Sec. 203. Risk transfer
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The Administrator shall annually cede a portion of the risk with respect to the mortgages insured by the FHA to the private reinsurance or capital markets, or any combination thereof, and at rates and terms that the Administrator determines to be reasonable and appropriate, in an amount that— is sufficient to maintain the ability of FHA to pay claims; manages and limits the annual exposure of the funds managed by FHA; and is subject to market conditions. The Administrator shall develop and implement models and standards for ceding of risk as required under paragraph
(1)not later than the expiration of the 24-month period beginning upon the date of the enactment of this Act. In developing the models and standards under subparagraph (A), the FHA shall consult with the Government National Mortgage Association and shall review such Association’s guidelines relating to risk-sharing and other credit enhancement activities. The model and standards established under this section shall include guidelines for the qualification of persons or entities to participate in risk transfer and other credit enhancement activities with the FHA. In establishing such guidelines, the FHA shall review the guidelines established by the Director for qualification of persons or entities to participate in risk transfer, risk-sharing, and other credit enhancement activities with the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. The FHA shall determine whether such guidelines for such enterprises are sufficient for purposes of the FHA, including whether such guidelines meet the requirements under paragraph (3), and— if the FHA determines that such guidelines are so sufficient, the FHA shall adopt such guidelines for purposes of this section, to the extent appropriate, with any changes necessary to account for differences between the mortgages insured under this title and the National Housing Act and the business under such provisions and the business of such enterprises; or if the FHA determines that such guidelines are not so sufficient, the FHA shall adopt such guidelines for purposes of this section, to the extent appropriate and with changes referred to in subparagraph (A), together with additional criteria sufficient to address any such insufficiency. Such guidelines shall ensure that— persons or entities participating in risk transfer, risk-sharing, and other credit enhancement activities pursuant to this section have sufficient capital, credit worthiness, and liquidity, and are otherwise capable of fulfilling their obligations to the FHA; such persons or entities and their principals or officers are not engaged in a business the goals of which would conflict with the purposes of the FHA or the National Housing Act; for purposes of this section, private mortgage insurance is not considered a business the goals of which conflict with the purposes of the FHA or the National Housing Act; and product or service delivery will be conducted in a manner that is efficient and effective, and that will comply with the requirement under section 521(d). After the expiration of the 24-month period referred to in subsection (a)(2)(A), the FHA shall ensure that, in each fiscal year, not less than 10 percent of any new business in mortgages on 1- to 4-family residential property is insured pursuant to a risk transfer agreement with respect to such mortgage that complies with the standards established pursuant to subsection (a). In any fiscal year, the FHA may not comply with paragraph
(1)by entering into risk transfer agreements with respect only to one or a limited number of types or categories of mortgages, or mortgages having only particular, or a particular range of, original principal obligation amounts, but shall enter into risk transfer agreements for all types and amounts of mortgages insured by the FHA, to the extent required under paragraph (1). For purposes of this subsection, with respect to a fiscal year, the term new business means the aggregate dollar amount of the principal obligations of mortgages for which a commitment to insure is made pursuant to the National Housing Act or this title, as applicable, during such fiscal year. Upon the expiration of each of the 3- and 5-year periods beginning on the date of the enactment of this Act, the FHA shall submit a report to the Congress on the findings and results of risk transfer activities under this section. Such reports shall describe the model and standards for entering into risk transfer agreements, analyze appropriate dollar amount limits for the original principal obligations of mortgages that should be subject to a risk transfer requirement, identify the effects of such risk transfer activities on the Mutual Mortgage Insurance Fund, identify the effects of such risk transfer activities with respect to the Government National Mortgage Association, and make recommendations regarding expanding the risk transfer requirement under subsection (c). This section shall take effect on the date of the enactment of this Act. During the transition period under section 551, any reference in this section to the FHA shall be construed to refer to the Secretary of Housing and Urban Development to the extent the Secretary has not delegated authority under this section to the FHA pursuant to section 552(1).