I 

108TH CONGRESS 

1ST SESSION H. R. 895

To provide for the construction and renovation of child care facilities, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 25, 2003

Mrs. MCCARTHY of New York introduced the following bill; which was 

referred to the Committee on Financial Services 

A BILL

To provide for the construction and renovation of child care 

facilities, 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 ‘‘Child Care Construc5 tion and Renovation Act’’. 

6 SEC. 2. USE OF COMMUNITY DEVELOPMENT BLOCK 

7 GRANTS TO ESTABLISH CHILD CARE FACILI8 TIES. 

9 Section 105(a) of the Housing and Community De10 velopment Act of 1974 (42 U.S.C. 5305(a)) is amended—
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1 (1) in paragraph (22), by striking ‘‘and’’ at the 

2 end; 

3 (2) in paragraph (23), by striking the period at 

4 the end and inserting a semicolon; 

5 (3) in paragraph (24), by striking ‘‘and’’ at the 

6 end; 

7 (4) in paragraph (25), by striking the period at 

8 the end and inserting ‘‘; and’’; and 

9 (5) by adding at the end the following: 

10 ‘‘(26) the construction and renovation of child 

11 care facilities.’’. 

12 SEC. 3. INSURANCE FOR MORTGAGES ON NEW AND REHA13 BILITATED CHILD CARE FACILITIES. 

14 Title II of the National Housing Act (12 U.S.C. 1707 

15 et seq.) is amended by adding at the end the following: 

16 ‘‘SEC. 257. MORTGAGE INSURANCE FOR CHILD CARE FA17 CILITIES. 

18 ‘‘(a) DEFINITIONS.—In this section: 

19 ‘‘(1) CHILD CARE FACILITY.—The term ‘child 

20 care facility’— 

21 ‘‘(A) means a public or private facility 

22 that—

23 ‘‘(i) has as its purpose the care and 

24 development of— 
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1 ‘‘(I) children who are less than 

2 16 years of age; or 

3 ‘‘(II) school-age children and 

4 youth during non-school hours; and 

5 ‘‘(ii) is operated in accordance with all 

6 applicable State and local laws and regula7 tions; and 

8 ‘‘(B) does not include any facility for 

9 school-age children that is primarily for use 

10 during normal school hours. 

11 ‘‘(2) EQUIPMENT.—The term ‘equipment’ in12 cludes— 

13 ‘‘(A) machinery, utilities, and built-in 

14 equipment, and any necessary enclosure or 

15 structure to house them; and 

16 ‘‘(B) any other items necessary for the 

17 functioning of a particular facility as a child 

18 care facility, including necessary furniture, 

19 books, and curricular and program materials. 

20 ‘‘(3) FIRST MORTGAGE.—The term ‘first mort21 gage’— 

22 ‘‘(A) means such classes of first liens as 

23 are commonly given to secure advances (includ24 ing advances during construction) on, or the 

25 unpaid purchase price of, real estate under the 
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1 laws of the State in which the real estate is lo2 cated, together with the credit instrument or in3 struments (if any) secured thereby; and 

4 ‘‘(B) includes any mortgage in the form of 

5 1 or more trust mortgages or mortgage inden6 tures or deeds of trust, securing notes, bonds, 

7 or other credit instruments, that, by the same 

8 instrument or by a separate instrument, creates 

9 a security interest in initial equipment, whether 

10 or not attached to the realty. 

11 ‘‘(4) MORTGAGE.—The term ‘mortgage’ means 

12 a first mortgage on real estate in fee simple, or on 

13 the interest of either the lessor or lessee thereof 

14 under a lease having a period of not less than 7 

15 years to run beyond the maturity date of the mort16 gage. 

17 ‘‘(5) MORTGAGOR.—The term ‘mortgagor’ has 

18 the meaning given the term in section 207(a). 

19 ‘‘(b) INSURANCE OF MORTGAGES.—In order to facili20 tate the establishment and rehabilitation of child care fa21 cilities, the Secretary may—

22 ‘‘(1) insure a mortgage that is secured by a 

23 property or project that is—

24 ‘‘(A) a new child care facility, including a 

25 new addition to an existing child care facility 
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1 (regardless of whether the existing facility is 

2 being rehabilitated); or 

3 ‘‘(B) a substantially rehabilitated child 

4 care facility, including equipment to be used in 

5 the operation of the facility; and 

6 ‘‘(2) make a commitment to insure any mort7 gage described in paragraph (1) before the date of 

8 execution or disbursement of the mortgage. 

9 ‘‘(c) TERMS AND CONDITIONS.—

10 ‘‘(1) ELIGIBLE CHILD CARE FACILITIES.—Each 

11 mortgage insured under this section shall be secured 

12 by a child care facility for which a certification of 

13 compliance has been issued by the Secretary under 

14 section 258(c) during the 12-month period preceding 

15 the date on which the commitment to insure the 

16 mortgage is issued under this section. 

17 ‘‘(2) APPROVED MORTGAGOR.—

18 ‘‘(A) IN GENERAL.—Each mortgage in19 sured under this section shall be executed by a 

20 mortgagor approved by the Secretary. 

21 ‘‘(B) REGULATION.—The Secretary may—

22 ‘‘(i) require an approved mortgagor 

23 who executes a mortgage under subpara24 graph (A) to be regulated with respect to 

25 charges and methods of financing and, if 
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1 the mortgagor is a corporate entity, with 

2 respect to capital structure and rate of re3 turn; and 

4 ‘‘(ii) as an aid to the regulation of any 

5 mortgagor under clause (i), make such 

6 contracts with and acquire for not more 

7 than $100 such stock or interest in such 

8 mortgagor as the Secretary considers to be 

9 necessary. 

10 ‘‘(C) STOCK OR INTEREST.—Any stock or 

11 interest purchased under subparagraph (B)(ii) 

12 shall be— 

13 ‘‘(i) paid for out of the General Insur14 ance Fund; and 

15 ‘‘(ii) redeemed by the mortgagor at 

16 par upon the termination of all obligations 

17 of the Secretary under the insurance. 

18 ‘‘(3) PRINCIPAL OBLIGATION.—Each mortgage 

19 insured under this section shall involve a principal 

20 obligation in an amount not to exceed 90 percent of 

21 the estimated value of the property or project, or 95 

22 percent of the estimated value of the property or 

23 project in the case of a mortgagor that is a private 

24 nonprofit corporation or association (as defined pur25 suant to section 221(d)(3)), including—
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1 ‘‘(A) equipment to be used in the operation 

2 of the facility when the proposed improvements 

3 are completed and the equipment is installed; or 

4 ‘‘(B) a solar energy system (as defined in 

5 subparagraph (3) of the last paragraph of sec6 tion 2(a)) or residential energy conservation 

7 measures (as defined in subparagraphs (A) 

8 through (G) and (I) of section 210(11) of the 

9 National Energy Conservation Policy Act), in 

10 cases in which the Secretary determines that 

11 such measures are in addition to those required 

12 under the minimum property standards and will 

13 be cost-effective over the life of the measure. 

14 ‘‘(4) AMORTIZATION AND INTEREST.—Each 

15 mortgage insured under this section shall—

16 ‘‘(A) provide for complete amortization by 

17 periodic payments under such terms as the Sec18 retary shall prescribe; 

19 ‘‘(B) have a maturity date satisfactory to 

20 the Secretary, but in no event longer than 25 

21 years; and 

22 ‘‘(C) bear interest at such rate as may be 

23 agreed upon by the mortgagor and the mort24 gagee, and the Secretary shall not issue any 

25 regulations or establish any terms or conditions 
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1 that interfere with the ability of the mortgagor 

2 and mortgagee to determine the interest rate. 

3 ‘‘(5) RELEASE.—The Secretary may consent to 

4 the release of a part or parts of the mortgaged prop5 erty or project from the lien of any mortgage in6 sured under this section upon such terms and condi7 tions as the Secretary may prescribe. 

8 ‘‘(6) MORTGAGE INSURANCE TERMS.—Sub9 sections (d), (e), (g), (h), (i), (j), (k), (l), and (n) of 

10 section 207 apply to any mortgage insured under 

11 this section, except that all references in such sub12 sections to section 207 shall be construed, for pur13 poses of mortgage insurance under this section, to 

14 refer to this section. 

15 ‘‘(d) MORTGAGE INSURANCE FOR FIRE SAFETY

16 EQUIPMENT LOANS.—

17 ‘‘(1) AUTHORITY.—The Secretary may, upon 

18 such terms and conditions as the Secretary may pre19 scribe, make commitments to insure and insure 

20 loans made by financial institutions or other ap21 proved mortgagees to child care facilities to provide 

22 for the purchase and installation of fire safety equip23 ment necessary for compliance with the 1967 edition 

24 of the Life Safety Code of the National Fire Protec-
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1 tion Association (or any subsequent edition specified 

2 by the Secretary of Health and Human Services). 

3 ‘‘(2) LOAN REQUIREMENTS.—To be eligible for 

4 insurance under this subsection a loan shall— 

5 ‘‘(A) not exceed the estimate by the Sec6 retary of the reasonable cost of the equipment 

7 fully installed; 

8 ‘‘(B) bear interest at such rate as may be 

9 agreed upon by the mortgagor and the mort10 gagee; 

11 ‘‘(C) have a maturity date satisfactory to 

12 the Secretary; 

13 ‘‘(D) be made by a financial institution or 

14 other mortgagee approved by the Secretary as 

15 eligible for insurance under section 2 or a mort16 gagee approved under section 203(b)(1); 

17 ‘‘(E) comply with other such terms, condi18 tions, and restrictions as the Secretary may 

19 prescribe; and 

20 ‘‘(F) be made with respect to a child care 

21 facility for which a certification of compliance 

22 has been issued by the Secretary under section

23 258(c) during the 12-month period preceding 

24 the date on which the commitment to insure is 

25 issued under this subsection. 
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1 ‘‘(3) INSURANCE REQUIREMENTS.—

2 ‘‘(A) SECTION 2.—Subsections (c), (d), 

3 and (h) of section 2 shall apply to any loan in4 sured under this subsection, except that all ref5 erences in such subsections to ‘this section’ or 

6 ‘this title’ shall be construed, for purposes of 

7 this subsection, to refer to this subsection. 

8 ‘‘(B) SECTION 220.—Paragraphs (5), (6), 

9 (7), (9), and (10) of section 220(h) shall apply 

10 to any loan insured under this subsection, ex11 cept that all references in such paragraphs to 

12 home improvement loans shall be construed, for 

13 purposes of this subsection, to refer to loans 

14 under this subsection. 

15 ‘‘(e) SCHEDULES AND DEADLINES.—The Secretary 

16 shall establish schedules and deadlines for the processing 

17 and approval (or provision of notice of disapproval) of ap18 plications for mortgage insurance under this section. 

19 ‘‘(f) LIMITATION ON INSURANCE AUTHORITY.—

20 ‘‘(1) TERMINATION.—No mortgage may be in21 sured under this section or section 223(h) after Sep22 tember 30, 2005, except pursuant to a commitment 

23 to insure issued on or before such date. 

24 ‘‘(2) AGGREGATE PRINCIPAL AMOUNT LIMITA25 TION.—
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1 ‘‘(A) IN GENERAL.—The aggregate prin2 cipal amount of mortgages for which the Sec3 retary enters into commitments to insure under 

4 this section or section 223(h) on or before the 

5 date described in paragraph (1) may not exceed 

6 $2,000,000,000. 

7 ‘‘(B) REPORT.—If, on the date described 

8 in paragraph (1), the aggregate insurance au9 thority provided under this paragraph has not 

10 been fully used, the Secretary of the Treasury 

11 shall submit to Congress a report evaluating the 

12 need for continued mortgage insurance under 

13 this section. 

14 ‘‘(g) NONDISCRIMINATION REQUIREMENT.—

15 ‘‘(1) IN GENERAL.—A child care facility receiv16 ing assistance under this title may not discriminate 

17 on the basis of race, color, or national origin (to the 

18 extent provided in title VI of the Civil Rights Act of 

19 1964 (42 U.S.C. 2000d et seq.)), religion (subject to 

20 subparagraph (B)), national origin, sex (to the ex21 tent provided in title IX of the Education Amend22 ments of 1972 (20 U.S.C. 1681 et seq.)), or dis23 ability (to the extent provided in section 504 of the 

24 Rehabilitation Act of 1973 (29 U.S.C. 794)), under 
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1 any program or activity receiving Federal financial 

2 assistance under this title. 

3 ‘‘(2) FACILITIES OF RELIGIOUS ORGANIZA4 TIONS.—The prohibition with respect to religion 

5 under paragraph (1) shall not apply to a child care 

6 facility that is controlled by, or that is closely identi7 fied with, the tenets of a particular religious organi8 zation, if the application of this paragraph would not 

9 be consistent with the religious tenets of such orga10 nization. 

11 ‘‘(h) LIABILITY INSURANCE.—A child care provider 

12 operating a child care facility assisted under this section 

13 or section 223(h) shall obtain and maintain liability insur14 ance in such amounts and subject to such requirements 

15 as the Secretary considers to be appropriate. 

16 ‘‘(i) SMALL PURPOSE LOANS.—

17 ‘‘(1) IN GENERAL.—To the extent that amounts 

18 are made available pursuant to subsection (l), the 

19 Secretary shall make loans, directly or indirectly, to 

20 providers of child care facilities for reconstruction or 

21 renovation of such facilities, in accordance with this 

22 subsection. 

23 ‘‘(2) REQUIREMENTS.—A loan under this sub24 section—
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1 ‘‘(A) may be made only for a child care fa2 cility that is financially and operationally viable, 

3 as determined under standards established by 

4 the Secretary; 

5 ‘‘(B) may not have a term to maturity ex6 ceeding 7 years; 

7 ‘‘(C) shall bear interest at a rate estab8 lished by the Secretary; and 

9 ‘‘(D) shall be subject to such other terms 

10 and conditions as the Secretary may establish 

11 by regulation. 

12 ‘‘(3) AGGREGATE LOAN AMOUNT.—The aggre13 gate amount of loans under this subsection to a sin14 gle provider may not exceed $30,000. 

15 ‘‘(j) NOTIFICATION.—The Secretary shall take such 

16 actions as may be necessary to publicize the availability 

17 of the programs for mortgage insurance under this section 

18 and section 223(h), and the loan program under sub19 section (i) of this section, in a manner that ensures that 

20 information concerning such programs will be available to 

21 child care providers throughout the United States. 

22 ‘‘(k) REGULATIONS.—The Secretary shall—

23 ‘‘(1) issue any regulations necessary to carry 

24 out this section; and 
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1 ‘‘(2) in carrying out paragraph (1), consult with 

2 the Secretary of Health and Human Services with 

3 respect to any aspects of the regulations regarding 

4 child care facilities. 

5 ‘‘(l) AUTHORIZATION OF APPROPRIATIONS.—There is 

6 authorized to be appropriated to carry out this section 

7 $30,000,000 for fiscal year 2004, to remain available until 

8 expended, of which not more than 10 percent may be used 

9 for loans under subsection (i).’’. 

10 SEC. 4. INSURANCE FOR MORTGAGES FOR ACQUISITION OR 

11 REFINANCING DEBT OF EXISTING CHILD 

12 CARE FACILITIES. 

13 (a) IN GENERAL.—Section 223 of the National 

14 Housing Act (12 U.S.C. 1715n) is amended by adding at 

15 the end the following: 

16 ‘‘(h) MORTGAGE INSURANCE FOR PURCHASE OR RE17 FINANCING OF EXISTING CHILD CARE FACILITIES.—

18 ‘‘(1) DEFINITIONS.—In this subsection, the 

19 terms that are defined in section 257(a) have the 

20 same meanings as in that section. 

21 ‘‘(2) AUTHORITY.—Notwithstanding any other 

22 provision of this Act, the Secretary may insure 

23 under any section of this title a mortgage executed 

24 in connection with— 
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1 ‘‘(A) the purchase or refinancing of an ex2 isting child care facility; 

3 ‘‘(B) the purchase of a structure to serve 

4 as a child care facility; or 

5 ‘‘(C) the refinancing of existing debt of an 

6 existing child care facility. 

7 ‘‘(3) PURCHASE OF EXISTING FACILITIES AND

8 STRUCTURES.—In the case of the purchase under 

9 this subsection of an existing child care facility or 

10 purchase of an existing structure to serve as such a 

11 facility, the Secretary shall prescribe any terms and 

12 conditions that the Secretary considers necessary to 

13 ensure that—

14 ‘‘(A) the facility or structure purchased 

15 continues to be used as a child care facility; and 

16 ‘‘(B) the facility receives a certification of 

17 compliance under section 258(c). 

18 ‘‘(4) REFINANCING OF EXISTING FACILITIES.—

19 In the case of refinancing of an existing child care 

20 facility, the Secretary shall prescribe any terms and 

21 conditions that the Secretary considers necessary to 

22 ensure that—

23 ‘‘(A) the refinancing is used to lower the 

24 monthly debt service costs (taking into account 
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1 any fees or charges connected with such refi2 nancing) of the existing facility; 

3 ‘‘(B) the proceeds of any refinancing will 

4 be employed only to retire the existing indebted5 ness and pay the necessary cost of refinancing 

6 on the existing facility; 

7 ‘‘(C) the existing facility is economically 

8 viable; and 

9 ‘‘(D) the facility receives a certification of 

10 compliance under section 258(c). 

11 ‘‘(5) LIMITATION ON INSURANCE AUTHORITY.—

12 The authority of the Secretary to enter into commit13 ments to insure mortgages under this subsection is 

14 subject to section 257(f).’’. 

15 SEC. 5. STUDY OF AVAILABILITY OF SECONDARY MARKETS 

16 FOR MORTGAGES ON CHILD CARE FACILI17 TIES. 

18 (a) STUDY.—The Secretary of the Treasury shall 

19 conduct a study of the secondary mortgage markets to de20 termine—

21 (1) whether such a market exists for purchase 

22 of mortgages eligible for insurance under sections 

23 223(h) and 257 of the National Housing Act (as 

24 added by this Act); 
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1 (2) whether such a market would affect the 

2 availability of credit available for development of 

3 child care facilities or would lower development costs 

4 of such facilities; and 

5 (3) the extent to which such a market or other 

6 activities to provide credit enhancement for loans for 

7 child care facilities is needed to meet the demand for 

8 such facilities. 

9 (b) REPORT.—Not later than 2 years after the date 

10 of enactment of this Act, the Secretary of the Treasury 

11 shall submit to Congress a report regarding the results 

12 of the study conducted under this section. 

13 SEC. 6. TECHNICAL AND FINANCIAL ASSISTANCE GRANTS. 

14 (a) DEFINITIONS.—In this section: 

15 (1) CHILD CARE FACILITY.—The term ‘‘child 

16 care facility’’ has the meaning given that term in 

17 section 257(a) of the National Housing Act, as 

18 added by section 3. 

19 (2) ELIGIBLE INTERMEDIARY.—The term ‘‘eli20 gible intermediary’’ means a private, nonprofit inter21 mediary organization that has demonstrated experi22 ence in— 

23 (A) financing the construction and renova24 tion of physical facilities; 
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1 (B) providing technical and financial as2 sistance to child care providers or other similar 

3 entities; 

4 (C) working with small businesses; and 

5 (D) securing private sources for capital fi6 nancing; and 

7 (3) ELIGIBLE RECIPIENT.—The term ‘‘eligible 

8 recipient’’ means any— 

9 (A) existing or start-up center-based or 

10 home-based child care provider; and 

11 (B) organization in the process of estab12 lishing a center-based or home-based child care 

13 program or otherwise seeking to provide child 

14 care services. 

15 (4) EQUIPMENT.—The term ‘‘equipment’’ has 

16 the meaning given that term in section 257(a) of the 

17 National Housing Act, as added by section 3. 

18 (b) GRANT AUTHORITY.—The Secretary of Housing 

19 and Urban Development, in consultation with the Sec20 retary of Health and Human Services, may award grants 

21 on a competitive basis in accordance with this section to 

22 eligible intermediaries for use in accordance with sub23 sections (e) and (f). 

24 (c) APPLICATIONS.—To be eligible to receive a grant 

25 under this section an eligible intermediary shall submit to 
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1 the Secretary an application, in such form and containing 

2 such information as the Secretary may require. 

3 (d) PRIORITY.—In awarding grants under this sec4 tion the Secretary shall give a priority to applicants under 

5 subsection (c) that serve low-income or rural areas. 

6 (e) USE OF FUNDS.—

7 (1) REVOLVING LOAN FUND.—Each eligible 

8 intermediary that receives a grant under this section 

9 shall deposit the grant amount into a child care re10 volving loan fund established by the eligible inter11 mediary. 

12 (2) PAYMENTS FROM FUND.—Subject to sub13 section (f), from amounts deposited into the revolv14 ing loan fund under paragraph (1), each eligible 

15 intermediary shall provide technical and financial as16 sistance (in the form of loans, grants, investments, 

17 guarantees, interest subsidies, and other appropriate 

18 forms of assistance) to eligible recipients for the ac19 quisition or improvement of child care facilities or 

20 equipment. 

21 (3) LOAN REPAYMENTS AND INVESTMENT PRO22 CEEDS.—Any amount received by an eligible inter23 mediary from an eligible recipient in the form of a 

24 loan repayment or investment proceeds shall be de25 posited into the child care revolving fund of the eligi-
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1 ble intermediary for redistribution to other eligible 

2 recipients in accordance with this section. 

3 (f) ALLOCATION OF FUNDS.—Of the amounts dis4 tributed from the revolving loan fund of an eligible inter5 mediary under subsection (e)(2) in each fiscal year—

6 (1) not less than 50 percent shall be used for 

7 the renovation or construction of child care facilities 

8 or the acquisition of equipment by eligible recipients, 

9 except that the amount made available to any eligi10 ble recipient under this paragraph may not exceed 

11 40 percent of the total costs incurred by the eligible 

12 recipient in connection with such renovation, con13 struction, or acquisition; and 

14 (2) the amount remaining after distribution 

15 under paragraph (1), shall be used to provide direct 

16 assistance to eligible recipients in obtaining public or 

17 private financing for the renovation or construction 

18 of child care facilities and the acquisition of equip19 ment, including developing and implementing financ20 ing resources, options, and plans for those recipi21 ents. 

22 (g) DAVIS BACON ACT.—The Act of March 3, 1931 

23 (popularly known as the Davis-Bacon Act) shall apply to 

24 actions taken under this Act. 
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1 (h) AUTHORIZATION OF APPROPRIATIONS.—There is 

2 authorized to be appropriated to carry out this section 

3 $10,000,000 for each of fiscal years 2004 through 2008.

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