II 

110TH CONGRESS 

2D SESSION S. 3119 

To stimulate the economy by encouraging energy efficiency, infrastructure 

and workforce investment, and homeownership retention, and by amending the Internal Revenue Code of 1986 to provide certain business 

tax relief and incentives, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 12, 2008 

Ms. COLLINS introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To stimulate the economy by encouraging energy efficiency, 

infrastructure and workforce investment, and homeownership retention, and by amending the Internal Revenue Code of 1986 to provide certain business tax relief 

and incentives, 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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Economic Recovery Act of 2008’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows: 


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Sec. 1. Short title; table of contents. 

TITLE I—TAX PROVISIONS 

Sec. 101. Credit for replacement of wood-burning stoves meeting environmental 

standards. 

Sec. 102. Renewable electricity production credit. 

Sec. 103. Permanent increase in limitations on expensing of certain depreciable 

business assets; study on expensing limits. 

Sec. 104. 15-year straight-line cost recovery for qualified restaurant property. 

TITLE II—ENERGY PROVISIONS 

Sec. 201. Weatherization assistance. 

Sec. 202. Energy Star programs. 

TITLE III—TRANSPORTATION PROVISIONS 

Subtitle A—Build America Bonds 

Sec. 301. Credit to holders of Build America bonds. 

Sec. 302. Transportation Finance Corporation. 

Subtitle B—Commercial Truck Fuel Savings 

Sec. 311. Short title. 

Sec. 312. Findings. 

Sec. 313. Definitions. 

Sec. 314. Waiver of highway funding reduction relating to weight of vehicles 

using Interstate System highways. 

Sec. 315. GAO truck safety demonstration report. 

Sec. 316. Responsibilities of States. 

TITLE IV—WORKFORCE DEVELOPMENT 

Sec. 401. Statewide and local workforce investment systems. 

TITLE V—HOUSING PROVISIONS 

Sec. 501. Insurance of homeownership retention mortgages. 

Sec. 502. Study of auction or bulk refinance program. 

1 TITLE I—TAX PROVISIONS 

2 SEC. 101. CREDIT FOR REPLACEMENT OF WOOD-BURNING 

3 STOVES MEETING ENVIRONMENTAL STAND4 ARDS. 

5 (a) IN GENERAL.—Subpart A of part IV of sub6 chapter A of chapter 1 of the Internal Revenue Code of 

7 1986 (relating to nonrefundable personal credits) is 


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1 amended by inserting after section 25D the following new 

2 section: 

3 ‘‘SEC. 25E. REPLACEMENT OF WOOD-BURNING STOVES. 

4 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in5 dividual, there shall be allowed as a credit against the tax 

6 imposed by this chapter for the taxable year an amount 

7 equal to the qualified stove replacement expenditures paid 

8 or incurred by the taxpayer for the taxable year. 

9 ‘‘(b) LIMITATION.—The amount of the credit under 

10 subsection (a) with respect to the replacement of each non11 compliant wood stove shall not exceed $500. 

12 ‘‘(c) QUALIFIED STOVE REPLACEMENT EXPENDI13 TURES.—For purposes of this section— 

14 ‘‘(1) IN GENERAL.—The term ‘qualified stove 

15 replacement expenditures’ means expenditures made 

16 by the taxpayer for the purchase and installation of 

17 a compliant stove which— 

18 ‘‘(A) is installed in a dwelling unit located 

19 in the United States, and 

20 ‘‘(B) replaces a noncompliant wood stove 

21 used in such dwelling unit. 

22 Such term includes expenditures for labor costs 

23 properly allocable to the onsite preparation, assem24 bly, or original installation of the compliant stove. 


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1 ‘‘(2) COMPLIANT STOVE.—The term ‘compliant 

2 stove’ means— 

3 ‘‘(A) a wood-burning stove which meets the 

4 requirements set forth in the ‘Standards of Per5 formance for New Residential Wood Heaters’ 

6 issued by the Environmental Protection Agency, 

7 and 

8 ‘‘(B) a pellet or corn-burning stove. 

9 ‘‘(3) NONCOMPLIANT WOOD STOVE.—The term 

10 ‘noncompliant wood stove’ means any wood-burning 

11 stove that is not a compliant stove. 

12 ‘‘(d) JOINT OCCUPANCY, COOPERATIVE HOUSING

13 CORPORATIONS, AND WHEN EXPENDITURE MADE.— 

14 Rules similar to the rules of paragraphs (4), (5), and (8) 

15 of section 25D(e) shall apply for purposes of this section. 

16 ‘‘(e) BASIS ADJUSTMENT.—For purposes of this sub17 title, if a credit is allowed under this section for any ex18 penditure with respect to any property, the increase in the 

19 basis of such property which would (but for this sub20 section) result from such expenditure shall be reduced by 

21 the amount of the credit so allowed. 

22 ‘‘(f) TERMINATION.—This section shall not apply to 

23 expenditures made after December 31, 2010.’’. 

24 (b) CONFORMING AMENDMENTS.— 


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1 (1) Subsection (a) of section 1016 of the Inter2 nal Revenue Code of 1986 is amended— 

3 (A) by striking ‘‘and’’ at the end of para4 graph (35), 

5 (B) by striking the period at the end of 

6 paragraph (36) and inserting ‘‘, and’’, and 

7 (C) by adding at the end the following new 

8 paragraph: 

9 ‘‘(37) to the extent provided in section 25E(e), 

10 in the case of amounts with respect to which a credit 

11 has been allowed under section 25E.’’. 

12 (2) The table of sections for subpart A of part 

13 IV of subchapter A of chapter 1 of such Code is 

14 amended by inserting after the item relating to sec15 tion 25D the following new item: 

‘‘Sec. 25E. Replacement of wood-burning stoves.’’. 

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to expenditures for stoves pur18 chased after the date of the enactment of this Act. 

19 SEC. 102. RENEWABLE ELECTRICITY PRODUCTION CREDIT. 

20 (a) EXTENSION.—Section 45(d) of the Internal Rev21 enue Code of 1986 (relating to qualified facilities) is 

22 amended by striking ‘‘January 1, 2009’’ each place it ap23 pears in paragraphs (1), (2), (3), (4), (5), and (7) and 

24 inserting ‘‘January 1, 2012’’. 


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1 (b) REPEAL OF MUNICIPAL SOLID WASTE AS QUALI2 FIED RESOURCE.— 

3 (1) IN GENERAL.—Paragraph (1) of section 

4 45(c) of the Internal Revenue Code of 1986 is 

5 amended by inserting ‘‘and’’ at the end of subpara6 graph (F) and by striking subparagraph (G). 

7 (2) CONFORMING AMENDMENT.—Subsection (d) 

8 of section 45 of such Code is amended by striking 

9 paragraph (6). 

10 (3) EFFECTIVE DATE.—The amendments made 

11 by this subsection shall apply to property placed in 

12 service after the date of the enactment of this Act. 

13 (c) EXTENSION OF CREDIT FOR RESIDENTIAL EN14 ERGY EFFICIENT PROPERTY.—Subsection (g) of section 

15 25D of the Internal Revenue Code of 1986 (relating to 

16 termination) is amended by striking ‘‘December 31, 2008’’ 

17 and inserting ‘‘December 31, 2012’’. 

18 SEC. 103. PERMANENT INCREASE IN LIMITATIONS ON EX19 PENSING OF CERTAIN DEPRECIABLE BUSI20 NESS ASSETS; STUDY ON EXPENSING LIMITS. 

21 (a) IN GENERAL.—Subsection (b) of section 179 of 

22 the Internal Revenue Code of 1986 (relating to limita23 tions) is amended— 

24 (1) by striking ‘‘$25,000’’ and all that follows 

25 in paragraph (1) and inserting ‘‘$128,000.’’, 


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1 (2) by striking ‘‘$200,000’’ and all that follows 

2 in paragraph (2) and inserting ‘‘$512,000.’’, 

3 (3) by striking ‘‘after 2007 and before 2011, 

4 the $125,000 and $500,000’’ in paragraph (5)(A) 

5 and inserting ‘‘after 2008, the $128,000 and the 

6 $512,000’’, 

7 (4) by striking ‘‘2006’’ in paragraph (5)(A)(ii) 

8 and inserting ‘‘2007’’, and 

9 (5) by striking paragraph (7). 

10 (b) STUDY.— 

11 (1) IN GENERAL.—The Secretary of the Treas12 ury shall conduct a study on the use and impact of 

13 increased limitations on expensing of depreciable 

14 business assets under section 179 of the Internal 

15 Revenue Code of 1986, including— 

16 (A) the use of expensing following the in17 crease of limitations in 2003, 2007, and 2008; 

18 (B) the impact of higher limitations on ex19 pensing on small businesses, including informa20 tion on businesses by size and industry; and 

21 (C) the impact of higher limitations on ex22 pensing on economic activity, including business 

23 investment, business expansion, and job growth. 

24 (2) REPORT.—The Secretary of the Treasury 

25 shall, not later than one year after the date of the 


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1 enactment of this Act, submit a report on the results 

2 of the study required under paragraph (1) to the 

3 Committee on Ways and Means of the House of 

4 Representatives and the Committee on Finance of 

5 the Senate. 

6 (c) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to taxable years beginning after 

8 December 31, 2008. 

9 SEC. 104. 15-YEAR STRAIGHT-LINE COST RECOVERY FOR 

10 QUALIFIED RESTAURANT PROPERTY. 

11 (a) IN GENERAL.—Clause (v) of section 168(e)(3)(E) 

12 of the Internal Revenue Code of 1986 (relating to 15-year 

13 property) is amended by striking ‘‘January 1, 2008’’ and 

14 inserting ‘‘January 1, 2010’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall apply to property placed in service after 

17 December 31, 2007. 

18 TITLE II—ENERGY PROVISIONS 

19 SEC. 201. WEATHERIZATION ASSISTANCE. 

20 Section 422 of the Energy Conservation and Produc21 tion Act (42 U.S.C. 6872) is amended to read as follows: 

22 ‘‘SEC. 422. AUTHORIZATION OF APPROPRIATIONS. 

23 ‘‘There are authorized to be appropriated to carry out 

24 the weatherization program under this part— 

25 ‘‘(1) $1,000,000,000 for fiscal year 2009; 


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1 ‘‘(2) $1,200,000,000 for fiscal year 2010; and 

2 ‘‘(3) $1,400,000,000 for fiscal year 2011.’’. 

3 SEC. 202. ENERGY STAR PROGRAMS. 

4 There are authorized to be appropriated for use in 

5 carrying out the Energy Star program under section 324A 

6 of the Energy Policy and Conservation Act (42 U.S.C. 

7 6294a)— 

8 (1) to the Administrator of the Environmental 

9 Protection Agency, $100,000,000 for each fiscal 

10 year; and 

11 (2) to the Secretary of Energy, $12,000,000 for 

12 each fiscal year. 

13 TITLE III—TRANSPORTATION 

14 PROVISIONS 

15 Subtitle A—Build America Bonds 

16 SEC. 301. CREDIT TO HOLDERS OF BUILD AMERICA BONDS. 

17 (a) IN GENERAL.—Subpart H of part IV of sub18 chapter A of chapter 1 of the Internal Revenue Code of 

19 1986 (relating to nonrefundable credit to holders of cer20 tain bonds) is amended by adding at the end the following 

21 new section: 

22 ‘‘SEC. 54A. CREDIT TO HOLDERS OF BUILD AMERICA 

23 BONDS. 

24 ‘‘(a) ALLOWANCE OF CREDIT.—If a taxpayer holds 

25 a Build America bond on 1 or more credit allowance dates 


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1 of the bond occurring during any taxable year, there shall 

2 be allowed as a credit against the tax imposed by this 

3 chapter for the taxable year an amount equal to the sum 

4 of the credits determined under subsection (b) with re5 spect to such dates. 

6 ‘‘(b) AMOUNT OF CREDIT.— 

7 ‘‘(1) IN GENERAL.—The amount of the credit 

8 determined under this subsection with respect to any 

9 credit allowance date for a Build America bond is 25 

10 percent of the annual credit determined with respect 

11 to such bond. 

12 ‘‘(2) ANNUAL CREDIT.—The annual credit de13 termined with respect to any Build America bond is 

14 the product of— 

15 ‘‘(A) the applicable credit rate, multiplied 

16 by 

17 ‘‘(B) the outstanding face amount of the 

18 bond. 

19 ‘‘(3) APPLICABLE CREDIT RATE.—For purposes 

20 of paragraph (2), the applicable credit rate with re21 spect to an issue is the rate equal to an average 

22 market yield (as of the day before the date of sale 

23 of the issue) on outstanding long-term corporate 

24 debt obligations (determined in such manner as the 

25 Secretary prescribes). 


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1 ‘‘(4) CREDIT ALLOWANCE DATE.—For purposes 

2 of this section, the term ‘credit allowance date’ 

3 means— 

4 ‘‘(A) March 15, 

5 ‘‘(B) June 15, 

6 ‘‘(C) September 15, and 

7 ‘‘(D) December 15. 

8 Such term includes the last day on which the bond 

9 is outstanding. 

10 ‘‘(5) SPECIAL RULE FOR ISSUANCE AND RE11 DEMPTION.—In the case of a bond which is issued 

12 during the 3-month period ending on a credit allow13 ance date, the amount of the credit determined 

14 under this subsection with respect to such credit al15 lowance date shall be a ratable portion of the credit 

16 otherwise determined based on the portion of the 3- 

17 month period during which the bond is outstanding. 

18 A similar rule shall apply when the bond is redeemed 

19 or matures. 

20 ‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—The 

21 credit allowed under subsection (a) for any taxable year 

22 shall not exceed the excess of— 

23 ‘‘(1) the sum of the regular tax liability (as de24 fined in section 26(b)) plus the tax imposed by sec25 tion 55, over 


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1 ‘‘(2) the sum of the credits allowable under this 

2 part (other than subpart C, section 1400N(l), and 

3 this section). 

4 ‘‘(d) CREDIT INCLUDED IN GROSS INCOME.—Gross 

5 income includes the amount of the credit allowed to the 

6 taxpayer under this section (determined without regard to 

7 subsection (c)) and the amount so included shall be treat8 ed as interest income. 

9 ‘‘(e) BUILD AMERICA BOND.—For purposes of this 

10 section, the term ‘Build America bond’ means any bond 

11 issued as part of an issue if— 

12 ‘‘(1) 95 percent or more of the proceeds of such 

13 issue are to be used for expenditures incurred after 

14 the date of the enactment of this section for 1 or 

15 more qualified projects pursuant to an allocation of 

16 such proceeds to such project or projects by the 

17 Transportation Finance Corporation, 

18 ‘‘(2) the bond is issued by the Transportation 

19 Finance Corporation and is in registered form (with20 in the meaning of section 149(a)), 

21 ‘‘(3) the Transportation Finance Corporation 

22 certifies that it meets the State contribution require23 ment of subsection (l) with respect to such project, 

24 as in effect on the date of issuance, 


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1 ‘‘(4) the Transportation Finance Corporation 

2 certifies that the State in which an approved quali3 fied project is located meets the requirement de4 scribed in subsection (m), 

5 ‘‘(5) the face amount of such bond, when added 

6 to the face amount of all Build America bonds pre7 viously issued in the calendar year, does not exceed 

8 the Build America bond limitation for such year 

9 under subsection (g), 

10 ‘‘(6) the term of each bond which is part of 

11 such issue does not exceed 30 years, 

12 ‘‘(7) the payment of principal with respect to 

13 such bond is the obligation of the Transportation Fi14 nance Corporation, and 

15 ‘‘(8) the issue meets the requirements of sub16 section (h). 

17 ‘‘(f) QUALIFIED PROJECT.—For purposes of this sec18 tion, the term ‘qualified project’ means the capital im19 provements to any transportation infrastructure project of 

20 any governmental unit or other person, including roads, 

21 bridges, rail and transit systems, ports, and inland water22 ways, proposed by 1 or more States and approved by the 

23 Transportation Finance Corporation, but does not include 

24 costs of operations or maintenance with respect to such 

25 project. 


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1 ‘‘(g) LIMITATION ON AMOUNT OF BONDS DES2 IGNATED.— 

3 ‘‘(1) NATIONAL LIMITATION.—There is a Build 

4 America bond limitation for each calendar year. 

5 Such limitation is— 

6 ‘‘(A) $5,000,000,000 for 2009, 

7 ‘‘(B) $5,000,000,000 for 2010, 

8 ‘‘(C) $10,000,000,000 for 2011, 

9 ‘‘(D) $10,000,000,000 for 2012, 

10 ‘‘(E) $10,000,000,000 for 2013, 

11 ‘‘(F) $10,000,000,000 for 2014, and 

12 ‘‘(G) except as provided in paragraph (4), 

13 zero thereafter. 

14 ‘‘(2) MINIMUM ALLOCATIONS TO STATES.—In 

15 making allocations for each calendar year under sub16 section (e)(1), the Transportation Finance Corpora17 tion shall ensure that the amount allocated for quali18 fied projects located in each State for such calendar 

19 year is not less than 1 percent of the total amount 

20 allocated for such year. 

21 ‘‘(3) CARRYOVER OF UNUSED ISSUANCE LIMI22 TATION.—If for any calendar year the limitation 

23 amount imposed by paragraph (1) exceeds the 

24 amount of Build America bonds issued during such 

25 year, such excess shall be carried forward to one or 


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1 more succeeding calendar years as an addition to the 

2 limitation imposed by paragraph (1) and until used 

3 by issuance of Build America bonds. 

4 ‘‘(4) ISSUANCE OF SMALL DENOMINATION

5 BONDS.—From the Build America bond limitation 

6 for each year, the Transportation Finance Corpora7 tion shall issue a limited quantity of Build America 

8 bonds in small denominations suitable for purchase 

9 as gifts by individual investors wishing to show their 

10 support for investing in America’s transportation in11 frastructure. 

12 ‘‘(h) SPECIAL RULES RELATING TO EXPENDI13 TURES.— 

14 ‘‘(1) IN GENERAL.—An issue shall be treated as 

15 meeting the requirements of this subsection if, as of 

16 the date of issuance, the Transportation Finance 

17 Corporation reasonably expects— 

18 ‘‘(A) at least 95 percent of the proceeds of 

19 such issue are to be spent for 1 or more quali20 fied projects within the 5-year period beginning 

21 on such date, 

22 ‘‘(B) to incur a binding commitment with 

23 a State or third party to spend at least 10 per24 cent of the proceeds of such issue, or to com25 mence construction, with respect to such 


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1 projects within the 12-month period beginning 

2 on such date, and 

3 ‘‘(C) to proceed with due diligence to com4 plete such projects and to spend the proceeds of 

5 such issue. 

6 ‘‘(2) RULES REGARDING CONTINUING COMPLI7 ANCE AFTER 5-YEAR DETERMINATION.—To the ex8 tent that less than 95 percent of the proceeds of 

9 such issue are expended by the close of the 5-year 

10 period beginning on the date of issuance, the Trans11 portation Finance Corporation shall redeem all of 

12 the nonqualified bonds within 90 days after the end 

13 of such period. For purposes of this paragraph, the 

14 amount of the nonqualified bonds required to be re15 deemed shall be determined in the same manner as 

16 under section 142. 

17 ‘‘(3) REALLOCATION.—In the event the recipi18 ent of an allocation under subsection (g) after notice 

19 and a reasonable opportunity to take corrective ac20 tion fails to demonstrate to the satisfaction of the 

21 Transportation Finance Corporation that its actions 

22 will allow the Transportation Finance Corporation to 

23 meet the requirements under this subsection, the 

24 Transportation Finance Corporation may redisVerDate Aug 31 2005 05:58 Jun 13, 2008 Jkt 069200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S3119.IS S3119

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1 tribute the allocation meant for such recipient to 

2 other recipients. 

3 ‘‘(i) SPECIAL RULES RELATING TO ARBITRAGE.—A 

4 bond which is a part of an issue shall not be treated as 

5 a Build America bond unless, with respect to the issue 

6 of which such bond is a part, the Transportation Finance 

7 Corporation satisfies the arbitrage requirements of section 

8 148 with respect to proceeds of the issue. 

9 ‘‘(j) RECAPTURE OF PORTION OF CREDIT WHERE

10 CESSATION OF COMPLIANCE.—If any bond which when 

11 issued purported to be a Build America bond ceases to 

12 be such a bond, the Transportation Finance Corporation 

13 shall pay to the United States (at the time required by 

14 the Secretary) an amount equal to the sum of— 

15 ‘‘(1) the aggregate of the credits allowable 

16 under this section with respect to such bond (deter17 mined without regard to subsection (c)) for taxable 

18 years ending during the calendar year in which such 

19 cessation occurs and each succeeding calendar year 

20 ending with the calendar year in which such bond is 

21 redeemed by the Transportation Finance Corpora22 tion, and 

23 ‘‘(2) interest at the underpayment rate under 

24 section 6621 on the amount determined under paraVerDate Aug 31 2005 05:58 Jun 13, 2008 Jkt 069200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\S3119.IS S3119

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1 graph (1) for each calendar year for the period be2 ginning on the first day of such calendar year. 

3 ‘‘(k) BUILD AMERICA BONDS TRUST ACCOUNT.— 

4 ‘‘(1) IN GENERAL.—The following amounts 

5 shall be held in a Build America Bonds Trust Ac6 count by the Transportation Finance Corporation: 

7 ‘‘(A) The proceeds from the sale of all 

8 bonds issued under this section. 

9 ‘‘(B) The investment earnings on proceeds 

10 from the sale of such bonds. 

11 ‘‘(C) The amount described in paragraph 

12 (2). 

13 ‘‘(D) Any earnings on any amounts de14 scribed in subparagraph (A), (B), or (C). 

15 ‘‘(2) APPROPRIATION OF REVENUES.—There is 

16 hereby appropriated to the Build America Bonds 

17 Trust Account an amount equal to the lesser of— 

18 ‘‘(A) the revenues resulting from the impo19 sition of fees pursuant to section 13031 of the 

20 Consolidated Omnibus Budget Reconciliation 

21 Act of 1985 (19 U.S.C. 58c) for fiscal years be22 ginning after September 31, 2008, or 

23 ‘‘(B) $50,000,000,000. 

24 ‘‘(3) USE OF FUNDS.—Amounts in the Build 

25 America Bonds Trust Account may be used only to 


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1 pay costs of qualified projects, redeem Build Amer2 ica bonds, and fund the operations of the Transpor3 tation Finance Corporation, except that amounts 

4 withdrawn from the Build America Bonds Trust Ac5 count to pay costs of qualified projects may not ex6 ceed the proceeds from the sale of Build America 

7 bonds described in subsection (e)(1). 

8 ‘‘(4) USE OF REMAINING FUNDS IN BUILD

9 AMERICA BONDS TRUST ACCOUNT.—Upon the re10 demption of all Build America bonds issued under 

11 this section, any remaining amounts in the Build 

12 America Bonds Trust Account shall be available to 

13 the Transportation Finance Corporation to pay the 

14 costs of any qualified project. 

15 ‘‘(5) APPLICABILITY OF FEDERAL LAW.—The 

16 requirements of any Federal law, including titles 23, 

17 40, and 49 of the United States Code, which would 

18 otherwise apply to projects to which the United 

19 States is a party or to funds made available under 

20 such law and projects assisted with those funds shall 

21 apply to— 

22 ‘‘(A) funds made available under the Build 

23 America Bonds Trust Account for similar quali24 fied projects, including contributions required 

25 under subsection (l), and 


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1 ‘‘(B) similar qualified projects assisted by 

2 the Transportation Finance Corporation 

3 through the use of such funds. 

4 ‘‘(6) INVESTMENT.—Subject to subsections (h) 

5 and (i), it shall be the duty of the Transportation 

6 Finance Corporation to invest in investment grade 

7 obligations such portion of the Build America Bonds 

8 Trust Account as is not, in the judgment of the 

9 Board of Directors of the Transportation Finance 

10 Corporation, required to meet current withdrawals. 

11 To the maximum extent practicable, investments 

12 should be made in securities that support infrastruc13 ture investment at the State and local level. 

14 ‘‘(l) STATE CONTRIBUTION REQUIREMENTS.— 

15 ‘‘(1) IN GENERAL.—For purposes of subsection 

16 (e)(3), the State contribution requirement of this 

17 subsection is met with respect to any qualified 

18 project if the Transportation Finance Corporation 

19 has received from 1 or more States, not later than 

20 the date of issuance of the bond, written commit21 ments for matching contributions of not less than 20 

22 percent (or such smaller percentage as determined 

23 under title 23, United States Code, for such State) 

24 of the cost of the qualified project. 


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1 ‘‘(2) STATE MATCHING CONTRIBUTIONS MAY

2 NOT INCLUDE FEDERAL FUNDS.—For purposes of 

3 this subsection, State matching contributions shall 

4 not be derived, directly or indirectly, from Federal 

5 funds, including any transfers from the Highway 

6 Trust Fund under section 9503. 

7 ‘‘(m) UTILIZATION OF UPDATED CONSTRUCTION

8 TECHNOLOGY FOR QUALIFIED PROJECTS.—For purposes 

9 of subsection (e)(4), the requirement of this subsection is 

10 met if the appropriate State agency relating to the quali11 fied project is utilizing updated construction technologies. 

12 ‘‘(n) OTHER DEFINITIONS AND SPECIAL RULES.— 

13 For purposes of this section— 

14 ‘‘(1) BOND.—The term ‘bond’ includes any ob15 ligation. 

16 ‘‘(2) TRANSPORTATION FINANCE CORPORA17 TION.—The term ‘Transportation Finance Corpora18 tion’ means the corporation established under sec19 tion 302(a) of the Economic Recovery Act of 2008. 

20 ‘‘(3) PARTNERSHIP; S CORPORATION; AND

21 OTHER PASS-THRU ENTITIES.— 

22 ‘‘(A) IN GENERAL.—In the case of a part23 nership, trust, S corporation, or other pass-thru 

24 entity, rules similar to the rules of section 41(g) 


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1 shall apply with respect to the credit allowable 

2 under subsection (a). 

3 ‘‘(B) NO BASIS ADJUSTMENT.—In the case 

4 of a bond held by a partnership or an S cor5 poration, rules similar to the rules under sec6 tion 1397E(i) shall apply. 

7 ‘‘(4) BONDS HELD BY REGULATED INVEST8 MENT COMPANIES.—If any Build America bond is 

9 held by a regulated investment company, the credit 

10 determined under subsection (a) shall be allowed to 

11 shareholders of such company under procedures pre12 scribed by the Secretary. 

13 ‘‘(5) CREDITS MAY BE STRIPPED.—Under regu14 lations prescribed by the Secretary— 

15 ‘‘(A) IN GENERAL.—There may be a sepa16 ration (including at issuance) of the ownership 

17 of a Build America bond and the entitlement to 

18 the credit under this section with respect to 

19 such bond. In case of any such separation, the 

20 credit under this section shall be allowed to the 

21 person who on the credit allowance date holds 

22 the instrument evidencing the entitlement to 

23 the credit and not to the holder of the bond. 

24 ‘‘(B) CERTAIN RULES TO APPLY.—In the 

25 case of a separation described in subparagraph 


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1 (A), the rules of section 1286 shall apply to the 

2 Build America bond as if it were a stripped 

3 bond and to the credit under this section as if 

4 it were a stripped coupon. 

5 ‘‘(6) CREDITS MAY BE TRANSFERRED.—Noth6 ing in any law or rule of law shall be construed to 

7 limit the transferability of the credit or bond allowed 

8 by this section through sale and repurchase agree9 ments. 

10 ‘‘(7) REPORTING.—The Transportation Finance 

11 Corporation shall submit reports similar to the re12 ports required under section 149(e). 

13 ‘‘(8) PROHIBITION ON USE OF HIGHWAY TRUST

14 FUND.—Notwithstanding any other provision of law, 

15 no funds derived from the Highway Trust Fund es16 tablished under section 9503 shall be used to pay for 

17 credits under this section or for the administrative 

18 costs of the Transportation Finance Corporation.’’. 

19 (b) REPORTING.—Subsection (d) of section 6049 of 

20 the Internal Revenue Code of 1986 (relating to returns 

21 regarding payments of interest) is amended by adding at 

22 the end the following new paragraph: 

23 ‘‘(9) REPORTING OF CREDIT ON BUILD AMER24 ICA BONDS.— 


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1 ‘‘(A) IN GENERAL.—For purposes of sub2 section (a), the term ‘interest’ includes amounts 

3 includible in gross income under section 54A(d) 

4 and such amounts shall be treated as paid on 

5 the credit allowance date (as defined in section 

6 54A(b)(4)). 

7 ‘‘(B) REPORTING TO CORPORATIONS, 

8 ETC.—Except as otherwise provided in regula9 tions, in the case of any interest described in 

10 subparagraph (A), subsection (b)(4) shall be 

11 applied without regard to subparagraphs (A), 

12 (H), (I), (J), (K), and (L)(i) of such subsection. 

13 ‘‘(C) REGULATORY AUTHORITY.—The Sec14 retary may prescribe such regulations as are 

15 necessary or appropriate to carry out the pur16 poses of this paragraph, including regulations 

17 which require more frequent or more detailed 

18 reporting.’’. 

19 (c) CONFORMING AMENDMENT.—Section 54(c)(2) of 

20 the Internal Revenue Code of 1986 is amended by insert21 ing ‘‘section 54A,’’ after ‘‘subpart C,’’. 

22 (d) CLERICAL AMENDMENTS.—The table of sections 

23 for subpart H of part IV of subchapter A of chapter 1 

24 of the Internal Revenue Code of 1986 is amended by add25 ing at the end the following new item: 

‘‘Sec. 54A. Credit for holders of Build America bonds.’’. 


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•S 3119 IS

1 (e) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to bonds issued after the date of 

3 the enactment of this Act. 

4 SEC. 302. TRANSPORTATION FINANCE CORPORATION. 

5 (a) RECOGNITION AND STATUS.—Congress grants 

6 consent and recognition to the establishment by 2 or more 

7 State infrastructure banks (established under section 610 

8 of title 23, United States Code) of a multistate organiza9 tion to be known as the ‘‘Transportation Finance Corpora10 tion’’ (hereafter in this section referred to as the ‘‘Cor11 poration’’). Additional State infrastructure banks may join 

12 the Transportation Finance Corporation subsequent to its 

13 establishment. 

14 (b) FUNCTIONS OF CORPORATION.—The Corpora15 tion— 

16 (1) is authorized to issue Build America bonds 

17 for the financing of qualified projects as required 

18 under section 54A of the Internal Revenue Code of 

19 1986, 

20 (2) is authorized to establish and operate the 

21 Build America Bonds Trust Account as required 

22 under section 54A(k) of such Code, 

23 (3) is authorized to act as a centralized entity 

24 to provide financing for qualified projects (as defined 

25 in section 54A(f) of such Code), 


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•S 3119 IS

1 (4) may— 

2 (A) leverage resources and stimulate public 

3 and private investment in transportation infra4 structure, 

5 (B) encourage States to create additional 

6 opportunities for the financing of transportation 

7 infrastructure, 

8 (C) perform any other function the sole 

9 purpose of which is to carry out the financing 

10 of qualified projects through Build America 

11 bonds, and 

12 (5) not later than February 15 of each year 

13 shall submit a report to Congress describing the ac14 tivities of the Corporation for the preceding year. 

15 (c) EXEMPTION FROM TAXES.— 

16 (1) IN GENERAL.—The Corporation, including 

17 its franchise, capital, reserves, surplus, sinking 

18 funds, mortgages or other security holdings, and in19 come, shall be exempt from all taxation now or here20 after imposed by the United States, by any territory, 

21 dependency, or possession thereof, or by any State, 

22 county, municipality, or local taxing authority, ex23 cept that any real property of the Corporation shall 

24 be subject to State, territorial, county, municipal, or 


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1 local taxation to the same extent according to its 

2 value as other real property is taxed. 

3 (2) FINANCIAL OBLIGATIONS.—Build America 

4 bonds or other obligations issued by the Corporation 

5 and the interest on or tax credits with respect to its 

6 bonds or other obligations shall not be subject to 

7 taxation by any State, county, municipality, or local 

8 taxing authority. 

9 (d) CONSTRUCTION REGARDING RECOGNITION AND

10 STATUS.— 

11 (1) IN GENERAL.—Nothing in this section shall 

12 be construed to establish the Corporation as a de13 partment, agency, or instrumentality of the United 

14 States Government, to establish the members of any 

15 governing board or the officers and employees of the 

16 Corporation, as officers or employees of the United 

17 States Government, or to subject the Corporation to 

18 the provisions of title 31, United States Code. 

19 (2) UNITED STATES NOT OBLIGATED.—The de20 posit of Federal funds into the Build America Bonds 

21 Trust Account established under section 54A(k) of 

22 the Internal Revenue Code of 1986 shall not be con23 strued as a commitment, guarantee, or obligation on 

24 the part of the United States to any third party, nor 

25 shall any third party have any right against the 


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1 United States for payment solely by virtue of the 

2 contribution. Any security or debt-financing instru3 ment issued by the Corporation shall expressly state 

4 that the security or instrument does not constitute 

5 a commitment, guarantee, or obligation of the 

6 United States. 

7 Subtitle B—Commercial Truck 

8 Fuel Savings 

9 SEC. 311. SHORT TITLE. 

10 This subtitle may be cited as the ‘‘Commercial Truck 

11 Fuel Savings Demonstration Act of 2008’’. 

12 SEC. 312. FINDINGS. 

13 Congress finds that— 

14 (1) diesel fuel prices have increased more than 

15 50 percent during the 1-year period between May 

16 2007 and May 2008; 

17 (2) laws governing Federal highway funding ef18 fectively impose a limit of 80,000 pounds on the 

19 weight of vehicles permitted to use highways on the 

20 Interstate System; 

21 (3) the administration of that provision in 

22 many States has forced heavy tractor-trailer and 

23 tractor-semitrailer combination vehicles traveling in 

24 those States to divert onto small State and local 


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1 roads on which higher vehicle weight limits apply 

2 under State law; 

3 (4) the diversion of those vehicles onto those 

4 roads increases fuel costs because of increased idling 

5 time and total travel time along those roads; and 

6 (5) permitting heavy commercial vehicles, in7 cluding tanker trucks carrying hazardous material 

8 and fuel oil, to travel on Interstate System highways 

9 when fuel prices are high would provide significant 

10 savings in the transportation of goods throughout 

11 the United States. 

12 SEC. 313. DEFINITIONS. 

13 In this subtitle: 

14 (1) COMMISSIONER.—The term ‘‘Commis15 sioner’’ means the Commissioner of Transportation 

16 of a State. 

17 (2) COVERED INTERSTATE SYSTEM HIGH18 WAY.— 

19 (A) IN GENERAL.—The term ‘‘covered 

20 Interstate System highway’’ means a highway 

21 designated as a route on the Interstate System. 

22 (B) EXCLUSION.—The term ‘‘covered 

23 Interstate System highway’’ does not include 

24 any portion of a highway that, as of the date 

25 of the enactment of this Act, is exempt from 


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1 the requirements of subsection (a) of section 

2 127 of title 23, United States Code, pursuant 

3 to a waiver under that subsection. 

4 (3) INTERSTATE SYSTEM.—The term ‘‘Inter5 state System’’ has the meaning given the term in 

6 section 101(a) of title 23, United States Code. 

7 SEC. 314. WAIVER OF HIGHWAY FUNDING REDUCTION RE8 LATING TO WEIGHT OF VEHICLES USING 

9 INTERSTATE SYSTEM HIGHWAYS. 

10 (a) PROHIBITION RELATING TO CERTAIN VEHI11 CLES.—Notwithstanding section 127(a) of title 23, United 

12 States Code, the total amount of funds apportioned to a 

13 State under section 104(b)(1) of that title for any period 

14 may not be reduced under section 127(a) of that title if 

15 a State permits a vehicle described in subsection (b) to 

16 use a covered Interstate System highway in the State in 

17 accordance with the conditions described in subsection (c). 

18 (b) COMBINATION VEHICLES IN EXCESS OF 80,000 

19 POUNDS.—A vehicle described in this subsection is a vehi20 cle having a weight in excess of 80,000 pounds that— 

21 (1) consists of a 3-axle tractor unit hauling a 

22 single trailer or semitrailer; and 

23 (2) does not exceed any vehicle weight limita24 tion that is applicable under the laws of a State to 

25 the operation of the vehicle on highways in the State 


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•S 3119 IS

1 that are not part of the Interstate System, as those 

2 laws are in effect on the date of enactment of this 

3 Act. 

4 (c) CONDITIONS.—This section shall apply at any 

5 time at which the weighted average price of retail number 

6 2 diesel in the United States is $3.50 or more per gallon. 

7 (d) EFFECTIVE DATE AND TERMINATION.—This sec8 tion shall not remain in effect— 

9 (1) after the date that is 2 years after the date 

10 of enactment of this Act; or 

11 (2) before the end of that 2-year period, after 

12 any date on which the Secretary of Transpor13 tation— 

14 (A) determines that— 

15 (i) operation of vehicles described in 

16 subsection (b) on covered Interstate Sys17 tem highways has adversely affected safety 

18 on the overall highway network; or 

19 (ii) a Commissioner has failed faith20 fully to use the highway safety committee 

21 as described in section 316(2)(A) or to col22 lect the data described in section 316(3); 

23 and 


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1 (B) publishes the determination, together 

2 with the date of termination of this section, in 

3 the Federal Register. 

4 (e) CONSULTATION REGARDING TERMINATION FOR

5 SAFETY.—In making a determination under subsection 

6 (d)(2)(A)(i), the Secretary of Transportation shall consult 

7 with the highway safety committee established by a Com8 missioner in accordance with section 316. 

9 SEC. 315. GAO TRUCK SAFETY DEMONSTRATION REPORT. 

10 The Comptroller General of the United States shall 

11 carry out a study of the effects of participation in the pro12 gram under section 314 on the safety of the overall high13 way network in States participating in that program. 

14 SEC. 316. RESPONSIBILITIES OF STATES. 

15 For the purpose of section 314, a State shall be con16 sidered to meet the conditions under this section if the 

17 Commissioner of the State— 

18 (1) submits to the Secretary of Transportation 

19 a plan for use in meeting the conditions described in 

20 paragraphs (2) and (3); 

21 (2) establishes and chairs a highway safety 

22 committee that— 

23 (A) the Commissioner uses to review the 

24 data collected pursuant to paragraph (3); and 

25 (B) consists of representatives of— 


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1 (i) agencies of the State that have re2 sponsibilities relating to highway safety; 

3 (ii) municipalities of the State; 

4 (iii) organizations that have evalua5 tion or promotion of highway safety among 

6 the principal purposes of the organizations; 

7 and 

8 (iv) the commercial trucking industry; 

9 and 

10 (3) collects data on the net effects that the op11 eration of vehicles described in section 314(b) on 

12 covered Interstate System highways have on the 

13 safety of the overall highway network, including the 

14 net effects on single-vehicle and multiple-vehicle col15 lision rates for those vehicles. 

16 TITLE IV—WORKFORCE 

17 DEVELOPMENT 

18 SEC. 401. STATEWIDE AND LOCAL WORKFORCE INVEST19 MENT SYSTEMS. 

20 Section 137 of the Workforce Investment Act of 1998 

21 (29 U.S.C. 2872) is amended to read as follows: 

22 ‘‘SEC. 137. AUTHORIZATION OF APPROPRIATIONS. 

23 ‘‘(a) YOUTH ACTIVITIES.— 

24 ‘‘(1) FISCAL YEAR 2009.—There is authorized 

25 to be appropriated and there is appropriated to 


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1 carry out the activities described in section 127(a), 

2 $1,174,000,000 for fiscal year 2009. 

3 ‘‘(2) FISCAL YEAR 2010.—There are authorized 

4 to be appropriated to carry out the activities de5 scribed in section 127(a), such sums as may be nec6 essary for fiscal year 2010. 

7 ‘‘(b) ADULT EMPLOYMENT AND TRAINING ACTIVI8 TIES.— 

9 ‘‘(1) FISCAL YEAR 2009.—There is authorized 

10 to be appropriated and there is appropriated to 

11 carry out the activities described in section 

12 132(a)(1), $1,099,000,000 for fiscal year 2009. 

13 ‘‘(2) FISCAL YEAR 2010.—There are authorized 

14 to be appropriated to carry out the activities de15 scribed in section 132(a)(1), such sums as may be 

16 necessary for fiscal year 2010. 

17 ‘‘(c) DISLOCATED WORKER EMPLOYMENT AND

18 TRAINING ACTIVITIES.— 

19 ‘‘(1) FISCAL YEAR 2009.—There is authorized 

20 to be appropriated and there is appropriated to 

21 carry out the activities described in section 

22 132(a)(2), $1,945,000,000 for fiscal year 2009. 

23 ‘‘(2) FISCAL YEAR 2010.—There are authorized 

24 to be appropriated to carry out the activities deVerDate Aug 31 2005 05:58 Jun 13, 2008 Jkt 069200 PO 00000 Frm 00034 Fmt 6652 Sfmt 6201 E:\BILLS\S3119.IS S3119

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•S 3119 IS

1 scribed in section 132(a)(2), such sums as may be 

2 necessary for fiscal year 2010.’’. 

3 TITLE V—HOUSING PROVISIONS 

4 SEC. 501. INSURANCE OF HOMEOWNERSHIP RETENTION 

5 MORTGAGES. 

6 (a) MORTGAGE INSURANCE PROGRAM.—Title II of 

7 the National Housing Act (12 U.S.C. 1707 et seq.) is 

8 amended by adding at the end the following new section: 

9 ‘‘SEC. 257. INSURANCE OF HOMEOWNERSHIP RETENTION 

10 MORTGAGES. 

11 ‘‘(a) AUTHORITY.— 

12 ‘‘(1) IN GENERAL.—The Secretary shall, sub13 ject only to the absence of qualified request for in14 surance under this section and to the limitations 

15 under subsection (e) of this section and section 

16 531(a), make commitments to insure and insure any 

17 mortgage covering a 1- to 4-family residence that is 

18 made for the purpose of paying or prepaying out19 standing obligations under an existing mortgage or 

20 mortgages on the residence if the mortgage being in21 sured under this section meets the requirements of 

22 this section, as established by the Secretary, and of 

23 section 203, except as modified by this section. 

24 ‘‘(2) ESTABLISHMENT AND IMPLEMENTATION

25 OF PROGRAM REQUIREMENTS.—The Secretary shall 


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1 establish program requirements and standards under 

2 this section and the Secretary shall implement such 

3 requirements and standards. The Secretary may es4 tablish and implement any requirements or stand5 ards through interim guidance and mortgage letters. 

6 ‘‘(b) REQUIREMENTS.—To be eligible for insurance 

7 under this section, a mortgage shall comply with all of 

8 the following requirements: 

9 ‘‘(1) OWNER OCCUPIED PRINCIPAL RESIDENCE

10 REQUIREMENT.—The residence to be covered by the 

11 mortgage insured under this section shall be occu12 pied by the mortgagor as the principal residence of 

13 the mortgagor. 

14 ‘‘(2) LACK OF CAPACITY TO PAY EXISTING

15 MORTGAGE OR MORTGAGES.— 

16 ‘‘(A) BORROWER CERTIFICATION.—The 

17 mortgagor shall provide a certification to the 

18 originator of the mortgage that the mortgagor 

19 has not intentionally defaulted on the existing 

20 mortgage or mortgages. 

21 ‘‘(B) LOSS MITIGATION RESPONSIBIL22 ITIES.—This section may not be construed to 

23 alter or in any way affect the responsibilities of 

24 any party (including the mortgage servicer) to 

25 engage in any or all loan modification or other 


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1 loss mitigation strategies to maximize value to 

2 investors as established by any applicable con3 tract. 

4 ‘‘(3) ELIGIBILITY OF MORTGAGES BY DATE OF

5 ORIGINATION.—The existing senior mortgage shall 

6 have been originated on before December 31, 2007. 

7 ‘‘(4) MAXIMUM LOAN TO VALUE RATIO FOR

8 NEW LOANS.—The mortgage being insured under 

9 this section shall involve a principal obligation (in10 cluding such initial service charges, appraisal, in11 spection, and other fees as the Secretary shall ap12 prove and including the mortgage insurance pre13 mium paid pursuant to subsection (d)(1)) in an 

14 amount not to exceed 90 percent of the current ap15 praised value of the property. Section 203(d) shall 

16 not apply to mortgages insured under this section. 

17 ‘‘(5) REQUIRED WAIVER OF PREPAYMENT PEN18 ALTIES AND FEES.—All penalties for prepayment of 

19 the existing mortgage or mortgages, and all fees and 

20 penalties related to default or delinquency on all ex21 isting mortgage or mortgages, shall be waived or for22 given. 

23 ‘‘(6) REQUIRED LOAN REDUCTION.— 

24 ‘‘(A) REDUCTION OF INDEBTEDNESS

25 UNDER EXISTING SENIOR MORTGAGE.—The 


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1 amount of indebtedness on the existing mort2 gage or mortgages on the residence shall have 

3 been substantially reduce by such percentage as 

4 the Secretary may require, and such reduction 

5 shall at least be sufficient to— 

6 ‘‘(i) provide for the refinancing of 

7 such existing mortgage or mortgages in an 

8 amount not greater than 90 percent of the 

9 current appraised value of the property in10 volved; 

11 ‘‘(ii) pay the full amount of the single 

12 premium to be collected pursuant to sub13 section (d)(1) (which shall be an amount 

14 up to 3.0 percent of the amount of the 

15 original insured principal obligation of the 

16 mortgage insured under this section and 

17 which shall serve as an additional reserve 

18 to cover possible loan losses); and 

19 ‘‘(iii) pay the full amount of the loan 

20 origination fee and any other closing costs, 

21 not to exceed 2.0 percent of the amount of 

22 the original insured principal obligation of 

23 the mortgage insured under this section. 

24 ‘‘(B) EXTINGUISHMENT OF DEBT BY REFI25 NANCING.— 


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•S 3119 IS

1 ‘‘(i) REQUIRED AGREEMENT.—All ex2 isting holders of mortgage liens on the 

3 property involved shall agree to accept the 

4 proceeds of the insured loan as payment in 

5 full of all indebtedness under all existing 

6 mortgages, and all encumbrances related 

7 to such mortgages shall be removed. The 

8 Secretary may take such action as the Sec9 retary considers necessary or appropriate 

10 to facilitate coordination and agreement 

11 between the holders of the existing senior 

12 mortgage and any existing subordinate 

13 mortgages, taking into consideration the 

14 subordinate lien status of such subordinate 

15 mortgages, to comply with the requirement 

16 under this subparagraph. 

17 ‘‘(ii) TREATMENT OF MULTIPLE

18 MORTGAGE LIENS.—In addition to clause 

19 (i), the Secretary shall adopt 1 of the fol20 lowing approaches for all mortgages or 

21 such classes of mortgages as the Secretary 

22 may determine and may, from time to 

23 time, reconsider: 

24 ‘‘(I) FIXED PRICE.—As a re25 quirement for participation in this 


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•S 3119 IS

1 program, all existing lien holders will 

2 agree to not provide any payment to 

3 subordinate lien holders other than 

4 such payment in accordance with a 

5 formula established by the Secretary 

6 as set forth in clause (iii); except that 

7 the Secretary may establish a short 

8 period within which first and subordi9 nate lien holders may negotiate to ex10 tinguish all subordinate liens for com11 pensation that may be different from 

12 the amount determined under such 

13 formula set forth in clause (iii). 

14 ‘‘(II) SHARED EQUITY.—The 

15 Secretary may require the mortgagor 

16 under a mortgage insured under this 

17 section to agree to share a portion of 

18 any future equity in the mortgaged 

19 property with holders of existing sub20 ordinate mortgages, in accordance 

21 with a formula for such shared equity 

22 established by the Secretary as set 

23 forth in clause (iii), except that pay24 ments of such shared equity may be 

25 made only after the Secretary recovers 


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•S 3119 IS

1 all amounts owed to the Secretary 

2 with respect to such mortgage pursu3 ant to the program under this section 

4 (including amounts owed pursuant to 

5 paragraph (8)). 

6 ‘‘(iii) FORMULA.—In determining a 

7 formula for determining any payments to 

8 subordinate lien holders pursuant to sub9 clauses (I) and (II) of clause (ii), and in 

10 any reconsideration of such formula as the 

11 Secretary may from time to time under12 take, the Secretary shall take into consid13 eration the current market value of such 

14 liens. 

15 ‘‘(iv) VOLUNTARY PROGRAM.—This 

16 subparagraph may not be construed to re17 quire any holder of any existing mortgage 

18 to participate in the program under this 

19 section generally, or with respect to any 

20 particular loan. 

21 ‘‘(v) SOURCE OF PAYMENTS FOR SUB22 ORDINATE LOANS.—Any amounts paid to 

23 holders of any existing subordinate mort24 gages in connection with the origination 


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1 and insurance of a mortgage under this 

2 section shall derive only from— 

3 ‘‘(I) the holder of the existing 

4 senior mortgage; or 

5 ‘‘(II) in the case only of the 

6 shared equity approach under clause 

7 (ii)(II), the mortgagor under the 

8 mortgage insured under this section. 

9 ‘‘(7) REQUIRED REDUCTION OF DEBT SERV10 ICE.—The debt service payments due under the 

11 mortgage insured under this section shall be in an 

12 amount that is substantially reduced from the debt 

13 service payments due under the existing mortgage or 

14 mortgages, which reduction may be achieved through 

15 a reduction of indebtedness, a reduction in the inter16 est rate being paid, or an extension of the term of 

17 the mortgage, or any combination thereof. 

18 ‘‘(8) FINANCIAL RECOVERY TO FEDERAL GOV19 ERNMENT THROUGH EXIT PREMIUM.— 

20 ‘‘(A) SUBORDINATE LIEN.—The mortgage 

21 shall provide that the Secretary shall retain a 

22 lien on the residence involved, which shall be 

23 subordinate to the mortgage insured under this 

24 section but senior to all other mortgages on the 

25 residence that may exist at any time, and which 


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•S 3119 IS

1 shall secure the repayment of the amount due 

2 under subparagraph (D). 

3 ‘‘(B) NO INTEREST OR PAYMENT DURING

4 MORTGAGE.—The amount secured by the lien 

5 retained by the Secretary pursuant to subpara6 graph (A) shall not bear interest and shall not 

7 be repayable to the Secretary except as pro8 vided in subparagraph (D) of this paragraph. 

9 ‘‘(C) NET PROCEEDS AVAILABLE FOR EXIT

10 PREMIUM.—Upon the sale, refinancing, or other 

11 disposition of the residence covered by a mort12 gage insured under this section, any proceeds 

13 resulting from such disposition that remain 

14 after deducting the remaining insured principal 

15 balance of the mortgage insured under this sec16 tion shall be available to meet the obligation 

17 under subparagraph (D). 

18 ‘‘(D) EXIT PREMIUM.—Upon any refi19 nancing of the mortgage insured under this sec20 tion or any sale or disposition of the residence 

21 covered by the mortgage, the Secretary shall, 

22 subject to the availability of sufficient net pro23 ceeds in subparagraph (C), receive the greater 

24 of— 


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•S 3119 IS

1 ‘‘(i) 3 percent of the amount of the 

2 original insured principal obligation of the 

3 mortgage; or 

4 ‘‘(ii) a percentage of the portion of 

5 the net proceeds described in subparagraph 

6 (C), which shall be— 

7 ‘‘(I) in the case of any refi8 nancing, sale, or disposition occurring 

9 during the first year of the term of 

10 the mortgage, 100 percent of such net 

11 proceeds; 

12 ‘‘(II) in the case of any refi13 nancing, sale, or disposition occurring 

14 during the second year of the term of 

15 the mortgage, 80 percent; 

16 ‘‘(III) in the case of any refi17 nancing, sale, or disposition occurring 

18 during the third year of the term of 

19 the mortgage, 60 percent; 

20 ‘‘(IV) in the case of any refi21 nancing, sale or disposition occurring 

22 during the fourth year of the term of 

23 the mortgage, 40 percent; 

24 ‘‘(V) in the case of any refi25 nancing, sale, or disposition occurring 


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•S 3119 IS

1 during the fifth year of the term of 

2 the mortgage, 20 percent; and 

3 ‘‘(VI) in the case of any refi4 nancing, sale, or disposition occurring 

5 after the end of the fifth year, 0 per6 cent. 

7 ‘‘(E) AUTHORITY TO PROHIBIT NEW SEC8 OND LIENS.—The Secretary may prohibit bor9 rowers from granting a new second lien on the 

10 mortgaged property during the first 5 years of 

11 the term of the mortgage insured under this 

12 section. 

13 ‘‘(9) DOCUMENTATION AND VERIFICATION OF

14 INCOME.—In complying with the FHA underwriting 

15 requirements under the program under this section, 

16 the mortgagee under the mortgage shall document 

17 and verify the income of the mortgagor in accord18 ance with procedures and standards that the Sec19 retary shall establish. 

20 ‘‘(10) FIXED RATE MORTGAGE.—The mortgage 

21 insured under this section shall bear interest at a 

22 single rate that is fixed for the entire term of the 

23 mortgage. 


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•S 3119 IS

1 ‘‘(c) FLEXIBLE UNDERWRITING CRITERIA.—The 

2 Secretary shall establish underwriting standards for mort3 gages insured under this section that— 

4 ‘‘(1) ensure that each mortgagor under a mort5 gage insured under this section has a reasonable ex6 pectation of repaying the mortgage, taking into con7 sideration the mortgagor’s income, assets, liabilities, 

8 payment history, and other applicable criteria; and 

9 ‘‘(2) provide for the underwriter of the insured 

10 loan to provide such representations and warranties 

11 as the Secretary considers necessary or appropriate 

12 for the Secretary to enforce compliance with all un13 derwriting and appraisal standards of the program. 

14 ‘‘(d) PREMIUMS.—For each mortgage insured under 

15 this section, the Secretary shall establish and collect— 

16 ‘‘(1) at the time of insurance, a single premium 

17 payment in an amount up to 3.0 percent of the 

18 amount of the original insured principal obligation of 

19 the mortgage, which shall be paid from the proceeds 

20 of the mortgage being insured under this section, 

21 through the reduction of the amount of indebtedness 

22 on the existing senior mortgage required under sub23 section (b)(6)(A); 

24 ‘‘(2) in addition to the premium under para25 graph (1), annual premium payments in an amount 


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•S 3119 IS

1 up to 1.50 percent of the remaining insured prin2 cipal balance of the mortgage; and 

3 ‘‘(3) an exit premium in the amount determined 

4 under subsection (b)(8), but which shall not be less 

5 than 3.0 percent of the original insured principal ob6 ligation of the mortgage, subject only to the avail7 ability of sufficient net proceeds from sale, refi8 nancing, or other disposition of the property, as de9 termined in subsection (b)(8). 

10 ‘‘(e) LIMITATION ON AGGREGATE INSURANCE AU11 THORITY.—The aggregate original principal obligation of 

12 all mortgages insured under this section may not exceed 

13 $300,000,000,000. 

14 ‘‘(f) ENHANCEMENT OF FHA CAPACITY.—The Sec15 retary shall take such actions as may be necessary to— 

16 ‘‘(1) contract for the establishment of under17 writing criteria, automated underwriting systems, 

18 pricing standards, and other factors relating to eligi19 bility for mortgages insured under this section; 

20 ‘‘(2) contract for independent quality reviews of 

21 underwriting, including appraisal reviews and fraud 

22 detection, of mortgages insured under this section or 

23 pools of such mortgages; and 


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•S 3119 IS

1 ‘‘(3) increase personnel of the Department as 

2 necessary to process or monitor the processing of 

3 mortgages insured under this section. 

4 ‘‘(g) MONITORING OF UNDERWRITING RISK.— 

5 ‘‘(1) MONITORING OF DESIGNATED UNDER6 WRITERS.—The Secretary shall monitor independent 

7 quality reviews as established pursuant to subsection 

8 (f)(2) to— 

9 ‘‘(A) determine compliance of designated 

10 underwriters with underwriting standards; 

11 ‘‘(B) determine rates of delinquency, 

12 claims rates, and loss rates of designated un13 derwriters; and 

14 ‘‘(C) terminate eligibility of designated un15 derwriters that do not meet minimum perform16 ance standards as the Secretary may establish 

17 and implement. 

18 ‘‘(2) REPORTS BY OVERSIGHT BOARD.—The 

19 Secretary shall submit monthly reports to Congress 

20 identifying the progress of the program for mortgage 

21 insurance under this section, which shall contain the 

22 following information for each month: 

23 ‘‘(A) The number of new mortgages in24 sured under this section, including the location 


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•S 3119 IS

1 of the properties subject to such mortgages by 

2 census tract. 

3 ‘‘(B) The aggregate principal obligation of 

4 new mortgages insured under this section. 

5 ‘‘(C) The average amount by which the in6 debtedness on existing mortgages is reduced in 

7 accordance with subsection (b)(6). 

8 ‘‘(D) The average amount by which the 

9 debt service payments on existing mortgages is 

10 reduced in accordance with subsection (b)(7). 

11 ‘‘(E) The amount of premiums collected 

12 for insurance of mortgages under this section. 

13 ‘‘(F) The claim and loss rates for mort14 gages insured under this section. 

15 ‘‘(G) The race, ethnicity, gender, and in16 come of the mortgagors, aggregated by geo17 graphic areas at least as specific as census 

18 tracts, except where necessary to protect the 

19 privacy of the borrower. 

20 ‘‘(H) Any other information that the Sec21 retary considers appropriate. 

22 ‘‘(3) REPORT BY INSPECTOR GENERAL.—The 

23 Inspector General of the Department of Housing 

24 and Urban Development shall conduct an annual 

25 audit of the program for mortgage insurance under 


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1 this section to determine compliance with this sec2 tion and program rules. 

3 ‘‘(h) DEFINITIONS.—For purposes of this section, the 

4 following definitions apply: 

5 ‘‘(1) EXISTING MORTGAGE.—The term ‘existing 

6 mortgage’ means, with respect to a mortgage in7 sured under this section, a mortgage that is to be 

8 extinguished, and paid or prepaid, from the proceeds 

9 of the mortgage insured under this section. 

10 ‘‘(2) EXISTING SENIOR MORTGAGE.—The term 

11 ‘existing senior mortgage’ means, with respect to a 

12 mortgage insured under this section, the existing 

13 mortgage that has superior priority. 

14 ‘‘(3) EXISTING SUBORDINATE MORTGAGE.—The 

15 term ‘existing subordinate mortgage’ means, with re16 spect to a mortgage insured under this section, an 

17 existing mortgage that has subordinate priority to 

18 the existing senior mortgage. 

19 ‘‘(i) SUNSET.—The authority of the Secretary to 

20 make any new commitment to insure any mortgage under 

21 this section shall terminate upon the expiration of the 2- 

22 year period beginning on the date of the enactment of the 

23 Economic Recovery Act of 2008.’’. 


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1 SEC. 502. STUDY OF AUCTION OR BULK REFINANCE PRO2 GRAM. 

3 (a) STUDY.—The Board of Governors of the Federal 

4 Reserve System (in this section referred to as the ‘‘Board 

5 of Governors’’), in consultation with the Secretary of 

6 Housing and Urban Development, shall conduct a study 

7 of the need for and efficacy of an auction or bulk refi8 nancing mechanism to facilitate refinancing of existing 

9 residential mortgages that are at risk for foreclosure into 

10 mortgages insured under the mortgage insurance program 

11 under title II of the National Housing Act. The study shall 

12 identify and examine various options for mechanisms 

13 under which lenders and servicers of such mortgages may 

14 make bids for forward commitments for such insurance 

15 in an expedited manner. 

16 (b) CONTENT.— 

17 (1) ANALYSIS.—The study required under sub18 section (a) shall analyze— 

19 (A) the feasibility of establish a mechanism 

20 that would facilitate the more rapid refinancing 

21 of borrowers at risk of foreclosure into per22 forming mortgages insured under title II of the 

23 National Housing Act; 

24 (B) whether such a mechanism would pro25 vide an effective and efficient mechanism to reVerDate Aug 31 2005 05:58 Jun 13, 2008 Jkt 069200 PO 00000 Frm 00051 Fmt 6652 Sfmt 6201 E:\BILLS\S3119.IS S3119

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1 duce foreclosures on qualified existing mort2 gages; 

3 (C) whether the use of an auction or bulk 

4 refinance program is necessary to stabilize the 

5 housing market and reduce the impact of tur6 moil in that market on the economy of the 

7 United States; 

8 (D) whether there are other mechanisms 

9 or authority that would be useful to reduce 

10 foreclosure; and 

11 (E) any other factors that the Board of 

12 Governors considers relevant. 

13 (2) DETERMINATIONS.—To the extent that the 

14 Board of Governors finds that a facility of the type 

15 described in paragraph (1) is feasible and useful, the 

16 study shall— 

17 (A) determine and identify any additional 

18 authority or resources needed to establish and 

19 operate such a mechanism; 

20 (B) determine whether there is a need for 

21 additional authority with respect to the loan un22 derwriting criteria included in section 257 of 

23 the National Housing Act or with respect to the 

24 eligibility of participating borrowers, lenders, or 

25 holders of liens; and 


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1 (C) determine whether such underwriting 

2 criteria should be established on the basis of in3 dividual loans, in the aggregate, or otherwise to 

4 facilitate the goal of refinancing borrowers at 

5 risk of foreclosure into viable loans insured 

6 under the National Housing Act. 

7 (c) REPORT.—Not later than the expiration of the 

8 60-day period beginning on the date of the enactment of 

9 this Act, the Board of Governors shall submit a report 

10 regarding the results of the study conducted under this 

11 section to the Committee on Financial Services of the 

12 House of Representatives and the Committee on Banking, 

13 Housing, and Urban Affairs of the Senate. The report 

14 shall include a detailed description of the analyses re15 quired under subsection (b)(1) and the determinations 

16 made pursuant to subsection (b)(2), and shall include any 

17 other findings and recommendations of the Board of Gov18 ernors pursuant to the study, including identifying various 

19 options for mechanisms described in subsection (a). 

Æ 


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