PRINTER'S NO. 2864
No. 2160 Session of 1989
INTRODUCED BY LASHINGER, ANGSTADT, BUSH, FARMER, J. TAYLOR,
GODSHALL, NAHILL, DEMPSEY, ARGALL, HERSHEY, REBER, GRUPPO,
CESSAR, BUNT, WESTON, HECKLER, RAYMOND, GLADECK, MERRY,
CLYMER, DIETTERICK, SERAFINI, JADLOWIEC, MARSICO, FAIRCHILD,
BLACK, GEIST, NAILOR, JOHNSON, SCHULER, FOX, E. Z. TAYLOR,
HESS, KONDRICH, WASS, HERMAN, J. L. WRIGHT, D. W. SNYDER,
J. H. CLARK, DISTLER, GANNON, PHILLIPS, NOYE, McVERRY,
PERZEL, CORNELL, FOSTER, TRELLO, TELEK, CIVERA, ALLEN,
ROBBINS, DAVIES, WILSON AND ADOLPH, DECEMBER 6, 1989
REFERRED TO COMMITTEE ON URBAN AFFAIRS, DECEMBER 6, 1989
AN ACT
1 Amending the act of December 3, 1959 (P.L.1688, No.621),
2 entitled, as amended, "An act to promote the health, safety
3 and welfare of the people of the Commonwealth by broadening
4 the market for housing for persons and families of low and
5 moderate income and alleviating shortages thereof, and by
6 assisting in the provision of housing for elderly persons
7 through the creation of the Pennsylvania Housing Finance
8 Agency as a public corporation and government
9 instrumentality; providing for the organization, membership
10 and administration of the agency, prescribing its general
11 powers and duties and the manner in which its funds are kept
12 and audited, empowering the agency to make housing loans to
13 qualified mortgagors upon the security of insured and
14 uninsured mortgages, defining qualified mortgagors and
15 providing for priorities among tenants in certain instances,
16 prescribing interest rates and other terms of housing loans,
17 permitting the agency to acquire real or personal property,
18 permitting the agency to make agreements with financial
19 institutions and Federal agencies, providing for the purchase
20 by persons of low and moderate income of housing units, and
21 approving the sale of housing units, permitting the agency to
22 sell housing loans, providing for the promulgation of
23 regulations and forms by the agency, prescribing penalties
24 for furnishing false information, empowering the agency to
25 borrow money upon its own credit by the issuance and sale of
26 bonds and notes and by giving security therefor, permitting
27 the refunding, redemption and purchase of such obligations by
1 the agency, prescribing remedies of holders of such bonds and
2 notes, exempting bonds and notes of the agency, the income
3 therefrom, and the income and revenues of the agency from
4 taxation, except transfer, death and gift taxes; making such
5 bonds and notes legal investments for certain purposes; and
6 indicating how the act shall become effective," providing for
7 additional programs to insure mortgage loans; authorizing the
8 provision of grants and subsidies; authorizing the formation
9 of corporations to carry out the purposes set forth in the
10 act; and making an appropriation.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. The title of the act of December 3, 1959
14 (P.L.1688, No.621), known as the Housing Finance Agency Law,
15 amended December 5, 1972 (P.L.1259, No.282), is amended to read:
16 AN ACT
17 To promote the health, safety and welfare of the people of the
18 Commonwealth by broadening the market for housing for persons
19 and families of low and moderate income and alleviating
20 shortages thereof, and by assisting in the provision of
21 housing for elderly persons through the creation of the
22 Pennsylvania Housing Finance Agency as a public corporation
23 and government instrumentality; providing for the
24 organization, membership and administration of the agency,
25 prescribing its general powers and duties and the manner in
26 which its funds are kept and audited, empowering the agency
27 to make housing loans to qualified mortgagors upon the
28 security of insured and uninsured mortgages, providing for
29 the creation of a home mortgage assurance program and fund,
30 empowering the agency to make grants and provide subsidies in
31 order to carry out the purposes of the agency, authorizing
32 the formation of corporations to carry out the purposes set
33 forth in the act, defining qualified mortgagors and providing
34 for priorities among tenants in certain instances,
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1 prescribing interest rates and other terms of housing loans,
2 permitting the agency to acquire real or personal property,
3 permitting the agency to make agreements with financial
4 institutions and Federal agencies, providing for the purchase
5 by persons of low and moderate income of housing units, and
6 approving the sale of housing units, permitting the agency to
7 sell housing loans, providing for the promulgation of
8 regulations and forms by the agency, prescribing penalties
9 for furnishing false information, empowering the agency to
10 borrow money upon its own credit by the issuance and sale of
11 bonds and notes and by giving security therefor, permitting
12 the refunding, redemption and purchase of such obligations by
13 the agency, prescribing remedies of holders of such bonds and
14 notes, exempting bonds and notes of the agency, the income
15 therefrom, and the income and revenues of the agency from
16 taxation, except transfer, death and gift taxes; making such
17 bonds and notes legal investments for certain purposes; and
18 indicating how the act shall become effective."
19 Section 2. The act is amended by adding a section to read:
20 Section 102.2. Further Declaration of Policy.--As a matter
21 of investment practice, private lending institutions are not
22 making adequate mortgage financing available for single family
23 homes, especially for first-time home buyers. This is
24 substantially due to capital reserve requirements of mortgage
25 insurance companies and variations in the national economy which
26 have made mortgage insurance increasingly expensive and harder
27 to obtain. This national market phenomenon has precluded many
28 qualified Pennsylvanians from obtaining mortgage financing to
29 purchase a home.
30 The Commonwealth has been hit particularly hard by this
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1 market phenomenon because mortgage insurance companies have been
2 reluctant to provide mortgage insurance coverage for older,
3 lower-priced housing which makes up a large portion of the
4 Commonwealth's housing stock.
5 The agency, although empowered to finance housing through the
6 sale of securities, has found it increasingly difficult to
7 adequately fulfill its mandate because of changes in national
8 market conditions and Federal tax law restrictions.
9 These evolving State and Federal occurrences have caused and
10 contributed to the deterioration of residential neighborhoods,
11 have inhibited local government from sustaining stable tax bases
12 to arrest and reverse this trend, and have generally reduced or
13 limited the supply of safe, decent and sanitary housing
14 available to low income and moderate income persons and
15 families.
16 It is declared to be the policy of the Commonwealth of
17 Pennsylvania to promote the health, safety and welfare of its
18 inhabitants by the creation of the Pennsylvania Home Mortgage
19 Assurance Fund. This fund will provide the capital to assist in
20 the creation, expansion and support of a Statewide mortgage
21 insurance initiative which shall be used to increase and improve
22 the availability of mortgage insurance in this Commonwealth.
23 Section 3. Section 103(6) and (13) of the act are amended
24 and the section is amended by adding clauses to read:
25 Section 103. Definitions.--As used in this act unless
26 otherwise indicated--
27 * * *
28 (6) "Insured mortgage" means a mortgage insured or approved
29 to be insured or guaranteed by a Federal agency and shall
30 include instruments or certificates which are guaranteed by a
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1 Federal agency and secured by insured or guaranteed mortgages,
2 and shall also include a mortgage insured or approved to be
3 insured by the agency.
4 * * *
5 (13) "Low income persons or families" and "moderate income
6 persons or families" shall mean families and persons who cannot
7 afford to pay the amounts at which private enterprise, without
8 the assistance of this act is providing a substantial supply of
9 decent, safe and sanitary housing or who are unable to purchase
10 a single family dwelling without mortgage insurance or similar
11 credit enhancement. The income limits for the admission of such
12 families and persons to projects, and the eligibility criteria
13 to qualify for mortgage insurance, shall be those established
14 pursuant to the rules and regulations established by the agency.
15 * * *
16 (21) "Single family dwelling" shall mean one to four family
17 dwelling units, one of which the owner must occupy.
18 (22) "Insurance reserve requirement" shall mean an amount
19 established by the agency, which shall, as of any particular
20 date of computation, be at least equal to the total of (i)
21 insurance benefits due and payable as of such date pursuant to
22 contracts of loan insurance, and (ii) an amount calculated to
23 equal any required policyholder's surplus which would be
24 required of a mortgage guaranty insurer either:
25 (A) under the act of May 17, 1921 (P.L.789, No.285), known
26 as "The Insurance Department Act of one thousand nine hundred
27 and twenty-one";
28 (B) by a nationally recognized rating agency such as
29 Standard & Poor's Corp., Moody's Investor's Service, Inc., or
30 other generally recognized rating organizations; or
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1 (C) as established by regulations of the agency.
2 (23) "Loan-to-value limitation" shall mean a limitation on
3 the ratio of the original principal balance of a loan to the
4 appraised value, including the estimated costs of repair and
5 rehabilitation and sale, if any, of the property securing it.
6 (24) "Approved lending institution" shall mean a qualified
7 mortgage lender approved by the agency for participation in the
8 Home Mortgage Assurance Program, including such successors and
9 assigns of any such institution as are permitted by regulation
10 of the agency. The term shall also include the agency.
11 Section 4. Section 205 of the act is amended by adding
12 clauses to read:
13 Section 205. Agency Powers.--The agency shall have the
14 following powers:
15 * * *
16 (20) To form corporations under the nonprofit and other laws
17 of the Commonwealth to assist the agency in carrying out the
18 programs and purposes set forth in this act.
19 (21) To provide grants and subsidies to effectuate and
20 further the purposes of this act.
21 Section 5. Section 401-B of the act, added December 31, 1981
22 (P.L.594, No.176), is amended to read:
23 Section 401-B. General Statement.--The agency is hereby
24 authorized to make [or], purchase and insure loans or mortgages
25 by contract with lending institutions to finance the purchase,
26 construction, improvement or rehabilitation of owner-occupied
27 single-family residences pursuant to the provisions of the
28 Mortgage Subsidy Bond Tax Act of 1980 (Public Law 96-499). The
29 agency may acquire, and contract and enter into advance
30 commitments to acquire by assignment or otherwise, loans secured
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1 by insurance or by mortgages owned by lending institutions or
2 participations therein at such purchase price and upon such
3 other terms as the agency shall determine. The agency may make
4 and execute contracts with lending institutions for the
5 origination and servicing of such loans and pay the value of
6 services rendered under such contracts.
7 Section 6. The act is amended by adding an article to read:
8 ARTICLE IV-D.
9 HOME MORTGAGE ASSURANCE PROGRAM
10 Section 401-D. General Authority.--(a) The agency shall
11 expand the availability of insurance products within the
12 Commonwealth to insure the repayment of loans secured by
13 mortgages on single family dwellings.
14 (b) The agency shall create, develop, administer and/or
15 supervise the administration of mortgage insurance programs to
16 address the needs of and encourage home ownership for low income
17 and moderate income families, the elderly, and other qualifying
18 persons who are unable to purchase a single family dwelling
19 without mortgage insurance or similar credit enhancement.
20 (c) In its efforts to promote the goals of accessible and
21 affordable mortgage insurance products for the Commonwealth, the
22 agency and any corporation formed by the agency to carry out the
23 Home Mortgage Assurance Program are hereby declared to be
24 licensed insurance carriers with full authority to insure,
25 reinsure, coinsure and otherwise engage in the insuring of loans
26 secured by mortgages on single family dwellings in accordance
27 with the provisions of this article; and any employes of the
28 agency who are specifically designated from time to time by
29 resolution of the board of the agency are empowered to
30 negotiate, solicit, sell and otherwise deal with mortgage loan
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1 insurance policies authorized pursuant to this article. The
2 authorization conferred upon the agency and its employes to
3 provide and deal with mortgage insurance is intended to be in
4 complete substitution of all licensing, filing and other
5 regulatory requirements otherwise applicable to insurance
6 carriers doing business within the Commonwealth of Pennsylvania
7 and their officers, employes and agents, including without
8 limitation, the act of May 17, 1921 (P.L.682, No.284), known as
9 "The Insurance Company Law of 1921"; the act of May 17, 1921
10 (P.L.789, No.285), known as "The Insurance Department Act of one
11 thousand nine hundred and twenty-one"; and the act of December
12 6, 1972 (P.L.1482, No.334), entitled "An act amending the act of
13 November 25, 1970 (P.L.707, No.230), entitled 'An act codifying
14 and compiling a part of the law of the Commonwealth,' adding
15 provisions relating to crimes, offenses and punishment, and
16 making repeals," dealing with unlawful insurance practices.
17 (d) In order to carry out the goals and purposes of this
18 act, the agency, and any corporation formed by the agency, shall
19 have the authority, subject to other provisions contained within
20 this article, to enter into contracts to insure, reinsure or
21 coinsure the repayment of loans secured by mortgages on single
22 family dwellings, and may procure reinsurance or coinsurance and
23 enter into reciprocal or interinsurance contracts from and with
24 any local agency or agency of the United States or any licensed
25 private mortgage insurer to prescribe forms of policies, to
26 establish premiums and otherwise to implement the Home Mortgage
27 Assurance Program.
28 (e) The powers of the agency to implement the provisions of
29 this article are to be construed broadly to effectuate the
30 purposes hereof and shall not be construed to limit the agency's
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1 powers.
2 Section 402-D. Home Mortgage Assurance Fund.--(a) The Home
3 Mortgage Assurance Fund is hereby established to implement the
4 provisions of this act and shall consist of sums appropriated by
5 the General Assembly for such purpose and any other funds
6 designated by the agency for such purpose, including the
7 proceeds of mortgage insurance premiums.
8 (b) The agency shall establish, as part of the Home Mortgage
9 Assurance Fund, one or more loan insurance reserve accounts. The
10 loan insurance reserve accounts shall secure commitments under
11 contracts to insure mortgage loans. The agency shall take all
12 reasonable steps to assure that each loan insurance reserve
13 account is continuously maintained at no less than the insurance
14 reserve requirement. The agency shall not cause funds to be
15 withdrawn from a loan insurance reserve account in amounts which
16 would reduce the account to less than the insurance reserve
17 requirement, except as necessary to satisfy liabilities arising
18 under contracts of insurance. In the event a loan insurance
19 reserve account falls below the insurance reserve requirement,
20 the agency shall cease making commitments for, and contracts of,
21 insurance, with respect to such account, including contracts of
22 coinsurance and reinsurance, until such time as the loan
23 insurance reserve account has been restored to the appropriate
24 level.
25 (c) The agency has the authority to create other accounts
26 within the Home Mortgage Assurance Fund as is necessary and/or
27 convenient to carry out the purposes of this article.
28 (d) The agency shall invest moneys in the Home Mortgage
29 Assurance Fund which are not required for current needs in such
30 eligible securities as the agency shall designate in the
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1 exercise of its reasonable judgment.
2 (e) The obligation of the agency to pay any insurance
3 benefits pursuant to contracts of insurance insuring loans shall
4 not exceed amounts deposited in the loan insurance reserve
5 account maintained with respect to such contracts of insurance.
6 Nothing in this article shall require the General Assembly to
7 appropriate moneys from the General Fund to account for any such
8 obligations. The insurance of loans under the provisions of this
9 article shall not directly or indirectly or contingently
10 obligate the Commonwealth or any political subdivision or
11 instrumentality thereof to levy or to pledge any form of
12 taxation therefor or to make any appropriation for their
13 payment.
14 (f) Moneys contained in the Home Mortgage Assurance Fund may
15 not be transferred to any other fund of the agency except as
16 necessary to pay the expenses of operating the program of loan
17 insurance authorized by this article, and except to the extent
18 excess funds exist which are not required for the proper
19 administration of the Home Mortgage Assurance Program. The
20 agency shall not be obligated to utilize any moneys under the
21 direction and control of the agency, other than moneys in the
22 Home Mortgage Assurance Fund, to satisfy liabilities arising
23 from contracts of insurance authorized by this article.
24 Section 403-D. Borrower Qualifications.--(a) To qualify for
25 loan insurance pursuant to this article, a borrower shall be, or
26 by reason of a loan insured pursuant to this article shall
27 become, the owner of the single family dwelling for which an
28 insured loan is authorized, and shall be able to bear the usual
29 expenses of maintaining such single family dwelling and repaying
30 the loan. The agency may by regulation establish such other
19890H2160B2864 - 10 -
1 additional requirements as it shall deem necessary in its
2 reasonable judgment to accomplish the purposes of this article.
3 (b) The agency may insure or issue commitments to insure
4 loans upon the certification of an officer of an approved
5 lending institution that the borrower is qualified for loan
6 insurance according to eligibility requirements specified by the
7 regulations of the agency.
8 Section 404-D. Mortgage Eligibility Requirements.--Loans or
9 mortgages insured pursuant to this article shall meet all of the
10 following requirements:
11 (1) The borrower must meet the qualifications of 403-D.
12 (2) The mortgage loan shall not exceed the loan-to-value
13 limitation established by agency regulation.
14 (3) Dates of maturity on the mortgage shall be satisfactory
15 to the agency.
16 (4) The amortization schedule of the mortgage loan shall be
17 satisfactory to the agency.
18 (5) The mortgage or loan shall contain such terms regarding
19 property insurance, repairs, alterations, payment of taxes and
20 assessments, default reserves, delinquency charges, default
21 remedies, anticipation of maturity, prior and subordinate liens,
22 equitable and legal redemption rights, and prepayment privileges
23 as are satisfactory to the agency.
24 (6) Any other terms and conditions as the agency, by
25 regulation, determines are necessary to further the purposes of
26 this article.
27 Section 405-D. Agency Powers Upon Default.--(a) The agency
28 shall establish procedures to be followed by approved lending
29 institutions in the event of default on a loan insured pursuant
30 to this article. The agency may require that, prior to
19890H2160B2864 - 11 -
1 submitting a claim, an approved lending institution shall
2 foreclose or exercise a power of sale and take possession of the
3 property or otherwise acquire title and possession of such
4 property within the time specified by the agency. The agency,
5 upon submission of such a claim, may pursue alternatives which
6 include, but are not limited to, the following:
7 (1) Pay the approved lending institution the benefit of the
8 insurance.
9 (2) Acquire the insured loan and any security therefor upon
10 payment to the approved lending institution the benefit of the
11 insurance.
12 (3) Upon conveyance to the agency of all the right, title,
13 and interest of the approved lending institution in the
14 foreclosed property and the assignment of all claims of the
15 approved lending institution against the defaulting borrower to
16 the agency, pay to the approved lending institution the benefit
17 of the insurance. In any case in which the agency has insured
18 only a portion of the outstanding principal indebtedness of a
19 loan, it may further provide that not more than an equivalent
20 percentage of the total accrued interest and costs shall be
21 payable by the agency pursuant to this section in the event of a
22 default.
23 Section 406-D. Mortgage Insurance Premiums.--The Agency
24 shall fix mortgage insurance premiums for the insurance of
25 mortgage payments under the provisions of this article. The
26 amount of premium need not be uniform for all insured loans.
27 Such premiums shall be payable by mortgagors or mortgagees in
28 such manner as prescribed by the agency.
29 Section 407-D. Mortgages Insured by Agency to be Legal
30 Investments.--(a) Loans secured by mortgages, the payments of
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1 which are insured by the agency, shall be legal investments for
2 the agency and for all trust companies, banks, investment
3 companies, savings banks, building and loan associations,
4 executives, administrators, guardians, conservators, trustees
5 and other fiduciaries, and pension, profit-sharing and
6 retirement funds. For the purpose of determining the percentage
7 of capital, surplus, assets or deposits which may be invested
8 therein by an institution under the supervision of the
9 Pennsylvania Department of Banking, such loans shall be treated
10 similarly to loans insured or to be insured by the Federal
11 Housing Administrator. Otherwise, such loans shall not be
12 subject to limitations, conditions or restrictions imposed by
13 law except as provided by this article.
14 (b) The property, real or personal, securing such loans
15 shall be unencumbered except for easements, leases, residential
16 restrictions and other encumbrances which do not materially
17 adversely affect the use or value of the property, and, in the
18 case of insured subordinate mortgages, prior liens to the extent
19 deemed appropriate by the agency. A certificate of title issued
20 by some suitable person approved by the mortgagee or a policy of
21 title insurance shall reside with the mortgagee until the
22 mortgage loan is paid.
23 Section 408-D. Application Procedures.--The agency shall
24 establish, by regulation, fees, forms and guidelines for
25 submitting an application for mortgage insurance pursuant to
26 this article.
27 Section 7. This act shall take effect in 60 days.
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