, and make recommendations to the Federal Housing Commissioner. The Commissioner shall promptly provide the Advisory Board with such information as the Board determines to be necessary to carry out its review of the activities and policies of the Federal Housing Administration.
The Board shall, not later than December 31 of each year, submit to the Secretary and the Congress a report of its assessment of the activities of the Federal Housing Administration, including the soundness of underwriting procedures, the adequacy of information systems, the appropriateness of staffing patterns, the effectiveness of the Mortgagee Review Board, and other matters related to the Federal Housing Administration’s ability to serve the nation’s homebuyers and renters. Such report shall contain the Board’s recommendations for improvement and include any minority views.
The Board shall meet in Washington, D.C., not less than twice annually, or more frequently if requested by the Federal Housing Commissioner or a majority of the members. The Board shall elect a chair, vice-chair and secretary and adopt methods of procedure. The Board may establish committees and subcommittees as needed.
Subject to the provisions of section 1006 of title 5, all members of the Board may be compensated and shall be entitled to reimbursement from the Department for traveling expenses incurred in attendance at meetings of the Board.
The Board shall terminate on January 1, 1995.
There is established within the Federal Housing Administration the Mortgagee Review Board (“Board”). The Board is empowered to initiate the issuance of a letter of reprimand, the probation, suspension or withdrawal of any mortgagee found to be engaging in activities in violation of Federal Housing Administration requirements or the nondiscrimination requirements of the Equal Credit Opportunity Act [15 U.S.C. 1691 et seq.], the Fair Housing Act [42 U.S.C. 3601 et seq.], or Executive Order 11063.
The Board shall consist of—
the Assistant Secretary of Housing/Federal Housing Commissioner;
the General Counsel of the Department;
the President of the Government National Mortgage Association;
the Assistant Secretary for Administration;
the Assistant Secretary for Fair Housing Enforcement (in cases involving violations of nondiscrimination requirements); and
the Chief Financial Officer of the Department or their designees.
When any report, audit, investigation, or other information before the Board discloses that a basis for an administrative action against a mortgagee exists, the Board shall take one of the following administrative actions:
The Board may issue a letter of reprimand only once to a mortgagee without taking action under subparagraphs 2 (B), (C), or (D) of this section. A letter of reprimand shall explain the violation and describe actions the mortgagee should take to correct the violation.
The Board may place a mortgagee on probation for a specified period of time not to exceed 6 months for the purpose of evaluating the mortgagee’s compliance with Federal Housing Administration requirements, the Equal Credit Opportunity Act [15 U.S.C. 1691 et seq.], the Fair Housing Act [42 U.S.C. 3601 et seq.], Executive Order 11063, or orders of the Board. During the probation period, the Board may impose reasonable additional requirements on a mortgagee including supervision of the mortgagee’s activities by the Federal Housing Administration, periodic reporting to the Federal Housing Commissioner, or submission to Federal Housing Administration audits of internal financial statements, audits by an independent certified public accountant or other audits.
The Board may issue an order temporarily suspending a mortgagee’s approval for doing business with the Federal Housing Administration if (i) there exists adequate evidence of a violation or violations and (ii) continuation of the mortgagee’s approval, pending or at the completion of any audit, investigation, or other review, or such administrative or other legal proceedings as may ensue, would not be in the public interest or in the best interests of the Department. Notwithstanding paragraph (4)(A), a suspension shall be effective upon issuance by the Board if the Board determines that there exists adequate evidence that immediate action is required to protect the financial interests of the Department or the public. A suspension shall last for not less than 6 months, and for not longer than 1 year. The Board may extend the suspension for an additional 6 months if it determines the extension is in the public interest. If the Board and the mortgagee agree, these time limits may be extended. During the period of suspension, the Federal Housing Administration shall not commit to insure any mortgage originated by the suspended mortgagee.
The Board may issue an order withdrawing a mortgagee if the Board has made a determination of a serious violation or repeated violations by the mortgagee. The Board shall determine the terms of such withdrawal, but the term shall be not less than 1 year. Where the Board has determined that the violation is egregious or willful, the withdrawal shall be permanent.
The Board may at any time enter into a settlement agreement with a mortgagee to resolve any outstanding grounds for an action. Agreements may include provisions such as—
cessation of any violation;
correction or mitigation of the effects of any violation;
repayment of any sums of money wrongfully or incorrectly paid to the mortgagee by a mortgagor, by a seller or by the Federal Housing Administration;
actions to collect sums of money wrongfully or incorrectly paid by the mortgagee to a third party;
indemnification of the Federal Housing Administration for mortgage insurance claims on mortgages originated in violation of Federal Housing Administration requirements;
modification of the length of the penalty imposed; or
implementation of other corrective measures acceptable to the Secretary.
Material failure to comply with the provisions of a settlement agreement shall be sufficient cause for suspension or withdrawal.
The Board shall issue a written notice to the mortgagee at least 30 days prior to taking any action against the mortgagee under subparagraph (B), (C), or (D) of paragraph (3). The notice shall state* the specific violations which have been alleged, and shall direct the mortgagee to reply in writing to the Board within 30 days. If the mortgagee fails to reply during such period, the Board may make a determination without considering any comments of the mortgagee.
If the Board takes action against a mortgagee under subparagraph (B), (C), or (D) of paragraph (3), the Board shall promptly notify the mortgagee in writing of the nature, duration, and specific reasons for the action. If, within 30 days of receiving the notice, the mortgagee requests a hearing, the Board shall hold a hearing on the record regarding the violations within 30 days of receiving the request. If a mortgagee fails to request a hearing within such 30-day period, the right of the mortgagee to a hearing shall be considered waived.
In any case in which the notification of the Board does not result in a hearing (including any settlement by the Board and a mortgagee), any information regarding the nature of the violation and the resolution of the action shall be available to the public.
The Secretary shall establish and publish in the Federal Register a description of and the cause for administrative action against a mortgagee.
Whenever the Secretary, upon request of the Mortgagee Review Board, determines that there is reasonable cause to believe that a mortgagee is violating, has violated, or is about to violate, a law, rule or regulation or any condition imposed in writing by the Secretary or the Board, and that such violation could result in significant cost to the Federal Government or the public, the Secretary may issue a temporary order requiring the mortgagee to cease and desist from any such violation and to take affirmative action to prevent such violation or a continuation of such violation pending completion of proceedings of the Board with respect to such violation. Such order shall include a notice of charges in respect thereof and shall become effective upon service to the mortgagee. Such order shall remain effective and enforceable for a period not to exceed 30 days pending the completion of proceedings of the Board with respect to such violation, unless such order is set aside, limited, or suspended by a court in proceedings authorized by subparagraph (B) of this paragraph. The Board shall provide the mortgagee an opportunity for a hearing on the record, as soon as practicable but not later than 20 days after the temporary cease-and-desist order has been served.
Within 10 days after the mortgagee has been served with a temporary cease-and-desist order, the mortgagee may apply to the United States district court for the judicial district in which the home office of the mortgagee is located, or the United States District Court for the District of Columbia, for an injunction setting aside, limiting of suspending the enforcement, operation, or effectiveness of such order pending the completion of the administrative proceedings pursuant to the notice of charges served upon the mortgagee, and such court shall have jurisdiction to issue such injunction.
In the case of violation or threatened violation of, or failure to obey, a temporary cease-and-desist order issued pursuant to this paragraph, the Secretary may apply to the United States district court, or the United States court of any territory, within the jurisdiction of which the home office of the mortgagee is located, for an injunction to enforce such order, and, if the court shall determine that there has been such violation or threatened violation or failure to obey, it shall be the duty of the court to issue such injunction.
For purposes of this subsection, the term “mortgagee” means—
a mortgagee approved under this chapter;
a lender or a loan correspondent approved under subchapter I of this chapter;
a branch office or subsidiary of the mortgagee, lender, or loan correspondent; or
a director*, officer, employee, agent, or other person participating in the conduct of the affairs of the mortgagee, lender, or loan correspondent.
The Board, in consultation with the Federal Housing Administration Advisory Board, shall annually recommend to the Secretary such amendments to statute or regulation as the Board determines to be appropriate to ensure the long term financial strength of the Federal Housing Administration fund and the adequate support for home mortgage credit.
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.
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.
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—
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;
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;
subject to unresolved findings contained in a Department of Housing and Urban Development or other governmental audit, investigation, or review;
engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility;
convicted of, or who has pled guilty or nolo contendre 3 to, a felony related to participation in the real estate or mortgage loan industry—
during the 7-year period preceding the date of the application for licensing and registration; or
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;
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
in violation of any other requirement as established by the Secretary.
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 May 20, 2009, by notice, mortgagee letter, or interim final regulations, which shall take effect upon issuance.
Whenever the Federal Housing Administration or Government National Mortgage Association initiates proceedings that could lead to withdrawing the mortgagee from participating in the program, the initiating agency shall—
within 24 hours notify the other agency in writing of the action taken;
provide to the other agency the factual basis for the action taken; and
if a mortgagee is withdrawn, publish its decision in the Federal Register.
Within 60 days of receipt of a notification of action that could lead to withdrawal under subsection 4 (1), the Federal Housing Administration or the Government National Mortgage Association shall—
conduct and complete its own investigation;
provide written notification to the other agency of its decision, including the factual basis for its decision; and
if a mortgagee is withdrawn, publish its decision in the Federal Register.
Whenever the Secretary has taken any discretionary action to suspend or revoke the approval of any mortgagee to participate in any mortgage insurance program under this subchapter, the Secretary shall provide prompt notice of the action and a statement of the reasons for the action to—
the Secretary of Veterans Affairs;
the chief executive officer of the Federal National Mortgage Association;
the chief executive officer of the Federal Home Loan Mortgage Corporation;
the Secretary of Agriculture;
if the mortgagee is a national bank, a subsidiary or affiliate* of such bank, a Federal savings association or a subsidiary or affiliate of a savings association, the Comptroller of the Currency;
if the mortgagee is a State bank that is a member of the Federal Reserve System or a subsidiary or affiliate of such a bank, or a bank holding company or a subsidiary or affiliate of such a company, the Board of Governors of the Federal Reserve System; and
if the mortgagee is a State bank or State savings association that is not a member of the Federal Reserve System or is a subsidiary or affiliate of such a bank, the Board of Directors of the Federal Deposit Insurance Corporation.
The Secretary shall prescribe standards for the appraisal of all property to be insured by the Federal Housing Administration. Such appraisals shall be performed in accordance with uniform standards, by individuals who have demonstrated competence and whose professional conduct is subject to effective supervision. These standards shall require at a minimum—
that the appraisals of properties to be insured by the Federal Housing Administration shall be performed in accordance with generally accepted appraisal standards, such as the appraisal standards promulgated by the Appraisal Foundation a not-for-profit corporation established on November 30, 1987 under the laws of Illinois; and
that each appraisal be a written statement used in connection with a real estate transaction that is independently an 5 impartially prepared by a licensed or certified appraiser setting forth an opinion of defined value of an adequately described property as of a specific date, supported by presentation and analysis of relevant market information.
The Appraisal Subcommittee of the Federal Financial Institutions Examination Council shall include the Secretary or his designee.
Any mortgagee that is authorized by the Secretary to process mortgages as a direct endorsement mortgagee (pursuant to the single-family home mortgage direct endorsement program established by the Secretary) may contract with an appraiser chosen at the discretion of the mortgagee for the performance of appraisals in connection with such mortgages. Such appraisers may include appraisal companies organized as corporations, partnerships, or sole proprietorships.
Any appraisal conducted pursuant to subparagraph (A) shall be conducted by an individual who complies with the qualifications or standards for appraisers established by the Secretary pursuant to this subsection.
In conducting an appraisal, such individual may utilize the assistance of others, who shall be under the direct supervision of the individual responsible for the appraisal. The individual responsible for the appraisal shall personally approve and sign any appraisal report.
Any individual who is an employee of an appraisal company (including any company organized as a corporation, partnership, or sole proprietorship) and who meets the qualifications or standards for appraisers and inclusion on appraiser fee panels established by the Secretary, shall be eligible for assignment to conduct appraisals for mortgages under this subchapter in the same manner and on the same basis as other approved appraisers.
With respect to any employee of an appraisal company described in subparagraph (A) who is offered an appraisal assignment in connection with a mortgage under this subchapter, the person utilizing the appraiser may contract directly with the appraisal company employing the appraiser for the furnishing of the appraisal services.
Beginning on July 30, 2008, any appraiser chosen or approved to conduct appraisals for mortgages under this subchapter shall—
be certified or licensed by the State in which the property to be appraised is located, except that a Federal employee who has as their primary duty conducting appraisal-related activities and who chooses to become a State-licensed or certified real estate appraiser need only to be licensed or certified in 1 State or territory to perform appraisals on mortgages insured by the Federal Housing Administration in all States and territories;
meet the requirements under the competency rule set forth in the Uniform Standards of Professional Appraisal Practice before accepting an assignment; and
have demonstrated verifiable education in the appraisal requirements established by the Federal Housing Administration under this subsection, which shall include the completion of a course or seminar that educates appraisers on those appraisal requirements, which shall be provided by—
the Federal Housing Administration; or
a third party, if the course is approved by the Secretary or a State appraiser certifying or licensing agency.
The Secretary shall, by regulation, require each mortgagee approved by the Secretary for participation in the FHA mortgage insurance programs of the Secretary—
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
to maintain copies of all such advertisements and promotional materials, in such form and for such period as the Secretary requires.
Source credit: (June 27, 1934, ch. 847, title II, § 202, 48 Stat. 1248; Feb. 3, 1938, ch. 13, § 3, 52 Stat. 10; June 3, 1939, ch. 175, § 5, 53 Stat. 805; Apr. 20, 1950, ch. 94, title I, § 122, 64 Stat. 59; Pub. L. 90–19, § 1(a)(3), May 25, 1967, 81 Stat. 17; Pub. L. 101–235, title I, § 142, Dec. 15, 1989, 103 Stat. 2030; Pub. L. 101–625, title III, § 322, Nov. 28, 1990, 104 Stat. 4134; Pub. L. 102–550, title V, §§ 502, 518, 519, Oct. 28, 1992, 106 Stat. 3778, 3792; Pub. L. 105–65, title V, § 551, Oct. 27, 1997, 111 Stat. 1412; Pub. L. 106–377, § 1(a)(1) [title II, § 209(c)], Oct. 27, 2000, 114 Stat. 1441, 1441A–25; Pub. L. 110–289, div. A, title IV, § 1404, div. B, title I, §§ 2116(1), (3), 2118(a), July 30, 2008, 122 Stat. 2810, 2832, 2833; Pub. L. 111–22, div. A, title II, § 203(a), (b), May 20, 2009, 123 Stat. 1643; Pub. L. 111–203, title III, § 373, July 21, 2010, 124 Stat. 1566; Pub. L. 117–286, § 4(a)(54), Dec. 27, 2022, 136 Stat. 4311; Pub. L. 119–101, title IV, § 403(a)(1)(A), title VII, § 702, July 11, 2026, 140 Stat. 898, 955.)
- 1934Enacted · Act of June 27, 1934, ch. 847 · 48 Stat. 1248
- 1938Amended · Act of Feb. 3, 1938, ch. 13 · 52 Stat. 10
- 1939Amended · Act of June 3, 1939, ch. 175 · 53 Stat. 805
- 1950Amended · Act of Apr. 20, 1950, ch. 94 · 64 Stat. 59
- 1967Amended · Pub. L. 90-19 · 81 Stat. 17
- 1989Amended · Pub. L. 101-235 · 103 Stat. 2030
- 1990Amended · Pub. L. 101-625 · 104 Stat. 4134
- 1992Amended · Pub. L. 102-550 · 106 Stat. 3778, 3792
- 1997Amended · Pub. L. 105-65 · 111 Stat. 1412
- 2000Amended · Pub. L. 106-377 · 114 Stat. 1441, 1441
- 2008Amended · Pub. L. 110-289 · 122 Stat. 2810, 2832, 2833
- 2009Amended · Pub. L. 111-22 · 123 Stat. 1643
- 2010Amended · Pub. L. 111-203 · 124 Stat. 1566
- 2022Amended · Pub. L. 117-286 · 136 Stat. 4311
- 2026Amended · Pub. L. 119-101 · 140 Stat. 898, 955
A history note hasn’t been published yet. The record shows enactment by ch. 847 on 1934-06-27.
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