I
106TH CONGRESS
2D SESSION
H. R. 3889
To provide for the construction and renovation of child care facilities, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 9, 2000
Mrs. MCCARTHY of New York (for herself and Mr. GILMAN) introduced the
following bill; which was referred to the Committee on Banking and Fi-
nancial Services
A BILL
To provide for the construction and renovation of child care
facilities, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Child Care Construc-
tion and Renovation Act’’.
SEC. 
2. 
USE 
OF 
COMMUNITY 
DEVELOPMENT 
BLOCK
GRANTS TO ESTABLISH CHILD CARE FACILI-
TIES.
Section 105(a) of the Housing and Community De-
velopment Act of 1974 (42 U.S.C. 5305(a)) is amended—
(1) in paragraph (22), by striking ‘‘and’’ at the
end;
(2) in paragraph (23), by striking the period at
the end and inserting a semicolon;
(3) in paragraph (24), by striking ‘‘and’’ at the
end;
(4) in paragraph (25), by striking the period at
the end and inserting ‘‘; and’’; and
(5) by adding at the end the following:
‘‘(26) the construction and renovation of child
care facilities.’’.
SEC. 3. INSURANCE FOR MORTGAGES ON NEW AND REHA-
BILITATED CHILD CARE FACILITIES.
Title II of the National Housing Act (12 U.S.C. 1707
et seq.) is amended by adding at the end the following:
‘‘SEC. 257. MORTGAGE INSURANCE FOR CHILD CARE FA-
CILITIES.
‘‘(a) DEFINITIONS.—In this section:
‘‘(1) CHILD CARE FACILITY.—The term ‘child
care facility’—
‘‘(A) means a public or private facility
that—
‘‘(i) has as its purpose the care and
development of—
‘‘(I) children who are less than
16 years of age; or
‘‘(II) school-age children and
youth during non-school hours; and
‘‘(ii) is operated in accordance with all
applicable State and local laws and regula-
tions; and
‘‘(B) does not include any facility for
school-age children that is primarily for use
during normal school hours.
‘‘(2) 
EQUIPMENT.—The 
term 
‘equipment’
includes—
‘‘(A) machinery, utilities, and built-in
equipment, and any necessary enclosure or
structure to house them; and
‘‘(B) any other items necessary for the
functioning of a particular facility as a child
care facility, including necessary furniture,
books, and curricular and program materials.
‘‘(3) 
FIRST
MORTGAGE.—The 
term 
‘first
mortgage’—
‘‘(A) means such classes of first liens as
are commonly given to secure advances (includ-
ing advances during construction) on, or the
unpaid purchase price of, real estate under the
laws of the State in which the real estate is lo-
cated, together with the credit instrument or in-
struments (if any) secured thereby; and
‘‘(B) includes any mortgage in the form of
1 or more trust mortgages or mortgage inden-
tures or deeds of trust, securing notes, bonds,
or other credit instruments, that, by the same
instrument or by a separate instrument, creates
a security interest in initial equipment, whether
or not attached to the realty.
‘‘(4) MORTGAGE.—The term ‘mortgage’ means
a first mortgage on real estate in fee simple, or on
the interest of either the lessor or lessee thereof
under a lease having a period of not less than 7
years to run beyond the maturity date of the mort-
gage.
‘‘(5) MORTGAGOR.—The term ‘mortgagor’ has
the meaning given the term in section 207(a).
‘‘(b) INSURANCE OF MORTGAGES.—In order to facili-
tate the establishment and rehabilitation of child care fa-
cilities, the Secretary may—
‘‘(1) insure a mortgage that is secured by a
property or project that is—
‘‘(A) a new child care facility, including a
new addition to an existing child care facility
(regardless of whether the existing facility is
being rehabilitated); or
‘‘(B) a substantially rehabilitated child
care facility, including equipment to be used in
the operation of the facility; and
‘‘(2) make a commitment to insure any mort-
gage described in paragraph (1) before the date of
execution or disbursement of the mortgage.
‘‘(c) TERMS AND CONDITIONS.—
‘‘(1) ELIGIBLE CHILD CARE FACILITIES.—Each
mortgage insured under this section shall be secured
by a child care facility for which a certification of
compliance has been issued by the Secretary under
section 258(c) during the 12-month period preceding
the date on which the commitment to insure the
mortgage is issued under this section.
‘‘(2) APPROVED MORTGAGOR.—
‘‘(A) IN
GENERAL.—Each mortgage in-
sured under this section shall be executed by a
mortgagor approved by the Secretary.
‘‘(B) REGULATION.—The Secretary may—
‘‘(i) require an approved mortgagor
who executes a mortgage under subpara-
graph (A) to be regulated with respect to
charges and methods of financing and, if
the mortgagor is a corporate entity, with
respect to capital structure and rate of re-
turn; and
‘‘(ii) as an aid to the regulation of any
mortgagor under clause (i), make such
contracts with and acquire for not more
than $100 such stock or interest in such
mortgagor as the Secretary considers to be
necessary.
‘‘(C) STOCK OR INTEREST.—Any stock or
interest purchased under subparagraph (B)(ii)
shall be—
‘‘(i) paid for out of the General Insur-
ance Fund; and
‘‘(ii) redeemed by the mortgagor at
par upon the termination of all obligations
of the Secretary under the insurance.
‘‘(3) PRINCIPAL OBLIGATION.—Each mortgage
insured under this section shall involve a principal
obligation in an amount not to exceed 90 percent of
the estimated value of the property or project, or 95
percent of the estimated value of the property or
project in the case of a mortgagor that is a private
nonprofit corporation or association (as defined pur-
suant to section 221(d)(3)), including—
that interfere with the ability of the mortgagor
and mortgagee to determine the interest rate.
‘‘(5) RELEASE.—The Secretary may consent to
the release of a part or parts of the mortgaged prop-
erty or project from the lien of any mortgage in-
sured under this section upon such terms and condi-
tions as the Secretary may prescribe.
‘‘(6) MORTGAGE
INSURANCE
TERMS.—Sub-
sections (d), (e), (g), (h), (i), (j), (k), (l), and (n) of
section 207 apply to any mortgage insured under
this section, except that all references in such sub-
sections to section 207 shall be construed, for pur-
poses of mortgage insurance under this section, to
refer to this section.
‘‘(d) MORTGAGE INSURANCE
FOR FIRE SAFETY
EQUIPMENT LOANS.—
‘‘(1) AUTHORITY.—The Secretary may, upon
such terms and conditions as the Secretary may pre-
scribe, make commitments to insure and insure
loans made by financial institutions or other ap-
proved mortgagees to child care facilities to provide
for the purchase and installation of fire safety equip-
ment necessary for compliance with the 1967 edition
of the Life Safety Code of the National Fire Protec-
tion Association (or any subsequent edition specified
by the Secretary of Health and Human Services).
‘‘(2) LOAN REQUIREMENTS.—To be eligible for
insurance under this subsection a loan shall—
‘‘(A) not exceed the estimate by the Sec-
retary of the reasonable cost of the equipment
fully installed;
‘‘(B) bear interest at such rate as may be
agreed upon by the mortgagor and the mort-
gagee;
‘‘(C) have a maturity date satisfactory to
the Secretary;
‘‘(D) be made by a financial institution or
other mortgagee approved by the Secretary as
eligible for insurance under section 2 or a mort-
gagee approved under section 203(b)(1);
‘‘(E) comply with other such terms, condi-
tions, and restrictions as the Secretary may
prescribe; and
‘‘(F) be made with respect to a child care
facility for which a certification of compliance
has been issued by the Secretary under section
258(c) during the 12-month period preceding
the date on which the commitment to insure is
issued under this subsection.
‘‘(3) INSURANCE REQUIREMENTS.—
‘‘(A) SECTION
2.—Subsections (c), (d),
and (h) of section 2 shall apply to any loan in-
sured under this subsection, except that all ref-
erences in such subsections to ‘this section’ or
‘this title’ shall be construed, for purposes of
this subsection, to refer to this subsection.
‘‘(B) SECTION 220.—Paragraphs (5), (6),
(7), (9), and (10) of section 220(h) shall apply
to any loan insured under this subsection, ex-
cept that all references in such paragraphs to
home improvement loans shall be construed, for
purposes of this subsection, to refer to loans
under this subsection.
‘‘(e) SCHEDULES AND DEADLINES.—The Secretary
shall establish schedules and deadlines for the processing
and approval (or provision of notice of disapproval) of ap-
plications for mortgage insurance under this section.
‘‘(f) LIMITATION ON INSURANCE AUTHORITY.—
‘‘(1) TERMINATION.—No mortgage may be in-
sured under this section or section 223(h) after Sep-
tember 30, 2005, except pursuant to a commitment
to insure issued on or before such date.
‘‘(2) AGGREGATE PRINCIPAL AMOUNT LIMITA-
TION.—
‘‘(A) IN GENERAL.—The aggregate prin-
cipal amount of mortgages for which the Sec-
retary enters into commitments to insure under
this section or section 223(h) on or before the
date described in paragraph (1) may not exceed
$2,000,000,000.
‘‘(B) REPORT.—If, on the date described
in paragraph (1), the aggregate insurance au-
thority provided under this paragraph has not
been fully used, the Secretary of the Treasury
shall submit to Congress a report evaluating the
need for continued mortgage insurance under
this section.
‘‘(g) NONDISCRIMINATION REQUIREMENT.—
‘‘(1) IN GENERAL.—A child care facility receiv-
ing assistance under this title may not discriminate
on the basis of race, color, or national origin (to the
extent provided in title VI of the Civil Rights Act of
1964 (42 U.S.C. 2000d et seq.)), religion (subject to
subparagraph (B)), national origin, sex (to the ex-
tent provided in title IX of the Education Amend-
ments of 1972 (20 U.S.C. 1681 et seq.)), or dis-
ability (to the extent provided in section 504 of the
Rehabilitation Act of 1973 (29 U.S.C. 794)), under
any program or activity receiving Federal financial
assistance under this title.
‘‘(2) FACILITIES
OF
RELIGIOUS
ORGANIZA-
TIONS.—The prohibition with respect to religion
under paragraph (1) shall not apply to a child care
facility that is controlled by, or that is closely identi-
fied with, the tenets of a particular religious organi-
zation, if the application of this paragraph would not
be consistent with the religious tenets of such orga-
nization.
‘‘(h) LIABILITY INSURANCE.—A child care provider
operating a child care facility assisted under this section
or section 223(h) shall obtain and maintain liability insur-
ance in such amounts and subject to such requirements
as the Secretary considers to be appropriate.
‘‘(i) SMALL PURPOSE LOANS.—
‘‘(1) IN GENERAL.—To the extent that amounts
are made available pursuant to subsection (l), the
Secretary shall make loans, directly or indirectly, to
providers of child care facilities for reconstruction or
renovation of such facilities, in accordance with this
subsection.
‘‘(2) REQUIREMENTS.—A loan under this
subsection—
‘‘(A) may be made only for a child care fa-
cility that is financially and operationally viable,
as determined under standards established by
the Secretary;
‘‘(B) may not have a term to maturity ex-
ceeding 7 years;
‘‘(C) shall bear interest at a rate estab-
lished by the Secretary; and
‘‘(D) shall be subject to such other terms
and conditions as the Secretary may establish
by regulation.
‘‘(3) AGGREGATE LOAN AMOUNT.—The aggre-
gate amount of loans under this subsection to a sin-
gle provider may not exceed $30,000.
‘‘(j) NOTIFICATION.—The Secretary shall take such
actions as may be necessary to publicize the availability
of the programs for mortgage insurance under this section
and section 223(h), and the loan program under sub-
section (i) of this section, in a manner that ensures that
information concerning such programs will be available to
child care providers throughout the United States.
‘‘(k) REGULATIONS.—The Secretary shall—
‘‘(1) issue any regulations necessary to carry
out this section; and
‘‘(2) in carrying out paragraph (1), consult with
the Secretary of Health and Human Services with
respect to any aspects of the regulations regarding
child care facilities.
‘‘(l) AUTHORIZATION OF APPROPRIATIONS.—There is
authorized to be appropriated to carry out this section
$30,000,000 for fiscal year 2001, to remain available until
expended, of which not more than 10 percent may be used
for loans under subsection (i).’’.
SEC. 4. INSURANCE FOR MORTGAGES FOR ACQUISITION OR
REFINANCING DEBT OF EXISTING CHILD
CARE FACILITIES.
(a) IN GENERAL.—Section 223 of the National
Housing Act (12 U.S.C. 1715n) is amended by adding at
the end the following:
‘‘(h) MORTGAGE INSURANCE FOR PURCHASE OR RE-
FINANCING OF EXISTING CHILD CARE FACILITIES.—
‘‘(1) DEFINITIONS.—In this subsection, the
terms that are defined in section 257(a) have the
same meanings as in that section.
‘‘(2) AUTHORITY.—Notwithstanding any other
provision of this Act, the Secretary may insure
under any section of this title a mortgage executed
in connection with—
‘‘(A) the purchase or refinancing of an ex-
isting child care facility;
‘‘(B) the purchase of a structure to serve
as a child care facility; or
‘‘(C) the refinancing of existing debt of an
existing child care facility.
‘‘(3) PURCHASE OF EXISTING FACILITIES AND
STRUCTURES.—In the case of the purchase under
this subsection of an existing child care facility or
purchase of an existing structure to serve as such a
facility, the Secretary shall prescribe any terms and
conditions that the Secretary considers necessary to
ensure that—
‘‘(A) the facility or structure purchased
continues to be used as a child care facility; and
‘‘(B) the facility receives a certification of
compliance under section 258(c).
‘‘(4) REFINANCING OF EXISTING FACILITIES.—
In the case of refinancing of an existing child care
facility, the Secretary shall prescribe any terms and
conditions that the Secretary considers necessary to
ensure that—
‘‘(A) the refinancing is used to lower the
monthly debt service costs (taking into account
any fees or charges connected with such refi-
nancing) of the existing facility;
‘‘(B) the proceeds of any refinancing will
be employed only to retire the existing indebted-
ness and pay the necessary cost of refinancing
on the existing facility;
‘‘(C) the existing facility is economically
viable; and
‘‘(D) the facility receives a certification of
compliance under section 258(c).
‘‘(5) LIMITATION ON INSURANCE AUTHORITY.—
The authority of the Secretary to enter into commit-
ments to insure mortgages under this subsection is
subject to section 257(f).’’.
SEC. 5. STUDY OF AVAILABILITY OF SECONDARY MARKETS
FOR MORTGAGES ON CHILD CARE FACILI-
TIES.
(a) STUDY.—The Secretary of the Treasury shall
conduct a study of the secondary mortgage markets to
determine—
(1) whether such a market exists for purchase
of mortgages eligible for insurance under sections
223(h) and 257 of the National Housing Act (as
added by this Act);
(2) whether such a market would affect the
availability of credit available for development of
child care facilities or would lower development costs
of such facilities; and
(3) the extent to which such a market or other
activities to provide credit enhancement for loans for
child care facilities is needed to meet the demand for
such facilities.
(b) REPORT.—Not later than 2 years after the date
of enactment of this Act, the Secretary of the Treasury
shall submit to Congress a report regarding the results
of the study conducted under this section.
SEC. 6. TECHNICAL AND FINANCIAL ASSISTANCE GRANTS.
(a) DEFINITIONS.—In this section:
(1) CHILD CARE FACILITY.—The term ‘‘child
care facility’’ has the meaning given that term in
section 257(a) of the National Housing Act, as
added by section 3.
(2) ELIGIBLE INTERMEDIARY.—The term ‘‘eli-
gible intermediary’’ means a private, nonprofit inter-
mediary organization that has demonstrated experi-
ence in—
(A) financing the construction and renova-
tion of physical facilities;
(B) providing technical and financial as-
sistance to child care providers or other similar
entities;
(C) working with small businesses; and
(D) securing private sources for capital fi-
nancing; and
(3) ELIGIBLE RECIPIENT.—The term ‘‘eligible
recipient’’ means any—
(A) existing or start-up center-based or
home-based child care provider; and
(B) organization in the process of estab-
lishing a center-based or home-based child care
program or otherwise seeking to provide child
care services.
(4) EQUIPMENT.—The term ‘‘equipment’’ has
the meaning given that term in section 257(a) of the
National Housing Act, as added by section 3.
(b) GRANT AUTHORITY.—The Secretary of Housing
and Urban Development, in consultation with the Sec-
retary of Health and Human Services, may award grants
on a competitive basis in accordance with this section to
eligible intermediaries for use in accordance with sub-
sections (e) and (f).
(c) APPLICATIONS.—To be eligible to receive a grant
under this section an eligible intermediary shall submit to
the Secretary an application, in such form and containing
such information as the Secretary may require.
(d) PRIORITY.—In awarding grants under this sec-
tion the Secretary shall give a priority to applicants under
subsection (c) that serve low-income or rural areas.
(e) USE OF FUNDS.—
(1) REVOLVING
LOAN
FUND.—Each eligible
intermediary that receives a grant under this section
shall deposit the grant amount into a child care re-
volving loan fund established by the eligible inter-
mediary.
(2) PAYMENTS FROM FUND.—Subject to sub-
section (f), from amounts deposited into the revolv-
ing loan fund under paragraph (1), each eligible
intermediary shall provide technical and financial as-
sistance (in the form of loans, grants, investments,
guarantees, interest subsidies, and other appropriate
forms of assistance) to eligible recipients for the ac-
quisition or improvement of child care facilities or
equipment.
(3) LOAN REPAYMENTS AND INVESTMENT PRO-
CEEDS.—Any amount received by an eligible inter-
mediary from an eligible recipient in the form of a
loan repayment or investment proceeds shall be de-
posited into the child care revolving fund of the eligi-
ble intermediary for redistribution to other eligible
recipients in accordance with this section.
(f) ALLOCATION OF FUNDS.—Of the amounts dis-
tributed from the revolving loan fund of an eligible inter-
mediary under subsection (e)(2) in each fiscal year—
(1) not less than 50 percent shall be used for
the renovation or construction of child care facilities
or the acquisition of equipment by eligible recipients,
except that the amount made available to any eligi-
ble recipient under this paragraph may not exceed
40 percent of the total costs incurred by the eligible
recipient in connection with such renovation, con-
struction, or acquisition; and
(2) the amount remaining after distribution
under paragraph (1), shall be used to provide direct
assistance to eligible recipients in obtaining public or
private financing for the renovation or construction
of child care facilities and the acquisition of equip-
ment, including developing and implementing financ-
ing resources, options, and plans for those recipi-
ents.
(g) DAVIS BACON ACT.—The Act of March 3, 1931
(popularly known as the Davis-Bacon Act) shall apply to
actions taken under this Act.
(h) AUTHORIZATION OF APPROPRIATIONS.—There is
authorized to be appropriated to carry out this section
$10,000,000 for each of fiscal years 2001 through 2005.
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