Sec. 257. Capital classifications and performance measures for Mutual Mortgage Insurance Fund
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At any time that the capital ratio (as such term is defined in section 256(c)(2) of this title) is greater than 4.0 percent, the account for the Mutual Mortgage Insurance Fund established pursuant to section 256(a)(1) shall be classified as adequately capitalized for purposes of this subtitle. At any time that the capital ratio is less than 4.0 percent— the account for the Mutual Mortgage Insurance Fund established pursuant to section 256(a)(1) shall be classified as undercapitalized for purposes of this subtitle; and if such capital ratio is— equal to or greater than 2.0 percent, the FHA may not enter into any new commitment to insure any mortgage on a 1- to 4-family residential property that involves a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the FHA shall approve) in an amount exceeding 90 percent of the appraised value of the property; and less than 2.0 percent but equal to or greater than 0.0 percent, the FHA may not enter into any new commitment to insure any mortgage on a 1- to 4-family residential property that involves a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the FHA shall approve) in an amount exceeding 80 percent of the appraised value of the property.
At any time that the capital ratio is less than 0.0 percent— the account for the Mutual Mortgage Insurance Fund established pursuant to section 256(a)(1) shall be classified as significantly undercapitalized for purposes of this subtitle; and the Director may, pursuant to section 258(a)(1), take actions under section 258(b). The Director shall determine the capital ratio and the capital classification of the account for the Mutual Mortgage Insurance Fund established pursuant to section 256(a)(1) for purposes of this subtitle not less frequently than each calendar quarter.
The Director shall develop a risk-based capital model to determine the amount of capital that is sufficient for the FHA to maintain positive capital during a period of economic stress. The model shall incorporate the assumptions under paragraphs
(2)and (3). For purposes of paragraph (1), the Director shall assume that, during the period of economic stress referred to in paragraph (1), credit losses occur at a rate consistent with a nationwide economic recession of average severity based on nationwide economic recessions since 1950. For purposes of paragraph (1), the Director shall make assumptions about such other aspects of the period of economic stress as the Director determines are appropriate and consistent. If the account for the Mutual Mortgage Insurance Fund established pursuant to section 256(a)(1) is classified as undercapitalized or significantly undercapitalized, the FHA shall— submit to the Director a capital restoration plan meeting the requirements of section 258(d) for raising or restoring the capital of such account to an amount not less than the amount required for such account to be classified as adequately capitalized; and upon approval by the Director, carry out such plan. If the Director disapproves a capital restoration plan submitted under this subsection, the Director shall convey in writing reasons for such disapproval and shall provide for the FHA to resubmit a revised plan for approval by the Director.