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Committee on Financial Services

United States House of Representatives

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H.R. 1776
THE "AMERICAN HOMEOWNERSHIP AND ECONOMIC
OPPORTUNITY ACT OF 2000"

SECTION-BY-SECTION
COMMITTEE PRINT dated 2/18/2000
As ordered reported by the Housing Subcommittee on 2/15/2000


Section 1. Short Title and Table of Contents. States that the act may be cited as the "American Homeownership and Economic Opportunity Act of 2000."

Section 2. Findings and purpose. Congressional findings are that expanding homeownership opportunities should be a national priority, that there is an abundance of conventional capital available, and that communities possess ample will and creativity to provide opportunities uniquely designed to assist their citizens to achieve homeownership. Purposes of the act are to encourage homeownership by families not otherwise able to afford homeownership, to promote the ability of the private sector to produce affordable housing without excessive government regulation, to expand homeownership through tax incentives such as the home mortgage-interest deduction, and to facilitate the availability of capital for homeownership opportunities.

TITLE I Removal Of Barriers to Housing Affordability

Section 101. Short title. This title may be referred to as the "Housing Affordability Barrier Removal Act of 2000."

Section 102. Housing impact analysis. Requires that all proposed federal regulations include a housing impact analysis so that a federal agency can certify that a proposed regulation would have no significant deleterious impact upon housing affordability. If a proposed rule would have a negative impact, then an opportunity is given to groups to offer an alternative that achieves the stated objectives with a less deleterious impact on housing. HUD is directed to create model impact analyses that other agencies can use for these purposes.

Section 103. Grants for regulatory barrier removal strategies. Authorizes $15 million for FY 2001 through FY 2005 for grants to States, local governments, and eligible consortia for regulatory barrier removal strategies. This is a reauthorization of the same amount under an already existing CDBG setaside (Section 107(a)(1)(H)). Grants provided for these purposes must be used in coordination with the local comprehensive housing affordability strategy ("CHAS").

Section 104. Eligibility for community development block grants. Requires a jurisdiction as a condition of eligibility under the CDBG program to make a good faith effort to reduce barriers to affordable housing identified in the CHAS submitted by the jurisdiction to HUD, without creating any new private right of action.

Section 105. Regulatory barriers clearinghouse. Creates within HUD’s Office of Policy Development and Research a "Regulatory Barriers Clearinghouse" to collect and disseminate information on, among other things, the prevalence of regulatory barriers and their effects on availability of affordable housing, and successful barrier removal strategies.

TITLE II Homeownership Through Mortgage Insurance and
Loan Guarantees

Section 201. Study of Mandatory Inspection Requirement for Single-Family Mortgage Insurance. Requires a GAO study of the inspection process for FHA properties, comparing or estimating the potential financial losses and savings to the Mutual Mortgage Insurance Fund between a system that would require a mandatory FHA inspection and the current optional inspection. The study would also review the potential impact of a mandatory FHA system on the homebuying process, particularly including underserved areas where FHA losses are the greatest and whether there is a housing quality and/or financial difference in inspected homes and those without inspections. The study would also review the current option practice and report whether consumers understand the availability of independent inspections, financed by FHA and whether their choices for an inspection are affected or pressured by market or economic forces.

Section 202. Extension of Loan Term for Manufactured Home Lots. Extends the loan terms for manufactured home lots financed by insured financial institutions from 15 years, 32 days to 20 years, 32 days.

Section 203. Neighborhood Teacher Program. Allows the sale of FHA single-family properties at discounted prices to teachers.

Section 204. Law enforcement officer homeownership pilot program. Requires the HUD Secretary to develop a pilot program designed to assist law enforcement officers to purchase homes in locally designated high crime areas. No downpayment is required. The borrower must have served as police officer for at least 6 months. The provision is primarily targeted for high-crime areas (H.R. 2931).

Section 205. Home equity conversion mortgages. Allows for the refinancing of home equity conversion mortgages (HECMs) for elderly homeowners. Reduces the single premium payment to credit the premium paid on the original loan (subject to an actuarial study); establishes a limit on origination fees that may be charged (which fees may be fully financed) and prohibits the charging of broker fees; waives counseling requirements if the borrower has received counseling in the prior five years and the increase in the principal limit exceeds refinancing costs by an amount set by the Department; and provides a disclosure under a refinanced mortgage of the total cost of refinancing and the principal limit increase.

Directs the Department to conduct an actuarial study within 180 days of the effect of reducing the refinancing premium collected under a refinancing and of the effect creating a single national loan limit for HECM reverse mortgages. Requires HUD to waive the up-front mortgage insurance premium in cases where reverse mortgage proceeds are used for costs of a qualified long-term care insurance contract.

Section 206. Preventing fraud in rehabilitation loan program. Establishes stronger anti-fraud protections in HUD’s 203(k) home acquisition and rehabilitation program. Prohibit any identity of interest between a lender, consultant, contractor, non-profit agency, real estate agent, inspector or appraiser involved in a 203(k) loan; establishes stricter, uniform criteria for approving non-profits participating in the program; requires lenders to ensure the work has been completed to the borrowers’ satisfaction through interview before dispersing the final loan payment; requires that consultants involved in 203(k) loans be certified by HUD; requires in cases of owner/occupied participants with improvements over $25,000, that the borrower go through a certified or bonded general contractor; and requires HUD to report to Congress the potential impact of eliminating the non-profit component of the program (currently non-profits comprise three to four percent. (H.R. 3617, the "Consumers’ Home Improvement Protection Act).

Section 207. FHA Insurance for Hybrid Arms. Adds a Hybrid FHA ARMS provision that will raise the current ARM cap of 30 percent of total FHA mortgage business to 40 percent. It will also authorize FHA to insure ARMs that carry fixed interest rates for the first 3 to 10 years of their term.

Section 208. Report on title I home improvement loan program. Requires HUD within one year of enactment of this act to provide Congress with a report containing recommendations for improvements to the property improvement loan insurance program under title I of the National Housing Act. In determining such recommendations, the Secretary shall consult with interested persons and organizations, including the lending industry and consumer organizations.

TITLE III Section 8 Homeownership Option

Section 301. Down-payment assistance. PHAs are authorized to provide down-payment assistance in the form of a single grant, in lieu of monthly assistance. Such down-payment assistance shall not exceed the total amount of monthly assistance received by the tenant for the first year of assistance. For FY 2000 and thereafter, assistance under this section shall be available to the extent sums are appropriated.

Section 302. Pilot program for homeownership assistance for disabled families. Adds a pilot program to demonstrate the use of tenant-based Section 8 assistance (Section 8 vouchers) for the purchase of a home that will be owned by 1 or more members of the disabled family and will be occupied by that family and meets certain requirements. Requirements include purchase of the property within three years of enactment of this Act; demonstrated income level from employment or other sources (including public assistance), that is not less that twice the Section 8 payment standard established by the PHA; participation in a housing counseling program provided by the PHA, and other requirements established by the PHA in accordance with requirements established by the Secretary of HUD.

TITLE IV Community Development Block Grants

Section 401. Reauthorization. Reauthorizes the Community Development Block Grant (CDBG) program at $4.9 billion for FY 2001 and at such sums as may be appropriated thereafter through 2005.

Section 402. Prohibition of Set-Asides. Prohibits set-asides within the CDBG program.

Section 403. Homeownership for Municipal Employees. Provides that a mayor or local governing official may use CDBG funds to assist certain municipal employees to purchase homes within their jurisdiction. These employees would be uniformed municipal employees (police, sanitation workers, firemen) and teachers. Assistance can take the form of downpayment assistance, help with closing costs, housing counseling, or subsidizing mortgage rates. Eligible employees are those with incomes at or below 150% of area median income.

Section 404. Technical Amendment relating to Brownfields. Makes environmental cleanup and economic development activities related to Brownfields a permanently eligible activity under Community Development Block Grants by permanently amending the Housing and Community Development Act of 1974.

Section 405. Income Eligibility. Requires HUD to grant exceptions for at least ten jurisdictions of its income eligibility limits on the use of CDBG and HOME funds. Currently, HOME and CDBG grantees are capped at 80% of the national median income instead of being allowed to serve households with incomes of 80% of median of the local area. For those jurisdictions that HUD selects based on housing costs and average income, the relevant median income for purposes of the CDBG/HOME limits will be the local median, rather than the national median.

Section 406. Housing opportunities for persons with AIDS. Reauthorizes the Housing Opportunities For People with AIDS Program (HOPWA) at $260 million for FY 2001, and thereafter at such sums as may be appropriated through 2005.

TITLE V HOME Investment Partnership Program

Section 501. Reauthorization. Reauthorizes the HOME Investment Partnerships Program through FY 2003, at $1.65 billion for FY 2001 and at such sums as may be appropriated thereafter through 2005.

Section 502. Eligibility of limited equity cooperatives and mutual housing associations. Amends HOME to make eligible mutual housing associations and limited equity cooperatives.

Section 503. Leveraging affordable housing investment through local loan pools. Allows HOME funds to be used as leverage in connection with the creation of greater "loan pools" (ten times the amount of the HOME funds invested in such a pool) without imposing the HOME income restrictions on the entire pool (i.e. allows "mixed-income" pools.

Section 504. Loan guarantees. Creates a HOME Loan Guarantee program, by adding a provision allowing the Secretary to guarantee (similar to CDBG loan guarantees) the obligations of participating jurisdictions made in connection with affordable housing efforts by pledging as security a participating jurisdiction's future HOME allocations (up to five times the latest allocation).

Section 505. Homeownership for Municipal Employees. Provides that a mayor or local governing official may use HOME funds to assist certain municipal employees to purchase homes within their jurisdiction. These employees would be uniformed municipal employees (police, sanitation workers, firemen) and teachers. Assistance can take the form of downpayment assistance, help with closing costs, housing counseling, or subsidizing mortgage rates. Eligible employees are those with incomes at or below 115% of area median income.

Section 506. Use of section 8 assistance by "grandfamilies" to rent dwelling unit projects assisted under HOME program. Allows HOME funds (in rental units otherwise not eligible for HOME funds) to be used for facilities with units with low-income families having a grandparent residing with a grandchild, with neither of the child's parents residing in the household.

TITLE VI Local Home Ownership Initiatives

Section 601. Reauthorization of Neighborhood Reinvestment Corporation. Reauthorizes the Neighborhood Reinvestment Corporation at $90 million for FY 2001 and at such sums as may be necessary through FY 2005.

Section 602. Homeownership zones. Provides grants for use in "Homeownership Zones", which are designated areas in which large scale development projects are designed to reclaim distressed neighborhoods by creating homeownership opportunities for low and moderate income families. Authorizes $25 million in grants for FY 2001 and such sums as may necessary for FY 2002, to remain available until expended.

Section 603. Lease-to-own. Provides for a sense of the Congress that residential tenancies under lease to own provisions can facilitate homeownership by low and moderate income families. Requires the Secretary to provide a report to Congress within 3 months after enactment of the act, analyzing whether lease to own provision can be incorporated within the HOME investment partnerships program, the public housing program, and other federally-assisted housing programs.

Section 604. Local capacity building. Amends Section 4 of Public Law 103-120 (the "HUD Demonstration Act"), to add the National Association of Housing Partnerships as an intermediary organization eligible for federal grants to develop the capacity and ability of community development corporations and community housing development organizations to undertake community development and affordable housing projects.

Section 605. Consolidated Application and Planning Requirement and Super NOFA. Establishes a statutory basis for consolidating several Notices of Funding Availability (NOFAs) for various HUD programs into one "SuperNOFA", thereby streamlining the process.

Section 606. Assistance for self-help housing providers. Reauthorizes the Self-Help Housing Providers through FY 2003, at $25 million for FY 2001 and such sums as may be necessary for each of FY 2002 and 2003. Allows projects with 5 or more units to use their funds over a 3-year period. Allows entities to advance themselves funds prior to completion of environmental reviews for purposes of land acquisition {CHECK}.

Section 607. Housing counseling organizations. Adds "cooperative housing" as a form of homeownership eligible for housing counseling funds.

Title VII Indian Housing Homeownership

Section 701. Indian Lands Title Report Commission. Subject to amounts appropriated, creates an Indian Lands Title Report Commission to develop recommended approaches to improving how the Bureau of Indian Affairs conducts title reviews in connection with the sale of Indian lands. Receipt of a certificate from BIA is a prerequisite to any sales transaction on Indian lands, and the current procedure is overly burdensome and presents a regulatory barrier to increasing homeownership on Indian lands.

The Commission is composed of 12 members with knowledge of Indian land title issues (4 appointed by the President, 4 by the President from recommendations made by the Chairman of the Senate Committee on Banking, Housing and Urban Affairs Committee, and 4 by President from recommendations made by the Chairman of the House Committee on Banking and Financial Services). Authorized at $500,000.

Section 702. Loan guarantees for Indian housing. Permanently authorizes the Section 184 Loan Guarantee Program for Indian housing.

Section 703. Native American housing assistance. Makes the following amendments to the Native American Housing and Self-Determination Act of 1996 (NAHASDA):

Restricts Secretary’s authority to grant waiver of Indian housing plan requirements upon noncompliance due to circumstances beyond the control of the Indian tribe to a period of 90 days. Allows Secretary to waive requirement for a local cooperation agreement provided the recipient has made a good faith effort to comply and agrees to make payments in lieu of taxes to the jurisdiction.

Sets forth requirement for assistance to Indian families that are not low-income upon a showing of need. Eliminates separate Indian housing plan requirements for small Indian tribes.

Provides Secretary with authority to waive statutory requirements of environmental reviews upon a determination that failure to comply does not undermine goals of the National Environmental Policy Act, will not threaten the health or safety of the community, is the result of inadvertent error and can be corrected by the recipient of funding. The intent is to address problems resulting from procedural, rather than substantive, noncompliance.

Revises provisions regarding audits and reviews by the Secretary by: making applicable the requirements of the Single Audit Act to tribal housing entities, allowing these to be treated as a non-Federal entities; permitting the Secretary to conduct audits to determine whether the grant recipient: has carried out eligible activities in a timely manner; has met certification requirements; has an ongoing capacity to carry out eligible activities in a timely manner; and has complied with the proposed housing plan.

Prescribes formula allocation for Indian housing authorities operating fewer than 250 units by requiring the amount of assistance provided to these tribes to be based on an average of their allocations from the prior five (5) fiscal years (fiscal years 1992 through 1997).

Amends hearing requirements to allow the Secretary to take immediate remedial action if the Secretary determines that the recipient has failed to comply substantially with any material provision of NAHASDA resulting in continued federal expenditures not authorized by law.

Upon noncompliance with the law due to technical incapacity, requires a recipient to enter into a "performance agreement" with the Secretary before the Secretary can provide technical assistance.

For Section 8 vouchers currently being used by an Indian tribe, requires counting such vouchers under the NAHASDA block grant allocation formula to ensure that families currently participating in the Section 8 voucher program will continue to be funded.

Repeals requirement regarding the certification of compliance with subsidy layering requirements with respect to housing assisted with grant amounts provided under the Act.

Title VIII Transfer of Unoccupied and Substandard HUD-Held Housing to Local Governments and Community Development Corporations.

Section 801. Transfer of Unoccupied and Substandard HUD-Held Housing to Local Governments and Community Development Corporations. Amends Section 204 of the VA, HUD and Independent Agencies Act of 1997, which sets forth the authority of the HUD Secretary to engage in property disposition activities. Requires the HUD Secretary to transfer, to the maximum extent practicable, ownership of eligible properties (HUD-owned substandard multifamily, unoccupied multifamily, or unoccupied single-family properties) to a unit of local government having jurisdiction for the area where the property is located, or to a community development corporation within such jurisdiction, on certain terms and conditions. Eligible properties do not include any property subject to a specific sale agreement under section 204(h) of the National Housing Act, as amended by Section 602 of the FY 99 VA, HUD and Independent Agencies Appropriations Act. Requires the HUD Secretary to issue a report within 6 months of enactment of the Act identifying any communities designated as "revitalization communities" pursuant to section 204(h) of the National Housing Act, as amended.

Adds provision requiring that properties eligible are those which have been HUD-held for at least six months, and changes to definition of "cost-recovery basis" to incorporate appraised cost of property plus carrying costs.

Title IX Private Mortgage Insurance Cancellation and Termination

Section 901. Short title. Provides that this title may be cited as the "Private Mortgage Insurance Technical Corrections and Clarification Act".

Section 902. Changes in amortization schedule. Clarifies that private mortgage insurance termination/cancellation rights for adjustable rate mortgages (ARMs) are based on the amortization schedule then in effect (the most recent calculation); treats a balloon mortgages like an ARM (uses most recent amortization schedule); bases cancellation/termination rights on modified terms if loan modification occurs.

Section 903. Deletion of ambiguous references to residential mortgages. Clarifies that borrowers' PMI cancellation and termination rights apply only to mortgages created after the effective date of the legislation (one year after the date of enactment).

Section 904. Cancellation rights after cancellation date. Clarifies that the good payment history requirement in the bill is calculated as of the later of the cancellation date or, the date on which a borrower requests cancellation. Provides that if a borrower is not current on payments as of the termination date, but later becomes current, termination shall not take place until the first day of following month (eliminates lender need to check and cancel PMI every day of the month). Clarifies that PMI cancellation or termination does not eliminate requirement to make PMI payments legitimately accrued prior to any cancellation or termination of PMI.

Section 905. Clarification of cancellation and termination issues and lender paid mortgage insurance disclosure requirements. Adds provision clarifying cancellation and termination issues related to terms ambiguous in law, including "good payment history", "automatic termination" and "accrued obligation for premium payments". Clarifies that PMI cancellation rights exist on the cancellation date, or any later date, as long as the borrower complies with all cancellation requirements. Clarifies that borrower must be current on loan payments to exercise cancellation.

Section 906. Definitions. Sets forth definitions of: a) refinanced; b) midpoint of the amortization period; d) original value; and e) principal residence.

Title X Rural Housing Homeownership

Section 1001. Promissory note requirement under housing repair loan program. Increases amount of promissory note (instead of use of liens on property) amounts from $2,500 to $7,500 (adjusted from late 1970’s amount to account for home repairs, e.g. roofing, heating systems, windows, without going through formal loan process).

Section 1002. Limited partnership eligibility for farm labor housing loans. Technical amendment that clarifies that limited partnerships are eligible for loans under Sec. 514 (Farm Labor Housing) in cases where the general partner is a nonprofit entity.

Section 1003. Project accounting records and practices. Sets forth accounting and recordkeeping requirements, including maintaining accounting records in accordance with generally accepted accounting principles for all projects that receive funds under this program; retaining records available for inspection by the Secretary for not less than six years, and other requirements.

Section 1004. Operating assistance for migrant farmworkers projects. Allows Sec. 521 operating assistance for farm labor housing complexes where "mixed" migrant and annual workers will live.

Section 1005. Multifamily rental housing loan guarantee program. Allows Native Americans to become eligible borrowers under the multifamily loan guarantee program; authorizes a "balloon payment" as a financing option; allow fees from lenders to be used to help offset program costs; and repeals existing prohibition against the transfer of property title from the lender to the federal government as well as the prohibition against the transfer of liability from one borrower to another.

Section 1006. Enforcement provisions. Provides criminal penalties and civil sanctions for violations of program requirements.

Section 1007. Amendments to title 18 of the United States Code. Amends Title 18 of the U.S. Code—Money Laundering— to strengthen enforcement and prosecution of program fraud and abuse.



 

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