I
103D CONGRESS
2D SESSION
H. R. 4445
To amend the Housing Act of 1949 to authorize the Secretary of Agriculture
to guarantee the repayment of loans made by private lenders for the
development costs of multifamily rental housing for low- and moderate-
income families in rural areas.
IN THE HOUSE OF REPRESENTATIVES
MAY 18, 1994
Mr. BEREUTER introduced the following bill; which was referred to the
Committee on Banking, Finance and Urban Affairs
A BILL
To amend the Housing Act of 1949 to authorize the Sec-
retary of Agriculture to guarantee the repayment of loans
made by private lenders for the development costs of
multifamily rental housing for low- and moderate-income
families in rural areas.
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 ‘‘Rural Multifamily
Rental Housing Loan Guarantee Demonstration Act’’.
SEC. 2. LOAN GUARANTEES FOR MULTIFAMILY RENTAL
HOUSING IN RURAL AREAS.
Title V of the Housing Act of 1949 is amended by
adding at the end the following new section:
‘‘SEC. 543. LOAN GUARANTEES FOR MULTIFAMILY RENTAL
HOUSING IN RURAL AREAS.
‘‘(a) AUTHORITY.—The Secretary may make commit-
ments to guarantee eligible loans for the development costs
of eligible housing and related facilities, and may guaran-
tee such eligible loans, in accordance with this section.
‘‘(b) EXTENT OF GUARANTEE.—A guarantee made
under this section shall guarantee repayment of an
amount not exceeding 90 percent of the unpaid principal
and interest of the loan for which the guarantee is made.
The liability of the United States under any guarantee
under this section shall decrease or increase pro rata with
any decrease or increase of the amount of the unpaid por-
tion of the obligation.
‘‘(c) ELIGIBLE BORROWERS.—A loan guaranteed
under this section may be made to a nonprofit organiza-
tion, an agency or body of any State government or politi-
cal subdivision thereof, or a private entity.
‘‘(d) ELIGIBLE HOUSING.—A loan may be guaran-
teed under this section only if the loan is used for the
development costs of housing and related facilities (as
such terms are defined in section 515(e)) that—
‘‘(1) consists of 5 or more adequate dwellings;
‘‘(2) is available for occupancy only by low or
moderate income families or persons, whose incomes
at the time of initial occupancy do not exceed 115
percent of the median income of the area, as deter-
mined by the Secretary;
‘‘(3) will remain available as provided in para-
graph (2), according to such binding commitments
as the Secretary may require, for the period of the
original term of the loan guaranteed, unless the Sec-
retary waives the applicability of such requirement
for the loan; and
‘‘(4) is located in a rural area.
A low-income housing tax credit under section 42 of the
Internal Revenue Code of 1986 may be provided in con-
nection with housing developed using amounts from a loan
guaranteed under this section, but only if such housing
complies with the requirements under such Code for such
a credit.
‘‘(e) ELIGIBLE LENDERS.—
‘‘(1) REQUIREMENT.—A loan may be guaran-
teed under this subsection only if the loan is made
by a lender that the Secretary determines—
‘‘(A) meets the qualifications, and has been
approved by the Secretary of Housing and
Urban Development, to make loans for multi-
family housing that are to be insured under the
National Housing Act;
‘‘(B) meets the qualifications, and has
been approved by the Federal National Mort-
gage Association, to make loans for multifamily
housing that are to be sold to such corporation;
‘‘(C) meets the qualifications, and has been
approved by the Federal Home Loan Mortgage
Corporation, to make loans for multifamily
housing that are to be sold to such Corporation;
or
‘‘(D) meets any qualifications that the Sec-
retary may, by regulation, establish for partici-
pation of lenders in the loan guarantee program
under this section.
‘‘(2) ELIGIBILITY LIST AND ANNUAL AUDIT.—
The Secretary shall establish a list of eligible lenders
and shall annually conduct an audit of each lender
included in the list for purposes of determining
whether such lender continues to be an eligible lend-
er.
‘‘(f) LOAN TERMS.—Each loan guaranteed pursuant
to this subsection shall—
‘‘(1) provide for complete amortization by peri-
odic payments to be made for a term not to exceed
40 years;
‘‘(2) involve a rate of interest agreed upon by
the borrower and the lender that does not exceed the
maximum allowable rate established by the Secretary
for purposes of this section and is fixed over the
term of the loan;
‘‘(3) involve a principal obligation (including
initial service charges, appraisal, inspection, and
other fees as the Secretary may approve) not to ex-
ceed—
‘‘(A) in the case of a borrower that is a
nonprofit organization or an agency or body of
any State or local government, 97 percent of
the development costs of the housing and relat-
ed facilities or the value of the housing and fa-
cilities, whichever is less;
‘‘(B) in the case of a borrower that is a
for-profit entity not referred to in subparagraph
(A), 90 percent of the development costs of the
housing and related facilities or the value of the
housing and facilities, whichever is less; and
‘‘(C) in the case of any borrower, for such
part of the property as may be attributable to
dwelling use, the applicable maximum per unit
dollar amount limitations under section 207(c)
of the National Housing Act; and
‘‘(4) be secured by a first mortgage on the
housing and related facilities for which the loan is
made, or otherwise, as the Secretary may determine
necessary to ensure repayment of the obligation.
‘‘(g) GUARANTEE FEE.—At the time of issuance of
a loan guaranteed under this section, the Secretary may
collect from the lender a fee equal to not more than 1
percent of the principal obligation of the loan.
‘‘(h) AUTHORITY FOR LENDERS TO ISSUE CERTIFI-
CATES OF GUARANTEE.—The Secretary may authorize
certain eligible lenders to determine whether a loan meets
the requirements for guarantee under this section and,
subject to the availability of authority to enter into guar-
antees under this section, execute a firm commitment for
a guarantee binding upon the Secretary and issue a certifi-
cate of guarantee evidencing a guarantee, without review
and approval by the Secretary of the specific loan. The
Secretary may establish standards for approving eligible
lenders for a delegation of authority under this subsection.
‘‘(i) PAYMENT UNDER GUARANTEE.—
‘‘(1) NOTICE OF DEFAULT.—In the event of de-
fault by the borrower on a loan guaranteed under
this section, the holder of the guarantee certificate
for the loan shall provide written notice of the de-
fault to the Secretary.
‘‘(2) FORECLOSURE.—After receiving notice
under paragraph (1) and providing written notice of
action under this paragraph to the Secretary, the
holder of the guarantee certificate for the loan may
initiate foreclosure proceedings for the loan in a
court of competent jurisdiction, in accordance with
regulations issued by the Secretary, to obtain posses-
sion of the security property. After the court issues
a final order authorizing foreclosure on the property,
the holder of the certificate shall be entitled to pay-
ment by the Secretary under the guarantee (in the
amount provided under subsection (b)) upon (A)
conveyance to the Secretary of title to the security
property, (B) submission to the Secretary of a claim
for payment under the guarantee, and (C) assign-
ment to the Secretary of all the claims of the holder
of the guarantee against the borrower or others aris-
ing out of the loan transaction or foreclosure pro-
ceedings, except claims released with the consent of
the Secretary.
‘‘(3) ASSIGNMENT
BY
SECRETARY.—After re-
ceiving notice under paragraph (1), the Secretary
may accept assignment of the loan if the Secretary
determines that the assignment is in the best inter-
ests of the United States. Assignment of a loan
under this paragraph shall include conveyance to the
Secretary of title to the security property, assign-
ment to the Secretary of all rights and interests
arising under the loan, and assignment to the Sec-
retary of all claims against the borrower or others
arising out of the loan transaction. Upon assignment
of a loan under this paragraph, the holder of a guar-
antee certificate for the loan shall be entitled to pay-
ment by the Secretary under the guarantee (in the
amount provided under subsection (b)).
‘‘(4) REQUIREMENTS.—Before any payment
under a guarantee is made under paragraph (2) or
(3), the holder of the guarantee certificate shall ex-
haust all reasonable possibilities of collection on the
loan guaranteed. Upon payment, in whole or in part,
to the holder, the note or judgment evidencing the
debt shall be assigned to the United States and the
holder shall have no further claim against the bor-
rower or the United States. The Secretary shall then
take such action to collect as the Secretary deter-
mines appropriate.
‘‘(j) VIOLATION OF GUARANTEE REQUIREMENTS BY
LENDERS ISSUING GUARANTEES.—
‘‘(1) INDEMNIFICATION.—If the Secretary de-
termines that a loan guaranteed by an eligible lender
pursuant to delegation of authority under subsection
(h) was not originated in accordance with the re-
quirements under this section and the Secretary
pays a claim under the guarantee for the loan, the
Secretary may require the eligible lender authorized
under subsection (h) to issue the guarantee certifi-
cate for the loan—
‘‘(A) to indemnify the Secretary for the
loss, if the payment under the guarantee was
made within a reasonable period specified by
the Secretary; or
‘‘(B) to indemnify the Secretary for the
loss regardless of when payment under the
guarantee was made, if the Secretary deter-
mines that fraud or misrepresentation was in-
volved in connection with the origination of the
loan.
‘‘(2) TERMINATION OF AUTHORITY TO ISSUE
GUARANTEES.—The Secretary may cancel a delega-
tion of authority under subsection (h) to an eligible
lender if the Secretary determines that the lender
scribing the program under this section for guaran-
teeing loans.
‘‘(2) CONTENTS.—The report shall—
‘‘(A) describe the types of borrowers pro-
viding housing with loans guaranteed under this
section, the areas served by the housing pro-
vided and the geographical distribution of the
housing, the levels of income of the residents of
the housing, the number of dwelling units pro-
vided, the extent to which borrowers under such
loans have obtained other financial assistance
for development costs of housing provided with
the loans, and the extent to which borrowers
under such loans have used low-income housing
tax credits provided under section 42 of the In-
ternal Revenue Code of 1986 in connection with
the housing provided with the loans;
‘‘(B) analyze the financial viability of the
housing provided with loans guaranteed under
this section and the need for project-based rent-
al assistance for such housing;
‘‘(C) include any recommendations of the
Secretary for expanding or improving the pro-
gram under this section for guaranteeing loans;
and
‘‘(D) include any other information regard-
ing the program for guaranteeing loans under
this section that the Secretary considers appro-
priate.
‘‘(r) DEFINITIONS.—For purposes of this subsection,
the following definitions shall apply:
‘‘(1) The term ‘development cost’ has the mean-
ing given the term in section 515(e).
‘‘(2) The term ‘eligible lender’ means a lender
determined by the Secretary to meet the require-
ments of subparagraph (A), (B), (C), or (D) of sub-
section (e)(1).
‘‘(3) The terms ‘housing’ and ‘related facilities’
have the meanings given such terms in section
515(e).
‘‘(s) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated for fiscal years 1995
and 1996 such sums as may be necessary for costs (as
such term is defined in section 502 of the Congressional
Budget Act of 1974) of loan guarantees made under this
section.
‘‘(t) TERMINATION DATE.—A loan may not be guar-
anteed under this section after September 30, 1996.’’.
Æ