§ 1708. — Federal Housing Administration operations.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1708]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER II--MORTGAGE INSURANCE
Sec. 1708. Federal Housing Administration operations
(a) Mutual Mortgage Insurance Fund
There is created a Mutual Mortgage Insurance Fund (hereinafter
referred to as the ``Fund''), which shall be used by the Secretary as a
revolving fund for carrying out the provisions of this subchapter with
respect to mortgages insured under section 1709 of this title as
hereinafter provided, and there shall be allocated immediately to such
Fund the sum of $10,000,000 out of funds made available to the Secretary
for the purposes of this subchapter.
(b) Advisory Board
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 the Federal Advisory
Committee Act.
(1) 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--
(A) 9 shall be appointed by the Secretary;
(B) 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
(C) 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.
(2) Membership on the Advisory Board shall include--
(A) not less than 4 persons with distinguished private
sector careers in housing finance, lending, management,
development or insurance;
(B) not less than 4 persons with outstanding reputations as
licensed actuaries, experts in actuarial science, or economics
related to housing;
(C) not less than 4 persons with backgrounds of leadership
in representing the interests of housing consumers;
(D) 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
(E) not less than 1 person with a background of leadership
representing rural housing interests.
(3) Members of the Advisory Board shall be selected to ensure,
to the greatest extent practicable, geographical representation or
every region of the country.
(4) Not more than 8 members of the Advisory Board may be from
any one political party.
(5) 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.
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\1\ See References in Text note below.
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(6) 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.
(7) 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.
(8) 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.
(9) 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.
(10) Subject to the provisions of Section 7 of the Federal
Advisory Committee Act, 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.
(11) The Board shall terminate on January 1, 1995.
(c) Mortgagee Review Board
(1) Establishment
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.
(2) Composition
The Board shall consist of--
(A) the Assistant Secretary of Housing/Federal Housing
Commissioner;
(B) the General Counsel of the Department;
(C) the President of the Government National Mortgage
Association;
(D) the Assistant Secretary for Administration;
(E) the Assistant Secretary for Fair Housing Enforcement (in
cases involving violations of nondiscrimination requirements);
(F) the Chief Financial Officer of the Department; and
(G) the Director of the Enforcement Center; or their
designees.
(3) Actions authorized
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:
(A) Letter of reprimand
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.
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\2\ So in original. Probably should be ``subparagraph''.
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(B) Probation
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.
(C) Suspension
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.
(D) Withdrawal
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.
(E) Settlements
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--
(i) cessation of any violation;
(ii) correction or mitigation of the effects of any
violation;
(iii) 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;
(iv) actions to collect sums of money wrongfully or
incorrectly paid by the mortgagee to a third party;
(v) indemnification of the Federal Housing
Administration for mortgage insurance claims on mortgages
originated in violation of Federal Housing Administration
requirements;
(vi) modification of the length of the penalty imposed;
or
(vii) 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.
(4) Notice and hearing
(A) 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.
(B) 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.
(C) 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.
(5) Publication
The Secretary shall establish and publish in the Federal
Register a description of and the cause for administrative action
against a mortgagee.
(6) Cease-and-desist orders
(A) 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.
(B) 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.
(C) 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.
(7) ``Mortgagee'' defined
For purposes of this subsection, the term ``mortgagee'' means--
(A) a mortgagee approved under this chapter;
(B) a lender or a loan correspondent approved under
subchapter I of this chapter;
(C) a branch office or subsidiary of the mortgagee, lender,
or loan correspondent; or
(D) a director, officer, employee, agent, or other person
participating in the conduct of the affairs of the mortgagee,
lender, or loan correspondent.
(8) Report required
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.
(d) Coordination of GNMA and FHA withdrawal action
(1) 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--
(A) within 24 hours notify the other agency in writing of the
action taken;
(B) provide to the other agency the factual basis for the action
taken; and
(C) if a mortgagee is withdrawn, publish its decision in the
Federal Register.
(2) Within 60 days of receipt of a notification of action that could
lead to withdrawal under subsection \3\ (1), the Federal Housing
Administration or the Government National Mortgage Association shall--
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\3\ So in original. Probably should be ``paragraph''.
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(A) conduct and complete its own investigation;
(B) provide written notification to the other agency of its
decision, including the factual basis for its decision; and
(C) if a mortgagee is withdrawn, publish its decision in the
Federal Register.
(e) Appraisal standards
(1) 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--
(A) 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
(B) that each appraisal be a written statement used in
connection with a real estate transaction that is independently an
\4\ 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.
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\4\ So in original. Probably should be ``and''.
(2) The Appraisal Subcommittee of the Federal Financial Institutions
Examination Council shall include the Secretary or his designee.
(3) Direct Endorsement Program.--
(A) 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.
(B) 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.
(C) 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.
(4) Fee Panel Appraisers.--
(A) 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.
(B) 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.
(June 27, 1934, ch. 847, title II, Sec. 202, 48 Stat. 1248; Feb. 3,
1938, ch. 13, Sec. 3, 52 Stat. 10; June 3, 1939, ch. 175, Sec. 5, 53
Stat. 805; Apr. 20, 1950, ch. 94, title I, Sec. 122, 64 Stat. 59; Pub.
L. 90-19, Sec. 1(a)(3), May 25, 1967, 81 Stat. 17; Pub. L. 101-235,
title I, Sec. 142, Dec. 15, 1989, 103 Stat. 2030; Pub. L. 101-625, title
III, Sec. 322, Nov. 28, 1990, 104 Stat. 4134; Pub. L. 102-550, title V,
Secs. 502, 518, 519, Oct. 28, 1992, 106 Stat. 3778, 3792; Pub. L. 105-
65, title V, Sec. 551, Oct. 27, 1997, 111 Stat. 1412; Pub. L. 106-377,
Sec. 1(a)(1) [title II, Sec. 209(c)], Oct. 27, 2000, 114 Stat. 1441,
1441A-25.)
References in Text
The Federal Advisory Committee Act, referred to in subsec. (b), is
Pub. L. 92-463, Oct. 6, 1972, 86 Stat. 770, as amended, which is set out
in the Appendix to Title 5, Government Organization and Employees.
Section 3537b(c) of title 42, referred to in subsec. (b)(5), was in
the original ``section 112(c) of the Department of Housing and Urban
Development Reform Act of 1989'', meaning section 112 of Pub. L. 101-
235, which does not contain a subsec. (c), but enacted section 13 of the
Department of Housing and Urban Development Act, which was classified to
section 3537b of title 42 prior to repeal by Pub. L. 104-65,
Sec. 11(b)(1), Dec. 19, 1995, 109 Stat. 701, and which contained a
subsec. (c) relating to registration with the Secretary.
The Equal Credit Opportunity Act, referred to in subsec. (c)(1),
(3)(B), is title VII of Pub. L. 90-321, as added by Pub. L. 93-495,
title V, Sec. 503, Oct. 28, 1974, 88 Stat. 1521, as amended, which is
classified generally to subchapter IV (Sec. 1691 et seq.) of chapter 41
of Title 15, Commerce and Trade. For complete classification of this Act
to the Code, see Short Title note set out under section 1601 of Title 15
and Tables.
The Fair Housing Act, referred to in subsec. (c)(1), (3)(B), is
title VIII of Pub. L. 90-284, Apr. 11, 1968, 82 Stat. 81, as amended,
which is classified principally to subchapter I (Sec. 3601 et seq.) of
chapter 45 of Title 42, The Public Health and Welfare. For complete
classification of this Act to the Code, see Short Title note set out
under section 3601 of Title 42 and Tables.
Executive Order 11063, referred to in subsec. (c)(1), (3)(B), is set
out as a note under section 1982 of Title 42.
Amendments
2000--Subsec. (c)(2)(E). Pub. L. 106-377, Sec. 1(a)(1) [title II,
Sec. 209(c)(1)], struck out ``and'' at end.
Subsec. (c)(2)(F). Pub. L. 106-377, Sec. 1(a)(1) [title II,
Sec. 209(c)(2)], which directed substitution of ``and'' for ``or their
designees.'', was executed by inserting ``and'' after semicolon to
reflect the probable intent of Congress, because the phrase ``or their
designees.'' appeared at end of par. (2) and did not appear in subpar.
(F).
Subsec. (c)(2)(G). Pub. L. 106-377, Sec. 1(a)(1) [title II,
Sec. 209(c)(3)], added subpar. (G).
1997--Subsec. (c)(3)(C). Pub. L. 105-65 inserted after first
sentence ``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.''
1992--Subsec. (b)(11). Pub. L. 102-550, Sec. 502, added par. (11).
Subsec. (c)(3)(C). Pub. L. 102-550, Sec. 518, inserted
``temporarily'' after ``order'', ``(i)'' after ``Administration if'',
``(ii)'' after ``violations and'', and ``, 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'' after ``6
months''.
Subsec. (c)(6)(D). Pub. L. 102-550, Sec. 519(1), struck out subpar.
(D) which read as follows: ``For purposes of this paragraph, the term
`mortgagee' means a mortgagee, a branch office or subsidiary of a
mortgagee, or a director, officer, employee, agent, or other person
participating in the conduct of the affairs of such mortgagee.''
Subsec. (c)(7), (8). Pub. L. 102-550, Sec. 519(2), added par. (7)
and redesignated former par. (7) as (8).
1990--Subsec. (e)(3), (4). Pub. L. 101-625 added pars. (3) and (4).
1989--Pub. L. 101-235 substituted ``Federal Housing Administration
operations'' for ``Mutual Mortgage Insurance Fund'' in section
catchline, designated existing provisions as subsec. (a) and inserted
heading, and added subsecs. (b) to (e).
1967--Pub. L. 90-19 substituted ``Secretary'' for ``Commissioner''
wherever appearing.
1950--Act Apr. 20, 1950, substituted ``Commissioner'' for
``Administrator'' wherever appearing.
1939--Act June 3, 1939, substituted ``created'' for ``create''.
1938--Act Feb. 3, 1938, inserted ``with respect to mortgages insured
under section 1709 of this title''.
Change of Name
Committee on Banking, Finance and Urban Affairs of House of
Representatives treated as referring to Committee on Banking and
Financial Services of House of Representatives by section 1(a) of Pub.
L. 104-14, set out as a note preceding section 21 of Title 2, The
Congress. Committee on Banking and Financial Services of House of
Representatives abolished and replaced by Committee on Financial
Services of House of Representatives, and jurisdiction over matters
relating to securities and exchanges and insurance generally transferred
from Committee on Energy and Commerce of House of Representatives by
House Resolution No. 5, One Hundred Seventh Congress, Jan. 3, 2001.
Section Referred to in Other Sections
This section is referred to in sections 1709, 1735, 1735f-11, 1735f-
14 of this title.
