I

106TH CONGRESS

2D SESSION H. R. 4822

To amend the Housing and Community Development Act of 1974 and the

Federal Home Loan Bank Act to increase capital available to communities for community and economic development projects, and for other

purposes.

IN THE HOUSE OF REPRESENTATIVES

JULY 11, 2000

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

Committee on Banking and Financial Services

A BILL

To amend the Housing and Community Development Act

of 1974 and the Federal Home Loan Bank Act to increase capital available to communities for community

and economic development projects, 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 ‘‘American Communities

5 Investment Act of 1999’’.
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1 SEC. 2. COMMUNITY DEVELOPMENT LOAN GUARANTEES.

2 (a) MAXIMUM AMOUNT OF OUTSTANDING GUARAN3 TEES FOR A SINGLE ISSUER.—Section 108 of the Housing

4 and Community Development Act of 1974 (42 U.S.C.

5 5308) is amended by striking subsection (b) and inserting

6 the following new subsection:

7 ‘‘(b) MAXIMUM AMOUNT OF OUTSTANDING GUARAN8 TEES.—The maximum aggregate outstanding amount of

9 notes and obligations of a single issuer guaranteed under

10 this section shall be an amount determined by the Sec11 retary based on the amount of the grant approval for the

12 issuer under section 106 or 107, the fiscal condition of

13 the issuer, and the potential return on investment of the

14 projects to be undertaken with the proceeds of such notes

15 and obligations, but may not in any case exceed the dis16 counted present value of the grants that the issuer would

17 receive over a period not to exceed 20 years if the issuer’s

18 annual grant amount over such period were equal to 80

19 percent of the current grant approval for the issuer.’’.

20 (b) STAKEHOLDER PARTICIPATION.—Section 108 of

21 the Housing and Community Development Act of 1974

22 (42 U.S.C. 5308) is amended by adding at the end the

23 following new subsection:

24 ‘‘(s) STAKEHOLDER PARTICIPATION.—

25 ‘‘(1) REQUIREMENT.—The Secretary shall pro26 vide that an issuer of notes or obligations under this
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1 section shall, in complying with any community par2 ticipation requirements (including the requirements

3 under section 104(a)) applicable to the development

4 of activities to be funded with the proceeds of such

5 notes or obligations guaranteed under this section,

6 include participation of major stakeholders in the

7 community in which such activities will be carried

8 out.

9 ‘‘(2) DEFINITION.—For purposes of this sub10 section, the term ‘stakeholder’ means a public or pri11 vate organizational entity whose future well-being

12 depends upon the applicant’s continued social and

13 economic viability, and includes the representatives

14 of the following community interests:

15 ‘‘(A) Business.

16 ‘‘(B) Banking.

17 ‘‘(C) Education.

18 ‘‘(D) Public health and safety.

19 ‘‘(E) Labor.

20 ‘‘(F) Community-based development orga21 nizations.

22 ‘‘(G) Arts, cultural, religious, philan23 thropic, professional, and civic organizations.’’.
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1 SEC. 3. COLLATERAL FOR FHLB ADVANCES.

2 Section 10(a)(4) of the Federal Home Loan Bank

3 Act (12 U.S.C. 1430(a)(4)) is amended by striking the

4 second sentence.

5 SEC. 4. AUTHORITY TO MAKE ADVANCES TO NONMEMBER

6 MORTGAGEES.

7 Section 10b of the Federal Home Loan Bank Act (12

8 U.S.C. 1430b) is amended to read as follows:

9 ‘‘SEC. 10B. ADVANCES TO NONMEMBER MORTGAGEES.

10 ‘‘(a) AUTHORITY.—Each Federal home loan bank

11 may make advances to a nonmember mortgagee, except

12 that such advances may be used only for community lend13 ing (as such term is defined in section 10(k)).

14 ‘‘(b) NONMEMBER MORTGAGEE DEFINED.—For pur15 poses of subsection (a), the term ‘nonmember mortgagee’

16 means any entity—

17 ‘‘(1) that is—

18 ‘‘(A) a State or local housing finance agen19 cy or Indian housing authority (including any

20 subsidiary of such agency or authority) ap21 proved under title II of the National Housing

22 Act, which—

23 ‘‘(i) is a chartered institution having

24 succession; and

25 ‘‘(ii) is subject to the inspection and

26 supervision of a governmental agency;
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1 ‘‘(B) a community development financial

2 institution that—

3 ‘‘(i) is not an insured depository insti4 tution or a subsidiary of an insured deposi5 tory institution; and

6 ‘‘(ii) at the time an advance under

7 this section is made, is certified as a com8 munity development financial institution

9 under the Community Development Bank10 ing and Financial Institutions Act of 1994;

11 and

12 ‘‘(iii) is a chartered institution having

13 succession; or

14 ‘‘(C) a State or local economic development

15 agency that—

16 ‘‘(i) is chartered under State law; and

17 ‘‘(ii) is an institution having succes18 sion; and

19 ‘‘(2) whose principal activity in the mortgage

20 field consists of lending the institution’s own funds.

21 ‘‘(c) SECURITY.—Advances under subsection (a) shall

22 be secured in accordance with the requirements of section

23 10.

24 ‘‘(d) TERMS AND CONDITIONS.—Advances made

25 under this section shall be made at the same rates of inter-
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1 est and upon the same terms and conditions as are com2 parable extensions of credit to member institutions.’’.

3 SEC. 5. COMMUNITY LENDING FUND.

4 Section 10 of the Federal Home Loan Bank Act (12

5 U.S.C. 1430) is amended by adding at the end the fol6 lowing new subsection:

7 ‘‘(k) COMMUNITY LENDING FUND.—

8 ‘‘(1) IN GENERAL.—Subject to regulations pre9 scribed by the Board to carry out this subsection,

10 each Federal home loan bank shall establish a Com11 munity Lending Fund, which the bank shall use to

12 facilitate community lending by its members and

13 nonmember mortgagees.

14 ‘‘(2) USE OF ASSETS OF COMMUNITY LENDING

15 FUNDS.—A bank may use amounts in its Commu16 nity Lending Fund only to provide grants, subsidies,

17 and subsidized advances to its members and non18 member mortgagees for use for community lending

19 activities.

20 ‘‘(3) LOW- AND MODERATE-INCOME TAR21 GETING.—Not less than 70 percent of the aggregate

22 amount of assistance provided by a bank from a

23 Community Lending Fund shall be used for the sup24 port of community lending activities that benefit

25 low- and moderate-income persons.
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1 ‘‘(4) LOCAL PRIORITIES.—Each bank—

2 ‘‘(A) shall give priority for assistance from

3 the Community Lending Fund of the bank for

4 projects located in empowerment zones and en5 terprise communities designated under part I of

6 subchapter U of chapter 1 of the Internal Rev7 enue Code of 1986 (26 U.S.C. 1391 et seq.);

8 and

9 ‘‘(B) may establish such other priorities

10 for the types of projects to receive assistance

11 from the Community Lending Fund of the bank

12 as the bank considers appropriate, and to which

13 the Board shall defer, if such priorities are con14 sistent with the safety and soundness of the

15 bank and the provisions of this subsection. .

16 ‘‘(5) COORDINATION OF ACTIVITIES.—The

17 Board shall require the banks, to the extent prac18 ticable, to coordinate their activities pursuant to this

19 subsection with any other State or Federal programs

20 intended to facilitate community lending.

21 ‘‘(6) REPORT.—Each member and nonmember

22 mortgagee receiving advances or assistance from a

23 Community Lending Fund established by a bank

24 shall report annually to the bank regarding the use

25 of such advances or assistance.
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1 ‘‘(7) CONTRIBUTION TO FUND.—Each bank

2 shall annually contribute 10 percent of the net earn3 ings of that bank (after deducting expenses related

4 to section 10(j) and operating expenses) to its Com5 munity Lending Fund. Each bank may contribute

6 additional moneys to the Fund, and may accept for

7 deposit into the Fund moneys from other parties.

8 ‘‘(8) SUSPENSION OF CONTRIBUTIONS.—

9 ‘‘(A) IN GENERAL.— If a bank finds that

10 the payments required under paragraph (7) are

11 contributing to the financial instability of such

12 bank, it may apply to the Board for a tem13 porary suspension of such payments. The Board

14 shall make a determination of whether the bank

15 is financially unstable and whether such pay16 ments are contributing to such instability, and

17 [may/shall] suspend such bank’s payments to

18 its Community Lending Fund if finds in the af19 firmative with respect to both such questions.

20 ‘‘(B) FACTORS TO BE CONSIDERED.—In

21 determining the financial stability of a bank for

22 purposes of this paragraph, the Board shall

23 consider such factors as—

24 ‘‘(i) whether the bank’s earnings are

25 severely depressed;
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1 ‘‘(ii) whether there has been a sub2 stantial decline in membership capital; and

3 ‘‘(iii) whether there has been a sub4 stantial reduction in advances outstanding.

5 ‘‘(C) REVIEW OF APPLICATIONS.—The

6 Board shall review any application under this

7 paragraph and any supporting financial data

8 and issue a written decision approving or dis9 approving such application. The Board’s deci10 sion shall be accompanied by specific findings

11 and reasons for its action.

12 ‘‘(D) DESIGNATION OF SUSPENSION PE13 RIOD.—If the Board grants a suspension, it

14 shall specify the period of time that such sus15 pension shall remain in effect and shall con16 tinue to monitor the bank’s financial condition

17 during such suspension.

18 ‘‘(E) SUSPENSIONS PROHIBITED UNDER

19 CERTAIN CIRCUMSTANCES.—The Board shall

20 not suspend payment to the Community Lend21 ing Fund of a bank if the bank’s reduction in

22 earnings is a result of—

23 ‘‘(i) a change in the terms for ad24 vances to members which is not justified

25 by market conditions;
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1 ‘‘(ii) inordinate operating and admin2 istrative expenses; or

3 ‘‘(iii) mismanagement.

4 ‘‘(9) REGULATIONS.—

5 ‘‘(A) IN GENERAL.—Not later than 1 year

6 after the date of the enactment of this Act, the

7 Board shall prescribe regulations to implement

8 this subsection.

9 ‘‘(B) LIMITATIONS, RESTRICTIONS, AND

10 OTHER REQUIREMENTS.—Subject to the re11 quirements of this subsection, such

12 regulations—

13 ‘‘(i) may specify activities, restric14 tions, and limitations for the use by the

15 banks of amounts from Community Lend16 ing Funds;

17 ‘‘(ii) may specify priorities for the use

18 of such advances;

19 ‘‘(iii) shall ensure that assistance pro20 vided from a Community Lending Fund

21 will be used only for community lending to

22 assist projects for which adequate long23 term monitoring is available to guarantee

24 requirements established pursuant to this

25 subsection are satisfied;
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1 ‘‘(iv) shall ensure that any subsidies

2 provided under this subsection by Banks to

3 member institutions and nonmember mort4 gagees are passed on to the ultimate bor5 rower;

6 ‘‘(v) shall specify standards for deter7 mining benefit for low- and moderate-in8 come persons, for purposes of paragraph

9 (3); and

10 ‘‘(vi) shall establish uniform standards

11 for assistance from Community Lending

12 Funds and community lending by member

13 institutions and nonmember mortgagees

14 supported by such assistance.

15 ‘‘(10) ADVISORY COUNCIL.—Each bank shall

16 appoint an Advisory Council of 7 to 15 persons

17 drawn from stakeholders (as such term is defined in

18 section 108(s) of the Housing and Community De19 velopment Act of 1974 (42 U.S.C. 5308(s)) in its

20 district. The Advisory Council shall meet with rep21 resentatives of the board of directors of the Bank

22 quarterly to advise the Bank on community lending

23 needs in the district and on the utilization of the

24 Community Lending Fund of the bank for meeting

25 such needs. Each Advisory Council established under
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1 this paragraph shall submit to the Board at least

2 annually its analysis of the community lending ac3 tivities carried out with amounts from the Commu4 nity Lending Fund of the bank by which the Com5 mittee is appointed.

6 ‘‘(11) REPORTS TO CONGRESS.—

7 ‘‘(A) The Board shall monitor and annu8 ally submit a report to the Congress and the

9 Advisory Council for each bank the support of

10 community lending by the banks and the utili11 zation of amounts from Community Lending

12 Funds.

13 ‘‘(B) The analyses submitted by the Advi14 sory Councils to the Board under paragraph

15 (10) shall be included as part of the reports re16 quired by this paragraph.

17 ‘‘(C) The Comptroller General of the

18 United States shall audit and evaluate the pro19 gram under this subsection after such program

20 has been operating for 2 years. The Comp21 troller General shall submit a report to the

22 Congress on the conclusions of the audit and

23 recommend improvements or modifications to

24 the program.
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1 ‘‘(12) DEFINITIONS.—For purposes of this sub2 section, the following definitions shall apply:

3 ‘‘(A) COMMUNITY LENDING.—The term

4 ‘community lending’ means providing financing

5 for activities that meet the requirements for eli6 gibility, under section 105 of the Housing and

7 Community Development Act of 1974 (42

8 U.S.C. 5305), for assistance with amounts for

9 grants under title I of such Act.

10 ‘‘(B) LOW- AND MODERATE-INCOME PER11 SONS.—The term ‘low- and moderate-income

12 persons has the meaning given such term in

13 section 102 of the Housing and Community De14 velopment Act of 1974 (42 U.S.C. 5302).

15 ‘‘(C) NONMEMBER MORTGAGE.—The term

16 ‘nonmember mortgagee’ has the meaning given

17 such term in section 10B(b) of this Act.’’.

18 (b) FUNDING FOR COMMUNITY LENDING FUNDS.—

19 Section 21B(f)(2)(C) of the Federal Home Loan Bank Act

20 (12 U.S.C. 1441b(f)(2)(C)) is amended to read as follows:

21 ‘‘(C) PAYMENTS BY FEDERAL HOME LOAN

22 BANKS.—

23 ‘‘(i) REFCORP FUNDING.—To the ex24 tent that the amounts available pursuant

25 to subparagraphs (A) and (B) are insuffi-
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1 cient to cover the amount of interest pay2 ments, each Federal home loan bank shall

3 pay to the Funding Corporation in each

4 calendar year, 10 percent of the net earn5 ings of that bank (after deducting expenses

6 relating to section 10(j) and operating ex7 penses).

8 ‘‘(ii) ANNUITY VALUE.—The Board

9 shall annually determine the extent to

10 which the value of the aggregate amounts

11 paid by the banks exceeds or falls short of

12 the value of an annuity of $300,000,000

13 per year that commences on the issuance

14 date and ends on the final scheduled matu15 rity date of the obligations, and shall select

16 appropriate present value factors for mak17 ing such determinations.

18 ‘‘(iii) ADJUSTMENT OF PERIOD OF

19 BANKS’ OBLIGATIONS.—The Board shall

20 extend or shorten the term of the banks’

21 payment obligations under this subpara22 graph, as necessary to ensure that the

23 value of all payments made by the banks

24 under this paragraph is equivalent to the

25 value of such an annuity.
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1 ‘‘(iv) EXTENSION OF PERIOD BEYOND

2 MATURITY DATES OF UNDERLYING OBLI3 GATIONS.—If the Board extends the term

4 of payments beyond the final scheduled

5 maturity date for the obligations, each

6 bank shall continue to pay 10 percent of

7 its net earnings (after deducting expenses

8 relating to section 10(j) and operating ex9 penses) to the general fund of the Treas10 ury until the value of all such payments by

11 the banks is equivalent to the value of such

12 an annuity.

13 ‘‘(v) FINAL YEAR ADJUSTMENT.—In

14 the final year in which the banks are re15 quired to make any payment to the general

16 fund of the Treasury under clause (iv), if

17 the dollar amount represented by 10 per18 cent of the net earnings of the banks ex19 ceeds the remaining obligation of the

20 banks to the Treasury, the Finance Board

21 shall reduce the percentage pro rata to a

22 level sufficient to pay the remaining obliga23 tion.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 subsections (a) and (b) shall become effective on January

3 1, 2000.

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