H. R. 2158—54
renew such contract, and the owner of the project shall accept
the offer, if the initial renewal is in accordance with the terms
and conditions specified in the mortgage restructuring and
rental assistance sufficiency plan and the rental assistance
assessment plan.
(2) TENANT-BASED ASSISTANCE.—Subject to the availability
of amounts provided in advance in appropriations Acts and
to the control of the Secretary of applicable accounts in the
Treasury of the United States, with respect to an expiring
section 8 contract on an eligible multifamily housing project
to be renewed with tenant-based assistance (based on a deter-
mination under subsection (c)), the Secretary shall enter into
contracts with participating administrative entities pursuant
to which the participating administrative entity shall provide
for the renewal of section 8 assistance on an eligible multifamily
housing project with tenant-based assistance, or the Secretary
shall provide for such renewal, in accordance with the terms
and conditions specified in the mortgage restructuring and
rental assistance sufficiency plan and the rental assistance
assessment plan.
(b) REQUIRED COMMITMENT.—After the initial renewal of a
section 8 contract pursuant to this section, the owner shall accept
each offer made pursuant to subsection (a) to renew the contract,
for the term of the affordability and use restrictions required by
section 514(e)(6), if the offer to renew is on terms and conditions
specified in the mortgage restructuring and rental assistance suffi-
ciency plan.
(c) DETERMINATION OF WHETHER TO RENEW WITH PROJECT-
BASED OR TENANT-BASED ASSISTANCE.—
(1) MANDATORY RENEWAL OF PROJECT-BASED ASSISTANCE.—
Section 8 assistance shall be renewed with project-based
assistance, if—
(A) the project is located in an area in which the
participating administrative entity determines, based on
housing market indicators, such as low vacancy rates or
high absorption rates, that there is not adequate available
and affordable housing or that the tenants of the project
would not be able to locate suitable units or use the tenant-
based assistance successfully;
(B) a predominant number of the units in the project
are occupied by elderly families, disabled families, or
elderly and disabled families;
(C) the project is held by a nonprofit cooperative owner-
ship housing corporation or nonprofit cooperative housing
trust.
(2) RENTAL ASSISTANCE ASSESSMENT PLAN.—
(A) IN GENERAL.—With respect to any project that is
not described in paragraph (1), the participating adminis-
trative entity shall, after consultation with the owner of
the project, develop a rental assistance assessment plan
to determine whether to renew assistance for the project
with tenant-based assistance or project-based assistance.
(B) RENTAL
ASSISTANCE
ASSESSMENT
PLAN
REQUIRE-
MENTS.—Each rental assistance assessment plan developed
under this paragraph shall include an assessment of the
impact of converting to tenant-based assistance and the
impact of extending project-based assistance on—
H. R. 2158—55
(i) the ability of the tenants to find adequate,
available, decent, comparable, and affordable housing
in the local market;
(ii) the types of tenants residing in the project
(such as elderly families, disabled families, large fami-
lies, and cooperative homeowners);
(iii) the local housing needs identified in the com-
prehensive housing affordability strategy, and local
market vacancy trends;
(iv) the cost of providing assistance, comparing
the applicable payment standard to the project’s
adjusted rent levels determined under section 514(g);
(v) the long-term financial stability of the project;
(vi) the ability of residents to make reasonable
choices about their individual living situations;
(vii) the quality of the neighborhood in which the
tenants would reside; and
(viii) the project’s ability to compete in the market-
place.
(C) 
REPORTS
TO
DIRECTOR.—Each 
participating
administrative entity shall report regularly to the Director
as defined in subtitle D, as the Director shall require,
identifying—
(i) each eligible multifamily housing project for
which the entity has developed a rental assistance
assessment plan under this paragraph that determined
that the tenants of the project generally supported
renewal of assistance with tenant-based assistance, but
under which assistance for the project was renewed
with project-based assistance; and
(ii) each project for which the entity has developed
such a plan under which the assistance is renewed
using tenant-based assistance.
(3) ELIGIBILITY FOR TENANT-BASED ASSISTANCE.—Subject to
paragraph (4), with respect to any project that is not described
in paragraph (1), if a participating administrative entity
approves the use of tenant-based assistance based on a rental
assistance assessment plan developed under paragraph (2), ten-
ant-based assistance shall be provided to each assisted family
(other than a family already receiving tenant-based assistance)
residing in the project at the time the assistance described
in section 512(2)(B) terminates.
(4) RENTS FOR FAMILIES RECEIVING TENANT-BASED ASSIST-
ANCE.—
(A) IN GENERAL.—Notwithstanding subsection (c)(1) or
(o)(1) of section 8 of the United States Housing Act of
1937, in the case of any family described in paragraph
(3) that resides in a project described in section 512(2)(B)
in which the reasonable rent (which rent shall include
any amount allowed for utilities and shall not exceed com-
parable market rents for the relevant housing market area)
exceeds the fair market rent limitation or the payment
standard, as applicable, the amount of assistance for the
family shall be determined in accordance with subpara-
graph (B).
(B) MAXIMUM MONTHLY RENT; PAYMENT STANDARD.—
With respect to the certificate program under section 8(b)
H. R. 2158—56
of the United States Housing Act of 1937, the maximum
monthly rent under the contract (plus any amount allowed
for utilities) shall be such reasonable rent for the unit.
With respect to the voucher program under section 8(o)
of the United States Housing Act of 1937, the payment
standard shall be deemed to be such reasonable rent for
the unit.
(5) INAPPLICABILITY OF CERTAIN PROVISION.—If a participat-
ing administrative entity approves renewal with project-based
assistance under this subsection, section 8(d)(2) of the United
States Housing Act of 1937 shall not apply.
SEC. 516. PROHIBITION ON RESTRUCTURING.
(a) PROHIBITION ON RESTRUCTURING.—The Secretary may elect
not to consider any mortgage restructuring and rental assistance
sufficiency plan or request for contract renewal if the Secretary
or the participating administrative entity determines that—
(1)(A) the owner or purchaser of the project has engaged
in material adverse financial or managerial actions or omissions
with regard to such project; or
(B) the owner or purchaser of the project has engaged
in material adverse financial or managerial actions or omissions
with regard to other projects of such owner or purchaser that
are federally assisted or financed with a loan from, or mortgage
insured or guaranteed by, an agency of the Federal Govern-
ment;
(2) material adverse financial or managerial actions or
omissions include—
(A) materially violating any Federal, State, or local
law or regulation with regard to this project or any other
federally assisted project, after receipt of notice and an
opportunity to cure;
(B) materially breaching a contract for assistance
under section 8 of the United States Housing Act of 1937,
after receipt of notice and an opportunity to cure;
(C) materially violating any applicable regulatory or
other agreement with the Secretary or a participating
administrative entity, after receipt of notice and an oppor-
tunity to cure;
(D) repeatedly and materially violating any Federal,
State, or local law or regulation with regard to the project
or any other federally assisted project;
(E) repeatedly and materially breaching a contract for
assistance under section 8 of the United States Housing
Act of 1937;
(F) repeatedly and materially violating any applicable
regulatory or other agreement with the Secretary or a
participating administrative entity;
(G) repeatedly failing to make mortgage payments at
times when project income was sufficient to maintain and
operate the property;
(H) materially failing to maintain the property accord-
ing to housing quality standards after receipt of notice
and a reasonable opportunity to cure; or
(I) committing any actions or omissions that would
warrant suspension or debarment by the Secretary;
H. R. 2158—57
(3) the owner or purchaser of the property materially failed
to follow the procedures and requirements of this subtitle,
after receipt of notice and an opportunity to cure; or
(4) the poor condition of the project cannot be remedied
in a cost effective manner, as determined by the participating
administrative entity.
The term ‘‘owner’’ as used in this subsection, in addition to it
having the same meaning as in section 8(f) of the United States
Housing Act of 1937, also means an affiliate of the owner. The
term ‘‘purchaser’’ as used in this subsection means any private
person or entity, including a cooperative, an agency of the Federal
Government, or a public housing agency, that, upon purchase of
the project, would have the legal right to lease or sublease dwelling
units in the project, and also means an affiliate of the purchaser.
The terms ‘‘affiliate of the owner’’ and ‘‘affiliate of the purchaser’’
means any person or entity (including, but not limited to, a general
partner or managing member, or an officer of either) that controls
an owner or purchaser, is controlled by an owner or purchaser,
or is under common control with the owner or purchaser. The
term ‘‘control’’ means the direct or indirect power (under contract,
equity ownership, the right to vote or determine a vote, or other-
wise) to direct the financial, legal, beneficial or other interests
of the owner or purchaser.
(b) OPPORTUNITY TO DISPUTE FINDINGS.—
(1) IN GENERAL.—During the 30-day period beginning on
the date on which the owner or purchaser of an eligible
multifamily housing project receives notice of a rejection under
subsection (a) or of a mortgage restructuring and rental assist-
ance sufficiency plan under section 514, the Secretary or partici-
pating administrative entity shall provide that owner or pur-
chaser with an opportunity to dispute the basis for the rejection
and an opportunity to cure.
(2) AFFIRMATION, MODIFICATION, OR REVERSAL.—
(A) IN GENERAL.—After providing an opportunity to
dispute under paragraph (1), the Secretary or the partici-
pating administrative entity may affirm, modify, or reverse
any rejection under subsection (a) or rejection of a mortgage
restructuring and rental assistance sufficiency plan under
section 514.
(B) REASONS
FOR
DECISION.—The Secretary or the
participating administrative entity, as applicable, shall
identify the reasons for any final decision under this para-
graph.
(C) REVIEW PROCESS.—The Secretary shall establish
an administrative review process to appeal any final deci-
sion under this paragraph.
(c) FINAL DETERMINATION.—Any final determination under this
section shall not be subject to judicial review.
(d) DISPLACED TENANTS.—Subject to the availability of amounts
provided in advance in appropriations Acts, for any low-income
tenant that is residing in a project or receiving assistance under
section 8 of the United States Housing Act of 1937 at the time
of rejection under this section, that tenant shall be provided with
tenant-based assistance and reasonable moving expenses, as deter-
mined by the Secretary.
(e) TRANSFER OF PROPERTY.—For properties disqualified from
the consideration of a mortgage restructuring and rental assistance
H. R. 2158—58
sufficiency plan under this section in accordance with paragraph
(1) or (2) of subsection (a) because of actions by an owner or
purchaser, the Secretary shall establish procedures to facilitate
the voluntary sale or transfer of a property as part of a mortgage
restructuring and rental assistance sufficiency plan, with a
preference for tenant organizations and tenant-endorsed commu-
nity-based nonprofit and public agency purchasers meeting such
reasonable qualifications as may be established by the Secretary.
SEC. 517. RESTRUCTURING TOOLS.
(a) MORTGAGE RESTRUCTURING.—
(1) In this subtitle, an approved mortgage restructuring
and rental assistance sufficiency plan shall include restructur-
ing mortgages in accordance with this subsection to provide—
(A) a restructured or new first mortgage that is
sustainable at rents at levels that are established in section
514(g); and
(B) a second mortgage that is in an amount equal
to no more than the difference between the restructured
or new first mortgage and the indebtedness under the
existing insured mortgage immediately before it is restruc-
tured or refinanced, provided that the amount of the second
mortgage shall be in an amount that the Secretary or
participating administrative entity determines can reason-
ably be expected to be repaid.
(2) The second mortgage shall bear interest at a rate not
to exceed the applicable Federal rate as defined in section
1274(d) of the Internal Revenue Code of 1986. The term of
the second mortgage shall be equal to the term of the restruc-
tured or new first mortgage.
(3) Payments on the second mortgage shall be deferred
when the first mortgage remains outstanding, except to the
extent there is excess project income remaining after payment
of all reasonable and necessary operating expenses (including
deposits in a reserve for replacement), debt service on the
first mortgage, and any other expenditures approved by the
Secretary. At least 75 percent of any excess project income
shall be applied to payments on the second mortgage, and
the Secretary or the participating administrative entity may
permit up to 25 percent to be paid to the project owner if
the Secretary or participating administrative entity determines
that the project owner meets benchmarks for management and
housing quality.
(4) The full amount of the second mortgage shall be imme-
diately due and payable if—
(A) the first mortgage is terminated or paid in full,
except as otherwise provided by the holder of the second
mortgage;
(B) the project is purchased and the second mortgage
is assumed by any subsequent purchaser in violation of
guidelines established by the Secretary; or
(C) the Secretary provides notice to the project owner
that such owner has failed to materially comply with any
requirements of this section or the United States Housing
Act of 1937 as those requirements apply to the project,
with a reasonable opportunity for such owner to cure such
failure.
H. R. 2158—59
(5) The Secretary may modify the terms or forgive all
or part of the second mortgage if the Secretary holds the
second mortgage and if the project is acquired by a tenant
organization or tenant-endorsed community-based nonprofit or
public agency, pursuant to guidelines established by the
Secretary.
(b) RESTRUCTURING TOOLS.—In addition to the requirements
of subsection (a) and to the extent these actions are consistent
with this section and with the control of the Secretary of applicable
accounts in the Treasury of the United States, an approved mort-
gage restructuring and rental assistance sufficiency plan under
this subtitle may include one or more of the following actions:
(1) FULL OR PARTIAL PAYMENT OF CLAIM.—making a full
payment of claim or partial payment of claim under section
541(b) of the National Housing Act, as amended by section
523(b) of this Act. Any payment under this paragraph shall
not require the approval of a mortgagee;
(2) REFINANCING OF DEBT.—refinancing of all or part of
the debt on a project. If the refinancing involves a mortgage
that will continue to be insured under the National Housing
Act, the refinancing shall be documented through amendment
of the existing insurance contract and not through a new insur-
ance contract;
(3) MORTGAGE
INSURANCE.—providing FHA multifamily
mortgage insurance, reinsurance or other credit enhancement
alternatives, including multifamily risk-sharing mortgage pro-
grams, as provided under section 542 of the Housing and
Community Development Act of 1992. Any limitations on the
number of units available for mortgage insurance under section
542 shall not apply to eligible multifamily housing projects.
Any credit subsidy costs of providing mortgage insurance shall
be paid from the Liquidating Accounts of the General Insurance
Fund or the Special Risk Insurance Fund and shall not be
subject to any limitation on appropriations;
(4) CREDIT ENHANCEMENT.—providing any additional State
or local mortgage credit enhancements and risk-sharing
arrangements that may be established with State or local hous-
ing finance agencies, the Federal Housing Finance Board, the
Federal National Mortgage Association, and the Federal Home
Loan Mortgage Corporation, to a modified or refinanced first
mortgage;
(5) COMPENSATION OF THIRD PARTIES.—consistent with the
portfolio restructuring agreement, entering into agreements,
incurring costs, or making payments, including incentive agree-
ments designed to reward superior performance in meeting
the purposes of this Act, as may be reasonably necessary,
to compensate the participation of participating administrative
entities and other parties in undertaking actions authorized
by this subtitle. Upon request to the Secretary, participating
administrative entities that are qualified under the United
States Housing Act of 1937 to serve as contract administrators
shall be the contract administrators under section 8 of the
United States Housing Act of 1937 for purposes of any contracts
entered into as part of an approved mortgage restructuring
and rental assistance sufficiency plan. Subject to the availabil-
ity of amounts provided in advance in appropriations Acts
for administrative fees under section 8 of the United States
H. R. 2158—60
Housing Act of 1937, such amounts may be used to compensate
participating administrative entities for compliance monitoring
costs incurred under section 519;
(6) USE
OF
PROJECT
ACCOUNTS.—applying any residual
receipts, replacement reserves, and any other project accounts
not required for project operations, to maintain the long-term
affordability and physical condition of the property or of other
eligible 
multifamily 
housing 
projects. 
The 
participating
administrative entity may expedite the acquisition of residual
receipts, replacement reserves, or other such accounts, by enter-
ing into agreements with owners of housing covered by an
expiring contract to provide an owner with a share of the
receipts, not to exceed 10 percent, in accordance with guidelines
established by the Secretary; and
(7) REHABILITATION NEEDS.—
(A) IN GENERAL.—Rehabilitation may be paid from the
residual receipts, replacement reserves, or any other project
accounts not required for project operations, or, as provided
in appropriations Acts and subject to the control of the
Secretary of applicable accounts in the Treasury of the
United States, from budget authority provided for increases
in the budget authority for assistance contracts under sec-
tion 8 of the United States Housing Act of 1937, the
rehabilitation grant program established under section 236
of the National Housing Act, as amended by section 531
of subtitle B of this Act, or through the debt restructuring
transaction. Rehabilitation under this paragraph shall only
be for the purpose of restoring the project to a non-luxury
standard adequate for the rental market intended at the
original approval of the project-based assistance.
(B) CONTRIBUTION.—Each owner or purchaser of a
project to be rehabilitated under an approved mortgage
restructuring and rental assistance sufficiency plan shall
contribute, from non-project resources, not less than 25
percent of the amount of rehabilitation assistance received,
except that the participating administrative entity may
provide an exception from the requirement of this subpara-
graph for housing cooperatives.
(c) ROLE OF FNMA AND FHLMC.—Section 1335 of the Federal
Housing Enterprises Financial Safety and Soundness Act of 1992
(12 U.S.C. 4565) is amended—
(1) in paragraph (3), by striking ‘‘and’’ at the end;
(2) paragraph (4), by striking the period at the end and
inserting ‘‘; and’’;
(3) by striking ‘‘To meet’’ and inserting the following:
‘‘(a) IN GENERAL.—To meet’’; and
(4) by adding at the end the following:
‘‘(5) assist in maintaining the affordability of assisted units
in eligible multifamily housing projects with expiring contracts,
as defined under the Multifamily Assisted Housing Reform
and Affordability Act of 1997.
‘‘(b) AFFORDABLE HOUSING GOALS.—Actions taken under sub-
section (a)(5) shall constitute part of the contribution of each entity
in meeting its affordable housing goals under sections 1332, 1333,
and 1334 for any fiscal year, as determined by the Secretary.’’.
H. R. 2158—61
(d) PROHIBITION
ON EQUITY SHARING
BY
THE SECRETARY.—
The Secretary is prohibited from participating in any equity agree-
ment or profit-sharing agreement in conjunction with any eligible
multifamily housing project.
(e) CONFLICT OF INTEREST GUIDELINES.—The Secretary may
establish guidelines to prevent conflicts of interest by a participating
administrative entity that provides, directly or through risk-sharing
arrangements, any form of credit enhancement or financing pursu-
ant to subsections (b)(3) or (b)(4) or to prevent conflicts of interest
by any other person or entity under this subtitle.
SEC. 518. MANAGEMENT STANDARDS.
Each 
participating 
administrative 
entity 
shall 
establish
management standards, including requirements governing conflicts
of interest between owners, managers, contractors with an identity
of interest, pursuant to guidelines established by the Secretary
and consistent with industry standards.
SEC. 519. MONITORING OF COMPLIANCE.
(a) COMPLIANCE AGREEMENTS.—(1) Pursuant to regulations
issued by the Secretary under section 522(a), each participating
administrative entity, through binding contractual agreements with
owners and otherwise, shall ensure long-term compliance with the
provisions of this subtitle. Each agreement shall, at a minimum,
provide for—
(A) enforcement of the provisions of this subtitle; and
(B) remedies for the breach of those provisions.
(2) If the participating administrative entity is not qualified
under the United States Housing Act of 1937 to be a section
8 contract administrator or fails to perform its duties under the
portfolio restructuring agreement, the Secretary shall have the
right to enforce the agreement.
(b) PERIODIC MONITORING.—
(1) IN GENERAL.—Not less than annually, each participating
administrative entity that is qualified to be the section 8 con-
tract administrator shall review the status of all multifamily
housing projects for which a mortgage restructuring and rental
assistance sufficiency plan has been implemented.
(2) INSPECTIONS.—Each review under this subsection shall
include onsite inspection to determine compliance with housing
codes and other requirements as provided in this subtitle and
the portfolio restructuring agreements.
(3) ADMINISTRATION.—If the participating administrative
entity is not qualified under the United States Housing Act
of 1937 to be a section 8 contract administrator, either the
Secretary or a qualified State or local housing agency shall
be responsible for the review required by this subsection.
(c) AUDIT
BY
THE SECRETARY.—The Comptroller General of
the United States, the Secretary, and the Inspector General of
the Department of Housing and Urban Development may conduct
an audit at any time of any multifamily housing project for which
a mortgage restructuring and rental assistance sufficiency plan
has been implemented.
SEC. 520. REPORTS TO CONGRESS.
(a) ANNUAL REVIEW.—In order to ensure compliance with this
subtitle, the Secretary shall conduct an annual review and report
H. R. 2158—62
to the Congress on actions taken under this subtitle and the status
of eligible multifamily housing projects.
(b) SEMIANNUAL REVIEW.—Not less than semiannually during
the 2-year period beginning on the date of the enactment of this
Act and not less than annually thereafter, the Secretary shall
submit reports to the Committee on Banking and Financial Services
of the House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate stating, for such periods,
the total number of projects identified by participating administra-
tive entities under each of clauses (i) and (ii) of section 515(c)(2)(C).
SEC. 521. GAO AUDIT AND REVIEW.
(a) INITIAL AUDIT.—Not later than 18 months after the effective
date of final regulations promulgated under this subtitle, the
Comptroller General of the United States shall conduct an audit
to 
evaluate 
eligible 
multifamily 
housing 
projects 
and 
the
implementation of mortgage restructuring and rental assistance
sufficiency plans.
(b) REPORT.—
(1) IN GENERAL.—Not later than 18 months after the audit
conducted under subsection (a), the Comptroller General of
the United States shall submit to Congress a report on the
status of eligible multifamily housing projects and the
implementation of mortgage restructuring and rental assistance
sufficiency plans.
(2) CONTENTS.—The report submitted under paragraph (1)
shall include—
(A) a description of the initial audit conducted under
subsection (a); and
(B) recommendations for any legislative action to
increase the financial savings to the Federal Government
of the restructuring of eligible multifamily housing projects
balanced with the continued availability of the maximum
number of affordable low-income housing units.
SEC. 522. REGULATIONS.
(a) RULEMAKING AND IMPLEMENTATION.—
(1) INTERIM REGULATIONS.—The Director shall issue such
interim regulations as may be necessary to implement this
subtitle and the amendments made by this subtitle with respect
to eligible multifamily housing projects covered by contracts
described in section 512(2)(B) that expire in fiscal year 1999
or thereafter. If, before the expiration of such period, the Direc-
tor has not been appointed, the Secretary shall issue such
interim regulations.
(2) FINAL
REGULATIONS.—The Director shall issue final
regulations necessary to implement this subtitle and the
amendments made by this subtitle with respect to eligible
multifamily housing projects covered by contracts described
in section 512(2)(B) that expire in fiscal year 1999 or thereafter
before the later of: (A) the expiration of the 12-month period
beginning upon the date of the enactment of this Act; and
(B) the 3-month period beginning upon the appointment of
the Director under subtitle D.
(3) FACTORS FOR CONSIDERATION.—Before the publication
of the final regulations under paragraph (2), in addition to
public comments invited in connection with publication of the
interim rule, the Secretary shall—