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H.R. 5818 (110th): Neighborhood Stabilization Act of 2008


The text of the bill below is as of Apr 16, 2008 (Introduced).


I

110th CONGRESS

2d Session

H. R. 5818

IN THE HOUSE OF REPRESENTATIVES

April 16, 2008

(for herself, Mr. Frank of Massachusetts, Mrs. Maloney of New York, Mr. Watt, Mr. Mahoney of Florida, Ms. Velázquez, Mr. Al Green of Texas, Mr. Gutierrez, Mr. Lynch, Mr. Carson, Mr. Ellison, and Mr. Clay) introduced the following bill; which was referred to the Committee on Financial Services

A BILL

To authorize the Secretary of Housing and Urban Development to make loans to States to acquire foreclosed housing and to make grants to States for related costs.

1.

Short title

This Act may be cited as the Neighborhood Stabilization Act of 2008.

2.

Congressional purposes

The purposes of this Act are—

(1)

to establish a loan and grant program administered by the Department of Housing and Urban Development to help States purchase and rehabilitate owner-vacated, foreclosed homes with the goal of stabilizing and occupying them as soon as possible, either through resale or rental to qualified families;

(2)

to distribute these loans and grants to areas with the highest foreclosure levels;

(3)

to provide incentives for States to use the funds to stabilize as many properties as possible; and

(4)

to provide housing for low- and moderate-income families, especially those that have lost homes to foreclosure.

3.

Loans and grants to States

The Secretary of Housing and Urban Development shall, subject to the availability of amounts under section 12, make grants under section 5(a) to qualified States and make loans under section 6 in accordance with the approved plans of qualified States, for use to carry out eligible housing stimulus activities under section 7.

4.

Qualified plans

(a)

In general

The Secretary may make a grant under this Act only to a State, and may allocate a loan authority amount under this Act only for a State, that has submitted to the Secretary a plan that meets the requirements under this section and has been approved under this section.

(b)

Contents

A plan under this section for a State shall—

(1)

designate a State housing finance agency, or other agency, department, or entity of the State, or any other designee, as the State administrator to act on behalf of the State for purposes of this Act;

(2)

describe the housing stimulus activities under section 7 to be carried out with assistance under this Act for the State by the entities identified pursuant to paragraph (1) of this subsection;

(3)

describe how such activities will help restore or improve the viability of neighborhoods by providing for purchase or occupancy of qualified foreclosed properties as soon as practicable and in a manner that will facilitate repayment of the loans provided under this Act for carrying out such activities;

(4)

set forth the procedures that the State will use to allocate grant and loan amounts and monitor for compliance with the requirements of section 7;

(5)

provide that grant and loan amounts provided under this Act for the State will be used only for eligible housing stimulus activities under section 7 that are eligible under such section for assistance with grant or loan amounts, as applicable;

(6)

provide preference for activities that serve the lowest income families, who otherwise meet the income requirements under section 7, for the longest period and homeowners, who otherwise meet such income requirements, whose mortgages have been foreclosed;

(7)

describe any other preferences the State may establish, such as housing for school teachers, veterans, workforce, or homeless persons;

(8)

provide for obligation and outlay of grant amounts, and for loan commitments and disbursement, in accordance with the requirements under section 9; and

(9)

in the case of any grant or loan amounts, that will be invested with the possibility of a return on investment, provide for use of any return on such investment only for one or more eligible housing stimulus activities under section 7.

(c)

Submission

(1)

In general

The Secretary shall provide for States to submit plans under this section to the Secretary and shall establish requirements for the contents and form of such plans. Except in the case of plan resubmitted pursuant to subsection (d)(3), the Secretary may not accept or consider a plan unless the plan is submitted to the Secretary before the expiration of the 30-day period beginning upon the date of the enactment of this Act.

(2)

Public approval

A State may not submit a plan to the Secretary unless the plan is approved by the governor of the State after a public hearing on the plan held pursuant to reasonable public notice.

(d)

Review and approval

(1)

Timing

The Secretary shall review, and approve or disapprove, each plan submitted or resubmitted pursuant to paragraph (3) in compliance with the requirements established under this section before the expiration of the 15-day period beginning upon the submission of the plan. If the Secretary does not approve or disapprove a plan that is submitted or resubmitted in accordance with the requirements under this section before the expiration of such 15-day period and notify the State of such approval or disapproval, the plan shall be considered approved for purposes of this section.

(2)

Standard for disapproval

The Secretary may disapprove a plan only if the plan fails to comply with the requirements of this Act.

(3)

Resubmission

If the Secretary disapproves the plan of a State, the Secretary shall submit to the State the reasons for the disapproval, and the State may, during the 15-day period that begins upon notification of such disapproval and the reasons for such disapproval, submit to the Secretary a revised plan for review and approval in accordance with this subsection.

5.

Allocation of amounts

(a)

Grants

From the total amount made available under section 12(a) for grants under this Act, the Secretary shall make a grant to each qualified State in the grant amount determined under subsection (c) of this section for the qualified State.

(b)

Loans

From the aggregate amount of authority for the outstanding principal balance of loans made under this Act pursuant to section 12(b)(1), the Secretary shall allocate such authority for loans under this Act for each qualified State in the loan authority amount determined under subsection (c) of this section for the qualified State.

(c)

Grant amounts and loan authority amounts

The grant amount or loan authority amount for a qualified State shall be the foreclosure grant share or foreclosure loan share, respectively, for the State determined under subsection (d), as such share is adjusted in accordance with an index established or selected by the Secretary to account for differences between qualified States in the median price of single family housing in such States.

(d)

Foreclosure shares

For purposes of this section:

(1)

Grant share

The foreclosure grant share for a qualified State shall be the amount that bears the same ratio to the total amount made available under section 12(a) as the number of foreclosures on mortgages for single family housing occurring in such State during the most recently completed four calendar quarters for which such information is available, as determined by the Secretary, bears to the aggregate number of such foreclosures occurring in all qualified States during such calendar quarters.

(2)

Loan share

The foreclosure loan share for a qualified State shall be the amount that bears the same ratio to the aggregate amount of the principal balance of loans that may be outstanding at any time under this Act pursuant to section 12(b)(1) as the number of foreclosures on mortgages for single family housing occurring in such State during the most recently completed four calendar quarters for which such information is available, as determined by the Secretary, bears to the aggregate number of such foreclosures occurring in all qualified States during such calendar quarters.

(e)

Distribution of full amount

The Secretary shall establish the index referred to in subsection (c) and the grant and loan authority amounts for the qualified States in a manner that provides that—

(1)

the aggregate of the grant amounts for all qualified States is equal to the total amount made available under section 12(a); and

(2)

the aggregate of the loan authority amounts for all qualified States is equal to the aggregate amount of authority for the outstanding principal balance of all loans made under this Act pursuant to section 12(b)(1).

(f)

Requirement To allocate to qualified metropolitan cities

Of any grant amounts and loan authority amounts allocated pursuant to this section for a State, such State shall allocate for each qualified metropolitan city located in such State a portion of such grant amounts and such loan authority amounts that bears the same ratio to such grant amounts and loan authority amounts, respectively, allocated for the State as the number of foreclosures on mortgages for single family housing occurring in such qualified metropolitan city during the most recently completed four calendar quarters for which such information is available, as determined by the Secretary, bears to the aggregate number of such foreclosures occurring in the State during such calendar quarters. A State may adjust such allocation to account for differences between median single family housing prices in the State and in qualified metropolitan cities in the State.

6.

Loans

(a)

Requirement of loan authority amount

The Secretary may make a loan under this Act for use in a qualified State only to the extent and in such amounts that loan authority amounts for such State are available.

(b)

Revolving availability of loan authority amount

The loan authority amount allocated for each qualified State shall—

(1)

upon the Secretary entering into a binding commitment to make a loan under this Act for use in such State, be decreased by the amount of the principal obligation of such loan; and

(2)

upon the repayment to the Secretary by any borrower of any principal amounts borrowed under a loan this Act for use in such State, be increased by the amount of principal repaid.

(c)

Assisted entities

The loan authority amount of a qualified State may be used under section 7(a) to provide a loan for the purchase or finance the purchase of qualified foreclosed housing by—

(1)

the State;

(2)

a unit of local government or a local governmental entity; or

(3)

a nonprofit organization.

(d)

Loan terms

Each loan provided under this Act from the loan authority amount of a qualified State shall—

(1)

bear no interest;

(2)

have a term to maturity of—

(A)

2 years, in the case of any loan made to purchase or finance the purchase of qualified foreclosed housing for use under section 7(a)(1) for homeownership; and

(B)

5 years, in the case of any loan made to purchase or finance the purchase of qualified foreclosed housing for use under section 7(a)(2) for rental;

(3)

not provide for amortization of the principal obligation of the loan during such term;

(4)

require payment of the original principal obligation under the loan only upon the expiration of the term of the loan; and

(5)

have such other terms and conditions as the Secretary may provide.

(e)

Procedure

Upon a request, by a State administrator, for a loan under this Act from the loan authority amount of the qualified State for which such administrator acts, the Secretary shall enter into a loan agreement as the Secretary determines appropriate with the borrower under the loan and shall disburse the loan amount in accordance with such terms, subject only to the absence of sufficient loan authority amount for the State.

(f)

Eligibility for repeat lending

A loan under this Act may be made to an entity that has previously borrowed amounts under a loan under this Act only if such entity has repaid 95 percent or more of the amounts due, including principal and interest, under all previous such loans.

(g)

Sunset

The Secretary may not enter into any commitment to make a loan under this Act, or make any such loan, after the expiration of the 24-month period beginning on the date of the enactment of this Act.

7.

Eligible housing stimulus activities

(a)

Loan amounts

Amounts provided under a loan under this Act for a qualified State shall be used, in accordance with the approved plan of such State, only for the following activities:

(1)

Homeownership housing provision

To purchase or finance the purchase of qualified foreclosed housing for resale as housing for homeownership to families having incomes that do not exceed 140 percent of the median income for the area in which the housing is located.

(2)

Rental housing provision

To purchase or finance the purchase of qualified foreclosed housing for use only as rental housing, subject to the following requirements:

(A)

Qualified tenants

All dwelling units in the housing purchased or financed using any loan amounts shall be available for rental only by families whose incomes do not exceed 100 percent of the median income for the area in which the housing is located.

(B)

Rents

Rents for each dwelling unit in the housing purchase or financed using any loan amounts shall be established at amounts that do not exceed market rents for comparable dwelling units located in the area in which the housing is located and in accordance with such requirements as the Secretary shall establish to ensure that rents are established in a fair, objective, and arms-length manner.

(3)

Housing rehabilitation

To rehabilitate qualified foreclosed housing acquired with assistance provided pursuant to this subsection, to the extent necessary to comply with applicable laws, codes, and other requirements relating to housing safety, quality, and habitability, for the purpose of reselling the housing, to the extent possible, during the 3-month period that begins upon completion of rehabilitation and at a price that is as close as possible to the acquisition price of the housing.

(b)

Grant amounts

Grant amounts provided under this Act to a qualified State shall be used, in accordance with the approved plan of such State, only for the following activities:

(1)

Operating and holding costs

For costs of holding and operating qualified foreclosed housing acquired pursuant to subsection (a), including costs of management, taxes, handling, insurance, and other related costs.

(2)

Costs relating to property acquisition

For costs relating to acquisition of qualified foreclosed housing pursuant to subsection (a), including reasonable closing costs.

(3)

Administrative costs

For administrative and planning costs of the State in administering loan authority amounts and grant amounts under this Act, except that the amount of grant amounts provided under this Act to a State that may be used under this paragraph shall not exceed the amount equal to 4 percent of the sum of the grants amounts provided to the State pursuant to section 5(a) and the loan authority amount allocated to the State pursuant to section 5(b).

(c)

Prohibited uses

The Secretary shall, by regulation, set forth prohibited uses of grant or loan amounts under this Act, which shall include use for—

(1)

political activities;

(2)

advocacy;

(3)

lobbying, whether directly or through other parties;

(4)

counseling services;

(5)

travel expenses; and

(6)

preparing or providing advice on tax returns.

(d)

Income targeting requirement

(1)

Very low-income families

Not less than 50 percent of the total grant amounts a State or qualified metropolitan city makes available under this Act shall be used for activities under subsection (b) in connection with providing housing for families whose incomes do not exceed 50 percent of the median income for the area in which the housing is located.

(2)

Extremely low-income families

Not less than 50 percent of the total grant amounts a State or qualified metropolitan city makes available under paragraph (1) shall be used for activities under subsection (b) in connection with providing housing for families whose incomes do not exceed 30 percent of the median income for the area in which the housing is located.

(3)

Waiver

The Secretary may waive the requirement under paragraph (2) with respect to a State or qualified metropolitan city if such State or city demonstrates to the satisfaction of the Secretary that it has attempted to, but can not comply with, such requirement.

(e)

Security

The Secretary shall retain a lien on any qualified foreclosed housing purchased or financed with a loan under this section in the amount of the principal obligation under the loan and interest due under the loan.

(f)

Qualified homeowners

This Act may not be construed to prevent the resale of qualified foreclosed housing to a prior owner or occupant of such housing who meets the income requirements of this Act.

(g)

Voucher nondiscrimination

A recipient of amounts from a loan or grant under this Act may not refuse to lease a dwelling unit in housing assisted with any such loan or grant amounts to a holder of a voucher or certificate of eligibility under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) because of the status of the prospective tenant as such a holder.

(h)

Effect of foreclosure on preexisting lease

(1)

In general

In the case of any foreclosure on any dwelling or residential real property acquired with any amounts made available under this Act, any successor in interest in such property pursuant to the foreclosure shall assume such interest subject to—

(A)

the provision, by the successor in interest, of a notice to vacate to any bona fide tenant at least 90 days before the effective date of the notice to vacate; and

(B)

the rights of any bona fide tenant, as of the date of such notice of foreclosure—

(i)

under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease or the end of the 6-month period beginning on the date of the notice of foreclosure, whichever occurs first, subject to the receipt by the tenant of the 90-day notice under subparagraph (A); or

(ii)

without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90-day notice under subparagraph (A), except that nothing under this subparagraph shall affect the requirements for termination of any federally subsidized tenancy.

(2)

Bona fide lease or tenancy

For purposes of this section, a lease or tenancy shall be considered bona fide only if—

(A)

the mortgagor under the contract is not the tenant;

(B)

the lease or tenancy was the result of an arms-length transaction; or

(C)

the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property.

8.

Shared appreciation agreement

Notwithstanding any other provision of this Act, no amounts from a loan or grant under this Act may be used under section 7 for any qualified foreclosed housing unless such binding agreements are entered into, in accordance with such requirements as the Secretary shall establish, that ensure that the Federal Government shall, upon any sale or disposition of the qualified foreclosed housing by the owner who acquires the housing pursuant to assistance under this Act, receive an amount equal to 20 percent of the difference between the net proceeds from such sale or disposition and the cost of such acquisition of the housing pursuant to assistance under this Act, after deductions for expenditures paid or incurred after the date of such acquisition that are properly chargeable to capital account (within the meaning of section 1016 of the Internal Revenue Code of 1986) with respect to such housing.

9.

Spending requirements

(a)

In general

Each qualified State that receives a grant under this Act or is allocated loan authority amounts under this Act pursuant to section 5(b) shall—

(1)

commence obligation of such grant amounts and commitment of such loan authority amounts not later than the expiration of the 45-day period that begins upon approval of the approved plan of State;

(2)

obligate all such grant amounts and enter into commitments for all such loan authority amounts not later than the expiration of the 180-day period beginning upon such approval; and

(3)

except as provided in subsection (b), outlay all such grant amounts and disburse all such loan authority amounts not later than the 12-month period that begins upon such approval.

This subsection shall not apply to loan authority amounts of a qualified State attributable, pursuant to section 6(b)(2), to repayment of principal amounts of loans under this Act.
(b)

Exception to spending requirement

If a State in good faith makes a request, in the plan submitted to the Secretary pursuant to section 4 or otherwise after approval of such plan, for extension of the period referred to in paragraph (1), (2), or (3) of subsection (a) of this section, the Secretary may extend the period for not more than 3 months.

10.

Accountability

(a)

Reporting

Each qualified State that receives a grant or allocation of loan authority amount under this Act shall submit a report to the Secretary, not later than the expiration of the 12-month period beginning upon the approval of the qualified plan by the Secretary, regarding use of such amounts which shall contain such information as the Secretary shall require.

(b)

Misuse of amounts

If the Secretary determines that any amounts from a grant or loan under this Act for a qualified State has been used in a manner that is materially in violation of this Act, any regulations issued under this Act, or any requirements or conditions under which such amounts were provided, the Secretary shall require the State to reimburse the Treasury of the United States in the amount of any such misused funds.

11.

Definitions

For purposes of this Act, the following definitions shall apply:

(1)

Approved plan

The term approved plan means a plan of a State that has been approved pursuant to section 4.

(2)

Covered multifamily housing

The term covered multifamily housing means a residential structure that—

(A)

consists of 20 or fewer dwelling units; and

(B)

is predominantly vacant.

(3)

Loan authority amount

The term loan authority amount means, with respect to a qualified State, the amount of loan authority available pursuant to section 12(b)(1) that is allocated for the State pursuant to section 5(b), as such amount may be increased or decreased pursuant to section 6(b).

(4)

Nonprofit organization

The term nonprofit organization has the meaning given such term in section 104 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12704).

(5)

Qualified foreclosed housing

The term qualified foreclosed housing means housing that—

(A)
(i)

is single family housing that is not occupied or vacated by an owner, pursuant to foreclosure or assignment of the mortgage on the housing or forfeiture of the housing; or

(ii)

is covered multifamily housing;

(B)

is owned by a lender, mortgage company, investor, financial institution, or other such entity, or any government entity, pursuant to foreclosure or assignment of the mortgage on the housing or forfeiture of the housing; and

(C)

has a purchase price—

(i)

in the case of single family housing, that does not exceed 90 percent of the average purchase price for single family housing in the area in which the housing is located, as determined by the Secretary.

(ii)

in the case of covered multifamily housing, that does not exceed the dollar amount limitation, for housing of the applicable size located in the area in which the housing is located, on the amount of a principal obligation of a mortgage eligible for insurance under section 207 of the National Housing Act (12 U.S.C. 1713), as in effect on the date of the enactment of this Act pursuant to such section 207(c)(3)(A) and section 206A of such Act (12 U.S.C. 1712a).

(6)

Qualified metropolitan city

The term qualified metropolitan city means an incorporated place that is among the 25 most populous incorporated places in the United States, as determined according to data from the most recent decennial census that is published before the date of the enactment of this Act.

(7)

Qualified State

The term qualified State means a State for which there is an approved plan.

(8)

Secretary

The term Secretary means the Secretary of Housing and Urban Development.

(9)

Single family housing

The term single family housing means a residential structure consisting of from one to four dwelling units.

(10)

State

The term State means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, the Virgin Islands, American Samoa, and other territory or possession of the United States.

(11)

State administrator

The term State administrator means the entity of a qualified State that is designated, pursuant to section 4(b)(1), in the approved plan of the State to act for the State for purposes of this Act.

12.

Funding

(a)

Grants

There is authorized to be appropriated to the Secretary of the Treasury $7,500,000,000 for grants under this Act.

(b)

Direct loans

(1)

Loan commitment authority limitation

Subject only to the availability of sufficient amounts for the costs (as such term is defined in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) of such loans and the absence of qualified requests for loans, the Secretary shall enter into commitments to make loans under this Act, and shall make such loans, in an amount such that the aggregate outstanding principal balance of such loans does not at any time exceed $7,500,000,000.

(2)

Authorization of appropriations for costs

There is authorized to be appropriated such sums as may be necessary for costs (as such term is defined in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) of loans under this Act.

13.

Regulations and implementation

(a)

Regulations

The Secretary shall issue any regulations necessary to carry out this Act.

(b)

Implementation

Pending the effectiveness of regulations issued pursuant to subsection (a), the Secretary shall take such action as may be necessary to implement this Act by notice, guidance, and interim rules.