SECTION 1. SHORT TITLE.

    This Act may be cited as the ``FHA-Insured Hospital Conversion and 
Re-Utilization Act''.

SEC. 2. GRANTS FOR FHA-INSURED HOSPITALS.

    Section 242 of the National Housing Act (12 U.S.C. 1715z-7) is 
amended by adding at the end the following new subsections:
    ``(i) Grants for Hospital Conversion and Re-Utilization.--
            ``(1) In general.--To the extent amounts are made available 
        for grants under this subsection, the Secretary may make grants 
        in accordance with this subsection to owners of eligible 
        hospitals under paragraph (3) for use only for carrying out 
        activities designed to convert hospitals (or portions thereof) 
        to facilities described in paragraph (4).
            ``(2) Form and use of grants.--Grants under this subsection 
        may be made only in the following forms for the following uses:
                    ``(A) Capital grants.--In the form of a capital 
                grant for use only for the capital costs of conversion 
                activities.
                    ``(B) Interest subsidies.--In the form of periodic 
                payments of interest subsidies in connection with any 
                loan made to finance such conversion activities.
            ``(3) Eligible hospitals.--An eligible hospital under this 
        paragraph is a hospital that--
                    ``(A) is subject to a mortgage that is insured 
                under this section;
                    ``(B)(i) is located in an area that the Secretary 
                determines has excess hospital capacity; or
                    ``(ii) would, in the determination of the 
                Secretary, improve its financial soundness as a result 
                of the proposed conversion and re-utilization 
                activities; and
                    ``(C) has submitted an application to the Secretary 
                for a grant under this subsection, which has been 
                approved by the Secretary.
            ``(4) Eligible health care facilities.--The Secretary shall 
        determine, for purposes of this subsection, the types of 
        facilities providing health care and supportive housing for 
        elderly persons and families to which hospitals (or portions 
        thereof) may be converted using grant amounts under this 
        subsection. Such facilities shall include assisted living 
        facilities, nursing homes, supportive housing for the elderly, 
        and any other facilities that the Secretary considers 
        appropriate.
            ``(5) Applications.--The Secretary shall provide for owners 
        of eligible hospitals under paragraph (3) to submit to the 
        Secretary applications for grants under this subsection in such 
        form and in accordance with such procedures as the Secretary 
        shall provide. An application shall contain--
                    ``(A) a description of the proposed conversion 
                activities for which a grant under this subsection is 
                requested and the type of facility to be established by 
                such activities;
                    ``(B) a statement of the amount of the grant 
                requested for such conversion activities;
                    ``(C) a description of the resources that are 
                expected to be made available, if any, in conjunction 
                with the grant under this subsection; and
                    ``(D) such other information or certifications that 
                the Secretary determines to be necessary or 
                appropriate.
            ``(6) Selection criteria.--The Secretary shall select 
        applications for grants under this subsection based upon 
        selection criteria, which shall be established by the Secretary 
        and shall include--
                    ``(A) the extent to which the conversion is likely 
                to meet health care and supportive housing needs in the 
                local community in which the hospital (or portion 
                thereof) to be converted is located;
                    ``(B) the inability of the applicant to fund the 
                conversion activities from existing financial 
                resources, as evidenced by the applicant's financial 
                records;
                    ``(C) the extent to which the applicant has 
                evidenced community support for the conversion, by such 
                indicators as letters of support from the local 
                community for the conversion and financial 
                contributions from public and private sources;
                    ``(D) the capability of the applicant of providing 
                for the sound operation of the proposed facility; and
                    ``(E) such other criteria as the Secretary 
                determines to be appropriate to ensure that amounts 
                made available for grants under this subsection are 
                used effectively.
            ``(7) Treatment of mortgage insurance.--Notwithstanding any 
        provision of this section or of any contract for mortgage 
        insurance provided pursuant to this section, an eligible 
        hospital (or a portion thereof) under paragraph (3) that is 
        subject to a mortgage insured pursuant to this section may be 
        converted using grant amounts under this subsection. The 
        Secretary shall provide for the uninterrupted continuation of 
        the mortgage insurance coverage for the hospital that is 
        subject to the conversion activities for the duration of the 
        original term of the mortgage insurance contract.
            ``(8) Definitions.--For the purposes of this subsection:
                    ``(A) Assisted living facility; nursing home.--The 
                terms `assisted living facility' and `nursing home' 
                have the meanings given such terms in section 232(b) 
                (12 U.S.C. 1715w(b)).
                    ``(B) Others.--The definitions in section 202(k) of 
                the Housing Act of 1959 (12 U.S.C. 1701q(k)) shall 
                apply.
            ``(9) Funding.--Amounts shall be available for grants under 
        this subsection as provided in sections 519(g) and 205(i).
    ``(j) Grants for Hospital Debt Service Assistance.--
            ``(1) In general.--To the extent amounts are made available 
        for grants under this subsection, the Secretary may make grants 
        in accordance with this subsection to owners of eligible 
        hospitals under paragraph (2) for use only to assist in paying 
        debt service on debt insured under this section. Grants under 
        this section shall be made only in the form of periodic 
        payments of interest subsidies.
            ``(2) Eligible hospitals.--An eligible hospital under this 
        paragraph is a hospital that--
                    ``(A) is subject to a mortgage that is insured 
                under this section;
                    ``(B) in the determination of the Secretary, is in 
                a distressed financial condition; and
                    ``(C) has submitted an application to the Secretary 
                for a grant under this subsection, as the Secretary 
                shall require, which has been approved by the 
                Secretary.
            ``(3) Funding.--Amounts shall be available for grants under 
        this subsection as provided in sections 519(g) and 205(i).''.

SEC. 3. FUNDING OF GRANTS FROM GENERAL INSURANCE FUND SURPLUS.

    Section 519 of the National Housing Act (12 U.S.C. 1735c) is 
amended by adding at the end the following new subsection:
    ``(g) Availability of Amounts for Hospital Conversion Grants.--
            ``(1) In general.--The amount of any negative credit 
        subsidy that is determined for any fiscal year, for purposes of 
        title V of the Congressional Budget Act of 1974 (2 U.S.C. 661 
        et seq.), and is attributable to the programs referred to in 
        paragraph (2) shall be considered to be new budget authority 
        and shall be available, without fiscal year limitation, for 
        grants under subsections (i) and (j) of section 242.
            ``(2) Covered programs.--The programs referred to in this 
        paragraph are the programs under this Act for insurance of 
        mortgages and loans that, on page 515 of the Appendix to the 
        Budget of the United States Government, Fiscal Year 2001 (H. 
        Doc. 106-162, Vol. II), in the table entitled `Summary of Loan 
        Levels, Subsidy Budget Authority and Outlays by Program', are 
        classified under budget account number 86-0200-0-1-371 and are 
        referred to as `FHA Full Insurance for Health Care Facilities 
        (plus 241/232)', `Health Care Refinances', and `Hospitals'.''.

SEC. 4. FUNDING OF GRANTS FROM MUTUAL MORTGAGE INSURANCE FUND SURPLUS.

    Section 205 of the National Housing Act (12 U.S.C. 1711) is 
amended--
            (1) in subsection (e), by inserting ``or for use for grants 
        pursuant to subsection (i)'' before the comma;
            (2) in subsection (h)(1), by inserting ``may not make 
        grants pursuant to subsection (i),'' after the 4th comma; and
            (2) by adding at the end the following new subsection:
    ``(i) Availability of Surplus Amounts for Hospital Conversion 
Grants.--Any amounts in the Mutual Mortgage Insurance Fund that are 
determined by the Secretary to be surplus to the amount required to 
meet the operational goals under subsection (h)(2) shall be available, 
without fiscal year limitation, for grants under subsections (i) and 
(j) section 242.''.
Funds such grants from general insurance fund and mutual mortgage insurance fund surpluses.
FHA-Insured Hospital Conversion and Re-Utilization Act