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HR 892119th CongressIn Committee

Mortgage Rate Reduction Act

Introduced: Jan 31, 2025
View on Congress.gov
Standard Summary
Comprehensive overview in 1-2 paragraphs

Mortgage Rate Reduction Act would expand federal mortgage programs to include second liens (second mortgages) under FHA, USDA, and VA authorities, but only in limited ways designed to help people assume existing loans when the first mortgage is already insured or guaranteed. Specifically, it would allow the FHA to insure second mortgages on properties where a first mortgage is insured under the FHA’s 203 program, and would allow USDA and VA to guarantee or insure second liens if the first lien is likewise insured or guaranteed. The bill also requires the agencies to publicly disclose certain loan information, by listing properties with insured/guaranteed loans and their origination dates on a public website within one year of enactment. The overall goal is to facilitate the transfer of real estate by making it easier for a buyer to assume the existing first loan, with a secondary financing option provided through insured/guaranteed second liens.

Key Points

  • 1Sense of Congress: Encourages expanding insurance/guarantee to second mortgages to facilitate the assumption of first mortgages when a property is sold to a new purchaser.
  • 2FHA expansion: Amends the National Housing Act so FHA can insure a second mortgage on real estate that already has a first mortgage insured under Section 203; clarifies what counts as a “second mortgage” for these purposes.
  • 3USDA expansion: Allows the Department of Agriculture to guarantee a second mortgage for eligible housing under Section 502(h) if the first mortgage is insured/guaranteed, to aid in financing an assumption by a subsequent purchaser.
  • 4VA expansion: Allows the VA to insure/guarantee a second lien on real estate housing loans only if the first lien is insured/guaranteed by VA, to support the sale and assumption of the first mortgage.
  • 5Public disclosure: Requires FHA, USDA, and VA to publish, within one year, lists on a public website of properties with insured/guaranteed loans, including property address and loan origination date for each loan.

Impact Areas

Primary groups/areas affected:- Homebuyers and property purchasers seeking to assume existing mortgages, who could benefit from a secondary financing option (second liens) backed by federal programs.Secondary groups/areas affected:- Lenders and servicers who participate in FHA, USDA, and VA loan programs, as they would have expanded eligibility criteria and new types of insured/guaranteed loans to manage.Additional impacts:- Increased transparency through public disclosure of loan properties and origination dates.- Potential changes in risk profiles for federal mortgage insurance/guarantee programs due to exposure on second liens.- Administrative work to implement new underwriting rules, revise program definitions, and maintain public disclosure websites.
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