§ 1735f-11. — Direction to Secretary to require mortgagees with above normal rates of early, serious defaults and claims to submit reports and take corrective action.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1735f-11]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER V--MISCELLANEOUS
Sec. 1735f-11. Review of mortgagee performance and authority to
terminate
(a) Periodic review of mortgagee performance
To reduce losses in connection with single family mortgage insurance
programs under this chapter, at least once a year the Secretary shall
review the rate of early defaults and claims for insured single family
mortgages originated or underwritten by each mortgagee.
(b) Comparison with other mortgagees
For each mortgagee, the Secretary shall compare the rate of early
defaults and claims for insured single family mortgage loans originated
or underwritten by the mortgagee in an area with the rate of early
defaults and claims for other mortgagees originating or underwriting
insured single family mortgage loans in the area. For purposes of this
section, the term ``area'' means each geographic area in which the
mortgagee is authorized by the Secretary to originate insured single
family mortgages.
(c) Termination of mortgagee origination approval
(1) Notwithstanding section 1708(c) of this title, the Secretary may
terminate the approval of a mortgagee to originate or underwrite single
family mortgages if the Secretary determines that the mortgage loans
originated or underwritten by the mortgagee present an unacceptable risk
to the insurance funds. The determination shall be based on the
comparison required under subsection (b) of this section and shall be
made in accordance with regulations of the Secretary. The Secretary may
rely on existing regulations published before this section takes effect.
(2) The Secretary shall give a mortgagee at least 60 days prior
written notice of any termination under this subsection. The termination
shall take effect at the end of the notice period, unless the Secretary
withdraws the termination notice or extends the notice period. If
requested in writing by the mortgagee within 30 days of the date of the
notice, the mortgagee shall be entitled to an informal conference with
the official authorized to issue termination notices on behalf of the
Secretary (or a designee of that official). At the informal conference,
the mortgagee may present for consideration specific factors that it
believes were beyond its control and that caused the excessive default
and claim rate.
(June 27, 1934, ch. 847, title V, Sec. 533, as added Pub. L. 100-242,
title IV, Sec. 407(b), Feb. 5, 1988, 101 Stat. 1902; amended Pub. L.
107-73, title II, Sec. 209, Nov. 26, 2001, 115 Stat. 675.)
Amendments
2001--Pub. L. 107-73 amended section catchline and text generally.
Prior to amendment, text read as follows:
``(a) To reduce losses in connection with mortgage insurance
programs under this chapter, the Secretary shall review, at least once a
year, the rate of early serious defaults and claims involving mortgagees
approved under this chapter. On the basis of this review, the Secretary
shall notify each mortgagee which, as determined by the Secretary, had a
rate of early serious defaults and claims during the preceding year
which was higher than the normal rate for the geographic area or areas
in which that mortgagee does business. In the notification, the
Secretary shall require each mortgagee to submit a report, within a time
determined by the Secretary, containing the mortgagee's (1) explanation
for the above normal rate of early serious defaults and claims; (2) plan
for corrective action, if applicable, both with regard to (A) mortgages
in default; and (B) its mortgage-processing system in general; and (3) a
timeframe within which this corrective action will be begun and
completed. If the Secretary does not agree with this timeframe or plan,
a mutually agreeable timeframe and plan will be determined.
``(b) Failure of the mortgagee to submit a report required under
subsection (a) of this section within the time determined by the
Secretary or to commence or complete the plan for corrective action
within the timeframe agreed upon by the Secretary may be cause for
suspension of the mortgagee from participation in programs under this
chapter.''
Section Referred to in Other Sections
This section is referred to in section 1709 of this title.
