Sec. 3. Indemnification by FHA mortgagees
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/bill/113/hr/1145/ih/section-3·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Section 202 of the National Housing Act ( 12 U.S.C. 1708 ) is amended by adding at the end the following new subsection: If the Secretary determines that the mortgagee knew, or should have known, of a serious or material violation of the requirements established by the Secretary with respect to a mortgage executed by a mortgagee approved by the Secretary under the direct endorsement program or insured by a mortgagee pursuant to the delegation of authority under section 256 such that the mortgage loan should not have been approved and endorsed for insurance, and the Secretary pays an insurance claim with respect to the mortgage within a reasonable period specified by the Secretary, the Secretary may require the mortgagee approved by the Secretary under the direct endorsement program or the mortgagee delegated authority under section 256 to indemnify the Secretary for the loss, irrespective of whether the violation caused the mortgage default.
If fraud or misrepresentation was involved in connection with the origination or underwriting and the Secretary determines that the mortgagee knew or should have known of the fraud or misrepresentation, the Secretary shall require the mortgagee approved by the Secretary under the direct endorsement program or the mortgagee delegated authority under section 256 to indemnify the Secretary for the loss regardless of when an insurance claim is paid. The Secretary shall, by regulation, establish an appeals process for mortgagees to appeal indemnification determinations made pursuant to paragraph
(1)or (2). The Secretary shall issue regulations establishing appropriate requirements and procedures governing the indemnification of the Secretary by the mortgagee, including public reporting on— the number of loans that— were not originated or underwritten in accordance with the requirements established by the Secretary; and involved fraud or misrepresentation in connection with the origination or underwriting; and the financial impact on the Mutual Mortgage Insurance Fund when indemnification is required. .
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Sec. 3
Indemnification by FHA mortgagees
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