I 

116TH CONGRESS 

2D SESSION H. R. 7809 

To require the Secretary of the Treasury to establish a HOPE Preferred 

Equity Facility to guarantee certain financial investments of commercial 

borrowers affected by COVID–19, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 29, 2020 

Mr. TAYLOR (for himself, Mr. LAWSON of Florida, and Mr. BARR) introduced 

the following bill; which was referred to the Committee on Financial Services 

A BILL 

To require the Secretary of the Treasury to establish a 

HOPE Preferred Equity Facility to guarantee certain 

financial investments of commercial borrowers affected 

by COVID–19, 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 ‘‘Helping Open Prop5 erties Endeavor Act of 2020’’ or the ‘‘HOPE Act of 

6 2020’’. 


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1 SEC. 2. HOPE PREFERRED EQUITY FACILITY. 

2 (a) ESTABLISHMENT.—The Secretary of the Treas3 ury shall establish a HOPE Preferred Equity Facility to 

4 provide financial assistance to borrowers of commercial 

5 mortgages in the form of a guarantee of a purchase by 

6 a financial institution of a preferred equity instrument 

7 issued by a borrower. The Secretary shall guarantee 100 

8 percent of any such purchase made under this section. 

9 (b) ELIGIBILITY OF BORROWERS.—A borrower is eli10 gible to receive financial assistance under this section if, 

11 as determined by the financial institution— 

12 (1) the borrower’s revenue during any consecu13 tive 3-month period between March 1, 2020, and 

14 February 28, 2021, from the property securing the 

15 commercial mortgage is at least 25 percent less than 

16 the revenue from such property during the same 

17 consecutive 3-month period in the previous year; 

18 (2) the borrower had not received written notice 

19 of monetary default on the commercial mortgage 

20 within the previous year and failed to cure such no21 tice as of March 1, 2020; 

22 (3) either— 

23 (A) the debt service coverage ratio with re24 spect to the commercial mortgage was at least 

25 1.3 times on an annual basis during 2019; or 


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1 (B) the debt service coverage ratio with re2 spect to the commercial mortgage was at least 

3 1.3 times on an annual basis during both 2017 

4 and 2018; 

5 (4) the property securing the commercial mort6 gage is not owner-occupied, except to manage the 

7 property or de minimis occupancy as otherwise pro8 vided by the Secretary; 

9 (5) the borrower or a parent company of the 

10 borrower has not acquired the subject property after 

11 March 1, 2020, through a foreclosure process; and 

12 (6) the borrower has not already received finan13 cial assistance under this section with respect to the 

14 applicable property securing the commercial mort15 gage. 

16 (c) REQUIREMENTS ON PREFERRED EQUITY IN17 STRUMENTS.— 

18 (1) IN GENERAL.—With respect to a preferred 

19 equity instrument purchased by a financial institu20 tion from a borrower, the purchase of which is guar21 anteed under this section— 

22 (A) the instrument shall be subordinate to 

23 perfected loans and unsecured debt; 

24 (B) the amount paid for such instrument 

25 shall be in an amount, as determined by the fiVerDate Sep 11 2014 22:37 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H7809.IH H7809

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1 nancial institution, that does not exceed 10 per2 cent of the outstanding amount owed on the 

3 commercial mortgage; 

4 (C) the purchase amount of the instrument 

5 shall be made available by the financial institu6 tion to the borrower in an account that the bor7 rower may draw down, in amounts and at times 

8 to be determined by the borrower for any pur9 pose the borrower determines may help the 

10 property, during the 1-year period following the 

11 date such purchase is made; 

12 (D) the instrument shall be unsecured by 

13 the subject property securing the commercial 

14 mortgage; 

15 (E) the instrument shall provide no right 

16 of foreclosure and no approval rights; 

17 (F) the instrument shall, except as pro18 vided under paragraph (2), have an annual in19 terest rate of 3 percent calculated on a monthly 

20 basis on all amounts that have been drawn from 

21 the account described in subparagraph (B), of 

22 which 0.5 percent shall be transferred to the 

23 Secretary of the Treasury for purposes under 

24 subsection (g)(4); 


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1 (G) any portion of the instrument may be 

2 redeemed by the borrower at any time with the 

3 financial institution, without penalty; 

4 (H) the instrument shall require payments 

5 to first be due after the end of the 2-year pe6 riod beginning on the earlier of— 

7 (i) the date on which all funds in the 

8 account described under subparagraph (B) 

9 have been drawn down by the borrower; or 

10 (ii) the end of the 1-year period begin11 ning on the date the purchase is made; 

12 (I) the instrument shall fully amortize over 

13 the 7-year period beginning on the date pay14 ments are first due; 

15 (J) the instrument shall require immediate 

16 redemption if there is more than a 50 percent 

17 change in the ownership of the borrower, except 

18 via death, compared to the date on which the 

19 instrument is purchased; 

20 (K) the instrument shall be approved in 

21 advance by the Secretary; and 

22 (L) the proceeds from such purchase may 

23 be used for— 

24 (i) expenses of the parent company re25 lated to the administration of oversight of 


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1 such borrower, ownership or operation of 

2 such borrower, or to a subsidiary entity of 

3 the parent company for same or similar ex4 penses; 

5 (ii) the benefit and operation of the 

6 property securing the commercial mort7 gage; 

8 (iii) payments of the preferred equity 

9 interest, including payments for principal, 

10 interest, insurance, taxes, utilities, fees, op11 erating expenses, and payroll expenses; and 

12 (iv) lender-required reserves such as 

13 capital expenditure reserves. 

14 (2) FAILURE TO MAKE PAYMENTS.— 

15 (A) IN GENERAL.—If a borrower fails to 

16 make payments due on a preferred equity in17 strument, the purchase of which is guaranteed 

18 under this section— 

19 (i) during the first year in which pay20 ments are due, the interest rate on the in21 strument shall increase to 3.5 percent for 

22 the remainder of the loan, beginning at the 

23 end of the first year; 

24 (ii) during the second year in which 

25 payments are due, the interest rate on the 


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1 instrument shall increase to 4.5 percent for 

2 the remainder of the loan, beginning at the 

3 end of the second year; 

4 (iii) during the third year in which 

5 payments are due, the interest rate on the 

6 instrument shall increase to 5.5 percent for 

7 the remainder of the loan, beginning at the 

8 end of the third year; 

9 (iv) during the fourth year in which 

10 payments are due, the interest rate on the 

11 instrument shall increase to 6.5 percent for 

12 the remainder of the loan, beginning at the 

13 end of the fourth year; 

14 (v) during the fifth year in which pay15 ments are due, the interest rate on the in16 strument shall increase to 7.5 percent for 

17 the remainder of the loan, beginning at the 

18 end of the fifth year; 

19 (vi) during the sixth year in which 

20 payments are due, the interest rate on the 

21 instrument shall increase to 8.5 percent for 

22 the remainder of the loan, beginning at the 

23 end of the sixth year; 

24 (vii) during the seventh year in which 

25 payments are due, the interest rate on the 


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1 instrument shall increase to 9.5 percent for 

2 the remainder of the loan, beginning at the 

3 end of the seventh year; and 

4 (viii) after the last year in which pay5 ments are due under the amortization 

6 schedule, the interest rate on the instru7 ment shall increase to 13 percent perma8 nently, beginning at the end of such year. 

9 (B) CURE PERIOD.—Before any interest 

10 rate increase required under subparagraph (A), 

11 the financial institution shall provide notice to 

12 the borrower within five calendar days. The 

13 borrower shall have a 30-day cure period before 

14 such increase takes effect, beginning on the 

15 date of such notice. 

16 (C) INCREASED INTEREST OWED TO

17 TREASURY.—With respect to any interest owed 

18 on a preferred equity instrument under sub19 paragraph (A) above 2.5 percent, such interest 

20 shall be owed to the Department of the Treas21 ury. 

22 (D) TREATMENT OF FINANCIAL INSTITU23 TION FAILURE TO ASSESS INTEREST.—If the fi24 nancial institution fails to assess interest re25 quired under this paragraph on the borrower, 


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1 or fails to notify the borrower of such required 

2 interest for a period of 3 months or more, the 

3 financial institution shall only be eligible to re4 ceive half of the service fee described under 

5 subsection (d)(1) for the period of such failure. 

6 (d) PAYMENTS TO FINANCIAL INSTITUTIONS.— 

7 (1) SERVICING FEE.—The Secretary shall pay 

8 each financial institution that purchases a preferred 

9 equity instrument, the purchase of which is guaran10 teed under this section, an annual servicing fee in an 

11 amount equal to 1 percent of the outstanding 

12 amount on such instrument, paid annually. 

13 (2) PAY FOR ORIGINATION.— 

14 (A) IN GENERAL.—The Secretary shall pay 

15 a financial institution described under para16 graph (1) at a rate, based on the covered 

17 amount, of— 

18 (i) 5 percent for a covered amount of 

19 not more than $350,000; 

20 (ii) 3 percent for a covered amount of 

21 more than $350,000 and less than 

22 $2,000,000; and 

23 (iii) 1 percent for a covered amount of 

24 not less than $2,000,000. 


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1 (B) EXCEPTION IN CASES OF LOSS.—If 

2 the borrower defaults on 90 percent or more of 

3 the amount drawn down, the financial institu4 tion shall repay any reimbursement amount 

5 paid pursuant to subparagraph (A). 

6 (C) COVERED AMOUNT DEFINED.—In this 

7 paragraph, with respect to a preferred equity 

8 instrument, the term ‘‘covered amount’’ means 

9 the full amount made available to the borrower 

10 at the time the instrument is purchased, re11 gardless of whether the borrower has drawn 

12 down the entire amount. 

13 (e) PROTECTION OF GOVERNMENT INTERESTS.— 

14 With respect to a borrower who issues a preferred equity 

15 instrument, the purchase of which is guaranteed under 

16 this section, until such time as the instrument is re17 deemed, the parent company of the borrower may not re18 move value from the borrower, including— 

19 (1) by paying any dividend; 

20 (2) with respect to any affiliated property of the 

21 borrower for which there is a manager, if the man22 ager and the borrower are related, by increasing any 

23 fee paid to the manager compared to the amount of 

24 such fee before such instrument is purchased; 


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1 (3) with respect to an affiliate of the owner 

2 property, by procuring the performance of services 

3 or selling goods that are not ordinary, necessary, 

4 and at market rates; or 

5 (4) by lending money to any owner of the bor6 rower or to any related person. 

7 (f) TREASURY AUTHORITY AND DUTIES.— 

8 (1) APPROVAL DEADLINE.—The Secretary shall 

9 approve or deny any preferred equity instrument 

10 submitted under this section to the Secretary within 

11 30 calendar days of such submission. 

12 (2) PURCHASE AND SALE AUTHORITY.—With 

13 respect to a preferred equity instrument, the pur14 chase of which is guaranteed under this section, the 

15 Secretary may, at the Secretary’s discretion— 

16 (A) purchase the preferred equity instru17 ment from the applicable financial institution 

18 any time after the end of 7-year period begin19 ning on the date payments are first due with 

20 respect to the instrument; 

21 (B) sell any preferred equity instrument 

22 purchased by the Secretary under subparagraph 

23 (A); and 


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1 (C) contract with a private servicer to serv2 ice any preferred equity instrument purchased 

3 by the Secretary under subparagraph (A). 

4 (3) TRANSFER OF NOTES AND PAPERS.—When 

5 the preferred equity instrument is redeemed by the 

6 Secretary, a digital copy of all notes and papers 

7 shall be provided to the Secretary upon request of 

8 the Secretary. Upon request of the Secretary, an 

9 original document shall be provided. 

10 (4) ADMINISTRATIVE COSTS.—The Secretary 

11 shall use amounts described under subsection 

12 (c)(1)(E) for administrative costs of carrying out 

13 this section. 

14 (5) RULEMAKING.—Not later than 30 days 

15 after the date of the enactment of this Act, the Sec16 retary shall issue such rules or guidance as the Sec17 retary determines necessary to carry out this sec18 tion. 

19 (g) FINANCIAL INSTITUTION REQUIREMENTS AND

20 AUTHORITIES.— 

21 (1) DEADLINE FOR MAKING FUNDS AVAIL22 ABLE.—A financial institution submitting a pre23 ferred equity instrument to the Secretary under this 

24 section shall, if the Secretary approves such instru25 ment, make funds available to the borrower in conVerDate Sep 11 2014 22:37 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H7809.IH H7809

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1 nection with such instrument not later than 14 cal2 endar days after such approval. 

3 (2) SALE OF INSTRUMENT TO TREASURY.—A 

4 financial institution may sell a preferred equity in5 strument to the Secretary after the end of the 10- 

6 year period beginning on the date on which the fi7 nancial institution purchased the instrument at par 

8 plus interest less origination fees. 

9 (3) FORECLOSURE.—In the event of a fore10 closure on the subject property securing a commer11 cial mortgage relating to a preferred equity instru12 ment, a financial institution shall sell the preferred 

13 equity instrument to the Secretary within 90 days 

14 after the date of foreclosure at par plus interest and 

15 origination fees. 

16 (4) ADDITIONAL COLLATERAL.—A financial in17 stitution may require additional collateral from a 

18 borrower, including personal recourse, corporate re19 course, a first lien on another encumbered property, 

20 or a claim on business assets. The financial institu21 tion may not receive a lien on the subject property. 

22 (h) OTHER REQUIREMENTS.— 

23 (1) PUBLIC REPORTING.—A borrower that re24 ceives financial assistance under this Act shall issue 

25 a public statement announcing such receipt immeVerDate Sep 11 2014 22:37 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H7809.IH H7809

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1 diately after such receipt. The Secretary periodically 

2 shall make publicly available a list of such bor3 rowers, along with the amount each such borrower 

4 received. 

5 (2) INDEMNIFICATION.—A preferred equity in6 strument issued under this section shall require that 

7 an approved guarantor (as determined by the finan8 cial institution) provide a guarantee to the financial 

9 institution and to the Secretary that provides for in10 demnification of such financial institution if the bor11 rower, a parent company of the borrower, or any af12 filiate of the borrower, with respect to the property 

13 securing the commercial mortgage, does the fol14 lowing: 

15 (A) Commits fraud, or misappropriates or 

16 misapplies any amounts received from the pur17 chase of such instrument. 

18 (B) Fails to apply such amounts in accord19 ance with the requirements of subsection 

20 (c)(1)(K). 

21 (C) Fails to comply with the requirements 

22 of subsection (f). 

23 (D) Intentionally wastes the property. 

24 (3) ADDITIONAL FEE.—A financial institution 

25 may charge additional fees to a borrower from which 


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1 the financial institution purchases a preferred equity 

2 instrument. 

3 (i) TREATMENT OF INSTRUMENTS BY REGU4 LATORS.—For purposes of calculating any capital require5 ment, the appropriate Federal banking agencies shall treat 

6 preferred equity instruments, the purchase of which are 

7 guaranteed under this section, in the same manner as 

8 loans guaranteed under the Paycheck Protection Program 

9 under section 7(a)(36) of the Small Business Act. 

10 (j) LIMITATION ON FINANCIAL ASSISTANCE GOING

11 TO ENTITIES CONTROLLED BY SENIOR MEMBERS OF THE

12 EXECUTIVE BRANCH OR MEMBERS OF CONGRESS.— 

13 (1) PROHIBITION.—A covered entity may not 

14 receive financial assistance under this section. 

15 (2) DEFINITION.—In this subsection, the term 

16 ‘‘covered entity’’ has the meaning given that term 

17 under section 4019(a) of the CARES Act (15 U.S.C. 

18 9054(a)). 

19 (k) FUNDING.—The Secretary shall, without further 

20 appropriation, use amounts made available under section 

21 4003(b)(4) of the CARES Act (15 U.S.C. 9042(b)(4)) to 

22 carry out this section. 

23 (l) DEFINITIONS.—In this section: 


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1 (1) APPROPRIATE FEDERAL BANKING AGEN2 CY.—The term ‘‘appropriate Federal banking agen3 cy’’— 

4 (A) has the meaning given that term under 

5 section 3 of the Federal Deposit Insurance Act 

6 (12 U.S.C. 1813); and 

7 (B) means the National Credit Union Ad8 ministration, in the case of an insured credit 

9 union (as defined under section 101 of the Fed10 eral Credit Union Act (12 U.S.C. 1752)). 

11 (2) BORROWER.—The term ‘‘borrower’’ means 

12 a borrower of a commercial mortgage loan. 

13 (3) COMMERCIAL MORTGAGE.—The term ‘‘com14 mercial mortgage’’ means a mortgage loan secured 

15 by an interest in real property owned for rental in16 come. 

17 (4) FINANCIAL INSTITUTION.—The term ‘‘fi18 nancial institution’’ means— 

19 (A) a person authorized to make and ap20 prove loans under section 7(a)(36) of the Small 

21 Business Act (15 U.S.C. 636(a)(36)) or section 

22 1109 of the CARES Act (Public Law 116– 

23 136); 

24 (B) a national banking association; and 


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1 (C) such other persons as the Secretary 

2 determines appropriate. 

3 (5) PARENT COMPANY.—The term ‘‘parent 

4 company’’ means any entity that has control over a 

5 borrower. 

6 (6) SECRETARY.—The term ‘‘Secretary’’ means 

7 the Secretary of the Treasury. 

Æ 


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