to approximately twice the amount of Federal ex-
penditures for direct Federal housing assistance
which benefits low-income households.
(7) The mortgage interest deduction and the
real estate tax deduction have little value to low-in-
come households because the itemized tax deductions
of low-income households generally do not exceed the
standard deduction.
(8) Over 90 percent of the total benefits of the
mortgage interest deduction accrue to home buyers
with incomes greater than $40,000.
(9) Current provisions in the Federal tax code
to promote home ownership among low-income
households, such as the mortgage revenue bond pro-
gram, the mortgage credit certificate program, and
the low-income housing credit, fail to simultaneously
attack the twin constraints of lack of wealth and low
income that prevent many low-income households
from becoming home owners.
(c) PURPOSES.—The purposes of this Act are—
(1) to establish a decentralized, market-driven
approach to increasing home ownership among low-
income households,
(2) to enable low-income households to over-
come the wealth and income constraints that fre-
quently prevent such households from becoming
home owners, and
(3) to reduce the disparities in home ownership
between low-income households and higher-income
households and between central cities and suburban
cities.
SEC. 2. HOME OWNERSHIP TAX CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business related credits) is amended by
adding at the end the following:
‘‘SEC. 45D. HOME OWNERSHIP TAX CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—For purposes of section 38,
the amount of the home ownership tax credit deter-
mined under this section for any taxable year in the
credit period shall be an amount equal to the appli-
cable percentage of the home ownership tax credit
amount allocated such taxpayer by a State housing
finance agency in the credit allocation year under
subsection (b).
‘‘(2) APPLICABLE PERCENTAGE.—For purposes
of this section, the Secretary shall prescribe the ap-
plicable percentage for any year in which the tax-
payer is a qualified lender. Such percentage with re-
spect to any month in the credit period with respect
to such taxpayer shall be percentages which will
yield over such period amounts of credit under para-
graph (1) which have a present value equal to 100
percent of the home ownership tax credit amount al-
located such taxpayer under subsection (b).
‘‘(3) METHOD OF DISCOUNTING.—The present
value under paragraph (2) shall be determined in
the same manner as the low-income housing credit
under section 42(b)(2)(C).
‘‘(b) ALLOCATION OF HOME OWNERSHIP TAX CRED-
IT AMOUNTS.—
‘‘(1) AMOUNT
OF
CREDIT.—Each qualified
State shall receive a home ownership tax credit dol-
lar amount for each calendar year in an amount
equal to the sum of—
‘‘(A) an amount equal to—
‘‘(i) 40 cents multiplied by the State
population, multiplied by
‘‘(ii) 10, plus
‘‘(B) the unused home ownership tax credit
dollar amount (if any) of such State for the
preceding year.
‘‘(2) QUALIFIED STATE.—For purposes of this
section—
‘‘(A) IN
GENERAL.—The term ‘qualified
State’ means a State with an approved alloca-
tion plan to allocate home ownership tax credits
to qualified lenders through the State housing
finance agency.
‘‘(B) APPROVED ALLOCATION PLAN.—For
purposes of this paragraph, the term ‘approved
allocation plan’ means a written plan, certified
by the Secretary, which includes—
‘‘(i) selection criteria for the allocation
of credits to qualified lenders—
‘‘(I) based on a process in which
lenders submit bids for the value of
the credit, and
‘‘(II) which gives priority to
qualified lenders with qualified home
ownership loans which are prepaid
during a calendar year, for credit allo-
cations in the succeeding calendar
year,
‘‘(ii) an assurance that the State will
not allocate in excess of 10 percent of the
home ownership tax credit amount for the
calendar year for qualified home ownership
loans which are neighborhood revitalization
project loans,
‘‘(iii) a procedure that the agency (or
an agent or other private contractor of
such agency) will follow in monitoring for
noncompliance with the provisions of this
section and in notifying the Internal Rev-
enue Service of such noncompliance with
respect to which such agency becomes
aware, and
‘‘(iv) such other assurances as the
Secretary may require.
‘‘(3) QUALIFIED
LENDER.—For purposes of
this section, the term ‘qualified lender’ means a
lender which—
‘‘(A) is an insured depository institution
(as defined in section 3 of the Federal Deposit
Insurance Act), an insured credit union (as de-
fined in section 101(7) of the Federal Credit
Union Act), community development financial
institution (as defined in section 103 of the
Community Development Banking and Finan-
cial Institutions Act of 1994 (12 U.S.C. 4702)),
or nonprofit community development corpora-
tion (as defined in section 613 of the Commu-
nity Economic Development Act of 1981 (42
U.S.C. 9802)),
‘‘(B) makes available, through such lender
or the lender’s designee, pre-purchase home
ownership counseling for mortgagors, and
‘‘(C) during the 1-year period beginning on
the date of the credit allocation, originates not
less than 100 qualified home ownership loans in
an aggregate amount not less than the amount
of the bid of such lender for such credit alloca-
tion.
‘‘(4) CARRYOVER OF CREDIT.—A home owner-
ship tax credit amount received by a State for any
calendar year and not allocated in such year shall
remain available to be allocated in the succeeding
calendar year.
‘‘(5) POPULATION.—For purposes of this sec-
tion, population shall be determined in accordance
with section 146(j).
‘‘(6) COST-OF-LIVING ADJUSTMENT.—
‘‘(A) IN GENERAL.—In the case of a cal-
endar year after 2001, the 40 cent amount con-
tained in paragraph (1)(A)(i) shall be increased
by an amount equal to—
‘‘(i) such amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such
calendar year by substituting ‘calendar
year 2000’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof.
‘‘(B) ROUNDING.—If any amount as ad-
justed under subparagraph (A) is not a multiple
of 5 cents, such amount shall be rounded to the
next lowest multiple of 5 cents.
‘‘(c) QUALIFIED
HOME
OWNERSHIP
LOAN
DE-
FINED.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified home
ownership loan’ means a loan originated and funded
by a qualified lender which is secured by a second
lien on a residence, but only if—
‘‘(A) the requirements of subsections (d),
(e), and (f) are met,
‘‘(B) subject to subparagraph (F), the pro-
ceeds from such loan are applied exclusively—
‘‘(i) to acquire such residence, or
‘‘(ii) to substantially improve such
residence in connection with a neighbor-
hood revitalization project,
‘‘(C) the principal amount of the loan—
‘‘(i) is not less than 10 percent of the
purchase price of the residence securing
the loan,
‘‘(ii) is not more than the lesser of—
‘‘(I) 30 percent of such purchase
price, or
‘‘(II) $25,000, and
‘‘(iii) results in a housing-debt to in-
come ratio with respect to such residence
of not more than 28 percent,
‘‘(D) in the case of a neighborhood revital-
ization project loan, subparagraph (C) shall be
applied—
‘‘(i) by substituting ‘$40,000’ for
‘$25,000’, and
‘‘(ii) by substituting ‘appraised value’
for ‘purchase price’ unless the lender
chooses not to apply this clause,
‘‘(E) the loan has a term of 30 years, and
‘‘(F) the loan is required to be repaid in
any case in which the loan which is secured by
the first lien on the residence is refinanced and
the amount of indebtedness resulting from the
refinancing exceeds the amount of the refi-
nanced indebtedness.
‘‘(2) ADJUSTMENT
OF
AMOUNTS
BASED
ON
CHANGES IN HOUSING PRICES.—
‘‘(A) IN GENERAL.—In the case of a cal-
endar year after 2001, the amounts under sub-
paragraphs (C) and (D) of paragraph (1) shall
be increased by an amount equal to—
‘‘(i) such amount, multiplied by
‘‘(ii) the housing price adjustment for
such calendar year.
‘‘(B) HOUSING PRICE ADJUSTMENT.—For
purposes of subparagraph (A), the housing
price adjustment for any calendar year is the
percentage (if any) by which—
‘‘(i) the housing price index for the
preceding calendar year, exceeds
‘‘(ii) the housing price index for cal-
endar year 2000.
‘‘(C) HOUSING
PRICE
INDEX.—For pur-
poses of subparagraph (B), the housing price
index means the housing price index published
by the Federal Housing Finance Board (as es-
tablished in section 2A of the Federal Home
Loan Bank Act (12 U.S.C. 1422a)) for the cal-
endar year.
‘‘(d) MORTGAGOR.—
‘‘(1) IN GENERAL.—A loan meets the require-
ments of this subsection if it is made to a
mortgagor—
‘‘(A) whose family income for the year in
which the mortgagor applies for the loan is 80
percent or less of the area median gross income
for the area in which the residence which se-
cures the mortgage is located,
‘‘(B) for whom the housing debt-to-income
ratio with respect to the residence securing the
loan would (but for the qualified home owner-
ship loan) exceed 28 percent,
‘‘(C) for whom the loan would not result in
a total debt-to-income ratio which is greater
than the guidelines set by the Federal Housing
Administration (or any other ratio as deter-
mined by the State housing finance agency or
lender if such ratio is less than such guide-
lines), and
‘‘(D) who attends pre-purchase home own-
ership counseling provided by the qualified lend-
er or the lender’s designee.
‘‘(2) DETERMINATION
OF
FAMILY
INCOME.—
For purposes of this subsection and subsection (h),
the family income of a mortgagor and area median
gross income shall be determined in accordance with
section 143(f)(2).
‘‘(e) RESIDENCE REQUIREMENTS.—A loan meets the
requirements of this subsection if it is secured by a resi-
dence that is—
‘‘(1) a single-family residence which is the prin-
cipal residence (within the meaning of section 121)
of the mortgagor, or can reasonably be expected to
become the principal residence of the mortgagor
within a reasonable time after the financing is pro-
vided,
‘‘(2) purchased by the mortgagor with a down
payment in an amount not less than the lesser of—
‘‘(A) 2 percent of the purchase price, or
‘‘(B) $1,000, and
‘‘(3) in the case of a mortgagor with a family
income greater than 50 percent of the area median
gross income, as determined under subsection
(d)(1)(A), not financed in connection with a quali-
fied mortgage issued under section 143.
For purposes of paragraph (1), a manufactured home
shall not be treated as a single-family residence unless
such home meets the requirements of section 604(h) of
the Housing and Community Development Act of 1974.