§1735f–11 — Title 12 Banks and Banking | U.S. Code

Summary

The official who runs the single-family mortgage insurance program must check each lender’s early default and claim rates at least once a year. They must compare a lender’s rates in each geographic area where the lender is allowed to make insured single-family loans with the rates of other lenders in that same area. (Area = each place the lender is authorized to operate.) If those comparisons show a lender’s loans are an unacceptable risk to the insurance funds, the official may stop that lender from originating or underwriting insured single-family mortgages. The official can use existing rules to do this. The lender must get at least 60 days’ written notice before the stop takes effect. If the lender asks in writing within 30 days of the notice, it can have an informal meeting to explain problems beyond its control that caused the high default or claim rates.

Title 12, §1735f–11

Banks and Banking — Source: USLM XML via OLRC

(a)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)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)(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) 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.

Notes & Related Subsidiaries

Editorial Notes

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.”

§1735f–11 Review of mortgagee performance and authority to terminate

Summary

Title 12, §1735f–11

Notes & Related Subsidiaries

Editorial Notes

Amendments

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