I 

109TH CONGRESS 

1ST SESSION H. R. 2656 

To amend section 502(h) of the Housing Act of 1949 to improve the rural 

housing loan guarantee program, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 26, 2005 

Mr. ANDREWS introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To amend section 502(h) of the Housing Act of 1949 to 

improve the rural housing loan guarantee program, and 

for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Rural Housing Oppor5 tunity and Enhancement Act of 2005’’. 

6 SEC. 2. GUARANTEES FOR RURAL HOUSING LOANS. 

7 (a) INCOME LIMITATION.— 

8 (1) IN GENERAL.—Section 502(h) of the Hous9 ing Act of 1949 (42 U.S.C. 1472(h)) is amended— 

10 (A) by striking paragraph (3); and 
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1 (B) in paragraph (11), by striking ‘‘ for 

2 low and moderate income families’’. 

3 (2) REPEAL.—Section 751 of the Agriculture, 

4 Rural Development, Food and Drug Administration, 

5 and Related Agencies Appropriations Act, 2001 (42 

6 U.S.C. 1472 note) is hereby repealed: 

7 (b) GUARANTEE FEE.— 

8 (1) IN GENERAL.—Section 502(h)(8) of the 

9 Housing Act of 1949 is amended by striking ‘‘not 

10 more than 1 percent’’ and inserting ‘‘0.9 percent’’. 

11 (2) REPEALS.—The following provisions are 

12 hereby repealed: 

13 (A) Section 739 of the Agriculture, Rural 

14 Development, Food and Drug Administration, 

15 and Related Agencies Appropriations Act, 2001 

16 (42 U.S.C. 1472 note). 

17 (B) Section 726 of the Agriculture, Rural 

18 Development, Food and Drug Administration, 

19 and Related Agencies Appropriations Act, 2005 

20 (118 Stat. 2842). 

21 (c) REPAYMENT ABILITY.—Section 502(h) of the 

22 Housing Act of 1949 is amended by inserting after para23 graph (2) the following new paragraph: 

24 ‘‘(3) ELIGIBILITY OF BORROWERS.—Any regu25 lations of the Secretary limiting eligibility of bor-
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1 rowers for loans guaranteed pursuant to this sub2 section based upon the ratio between the debt and 

3 income of the borrower shall provide for a higher in4 come-to-debt ratio with respect to loans for newly 

5 constructed properties’’. 

6 SEC. 3. GUARANTEES FOR REFINANCING LOANS. 

7 Section 502(h)(14) of the Housing Act of 1949 (42 

8 U.S.C. 1472(h)(13)) is amended as follows: 

9 (1) GUARANTEE FEE.— 

10 (A) In subparagraph (A), by striking 

11 ‘‘(F)’’ and inserting ‘‘(I)’’ 

12 (B) In subparagraph (E), by striking 

13 ‘‘(8),’’. 

14 (C) By redesignating subparagraphs (E) 

15 and (F) as subparagraphs (H) and (I), respec16 tively. 

17 (D) By inserting after subparagraph (D) 

18 the following new subparagraph: 

19 ‘‘(E) GUARANTEE FEE.—With respect to a 

20 refinancing loan under this paragraph, the Sec21 retary may collect from the lender at the time 

22 of issuance of the guarantee a fee equal to 0.5 

23 percent of the principal obligation of the loan.’’. 

24 (2) REFINANCING OTHER TYPES OF MORT25 GAGES.—In subparagraph (A)— 
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1 (A) by inserting ‘‘(i)’’ before ‘‘under this 

2 section’’; and 

3 (B) by inserting before the last comma the 

4 following: ‘‘, or (ii) to acquire or construct a 

5 single-family residence that meets the require6 ments of paragraph (4)’’. 

7 (3) LOAN AMOUNT.—In subparagraph (D), by 

8 striking ‘‘and such closing costs’’ and all that follows 

9 through ‘‘prescribe’’ and inserting the following: 

10 ‘‘and closing costs, which shall include amounts paid 

11 as an origination fee, but not in excess of 1 percent 

12 of the principal obligation of the loan, amounts paid 

13 as a discount fee, but not in excess of 200 basis 

14 points, any amounts required to be paid into escrow 

15 upon loan origination, and such other closing costs 

16 as the Secretary may prescribe’’. 

17 (4) ELIMINATION OF INCOME RESTRICTION.— 

18 In subparagraph (H), as so redesignated by para19 graph (1)(B) of this section, by striking ‘‘(3),’’. 

20 (5) LOAN REQUIREMENTS.—By inserting before 

21 subparagraph (H), as so redesignated by paragraph 

22 (1)(B) of this section, the following new subpara23 graphs: 

24 ‘‘(F) PROHIBITED LOAN TERMS.—The 

25 Secretary may not require, for a refinancing 
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1 loan to be eligible for a guarantee under this 

2 paragraph— 

3 ‘‘(i) that an appraisal credit report or 

4 underwriting be conducted in connection 

5 with the loan; or 

6 ‘‘(ii) in the case of a loan described in 

7 clause (i) of subparagraph (A), that the 

8 residence in connection with which the loan 

9 is made be located in a rural area. 

10 ‘‘(G) REQUIRED LOAN TERMS.—The Sec11 retary shall require, for a refinancing loan to be 

12 eligible for a guarantee under this paragraph, 

13 that— 

14 ‘‘(i) the borrower is not delinquent 

15 with respect to payment of the existing 

16 loan being refinanced; and 

17 ‘‘(ii) the monthly payments required 

18 by the borrower under the refinancing loan 

19 be at least $50 less than the monthly pay20 ments so required under the existing loan 

21 being refinanced.’’. 

22 SEC. 4. RECORDING OF LOANS. 

23 Section 501 of the Housing Act of 1949 (42 U.S.C. 

24 1471) is amended by adding at the end the following new 

25 subsection: 
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1 ‘‘(k) RECORDING REQUIREMENTS.—The Secretary 

2 shall provide that each loan made, insured, or guaranteed 

3 under this title shall be recorded, in accordance with any 

4 applicable State and local laws requiring recordation of 

5 loans, as a loan made, insured, or guaranteed (as appro6 priate) by the Department of Agriculture, and not as a 

7 conventional loan.’’. 

8 SEC. 5. RURAL AREA DEFINITION. 

9 Clause (3) of the first sentence of section 520 of the 

10 Housing Act of 1949 (42 U.S.C. 1490) is amended by 

11 striking ‘‘and (A)’’ and all that follows through ‘‘mod12 erate-income families,’’. 

13 SEC. 6. INCOME LIMITATION FOR DIRECT LOANS. 

14 The first sentence of paragraph (4) of section 501(b) 

15 of the Housing Act of 1949 (42 U.S.C. 1471(b)(4)) is 

16 amended by inserting before the period at the end the fol17 lowing: ‘‘, except that in determining such respective levels 

18 for purposes of direct loans made under section 502, sec19 tion 3(b)(2) of such Act (42 U.S.C. 1437a(b)(2)) shall be 

20 applied by substituting ‘150 percent’ for ‘80 per centum’ 

21 each place such term appears and by substituting ‘93.75 

22 percent’ for ‘50 per centum’ each place such term ap23 pears’’. 

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