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[House Report 106-553]
[From the U.S. Government Publishing Office]

106th Congress                                            Rept. 106-553
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 2

======================================================================

 
      AMERICAN HOMEOWNERSHIP AND ECONOMIC OPPORTUNITY ACT OF 2000

                                _______
                                

                 April 5, 2000.--Ordered to be printed

                                _______
                                

   Mr. Leach, from the Committee on Banking and Financial Services, 
                        submitted the following

                          SUPPLEMENTAL REPORT

                        [To accompany H.R. 1776]

    This supplemental report shows the cost estimate of the 
Congressional Budget Office with respect to the bill (H.R. 
1776), as reported, which was not included in the report 
submitted by the Committee on Banking and Financial Services on 
March 29, 2000 (H. Rept. 106-553).
    This supplemental report is submitted in accordance with 
clause 3(a)(2) of rule XIII of the Rules of the House of 
Representatives.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 4, 2000.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1776, the American 
Homeownership and Economic Opportunity Act of 2000.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Carla Pedone.
            Sincerely,
                                          Barry B. Anderson
                                       (For Dan Crippen, Director).
    Enclosure.

H.R. 1776--American Homeownership and Economic Opportunity Act of 2000

    Summary: H.R. 1776 aims to promote homeownership among 
lower-income families who might otherwise not be able to afford 
it. The bill would amend a number of existing statutes in an 
attempt to reduce regulations, to facilitate access by lower-
income families to federal mortgage insurance and loan 
guarantees, and to increase the flexibility available to local 
governments in using both newly authorized and existing 
programs for providing homeownership assistance. The bill would 
authorize appropriations to fund existing housing programs as 
well as new initiatives.
    CBO estimates H.R. 1776 would authorize the appropriation 
of about $36 billion over the fiscal year 2001-2005 period, 
assuming adjustments for inflation, and roughly $35 billion 
without adjustments for inflation. CBO estimates that enactment 
of the bill also would reduce direct spending by $675 million 
and federal revenues by $90 million over the five-year period. 
Therefore, pay-as-you-go procedures would apply.
    H.R. 1776 contains several intergovernmental mandates as 
defined in the Unfunded Mandates Reform Act (UMRA), but CBO 
estimates that the costs of complying with these mandates would 
not exceed the threshold established under that act ($55 
million in 2000, adjusted annually for inflation).
    The bill also contains private-sector mandates as defined 
in UMRA. Because those new requirements would depend on 
specific standards that would be established by the Secretary 
of Housing and Urban Development, CBO cannot determine whether 
their direct cost to the private sector would exceed the 
threshold specified in UMRA ($109 million in 2000, adjusted 
annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1776 is summarized in Tables 1 and 2 
below. Table 1 shows the authorizations of appropriations in 
the bill gradually increasing with inflation from $7.0 billion 
in fiscal year 2001 to an estimated $7.4 billion in fiscal year 
2005. Appropriation of those sums would result in additional 
outlays of $223 million in 2001 and an estimated $20.1 billion 
over the 2001-2005 period. Table 2 shows similar figures but 
assumes no adjustments for inflation. Under that scenario, 
outlays would increase by an estimated $19.7 billion over the 
five-year period.
    The bill would also reduce direct spending by an estimated 
$116 million in 2001 and a total of $675 million over the five-
year period. In addition, the bill would reduce federal 
revenues by $17 million in 2001 and a total of $90 million over 
the five-year period.
    The costs of this legislation would fall within budget 
functions 370 (mortgage and housing credit), 450 (community and 
regional development), and 600 (income security).
    Basis of estimate: CBO assumes that H.R. 1776 will be 
enacted during fiscal year 2000 and that the authorized amounts 
would be appropriated by the beginning of each fiscal year.

Spending subject to appropriation

    Where the bill specifies an authorization for 2001 and 
authorizes such sums as may be necessary in later years, CBO 
has computed authorizations for future years both with and 
without adjustments for inflation. The discussion below, 
however, focuses on the estimates with the adjustments for 
inflation (see Table 3).
            Title I: Removal of Barriers to Housing Affordability
    Title I would authorize the appropriation of an estimated 
$80 million, which would result in an estimated $47 million in 
additional outlays over the 2001-2005 period.

               TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 1776, WITH ADJUSTMENTS FOR INFLATION
----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in millions of dollars--
                                                     -----------------------------------------------------------
                                                        2000      2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law:
    Budget Authority................................     6,694         0         0         0         0         0
    Estimated Outlays...............................     5,518     5,739     4,226     2,093       980       438
Proposed Changes:
    Estimated Authorization Level...................         0     6,993     7,113     7,205     7,303     7,429
    Estimated Outlays...............................         0       223     2,119     4,848     6,098     6,779
Proposed Spending Under H.R. 1776:
    Estimated Authorization Level \1\...............     6,694     6,993     7,113     7,205     7,303     7,429
    Estimated Outlays...............................     5,518     5,962     6,345     6,941     7,078     7,217

                                                 DIRECT SPENDING

Spending Under Current Law \2\:
    Budget Authority Authority......................    -2,345    -2,414    -2,487    -2,561    -2,637    -2,717
    Estimated Outlays...............................    -2,344    -2,414    -2,487    -2,561    -2,637    -2,717
Proposed Changes:
    Estimated Budget Authority......................         0      -124      -134      -138      -142      -145
    Estimated Outlays...............................         0      -116      -134      -138      -142      -145
Proposed Spending Under H.R. 1776 \2\:
    Estimated Budget Authority......................    -2,345    -2,538    -2,621    -2,699    -2,779    -2,862
    Estimated Outlays...............................    -2,344    -2,530    -2,621    -2,699    -2,779    -2,862

                                                    REVENUES

Revenues Under Current Law \3\......................        15        17        17        18        19        19
Proposed Changes....................................         0       -17       -17       -18       -19       -19
Proposed Revenues Under H.R. 1776 \3\...............        15         0         0         0         0        0
----------------------------------------------------------------------------------------------------------------
\1\ The amount shown for 2000 is the amount appropriated for these programs.
\2\ Includes offsetting receipts generated by the FHA single-family loan guarantee program and outlays for HUD's
  manufactured housing activities.
\3\ Fees from inspection of manufactured homes.

              TABLE 2.--ESTIMATED BUDGETARY EFFECTS OF H.R. 1776, WITHOUT ADJUSTMENTS FOR INFLATION
----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in millions of dollars--
                                                     -----------------------------------------------------------
                                                        2000      2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law:
    Budget Authority................................     6,694         0         0         0         0         0
    Estimated Outlays...............................     5,518     5,739     4,226     2,093       980       438
Proposed Changes:
    Estimated Authorization Level...................         0     6,993     6,996     6,971     6,946     6,946
    Estimated Outlays...............................         0       223     2,114     4,809     5,979     6,558
Proposed Spending Under H.R. 1776:
    Estimated Authorization Level \1\...............     6,694     6,993     6,996     6,971     6,946     6,946
    Estimated Outlays...............................     5,518     5,962     6,340     6,902     6,959     6,996

                                                 DIRECT SPENDING

Spending Under Current Law \2\:
    Estimated Budget Authority......................    -2,345    -2,414    -2,487    -2,561    -2,637    -2,717
    Estimated Outlays...............................    -2,344    -2,414    -2,487    -2,561    -2,637    -2,717
Proposed Changes:
    Estimated Budget Authority......................         0      -124      -134      -138      -142      -145
    Estimated Outlays...............................         0      -116      -134      -138      -142      -145
Proposed Spending Under H.R. 1776 \2\:
    Estimated Budget Authority......................    -2,345    -2,538    -2,621    -2,699    -2,779    -2,862
    Estimated Outlays...............................    -2,344    -2,530    -2,621    -2,699    -2,779    -2,862

                                                    REVENUES

Revenues Under Current Law \3\......................        15        17        17        18        19        19
Proposed Changes....................................         0       -17       -17       -18       -19       -19
Proposed Revenues Under H.R. 1776 \3\...............        15         0         0         0         0         0
----------------------------------------------------------------------------------------------------------------
\1\ The amount shown for 2000 is the amount appropriated for these programs.
\2\ Includes offsetting receipts generated by the FHA single-family loan guarantee program and outlays for HUD's
  manufactured housing activities.
\3\ Fees from inspection of manufactured homes.

  TABLE 3.--ESTIMATED AUTHORIZATIONS AND SPENDING SUBJECT TO APPROPRIATION, WITH ADJUSTMENTS FOR INFLATION, BY
                                                    PROVISION
----------------------------------------------------------------------------------------------------------------
                                                                    By fiscal year, in millions of dollars--
                                                               -------------------------------------------------
                                                                  2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
                            TITLE I

Additional Administrative Costs for Housing Impact Analyses:
    Estimated Authorization...................................     (\1\)     (\1\)     (\1\)     (\1\)     (\1\)
    Estimated Outlays.........................................     (\1\)     (\1\)     (\1\)     (\1\)     (\1\)
Grants for Regulatory Barrier Removal Strategies:
    Estimated Authorization...................................        15        15        16        16        16
    Estimated Outlays.........................................     (\1\)         5        11        14        15

                           TITLE III

Down Payment Assistance:
    Estimated Authorization \2\...............................         0         0         0         0         0
    Estimated Outlays \2\.....................................         1         2         3         4         0
Pilot Program:
    Estimated Authorization...................................         2         0         0         0         0
    Estimated Outlays.........................................     (\1\)         1         1         0         0

                           TITLE IV

Community Development Block Grants:
    Estimated Authorization...................................     4,900     4,983     5,062     5,150     5,238
    Estimated Outlays.........................................        98     1,668     3,754     4,502     4,821
Housing Opportunities for Persons with AIDS:
    Estimated Authorization...................................       260       264       269       274       278
    Estimated Outlays.........................................         5        73       147       222       268

                            TITLE V

Home Investment Partnerships:
    Estimated Authorization...................................     1,641     1,669     1,698     1,727     1,758
    Estimated Outlays.........................................        33       247       776     1,183     1,515
Loan Guarantees:
    Estimated Authorization...................................         9         9         9         9         9
    Estimated Outlays.........................................         1         3         6         8         9

                           TITLE VI

Neighborhood Reinvestment Corporation:
    Estimated Authorization...................................        90        92        93        95        96
    Estimated Outlays.........................................        90        92        93        95        96
Homeownership Zone Grants:
    Estimated Authorization...................................        25        25         0         0         0
    Estimated Outlays.........................................         1         6        15        18         9
Local Capacity Building:
    Estimated Authorization...................................        25        25        26        26        27
    Estimated Outlays.........................................         1         9        19        23        25
Assistance for Self-Help Housing Providers:
    Estimated Authorization...................................        25        25        26         0         0
    Estimated Outlays.........................................         1         9        19        25        17

                           TITLE VII

Lands Title Commission:
    Estimated Authorization...................................         1         0         0         0         0
    Estimated Outlays.........................................     (\1\)     (\1\)         0         0         0
Indian Loan Guarantees:
    Estimated Authorization...................................         0         6         6         6         7
    Estimated Outlays.........................................         0         6         6         6         7

                           TITLE XI

Manufactured Housing Improvement:
    Estimated Authorization...................................         0         0         0         0         0
    Estimated Outlays.........................................        -8        -2        -2        -2        -3
Total:
    Estimated Authorization...................................     6,993     7,113     7,205     7,303     7,429
    Estimated Outlays.........................................       223     2,119     4,848     6,098     6,779
----------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000 per year.
\2\ The estimate assumes that funds would be appropriated for renewing all Section 8 contracts. Allowing the use
  of Section 8 rental assistance for down payment assistance for homeowners would speed up the spending of
  Section 8 funds initially, as increasing numbers of families would take advantage of this provision. The
  estimated outlays represent that initial increase in spending patterns. Budget authority would not be
  affected.

    Housing Impact Analysis. Section 102 of H.R. 1776 would 
require certain federal agencies, when publishing proposed and 
final rules, to either certify that their rule would not have a 
significant impact on the affordability of housing or to 
prepare a regulatory analysis of the rule's impact on the 
affordability of housing. CBO estimates that these requirements 
would increase the overall administrative costs to the federal 
government by about $2 million over the 2001-2005 period.
    Few of the roughly 4,000 rules issued each year would have 
an estimated annual economic impact of $100 million or more on 
the housing industry, and thus trigger the requirement for an 
impact analysis. Preparing the impact analyses where required, 
including the costs incurred by the agencies for reviewing 
public comments and those incurred by the Department of Housing 
and Urban Development (HUD) for collecting and publishing the 
information, would cost no more than $200,000 per year starting 
in 2002, when that requirement is assumed to be fully 
implemented. The additional costs of certifying rules would add 
an estimated $300,000 per year.
    Grants for Regulatory Barrier Removal Strategies. Section 
103 would authorize the appropriation of $15 million for fiscal 
year 2001 and such sums as may be necessary over the 2002-2005 
period for grants to state and local governments to develop 
strategies to remove regulatory barriers. Under current law, 
$15 million is authorized through set-asides from Community 
Development Block Grant (CDBG) funds. This provision would 
eliminate the use of CDBG set-asides for these grants. CBO 
estimates that section 103 would result in outlays of about $45 
million over the five-year period.
            Title III: Section 8 Homeownership Option
    Title III would authorize the appropriation of $2 million 
in 2001 and increase outlays, primarily for Section 8 housing 
subsidies, by $12 million over the 2001-2005 period.
    Down Payment Assistance. In lieu of 12 months of rental 
assistance payments, section 301 would authorize public housing 
agencies to provide a single up-front grant to eligible 
households, which would be used to help families purchase a 
home. CBO expects that this provision would initially speed up 
the spending of Section 8 funds until the number of households 
taking advantage of this provision each year levels off. CBO 
estimates that this provision would add $1 million to Section 8 
outlays in fiscal year 2001. The increment would grow to $4 
million in 2004, at which point CBO expects that the number of 
households using this provision would no longer increase. At 
that point, the additional outlays in 2005 from the shift of 
payments from 2006 into 2005 would roughly equal the outlay 
savings in 2005 from the shift of payments from 2005 into 2004. 
The estimate assumes that sufficient budget authority would be 
appropriated each year to renew all expiring Section 8 
contracts. Because the provision would require approval in 
advance in appropriation acts, it would not affect direct 
spending.
    CBO expects that relatively few households would use this 
provision because the low incomes of households eligible for 
Section 8 make it difficult for most to qualify for a mortgage. 
Of the Section 8 certificates and vouchers that become 
available in 2001 because of turnover, CBO assumes that roughly 
0.25 percent would be used for this purpose, with that 
percentage rising to 2 percent by 2004. As a result, the number 
of participating households would grow from around 400 in 
fiscal year 2001 to about 3,600 per year by 2004.
    Homeownership Pilot Program. Section 303 would authorize 
the appropriation of $2 million for fiscal year 2001 for 
homeownership pilot programs authorized under the Quality 
Housing and Work Responsibility Act of 1998, subject to the 
availability of matching funds from other sources. No funds are 
authorized for later years. CBO estimates that roughly one-half 
of these funds would be spent in 2002 and the remainder in 
2003.
            Title IV: Community Development Block Grants
    CBO estimates that, over the 2001-2005 period, Title IV 
would authorize the appropriation of $26.7 billion, assuming 
adjustments for inflation. Resulting outlays would total $15.6 
billion over the five-year period.
    Community Development Block Grant (CDBG) Program. Section 
401 would authorize $4.9 billion for fiscal year 2001 for CDBG 
and such sums as may be necessary for the 2002-2005 period. The 
appropriation for 2000 was $4.8 billion. CBO estimates that the 
bill would authorize a total of $25.3 billion over the five-
year period and that outlays would increase by $14.8 billion 
over that period.
    Housing Opportunities for Persons with AIDS (HOPWA) 
Program. Section 408 would authorize the appropriation of $260 
million for fiscal year 2001 for HOPWA and such sums as may be 
necessary for the 2002-2005 period. For 2000, $232 million was 
appropriated for this program. CBO estimates that the bill 
would authorize a total of $1.3 billion over the 2001-2005 
period, increasing outlays by $715 million.
            Title V: Home Investment Partnerships Program
    Title V would authorize the appropriation of an estimated 
$8.5 billion in budget authority, resulting in $3.8 billion in 
estimated outlays over the 2001-2005 period.
    HOME Program. Section 401 would authorize $1.65 billion for 
fiscal year 2001 for the Home Investment Partnerships Program 
(HOME) and such sums as may be necessary for each of the 
following four years. Under Section 504, a certain amount of 
these appropriations would be set aside for credit subsidies 
for a new loan guarantee program. That provision would 
authorize the Secretary of HUD to guarantee a cumulative total 
of up to $2 billion in loans issued by eligible local 
jurisdictions for financing the acquisition, new construction, 
or rehabilitation of affordable housing. CBO assumes that local 
jurisdictionswould borrow $400 million per year over the 2001-
2005 period. CBO further assumes that the credit subsidy rate for these 
obligations would be 2.3 percent, the same rate that is experienced 
under a similar program authorized by section 108 of the Housing and 
Community Development Act of 1974. Therefore, CBO estimates that of the 
total HOME appropriation, about $9 million per year would be set aside 
for the credit subsidies.
    Based on the historical spending rate for the HOME program, 
CBO estimates that appropriation of the authorized amounts for 
the HOME program would result in additional outlays of $3.8 
billion over the five-year period, including $27 million for 
the new loan guarantee program.
            Title VI: Local Homeownership Initiatives
    CBO estimates that Title VI would authorize the 
appropriation of $721 million and increase outlays by $663 
million over the 2001-2005 period.
    Neighborhood Reinvestment Corporation. Section 601 would 
authorize $90 million for fiscal year 2001 for a payment to the 
Neighborhood Reinvestment Corporation, and such sums as may be 
necessary for the 2002-2005 period to support neighborhood 
preservation projects. The appropriation for 2000 totaled $75 
million. This provision would add an estimated $466 million to 
outlays over the 2001-2005 period.
    Homeownership Zones. Section 602 would authorize the 
appropriation of $25 million for fiscal year 2001 and such sums 
as necessary for 2002 for Homeownership Zone Grants. No 
appropriation as provided for Homeownership Zone Grants in 
2000. Based on information from the Department of Housing and 
Urban Development, CBO estimates that this provision would add 
$49 million to outlays over the five-year period.
    Local Capacity Building. Section 604 would authorize the 
appropriation of such sums as necessary for the Capacity 
Building for Community Development and Affordable Housing 
program. In fiscal year 2000, grants for capacity building were 
funded through CDBG at $20 million. This provision would add 
the National Association of Housing Partnerships to the list of 
organizations eligible to provide housing assistance with funds 
that would be authorized under this section. To reflect this 
change, CBO assumed that the funding level would grow to $25 
million in fiscal year 2001. CBO expects that appropriation of 
these funds would result in discretionary outlays of $77 
million over the 2001-20005 period.
    Self-Help Housing Providers. Section 606 would authorize 
the appropriation of $25 million for fiscal year 2001 and such 
sums as may be necessary for 2002 and 2003 for assistance to 
providers of self-help housing. For 2000, funding for this 
program was provided as a set-aside of $20 million in the 
appropriation for the CDBG program. CBO estimates that the 
appropriation of the authorized funds would add $71 million to 
outlays over the 2001-2005 period.
            Title VII: Native American Homeownership
    CBO estimates that Title VII would authorize the 
appropriation of $26 million and add the same amount in outlays 
over the 2001-2005 period.
    Lands Title Commission. Section 701 would establish a Lands 
Title Commission to facilitate home loan mortgages on Indian 
trust lands. The commission would examine the system used by 
the Bureau of Indian Affairs for maintaining ownership records 
relating to trust lands and determine how to improve or replace 
that system in order to ensure that Native Americans are not 
restricted in their ability to obtain conventional mortgage 
loans. The bill would authorize a one-time appropriation of 
$0.5 million for expanses, which CBO estimates would be spent 
by the end of fiscal year 2002.
    Loan Guarantees. Section 702 would limit commitment 
authority for Indian housing loan guarantees to the levels 
specified in appropriations acts for each fiscal year, and 
authorize such sums as may be necessary to carry out this 
program for each fiscal year after 2001. (Under current law, 
the program is already authorized for 2001). CBO estimates that 
appropriations of $6 million to $7 million a year would 
increase discretionary outlays by $25 million over the 2002-
2005 period.
    Native American Housing Assistance. Section 703 would amend 
certain provisions of the Native American Housing Assistance 
and Self-Determination Act of 1996 (NAHASDA). Most changes 
concern participation and oversight requirements and 
enforcement of program rules, many of which have already been 
implemented under current law. Although these provisions could 
increase the costs of administering the program, CBO estimates 
that any increase would be negligible.
            Title XI: Manufactured Housing Improvement
    Under current law, HUD charges manufacturers fees for the 
cost of inspecting manufactured homes. These fees are recorded 
in the budget as revenues, and the spending of the fees does 
not require further appropriation. CBO estimates that under 
current law such spending will be $18 million a year over the 
2001-2005 period. Title XI would make federal spending 
associated with manufactured housing subject to appropriation, 
thus reducing direct spending for this program. (Collection of 
the fees would also became subject to appropriation action.)
    Title XI would require HUD to establish committee to set 
regulations for the industry, a program to resolve disputes and 
a program to monitor the installation of manufactured housing. 
These new responsibilities would significantly increase federal 
spending to more than $50 million a year, but such costs would 
be offset through higher fees. Because CBO expects such fees to 
be collected more quickly than they would be spent, CBO estimates that 
Title XI would reduce discretionary outlays by $17 million over the 
2001-2005 period.

Direct Spending and Revenues

    H.R. 1776 would make several changes affecting the Federal 
Housing Administration's (FHA's) single-family program and 
HUD's program governing standards for manufactured housing, 
resulting in a net decrease in both spending and revenues (see 
Table 4)
            Title II: Homeownership through Mortgage Insurance and Loan 
                    Guarantees
    CBO estimates that Title II would reduce net direct 
spending by a total of $593 million over the 2001-2005 period. 
This title would permanently change the process for determining 
down payments for single-family mortgages insured by FHA and 
provide authority for FHA to offer guarantees for two new loan 
guarantee programs.
    Simplification of Down Payment. Section 203 would 
permanently change the process FHA uses to determine the amount 
of down payments that are necessary for mortgages on single-
family homes that are insured by FHA. Under current law, the 
down payment requirement is calculated using a formula 
established in a 1996 pilot program. Under this formula, the 
maximum mortgage amount that can be insured by FHA is 
determined by using a fixed percentage of the home value, 
excluding closing costs. Authority to use this formula expires 
at the end of fiscal year 2000, and this provision would make 
its use permanent
    Based on information from FHA, CBO estimates that 
continuing the use of the down payment formula would slightly 
increase the loan-to-value (LTV) ratios for about 15 percent of 
the loans guaranteed each year after 2000. The LTV ratio, which 
indicates how much equity a borrower initially has in the home, 
serves as a good predictor of the likelihood of default. As 
such, CBO assumes that borrowers with less equity (that is, 
higher LTV ratios) would have higher default rates. Thus, we 
estimate that this provision would increase the cost of 
guaranteeing some loans, resulting in a decrease in offsetting 
receipts of $7 million in 2001 and $39 million over the 2001-
2005 period. (Under current law, FHA guarantees of new single-
family mortgages result in net offsetting receipts to the 
government because the credit subsidy is estimated to be 
negative. That is, guarantee fees for new mortgages more than 
offset the costs of expected defaults, resulting in net 
receipts from the single-family loan guarantee program.) The 
estimated changes in the loan subsidy receipts would be 
recorded in each of the years when new loans are disbursed.

                      TABLE 4.--ESTIMATED DIRECT SPENDING AND REVENUE EFFECTS, BY PROVISION
----------------------------------------------------------------------------------------------------------------
                                                                    By fiscal year, in millions of dollars--
                                                               -------------------------------------------------
                                                                  2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
                           TITLE II

Down Payment Simplification:
    Estimated Budget Authority................................         7         8         8         8         8
    Estimated Outlays.........................................         7         8         8         8         8
Reduced Down Payments for Teachers and Municipal Workers:
    Estimated Budget Authority................................       -24       -33       -34       -35       -36
    Estimated Outlays.........................................       -24       -33       -34       -35       -36
Hybrid ARMs:
    Estimated Budget Authority................................       -90       -92       -94       -96       -98
    Estimated Outlays.........................................       -90       -92       -94       -96       -98
                           TITLE XI

Manufactured Housing Improvement:
    Estimated Budget Authority................................       -17       -17       -18       -19       -19
    Estimated Outlays.........................................        -9       -17       -18       -19       -19
    Estimated Revenues........................................       -17       -17       -18       -19       -19
Total:
    Estimated Budget Authority................................      -124      -134      -138      -142      -145
    Estimated Outlays.........................................      -116      -134      -138      -142      -145
Estimated Revenues:                                                  -17       -17       -18       -19       -19
----------------------------------------------------------------------------------------------------------------

    Reduced Down Payment Requirements. Section 204 would reduce 
the down payment requirements for federally insured mortgages 
for teachers and uniformed municipal employees. Enacting this 
provision could enable certain teachers and uniformed municipal 
employees to purchase homes within their work regions with a 
FHA guarantee, by providing a down payment as low as one 
percent of the mortgage amount instead of a minimum of 3 
percent that is currently required. In addition, for each year 
that the loan is held and the borrower continues to teach or 
work in the designated school district or jurisdiction, FHA 
would waive 20 percent of the up-front cost of obtaining the 
loan. Normally, FHA charges a fee of 2.25 percent of the loan 
amount as the up-front cost of obtaining a FHA loan guarantee.
    The budgetary impact of this new loan program would depend 
on how people would react to the incentive it would create for 
households to seek homeownerships--in particular, how many 
households would use this provision to help them become 
homeowners and how long would homeowners remain in their homes. 
Based on information from associations representing teachers 
and mortgage bankers, CBO expects that about 50,000 loans 
(worth about $5 billion) under this program would be guaranteed 
each year. Furthermore, we assume that, of this expected 
volume, 50 percent would come from entirely new FHA borrowers 
and 50 percent would come from borrowers who have used the FHA 
program anyway but who would switch now to this more attractive 
option. On balance, CBO expects that this new program would be 
profitable (and thus generate negative subsidies), though not 
as profitable as the current single-family program where fees 
are not waived or reduced and the default rates are slightly 
lower. We estimate that this new program would have a negative 
subsidy rate of 2.0 percent, compared to a negative subsidy 
rate of 2.6 percent for FHA's current single-family program. 
CBO estimates the program would result in net additional 
receipts of $24 million in 2001 and $162 million over the 2001-
2005 period.
    Hybrid ARMS. Section 210 would authorize FHA to insure a 
relatively new mortgage product, known as hybrid adjustable-
rate mortgages (ARMs). These mortgages carry an initial fixed 
interest rate for longer than one year and then are subject to 
interest rate adjustments. The hybrid ARMs authorized to be 
guaranteed under the bill would carry an initial fixed interest 
rate for a period of not less than three years of the mortgage 
term. Under currently law, FHA has the authority to insure 
mortgages with one-year ARMs, though this product has seen 
demand in recent years.
    Based on information from FHA, CBO estimates that about 
60,000 new loans (worth about $6 billion) would be guaranteed 
each year under this new authority. Because we expect such 
loans to result in fewer defaults than the one-year ARMs (but 
more defaults than conventional loans), CBO estimates a 
negative subsidy rate of 2.0 percent for such guarantees. As a 
result, we anticipate that enacting this provision would 
increase receipts by $90 million in 2001 and $470 million over 
the next five years.
            Title XI: Manufactured Homes
    Title XI would make HUD's spending associated with 
manufactured housing, and the collection of the related fees, 
subject to appropriation. CBO estimates that such a change 
would reduce revenues by about $90 million and direct spending 
by $82 million over the 2001-2005 period.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays and governmental receipts that are subject 
to pay-as-you-go procedures are shown in the following table. 
For the purposes of enforcing pay-as-you-go procedures, only 
the effects in the current year, the budget year, and the 
succeeding four years are counted.

                                        TABLE 5.--ESTIMATED IMPACTS FOR H.R. 1776 ON DIRECT SPENDING AND RECEIPTS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     By fiscal year, in millions of dollars--
                                                        ------------------------------------------------------------------------------------------------
                                                          2000    2001     2002     2003     2004     2005     2006     2007     2008     2009     2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays.....................................      0     -116     -134     -138     -142     -145     -149     -152     -157     -161     -163
Changes in receipts....................................      0      -17      -17      -18      -19      -19      -20      -21      -22      -23      -24
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Estimated impact on state, local, and tribal governments: 
Title XI, the manufactured housing section, contains several 
preemptions of state authority:
           From the date of enactment of the bill until 
        the date that HUD finalizes its standard governing the 
        installation of manufactured housing, states would be 
        prohibited from lowering their standards from those 
        that are already in place;
           Once the federal installation standard is 
        finalized, if they choose to create their own 
        installation standard and program, states would be 
        required to set standards that are no less rigorous 
        than the federal program. State installation programs 
        that do not meet the federal minimum would be 
        superseded by the HUD standards; and
           Similarly, states that choose to create a 
        dispute resolution program would be required to set 
        standards that are at least as stringent as the federal 
        program; otherwise HUD would administer the program in 
        the state.
    CBO treats such preemptions of state law as mandates under 
UMRA. The mandates would impose no costs on state, local, or 
tribal governments, however, because the affected entities are 
not required to take any action. States that choose not to 
establish their own standards would be regulated and monitored 
by HUD.
    Other provisions of Title XI would broaden the activities 
HUD is authorized to include in its calculation of inspection 
fees for manufactured housing, and expand its authority to 
collect those fees in states where such collections are 
prohibited under current law. Though these provisions would 
change the method by which inspection fees are calculated and 
levied on manufacturers of manufactured housing, CBO estimates 
that states would continue to receive at least the same amount 
of funding under this program as they collect under current 
law.
    Estimated impact on the private sector: Title XI also 
contains private-sector mandates as defined in UMRA. Currently, 
manufacturers of manufactured housing must pay a fee to cover 
the cost of construction and safety inspections and other 
administrative activities. The bill would increase the cost of 
that mandate by expanding the activities covered by the fee to 
include items such as the on-site inspection of newly installed 
homes and the operation of a dispute resolution program. CBO 
estimates that those changes would increase private-sector 
costs by $9 million in 2001 and by a total of $108 million over 
the 2001-2005 period, assuming that 25 percent of new-home 
installations would be inspected. (The added cost could be 
higher or lower depending on the requirements specified by the 
Secretary of HUD.)
    The bill would also impose new federal standards on the 
installation of manufactured homes, including requiring 
installation inspections and mandating that all installers be 
trained and licensed. The cost of those new requirements to the 
private sector would also depend on the specific standards 
established by the Secretary of HUD.
    Overall, because the requirements imposed by the bill would 
depend in large part on future actions of the Secretary of HUD, 
CBO cannot determine whether their direct cost to private-
sector entities would exceed the threshold specified in UMRA 
($109 million in 2000, adjusted annually for inflation).
    Previous CBO estimates: Section 703 of H.R. 1776 
incorporates the revisions in S. 400 as passed in the Senate on 
February 28, 2000. In its cost estimate for S. 400, dated July 
14, 1999, CBO stated that enactment could have a small impact 
on the federal cost of administering the programs authorized by 
NAHASDA, but would not have a significant impact on the federal 
budget.
    Estimate prepared by: Federal Cost: Carla Pedone, Susanne 
Mehlman, Lanetee Keith, Mark Hadley, and John Righter. Federal 
Revenues: Hester Grippando. Impact on State, Local, and Tribal 
Governments: Susan Sieg Tompkins. Impact on the Private Sector: 
Bruce Vavrichek.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                                  
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