President Signs Omnibus Spending Bill; Increases FHA MF Loan Limits. MBA Writes OFHEO in Support of Temporary Increase in GSE Loan Limits

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1 President, Mark Johnson CBSHome Mortgage, Omaha 402/ Fax 402/ Vice President, Gina Jerauld Bank of the West, Omaha Fax 402/ Treasurer, David Olson Equitable Mortgage of NE, Blair 402/ Fax 402/ Secretary, Sherri O Callaghan TierOne Bank, Grand Island 308/ Fax 308/ Board of Directors E. Dean Neidan Sheree Brooks Forgue Jacalyn Ayoub Mary Jo McClurg Jack Hobbie Scott Jensen Tony Johnson Guy Griffith Cindy Muhlbach Jan Meister Education Chair Jo Lewis, Lincoln Officers Legal Counsel, John Boehm Butler, Galter & O Brien Law Firm, Lincoln 402/ Fax 402/ Editor, Jo Lewis HomeServices Lending, LLC. Lincoln 402/ Fax 402/ Also in this issue NIFA Clarification of FNMA Announcement and Seller Contributions (Page 2) Office of the Attorney General Guidance With Respect to 940 CMR 8.00 et. seq. (Page 2) FHA Modernization Bills: 110th Congress Comparison Chart (Page 5 8) Statement by HUD Secretary Alphonso Jackson on Passage of FHA Modernization Legislation by the U.S. Senate (Page 8) President Signs Omnibus Spending Bill; Increases FHA MF Loan Limits Nationwide Mortgage Licensing System Goes Live in Seven States On Wednesday, December 26, President Bush signed H.R. 2764, the "Consolidated Appropriations Act," that will fund the federal government for the remainder of FY The omnibus spending bill includes an increase in the FHA multifamily loan limits, which are determined by the size of the unit, the type of structure and the project location. H.R increases the limit to 170 percent in high cost areas and 215 percent on a case-by-case basis. HUD will need to amend its current factors and issue a Mortgagee Letter to provide appropriate percentages for each office. The Special limit areas (Alaska, Hawaii and the Virgin Islands) will remain at 260 percent. Steve O'Connor, MBA SVP Government Affairs MBA Writes OFHEO in Support of Temporary Increase in GSE Loan Limits On Wednesday, January 2, MBA sent a letter (attached) to OFHEO Director, James B. Lockhart, III, regarding a temporary increase in GSE conforming loan limits in an effort to increase liquidity in the mortgage market. MBA continues to believe that enactment of GSE oversight reform legislation is important for restoring confidence in the mortgage market and ensuring its health in the future. Notwithstanding that view, MBA's Residential Board of Governors supports, separate from the oversight reform effort, a temporary increase in the maximum loan limit that the GSEs may purchase from lenders, subject to the following conditions: the increase should be in effect for no less than 12 months, and up to 24 months if market conditions warrant; the temporary cap for a single family property should be set at no more than 150 percent of the current loan limit ($625,500) and should be available nationwide; and expanded loan limits should be available for purchase loans and refinancing. Steve O'Connor, MBA SVP Government Affairs On Wednesday, January 2, the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) launched a Nationwide Mortgage Licensing System (NMLS). States can utilize NMLS as a tool to reinforce mortgage regulation and increase supervision. Currently, seven states are using NMLS: Idaho, Iowa, Kentucky, Massachusetts, Nebraska, New York, and Rhode Island. All 50 states are expected to eventually adopt the system, along with 500,000 company and professional licensees. The system will help efforts to coordinate mortgage supervision and improve regulatory practices. Steve O'Connor, MBA SVP Government Affairs

2 NIFA Clarification of FNMA Announcement and Seller Contributions (1) 6% Seller Contributions NIFA continues to have a special waiver from Fannie Mae in connection with MyCommunityMortgage (MCM) loans that does allow a maximum of 6% seller contributions. Lenders can continue to ignore the messaging in DU as long as you are using the MCM product. We will notify lenders immediately if anything changes with this requirement. (2) Fannie Announcement dated November 6, 2007 Please note that the loan-level price adjustment (LLPA) does not apply to any of the MCM loan products. However, the LLPA does apply to the standard Fannie Mae product (standard 95%) and the standard Freddie Mac product (standard 95%). Therefore, lenders are strongly encouraged to run borrowers in Office of the Attorney General Guidance with 940 CMR 8.00 et. seq. (as amended) Editors Note: The following is an excerpt from a lengthy document. For space reasons, we are not able to include the entire document, but members who would like the entire document can Nebraska Mortgage Association at nebrmortassn@neb.rr.com requesting to have a copy of the entire pdf file ed to them. On October 17, 2007 the Office of the Attorney General amended 940 CMR 8.00 et. seq., the regulation under the Consumer Protection Act that identifies unfair and deceptive acts or practices in connection with mortgage brokering and mortgage lending. The new amended regulations were issued following an extensive comment period and after four hearings were held statewide between September 18 and 21, The new regulations will take effect on January 2, Since the regulations were promulgated, the Office of the Attorney General has received inquiries concerning the scope of certain regulations and questions relating to implementation of the regulations. The Office of the Attorney General has changed certain parts of the regulation, first by extending the effective date (which occurred in November); second, by changing Section 8.05 which requires certain disclosures to be provided to consumers; and third, by revising Section 8.06(16) to account for so-called No Income products. Also, in order to provide clarity on the issues raised in communications with the Office of the Attorney General, and to assist in the implementation of the regulations, the Office of the Attorney General issues this guidance. Effective Date Q. When are the new regulations effective? All the revised regulations are effective January 2, When the regulations were first announced, certain parts were effective January 2, 2008, while most parts were effective November 15, On November 12, 2007, the Attorney General announced that all of the regulations would be effective January DU using the MCM product or in LP using the Home Possible (HP) product regardless of the LTV. There is no minimum LTV requirement when using the MCM or HP loan product guidelines. NIFA Memorandum from Jacki Young dated 1/14/2008 Editors Note: NIFA is working diligently on trying to best implement a workable solution to the new Fannie Mae/Freddie Mac Adverse Market Delivery Charge. Implementations being reviewed are - the current line item to the GFE and HUD1s; and a possibility of rolling in of the fee to the pricing platform. NIFA is making every effort to keep their pricing structure on a simplified level. A decision regarding price inclusion of any Adverse Market Delivery Charges will be made as soon as possible. 2, 2008, in order to provide industry participants additional time to understand, and prepare implementation of, the new regulations. All regulations are effective January 2, Q. Do the regulations affect mortgage loans that are Òin the pipelineó prior to January 2, 2008 but have not closed by the effective date? No. In order to provide certainty to lenders and brokers and in order to prevent disrupting loan transactions that were planned in 2007 but still await consummation or Òclosing,Ó the regulations will apply only to loan applications received on or after January 2, If a borrower provides a complete loan application to a broker or lender in advance of January 2, 2008, then these regulations will not apply to that prospective loan. Changes in the Regulations Since their Announcement in October Q. What has changed since these regulations were first announced on October 17, 2007? Three things have changed since these regulations were first announced on October 17. First, the effective date changed. The effective date initially was November 15, 2007 for most of the regulations. In November, the Attorney General changed the effective date to January 2, 2008 for all regulations. Second, the office of the Attorney General changed the originally announced regulation by revising Section 8.05 governing disclosures to borrowers. The original revised regulation required two disclosure forms one for brokers and one for lenders that were required to be provided to borrowers. As of the filing of the final regulation, those new forms are no longer required. Instead, Section 8.05 provides that it is unfair or deceptive for a lender or broker to fail to provide to a borrower a disclosure required by federal or state law. Third, Section 8.06(16), which restricts the use of so-called stated income products, has been revised to account Continued Page -3-2

3 Office of the Attorney General from Page -2- for so-called No Income loan products. These products where a lender in no way considers employment status or income because the lender s decision is based on other criteria no longer require a borrower s signed statement of income. See Sections 8.03 (definition of No Income Loan Product ) and 8.06(16). Scope of Regulations Q. Do these regulations apply only to subprime mortgage loans? Sections 8.02 and 8.03 exempt reverse mortgages and openend home equity lines of credit from these regulations, as well as reduced interest rate mortgage originated under governmental affordable housing programs. See Sections 8.02 (Scope) and 8.03 (definition of mortgage loan). Beyond those exemptions, the regulations apply to all residential mortgage loans, not any particular subset of loans. The application of the regulations is not limited to loans known as subprime, high cost, or nonconventional loans. Q. Are banks or depository institutions excluded from the regulations? No. Banks and depository institutions are not exempt from the regulations. Banks and depository institutions, presuming they make residential mortgage loans, are mortgage lenders under the regulations. Q. Do the regulations apply to commercial loans or only residential mortgage loans? The regulations apply only to residential mortgage loans, not to commercial loans. The definitions for mortgage broker, mortgage lender, mortgage loan, and residential property in the regulations all reflect the application of the regulations to residential mortgage loans. Assessment of Reasonable Ability to Pay (Section 8.06(15) Q. Under subsection 8.06(15), may a lender or broker qualify a borrower for an adjustable rate mortgage with a fixed starter rate based on the borrower s ability to repay only at the fixed starter rate? No, the lender or broker must also take into account the loan rates and terms that adjust following the fixed rate period. Section 8.06(15) requires that lenders or brokers must reasonably determine the borrower s ability to repay the loan. That determination must take into account the borrower s ability to pay at the fully-indexed rate. If the duration of the fixed starter rate is relatively short (such as 2 or 3 years for 2/28 or 3/27 ARM loans), then in order to comply with Section 8.06(15) the lender certainly should determine the borrower s ability to pay the monthly payments at the fully indexed rate, following the ARM adjustment. If the duration of the fixed starter rate is considerably longer (such as 5, 7 or 10 years), then the lender has increased flexibility in taking into account the fully indexed rate in reasonably assessing the borrower s ability to repay. (See further discussion immediately below). Q. Does this regulation mean that the borrower must be qualified for the loan based on the ability to pay at the interest rate that adjusts upward in the future, even if the initial interest rate is fixed (and the adjustment does not occur) for five, seven or ten years? The overarching principle set forth in Section 8.06(15), set forth in the first sentence, is that lenders and brokers, based on information known at the time the loan is made, must reasonably believe that the borrower will be able to repay the loan. The second sentence then requires that the determination of a borrower s ability to repay shall take into account, without limitation,... the borrower s ability to repay at the fully indexed rate.... Therefore, lenders and brokers must take into account upward adjusting terms and their impact on scheduled payments. Accordingly, with respect to a two year fixed/twenty-eight year adjustable loan, a lender could not qualify a borrower based on the two year introductory terms alone, without taking into account the predictable increase in payments two years after loan origination. Likewise with an ARM loan that features a much longer fixed rate period (for instance, five, seven or as long as ten years), the lender still must take into account the future increase in interest rate and its impact on monthly payments. The regulation does not dictate precisely how lenders and brokers must underwrite ARM loans to account for those upward adjustments. But the regulation plainly prohibits lenders and brokers from ignoring those upward adjustments and increased payments qualifying borrowers based only on a short term, low interest rate and artificially low monthly payment. In determining how to take into account increased rates, changed terms or increased payments following an ARM adjustment, it is expected that lenders and brokers would reasonably take into account, for example: i) the duration of the introductory, fixed rate period; ii) the magnitude of the ARM adjustment when it occurs; iii) subsequent ARM adjustments, accounting for caps applicable to periodic adjustments as well as overall caps; iv) the resulting impact on the borrower s expected monthly payment obligation; and v) other underwriting criteria used by the lender to reasonably determine whether the borrower will be able to repay the loan both during the introductory period and after the ARM adjustments. Q. Does this regulation require all lenders to collect an escrow for property tax or insurance payments? No. This regulation does not mandate that lenders collect property tax or insurance escrows. The regulation does require that lenders, when determining a borrower s ability to repay, must take into account property taxes and insurance based on tax and insurance costs on the property at the time of the loan, regardless of whether the lender collects them. Restrictions on Stated Income or No-Doc Loans (Section 8.06(16)) Q. Does subsection 8.06(16) ban the use of no doc or stated income loans? No, those loan products may still be offered and used. In order to curtail abuse of these products, this subsection requires lenders to obtain a signed statement from the borrower stating borrower s income, even though a lender may choose not to verify or document the income so stated by the borrower. The signed statement also must disclose the impact of the no- or lowdocumentation feature on the loan terms and costs. Continued Page -4-3

4 Office of the Attorney General from Page -3- Q. Are there exemptions from this part of the regulation? For instance, for loans with low loan-to-value ratios, or where an existing borrower is obtaining a refinancing to decrease the interest rate or to improve other terms? Section 8.06(16) provides one exception from part of the regulation, for No Income Loan Products. A No Income Loan Product is one where the lender, pursuant to its written underwriting or origination policy, in no way considers a borrower s income or employment status. If a broker arranges or a lender makes a loan using a No Income Loan Product, then he or she need not collect a signed statement of the borrower s income as required by clause (a) of Section 8.06(16). The broker or lender still must disclose how the No Income Loan Product increases the applicable interest rate or other costs, if that is the case. Beyond that exception, Section 8.06(16) does not include exemptions for certain loans or borrower characteristics. For any loan where the broker or lender considers income but does not require documentation to verify the borrower s income, the broker or lender must have the borrower sign a document that (i) identifies income and source of income and (ii) discloses the impact of the low-documentation or no-documentation loan product on the loan terms. Q. Has the Office of the Attorney General issued a form to comply with Section 8.06(16)? No. The regulation does not specify or require a particular form. As noted at the beginning of this article, this is only an excerpt from the entire FAQ document. The following questins were also answered in the original document. NMA members who would like a copy of the entire document can Nebraska Mortgage Association at nebrmortassn@neb.rr.com requesting to have a copy of the pdf file ed to them. Q. Does Section 8.06(17) of the regulation ban all Yield Spread Premiums, or YSP s? Q. Must YSP s be disclosed to the borrower? Q. Do these regulations mean that a mortgage broker can no longer arrange a loan with no closing costs/no points, and instead must collect any fees or points directly at the closing? Q. How can a broker determine when the broker s compensation generates a conflict with the interests of their client, the borrower? Q. Can the Office of the Attorney General provide an example of what YSP s are permissible and what YSP s would violate the regulation? Q. If a conflict exists between the broker s financial interest and the borrower s interest, can the loan transaction go forward so long as the conflict is disclosed to the borrower? Q. If a conflict exists, can the loan transaction go forward if the broker gets the borrower to sign a form that acknowledges the conflict and waives any objection? Q. If one broker, generally speaking, charges 1.5 points per loan transaction, whether compensated in points or charges at closing or compensated via a YSP, but another broker in the same locality charges only about 1 point per loan, is the first broker obligated to change his pricing to avoid a conflict of interest because a borrower may be able to pay less by using a competing broker? Q. If a person holds both a mortgage broker license and a mortgage lender license, when does Section 8.06(17) apply and when does section 8.06(18) apply? Q. Are lenders allowed to offer special pricing or special loan terms for particular categories of borrowers? For instance, can a lender offer a better interest rate, or better loan terms: a) to a borrower that has multiple accounts with a lending bank? b) to a borrower that has a successful payment history on other accounts with the same lender? c) to a borrower that agrees to make monthly payments using an automatic debit feature? Q. Under Section 8.06(18), can a borrower pay a discount point to reduce the loan s interest rate, without violating the requirement that pricing models and cost features be based on credit or bona fide qualification criteria? Q. Does Section 8.06(18) prevent a lender from carrying out its goals under the Community Reinvestment Act or other programs designed to target lending to communities or borrowers that are in need? Q. Does Section 8.06(18) limit the flexibility of mortgage lenders or community banks to offer special or favorable terms to borrowers? For instance, if a homeowner currently has a subprime loan and faces potential default and the homeowner would not qualify for a conventional loan, can a lender offer special terms to help the borrower refinance? Or if a local teacher has difficulty affording payments on a conventional loan, can a lender offer special terms to help make housing affordable?? Q. Does Section 8.06(18) prohibit lenders from meeting the competition to make a loan? For instance, if a potential borrower provides a quote from a competitor at a 1 4 point lower interest rate, can a lender reduce its rate to try to meet the competition and win the customer s business? Q. Why did the Attorney General change the disclosure regulation in Section 8.05 from the version announced on October 17, 2007? Q. Does this new Section 8.05 supersede the old Section 8.05, which required form disclosures for certain home equity loans? Q. Does this regulation demand that a lender or broker translate disclosures into all possible languages, regardless of costs? And must a lender or broker provide an adult interpreter for all languages, regardless of costs? Q. How do these regulations change the law? Is this the first time chapter 93A has been applied to mortgage lenders and mortgage brokers? Q. Are these regulations related to the Massachusetts law passed in November 2007 that contains new provisions related to certain mortgage loans, mortgage originators and foreclosure protection? Q. Why is the Attorney General implementing these regulations now, when federal regulators also are considering new standards to protect consumers who purchase mortgage loans? 4

5 FHA Modernization Bills: 110 th Congress Comparison Chart Here is a comparison between the recently passed House and Senate version of FHA Modernization. Now they just have to come together and get it over to the President for signature we re hoping for mid-february! Topic FHA Modernization Bills: 110 th Congress H. R Financial Services Committee Bill S Senate Banking Committee Bill Status Loan limits Loan term extension Change to Limits on mortgage amount as percent of appraised value Cash investment requirement Creation of Higher Risk category of borrowers Risk-based premiums The Expanding American Homeownership Act of 2007 passed the full House on September 18, 2007 by a vote of 348 to 72. Maximum FHA loan set at the lower of (a) 125% of the local area median home price, or (b) 175% of the GSE conforming loan limit ($729,750 based on $417,000 limit in 2007). Provides additional authority to HUD to raise limits additional $100,000 if market conditions warrant. Floor raised from 48% to 65% of the GSE conforming loan limit. Provides additional authority to HUD to increase floor if market conditions warrant Extended to 40 years. Sets limit on mortgage amount to 97.75% of appraised value, except for zero down payment mortgages, where it can be the appraised value plus allowable fees. Requires three percent down payment for most mortgages; gifts from family members, government agencies or nonprofits with at least $4m in assets shall count towards that requirement; first time homebuyers and certain other borrowers eligible for insurance on lower- or zero-downpayment mortgages. Directs the Secretary to establish underwriting standards for Higher Risk borrowers with FICO scores below 560. Permits Secretary to establish premium structure for upfront or annual premiums, or both. Premium rates may vary over loan term if basis for change is determined at origination. Authorizes premiums to be determined based on product (e.g. adjustable rate mortgage) risk. The FHA Modernization Act of 2007 passed the Senate on December 14, 2007 by a vote of 93 to 1. Raises the maximum insurable loan amount to the lesser of (a) 100% of local median home price; or (b) the GSE conforming loan limit. Same floor as H.R. 1852; does not include market distress provision. Requires minimum of 1.5%; prohibits sellerfunded downpayment assistance from providing any of the required downpayment. Implementation of HUD s proposed risk-based premium rule (FR-5171-N-01) delayed by one year. Continued Pages -6 through 8-5

6 FHA Modernization Bills: 110 th Congress Topic H. R Financial Services Committee Bill S Senate Banking Committee Bill Change to Maximum upfront premium amounts Change to Maximum annual premium amounts Annual reporting requirement Foreclosure prevention counseling Pre-purchase counseling 2.25% for Standard-Risk mortgages; 3.0% on Higher-Risk mortgages and Zero- and Lower- Downpayment (Zero Down) mortgages for firsttime homebuyers. 0.5% for Standard and Higher-Risk mortgages; 0.75% for Zero Down mortgages. Requires annual report on default and foreclosure rates for Higher-Risk and Zero Down mortgages and use of loss mitigation. Requires annual independent actuarial review of the MMIF and quarterly reports on loan performance. Requires annual report on risk-based premiums and how they were determined. If mortgagee becomes sixty days delinquent, mortgagor will notify approved housing counseling entity and provide contact information for mortgagor. The entity will notify the mortgagor of both such delinquency and availability of foreclosure prevention counseling. The bill does not state how counseling would be funded. Requires homeownership counseling be provided by approved third party prior to closing. For zero down mortgages, counseling must cover other mortgage options; property appreciation needed to cover cost of the mortgage on second, fifth and tenth anniversaries; relative cost of Zero Down mortgage. Must include real estate property management in case of 2- or 3-unit properties. Counseling would be funded by using increase in premium revenue due to legislation. Requires mortgagees to disclose, at application, a list of counseling agencies approved by the Secretary; at execution, the terms of the mandatory payment incentive premium reduction, and a statement that the mortgagor has the right to loss mitigation. 3.0%, or 2.75% for first time homebuyers with approved homeownership counseling. Requires annual independent actuarial review of the MMIF and quarterly reports on loan performance. If borrower becomes 30 days delinquent, the mortgagee will notify the borrower of foreclosure prevention counseling. If borrower becomes 90 days delinquent and does not respond to mortgagee s attempts to contact the borrower, the mortgagee will provide sufficient information to a designated housing counseling entity to contact the borrower. The borrower may opt out of this agreement. The bill does not state how counseling would be funded. Creates three-year pilot program to test effectiveness of pre-purchase homeownership counseling for borrowers who put less than 3% down. 6

7 FHA Modernization Bills: 110 th Congress Topic H. R Financial Services Committee Bill S Senate Banking Committee Bill Borrowers without Sufficient Credit History Broker eligibility requirements Condominium loans Adjustment of premiums Expansion of programs covered by MMIF Home equity conversion mortgage (HECM) origination fees HECM caps HECM mortgages for cooperatives HECM for home purchase HECM study Implementation Creates Pilot program to establish automated process for providing alternative credit rating information for borrowers with insufficient traditional credit histories; program limited to 5% of number of loans in previous year; GAO required to study program s impact. Allows mortgage brokers to post surety bond worth between $50,000 and $100,000 in lieu of net worth and annual financial auditing requirements. Limits Section 234(c) loans to projects with blanket mortgages and makes loans secured by condominiums eligible for insurance under Section 203(b). Authorizes Secretary to adjust premiums if actuarial study shows that MMIF will not meet or maintain its target subsidy rate. Authorizes annual redetermination of premiums and increases commensurate with additional credit risk. Moves HECM, rehabilitation, homeownership voucher, Hawaiian Homelands, and Indian Reservations programs to MMIF. Limits origination fees to 1.5%. Removes limit on number of HECM loans and raises maximum insurable amount to conforming loan limit. Permits HECM mortgages to be secured by cooperatives. Authorizes insurance of home purchase mortgages. Requires study of effects of reducing HECM mortgage insurance premium on both the cost to mortgagor and financial soundness of the program. Authorizes implementation by a notice that is effective upon issuance. Does not alter existing net worth or annual financial auditing requirements. Amends definition of mortgage to include condominium mortgages so that they can be insured under Section 203. Same; also requires study on how limiting fees affects cost and availability of credit, as wells program s safety and soundness. Authorizes insurance of home purchase mortgages; so long as it is the primary residence 7

8 FHA Modernization Bills: 110 th Congress Topic H. R Financial Services Committee Bill S Senate Banking Committee Bill Information technology/ Human resources investment Multifamily Loan Limits Limitation on increase in mortgage insurance premium Additional provisions Authorizes FHA to use $25 million from excess premium collection for technology and salary improvements The bill increases the FHA multifamily loan limit high cost factors from 140% to 170% in high cost areas and from 170% to 215% on a case-by-case basis. The bill prohibits HUD from increasing the MIP on any FHA program (single family or multifamily) unless the Secretary determines that, without the increase, the program will require an appropriation of credit subsidy. Creates affordable housing grant fund, using increase in premium revenue due to legislation for grants for affordable rental housing and homeownership opportunities. Authorizes FHA to establish refinancing underwriting standards for both borrowers in loans with adverse terms and borrowers in default. Allows the Secretary to hold loan servicers responsible for failure to pay taxes, insurance premiums and other charges from escrow accounts by due date, and for reporting such failure to pay information to credit reporting agencies. Authorizes discretionary annual premium reduction after three years of own time payments by the borrower and mandatory reduction after five years. Requires refund of excess upfront premium charged Higher-Risk mortgagors. Requires HUD to consider of cost of repairs and maintaining existing affordability restrictions in determining market value of multifamily properties in noncompetitive sales to states and localities. Same; also requires HUD report on updating FHA processes and technology so FHA origination, insurance and servicing procedures conform with secondary market Similar to H.R except it is limited to multifamily programs and sunsets October 1, This would prohibit an MIP increase in FY 2008 and FY 2009, but does not extend into FY 2010 or beyond. Requires fraud prevention quality control prevention screening within eighteen months of date of enactment; expands existing federal statute criminalizing fraud against federal agencies to include FHA. Expands eligibility for post-purchase homeownership counseling to include borrowers having trouble meeting monthly obligations due to death, divorce, medical expenses; significant property damage or large property tax increase. Creates pilot program with new limits for cost of energy efficiency improvements to be included in mortgage amount; pilot program limited to 5% of loans originated in previous year. Statement by HUD Secretary Alphonso Jackson on Passage of FHA ModernizationLegislation by the U.S. Senate I applaud the Senate's overwhelming passage today of an FHA Modernization bill that will provide hundreds of thousands of hard working American families a safer mortgage option whether they're looking to purchase a home or refinance an existing mortgage. HUD's Federal Housing Administration can provide many homeowners with a fairer, more affordable, and more sustainable alternative to costly subprime loans. I especially appreciate the bipartisan leadership of Senators Chris Dodd and Mel Martinez in our effort to reform FHA. 8