I

103D CONGRESS

2D SESSION H. R. 4579

To amend title V of the Housing Act of 1949 to make necessary reforms

to the section 515 Rural Housing Program.

IN THE HOUSE OF REPRESENTATIVES

JUNE 14, 1994

Mrs. CLAYTON (for herself, Mr. CLYBURN, and Mr. THOMPSON of Mississippi)

introduced the following bill; which was referred jointly to the Committees

on Banking, Finance and Urban Affairs and Ways and Means

A BILL

To amend title V of the Housing Act of 1949 to make

necessary reforms to the section 515 Rural Housing

Program.

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

3 SECTION 1. This Act may be cited as the ‘‘Section

4 515 Rural Housing Reform’’.

5 SEC. 101. Title V of the Housing Act of 1949 (42

6 U.S.C. 1471 et seq.) is amended:

7 (a) Section 502(c)(1) is amended by adding a

8 new paragraph (C) to read as follows:
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1 ‘‘(C) Effective May 26, 1994, the Sec2 retary may not accept an offer to prepay, or re3 quest refinancing in accordance with subsection

4 (b)(3) of, any loan made or insured under sec5 tion 515 pursuant to a contract entered into be6 fore the enactment of the Department of Hous7 ing and Urban Development Reform Act of

8 1989 for a period of not less than two years

9 from the date of enactment of the Housing and

10 Community Development Act of 1994.

11 ‘‘(D) The Secretary shall conduct either di12 rectly or through a contract an independent as13 sessment of rural housing preservation provi14 sions. Such assessment, along with rec15 ommendations of changes in law and regulation

16 shall be submitted to relevant committees of the

17 Congress by May 31, 1996.’’.

18 (b) Section 502(c)(4)(C) is amended by revising

19 it to read as follows:

20 ‘‘(C) APPROVAL OF ASSISTANCE.—The

21 Secretary may approve assistance under sub22 paragraph (B) only if the restrictive period has

23 expired for any loan made or insured under sec24 tion 514 or 515 of this title pursuant to a con25 tract entered into after December 21, 1979, but
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1 before the date of enactment of the Department

2 of Housing and Urban Development Reform

3 Act of 1989 and the Secretary determines that

4 the combination of assistance provided.’’.

5 SEC. 201. Title V of the Housing Act of 1949 (42

6 U.S.C. 1471 et seq.) is amended:

7 (a) Section 515(a)(2) is amended to change

8 ‘‘fifty’’ to read ‘‘thirty’’.

9 (b) Section 515(b)(2) is amended to read ‘‘pro10 vide for amortization as if the term of the loan was

11 for a period of not to exceed fifty years and may

12 allow for a balloon payment at the end of the term

13 of the loan. Such loan may be, in the discretion of

14 the Secretary, rescheduled for a period not to exceed

15 fifty years from the date of the original loan. The

16 amount of the unpaid principal and interest of the

17 prior loan rescheduled shall not create a new charge

18 against any loan levels authorized by law.’’

19 SEC. 301. Title V of the Housing Act of 1949 (42

20 U.S.C. 1471 et seq.) is amended: Section 515(t) is amend21 ed by deleting paragraphs (4) and (5) and renumbering

22 paragraphs (6), (7), and (8) as paragraphs (4), (5), and

23 (6) respectively.

24 SEC. 401. Title V of the Housing Act of 1949 (U.S.C.

25 1471 et seq.) is amended: Section 510(d)(1) is amended
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1 to read ‘‘prosecution and defense of any litigation under

2 sections 515 shall be conducted, at the discretion of the

3 Secretary, by’’.

4 SEC. 501. Section 6103(1)(7) of the Internal Reve5 nue Code of 1986 is amended by adding a new subpara6 graph (x) to read ‘‘(x) any housing assistance program

7 administered by the Department of Agriculture that in8 volves initial and periodic review of an applicant’s or par9 ticipant’s income and only for use by officers and employ10 ees of the Department of Agriculture with respect to the

11 applicants and participants in such programs.’’.

12 SEC. 601. Section 536 of the Housing Act (42 U.S.C.

13 1471 et seq.) is amended by redesignating paragraphs (d),

14 (e), (f), (g), (h), and (i) as paragraphs (e), (f), (g), (h),

15 (i), and (j) respectively, adding a new paragraph (d), and

16 amending the last sentence of redesignated paragraph (g)

17 to read as follows:

18 ‘‘(d) SUBSIDY LAYERING.—The Secretary is author19 ized to establish a process for evaluating assistance pro20 vided under this title to ensure that excess assistance is

21 not provided. In conducting such an evaluation, the Sec22 retary shall utilize information received under paragraphs

23 (b) and (c) of this section. To the extent practicable, the

24 Secretary is authorized to make use of procedures, policies

25 and regulations currently in use by the Department of
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1 Housing and Urban Development and may, to the extent

2 practicable, develop memoranda of understanding with

3 State housing agencies to implement the provisions of this

4 section.

5 ‘‘(g) LIMITATION OF ASSISTANCE.—

6 * * * Notwithstanding the provisions of section 515(r),

7 the Secretary may decrease the amount of assistance pro8 vided under this title if he/she determines that other as9 sistance reported under paragraphs (b) and (c) will pro10 vide excess assistance and/or profits to the recipient.’’.

11 SEC. 701. Section 509(f) of the Housing Act of 1949

12 (U.S.C. 1471 et seq.), is amended to read as follows:

13 ‘‘(f) UNDERSERVED HOUSING.—

14 ‘‘(1) DESIGNATION OF UNDERSERVED AREA.—

15 The Secretary shall designate as targeted under16 served areas 100 counties and communities in each

17 fiscal year that have severe, unmet housing needs as

18 determined by the Secretary. A county or commu19 nity shall be eligible for designation if, during the 5-

20 year period preceding the year in which the designa21 tion is made, it has received an average amount of

22 assistance that is substantially lower than the aver23 age annual amount of assistance received during

24 that 5-year period by other counties and commu-
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1 nities in the State that are eligible for such assist2 ance calculated on a per capita basis, and has—

3 ‘‘(A) 15 percent or more of its population

4 at or below the poverty level; and

5 ‘‘(B) 5 percent of its population residing in

6 substandard housing.

7 As used in this paragraph, the term ‘poverty level’

8 has the meaning given the term in section 102(a)(9)

9 of the Housing and Community Development Act of

10 1974.

11 ‘‘(2) PREFERENCES.—In selecting projects to

12 receive assistance with amounts set aside under

13 paragraph (6), the Secretary shall give preference to

14 any project located in a county or community that

15 has, at the time of designation and as determined by

16 the Secretary—

17 ‘‘(A) 20 percent or more of its population

18 at or below poverty level; and

19 ‘‘(B) 7 percent or more of its population

20 residing in substandard housing.

21 In designating underserved areas under paragraph

22 (1), in each fiscal year the Secretary shall designate

23 not less than 5 counties or communities that contain

24 tribal allotted or Indian trust land. In designating

25 underserved areas under paragraph (1), the Sec-
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1 retary shall not designate more than 10 counties or

2 communities in one State or Puerto Rico during

3 each designation cycle. If in selecting the 100 under4 served areas there are more than 10 counties or

5 communities in one State or Puerto Rico which meet

6 the requirements of this paragraph, the Secretary

7 will select the 10 most underserved counties or com8 munities utilizing the highest combined percentages

9 of populations below the poverty level and house10 holds residing in substandard housing. The remain11 ing counties will be eligible for unused funds as de12 scribed in paragraph (6)(A).

13 ‘‘(3) OTHER UNDERSERVED AREAS.—In addi14 tion to the 100 targeted counties and communities,

15 the Secretary may also designate other underserved

16 areas that have a severe, unmet housing need based

17 upon objective requirements. Such objective require18 ments may include counties and communities experi19 encing trauma due to natural disasters or structural

20 change; communities that have remained consistently

21 poor; colonias as defined in paragraph (10) and

22 communities that have experienced long-term popu23 lations decline and job deterioration.

24 ‘‘(4) UNDERSERVED APPLICANTS.—The Sec25 retary may also set-aside funds under paragraph (6)
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1 for applicants who have been underserved. A class of

2 applicants shall be eligible for designation if, during

3 the 5-year period preceding the year in which the

4 designation is made, the class received an average

5 annual amount of assistance under this title that is

6 substantially lower than the class proportionate per7 centage of the rural population. Such underserved

8 applicants may include socially disadvantaged per9 sons such as women, blacks, Hispanics, Asian and

10 Pacific Islanders, and Native Americans.

11 ‘‘(5) OUTREACH PROGRAM AND REVIEW.—

12 ‘‘(A) OUTREACH.—The Secretary shall

13 publicize the availability to targeted under14 served areas and applicants of grants and loans

15 under this title and promote, to the maximum

16 extent feasible, efforts to apply for those grants

17 and loans.

18 ‘‘(B) REVIEW.—Upon receipt of data from

19 the 1990 decennial census, the Secretary shall

20 conduct a review of any designations made

21 under paragraph (1) and preferences given

22 under paragraph (2) and the eligibility of com23 munities and counties for such designation and

24 preference, examining the effects of such data

25 on such eligibility. The Secretary shall submit
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1 to Congress, not later than 9 months after the

2 availability of the data, a report regarding the

3 review, which shall include any recommenda4 tions of the Secretary for modifications in the

5 standards for designation and preference. The

6 Secretary shall also submit a report to Congress

7 at any time between decennial census when rec8 ommendations for modification will promote

9 targeting of assistance for underserved housing.

10 ‘‘(6) SET-ASIDE FOR TARGETED UNDERSERVED

11 HOUSING AND COLONIAS.—

12 ‘‘(A) IN GENERAL.—The Secretary shall

13 set aside and reserve for assistance an amount

14 not less than 5 percent but not greater than 10

15 percent in each fiscal year of the aggregate

16 amount of lending authority under sections

17 502, 504, and 515. During each fiscal year, the

18 Secretary shall set aside an amount of section

19 521 rental assistance that is appropriate to pro20 vide assistance with respect to the appropriate

21 lending authority set aside each year. The Sec22 retary shall also set aside a reasonable amount

23 of assistance in other programs under this title

24 if he/she deems necessary to provide for under25 served housing. The Secretary shall establish a
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1 procedure to reallocate any assistance set aside

2 in any fiscal year for targeted underserved

3 areas that has not been expended during a rea4 sonable period in such year for use in (i)

5 colonias that have applied for and are eligible

6 for assistance under subparagraph (B) or para7 graph (9) and did not receive assistance, and

8 (ii) counties and communities eligible for des9 ignation as targeted underserved areas but

10 which were not designated. The procedure shall

11 also provide that any assistance reallocated

12 under the preceding sentence that has not been

13 expended by a reasonable date established by

14 the Secretary (which shall be after the expira15 tion of the period referred to in the preceding

16 sentence) shall be made available and allocated

17 under the laws and regulations relating to such

18 assistance, notwithstanding this subsection.

19 ‘‘(B) LENGTH OF DESIGNATION.—In des20 ignating underserved areas under paragraph

21 (1), each such area shall remain designated for

22 a period of two years; except for counties which

23 contain tribal allotted or Indian trust land

24 which shall remain designated for three years.

25 ‘‘(C) PRIORITY FOR COLONIAS.—
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1 ‘‘(i) Notwithstanding the designation

2 of counties and communities as targeted

3 underserved areas under paragraph (1)

4 and the provisions of section 520, colonias

5 shall be eligible for assistance with

6 amounts reserved under subparagraph (A),

7 as provided in this subparagraph.

8 ‘‘(ii) In providing assistance from

9 amounts reserved under this paragraph in

10 each fiscal year, the Secretary shall give

11 priority to any application for assistance to

12 be used in, or in close proximity to, and

13 serving the residents of, a colonia located

14 in a State described under clause (iii).

15 After the Secretary has provided assistance

16 under the priority for colonias located in a

17 State in amount equal to 10 percent of the

18 total amount of assistance allocated under

19 this title to such State in the fiscal year or

20 an average size loan, whichever is greater,

21 the priority shall not apply to any applica22 tions for colonias in such State.

23 ‘‘(iii) This paragraph shall apply to

24 any State for the total amount of assist-
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1 ance allocated to it under this title during

2 each of such 2 fiscal years.

3 ‘‘(7) LIST OF UNDERSERVED AREAS.—The Sec4 retary shall publish annually the current list of tar5 geted underserved areas in the Federal Register.

6 ‘‘(8) PROJECT PREPARATION ASSISTANCE.—

7 ‘‘(A) IN GENERAL.—The Secretary shall

8 make grants to eligible applicants under sub9 paragraph (D) to promote the development of

10 affordable housing in targeted underserved

11 areas and colonias.

12 ‘‘(B) USE.—A grant under this subpara13 graph shall not exceed an amount that the Sec14 retary determines equal to the customary and

15 reasonable costs incurred in preparing an appli16 cation for a loan or a grant under section 502,

17 504, 514, 515, or 524 or a grant under section

18 516 or 533 (including preapplication planning,

19 site analysis, market analysis and other nec20 essary technical assistance). The Secretary shall

21 adjust the loan or grant amount under such

22 sections to take account of project preparation

23 costs that have been paid from grant proceeds

24 under this paragraph and that normally would
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1 be reimbursed with proceeds of the loan or

2 grant.

3 ‘‘(C) APPROVAL.—The Secretary shall ap4 prove a properly submitted application or issue

5 a written statement indicating the reasons for

6 disapproval not later than 60 days after receipt

7 of the application.

8 ‘‘(D) ELIGIBILITY.—For purpose of this

9 paragraph, an eligible applicant may be a non10 profit organization or corporation, a community

11 housing development organization, State, unit if

12 general local government, or agency of a State

13 or unit of general local government.

14 ‘‘(E) AVAILABILITY OF FUNDING.—Any

15 amounts appropriate to carry out this para16 graph shall remain available until expended.

17 ‘‘(9) PRIORITY FOR COLONIAS.—

18 ‘‘(A) IN GENERAL.—In providing assist19 ance under this title in any fiscal year described

20 under paragraph (B), each State in which

21 colonias are located shall give priority to any

22 applications for assistance to be used in a

23 colonia. The priority under this subparagraph

24 shall not apply in such State after 5 percent of

25 the assistance available in such fiscal year has
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1 been allocated for colonias qualifying for the

2 priority.

3 ‘‘(B) COVERED YEARS.—This paragraph

4 shall apply to any fiscal year following 2 fiscal

5 years in which the State did not obligate the

6 total amount of assistance allocated it under

7 this title during each of such 2 fiscal years.

8 ‘‘(10) DEFINITION OF COLONIA.—For purposes

9 of this subsection, the term ‘colonia’ means any

10 identifiable community that—

11 ‘‘(A) is in the State of Arizona, California,

12 New Mexico or Texas;

13 ‘‘(B) is in the area of the United States

14 within 150 miles of the border between United

15 States and Mexico, except that the term does

16 not include any standard metropolitan statis17 tical areas that has a population exceeding

18 1,000,000;

19 ‘‘(C) is determined to be a colonia on the

20 basis of objective criteria, including lack of po21 table water supply, lack of adequate sewage sys22 tems, and lack of decent, safe, and sanitary

23 housing; and
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1 ‘‘(D) was in existence as a colonia before

2 the date of enactment of the Cranston-Gonzalez

3 National Affordable Housing Act.’’.

4 SEC. 801. Section 515(s) of the Housing Act of 1949

5 (U.S.C. 1471 et seq.), is amended to read as follows:

6 ‘‘(s) No fee other than a late fee or reasonable appli7 cation fee not to exceed one-half of one percent of the pro8 posed mortgage amount, may be imposed by or for the

9 Secretary or any other Federal agency on or with respect

10 to a loan made or insured under this section. Such applica11 tion fee will be used, in part, to defray the cost of profes12 sional market studies obtained by the Secretary to deter13 mine market feasibility. Such application fee may be

14 waived for non-profit applicants which are not receiving

15 any tax credit benefits under section 42 of the Internal

16 Revenue Code.’’.

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