‘‘(B) ALLOCATION PLAN.—For purposes of 
this paragraph, the term ‘allocation plan’ means 
a written plan, submitted to the Secretary by 
October 15, 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 who will originate 
qualified home at last loans during 
the calendar year for which the tax 
credits are allocated for use. 
‘‘(ii) an assurance that the State will 
not allocate in excess of 10 percent of the 
home at last tax credit amount for the cal-
endar year for qualified home at last loans 
which 
are 
neighborhood 
revitalization 
project loans, 
‘‘(iii) an assurance that the State will 
not allocate in excess of 15 percent of the 
home at last tax credit amount for the cal-
endar year to one qualified lender,
‘‘(iv) an assurance that the State will 
not allow more than 25 percent of the 
home at last tax credit amount for the cal-
endar year to be used to subsidize home 
purchases or new home construction for 
qualified borrowers earning in excess of 
120 percent of household median income. 
‘‘(v) 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 
‘‘(vi) 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)), and 
‘‘(B) during the 1-year period beginning on 
the date of the credit allocation, uses its own 
funds to buy down the interest rate charged of 
a qualified borrower such that the aggregate 
amount of funds applied as prepaid points is 
not less than the amount of the bid of such 
lender for such credit allocation. 
‘‘(4) CARRYOVER OF CREDIT.—A home at last 
tax credit amount received by a State for any cal-
endar year and not allocated in such year shall re-
main available to be allocated in the succeeding cal-
endar 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 2003, 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 2002’ 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 AT LAST LOAN DEFINED.—
For purposes of this section, the term ‘qualified home at 
last loan’ means a first mortgage single-family residential 
loan funded by a qualified lender to finance the purchase 
or construction or purchase and construction of a resi-
dence by a qualified borrower which has a lower-than-mar-
ket interest rate as a result of a lender rate ‘buydown’, 
but only if—
‘‘(1) the requirements of subsections (d) and (e) 
are met, 
‘‘(2) subject to paragraph (6), the proceeds 
from such loan are applied exclusively—
‘‘(A) to acquire such residence, or
‘‘(B) to acquire and substantially improve 
such residence in connection with a neighbor-
hood revitalization project, or 
‘‘(C) to build a residence, 
‘‘(3) the principal amount of the loan is not 
greater than 105 percent of the purchase price of 
the residence securing the loan, 
‘‘(4) the loan results in a monthly housing ex-
pense-to-income ratio with respect to such residence 
of not more than 33 percent at the time of closing, 
‘‘(5) the total of prepaid points used to buy 
down the effective interest rate is not more than—
‘‘(A) $10,000 for qualified borrowers earn-
ing greater than 70 percent of area household 
median income, 
‘‘(B) $20,000 for qualified borrowers earn-
ing 70 percent or less of area household median 
income, 
‘‘(C) in the case of a neighborhood revital-
ization project loan, subparagraph (A) shall be 
applied by substituting ‘$15,000’ for ‘$10,000’, 
and subparagraph (B) shall be applied by sub-
stituting ‘$25,000’ for ‘$20,000’, or 
‘‘(D) in the case of a below-market-rate 
loan offered by a State housing finance agency
in conjunction with a mortgage revenue bond 
program, subparagraph (A) shall be applied by 
substituting ‘$5,000’ for ‘$10,000’, and sub-
paragraph (B) shall be applied by substituting 
‘$10,000’ for ‘$20,000’, 
‘‘(6) the loan has a term of 30 years, 
‘‘(7) the loan has a fixed interest rate and fully 
amortizes over the term of the mortgage, 
‘‘(8) the loan is a conventional single-family 
first mortgage, a government-guaranteed single-fam-
ily first mortgage, or a single-family first mortgage 
originated under a program which is administered 
by the State and which is in existence on the date 
of enactment of this section, and 
‘‘(9) the loan is in an amount not greater than 
the maximum principal obligation amount eligible 
for insurance under section 203(b)(2) of the Na-
tional Housing Act (12 U.S.C. 1709)(b)(2)) for a 1-
family dwelling. 
‘‘(d) MORTGAGOR.—
‘‘(1) IN GENERAL.—A loan meets the require-
ments of this subsection if it is made to a mort-
gagor—
‘‘(A) whose household income for the year 
in which the mortgagor applies for the loan is
80 percent or less of the area median gross 
household income for the area in which the resi-
dence which secures the mortgage is located, or 
‘‘(B) who is buying a home or duplex for 
owner-occupancy in a census tract targeted for 
reinvestment and redevelopment by the Depart-
ment of Housing and Urban Development, re-
gardless of household income, 
‘‘(C) for whom the monthly housing ex-
pense-to-income ratio with respect to a market-
rate single-family mortgage would exceed 28 
percent, 
‘‘(D) but for whom a qualified home at last 
loan would not result in a monthly housing ex-
pense-to-income ratio greater than 33 percent 
at the time of closing,
‘‘(E) who has not owned a home within the 
three years prior to the date of applying for a 
qualified home at last loan, and 
‘‘(F) who attends pre-purchase home-
ownership counseling provided by a qualified 
nonprofit organization consistent with stand-
ards established by the American Homeowner-
ship 
Education 
and 
Counseling 
Institute 
(AHECI).
‘‘(2) DETERMINATION
OF
HOUSEHOLD
IN-
COME.—For purposes of this subsection and sub-
section (h), the household 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) 1 percent of the purchase price, or 
‘‘(B) $1,000, and 
‘‘(3) in the case of a mortgagor with a house-
hold income greater than 50 percent of the area me-
dian gross income, as determined under subsection 
(d)(1)(A), not financed in connection with a quali-
fied mortgage issued under section 143. For pur-
poses 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. 
‘‘(f) DEFINITION AND SPECIAL RULES.—
‘‘(1) CREDIT PERIOD DEFINED.—For purposes 
of this section, the term ‘credit period’ means the 
taxable year in which a home at last tax credit 
amount is allocated to the taxpayer. 
‘‘(2) DISPOSITION OF HOME AT LAST LOANS.—
If a qualified home at last loan is disposed of in the 
12 months following its closing date as a result of 
a borrower default, the taxpayer forfeits the credit 
making it available for reallocation by the State. 
‘‘(3) PREPAYMENT OF HOME AT LAST LOANS.—
If, during the 12 months following its closing date, 
a qualified home at last loan is fully repaid by the 
borrower, the lender may claim only a portion of the 
tax credit with the remainder being forfeited and 
available for reallocation. The portion of tax credit 
that can be claimed is determined by dividing the 
number of days that have passed between the closing 
date and the date of payoff by 365 and multiplying 
that number by the value of the tax credit allocated 
to the lender for the purposes of originating the pre-
paid home at last loan.
‘‘(g) OTHER DEFINITIONS.—For purposes of this 
section—
‘‘(1) 
NEIGHBORHOOD
REVITALIZATION 
PROJECT LOAN.—
‘‘(A) IN GENERAL.—The term ‘neighbor-
hood revitalization project loan’ means a loan 
secured by a first mortgage on a one- to four-
family residence, the proceeds of which are used 
to substantially improve such residence in con-
nection with a neighborhood revitalization 
project. 
‘‘(B) 
NEIGHBORHOOD
REVITALIZATION 
PROJECT.—The term ‘neighborhood revitaliza-
tion project’ means a project of sufficient size 
and scope to alleviate physical deterioration and 
stimulate investment in—
‘‘(i) a geographic location within the 
jurisdiction of a unit of local government 
(but not the entire jurisdiction) designated 
in comprehensive plans, ordinances, or 
other documents as a neighborhood, vil-
lage, or similar geographic designation, or 
‘‘(ii) the entire jurisdiction of a unit 
of local government if the population of 
such jurisdiction is not in excess of 25,000.
‘‘(2) STATE.—The term ‘State’ includes a pos-
session of the United States. 
‘‘(3) STATE HOUSING FINANCE AGENCY.—The 
term ‘State housing finance agency’ means the pub-
lic agency, authority, corporation, or other instru-
mentality of a State that has the authority to pro-
vide residential mortgage loan financing throughout 
the State. 
‘‘(h) CERTIFICATION AND OTHER REPORTS TO THE 
SECRETARY.—
‘‘(1) CERTIFICATION WITH RESPECT TO STATE 
ALLOCATION OF HOME AT LAST TAX CREDITS.—The 
Secretary may, upon a finding of noncompliance, re-
voke the certification of a qualified State and revoke 
any qualified home at last tax credit amounts allo-
cated to such State or allocated by such State to a 
qualified lender. 
‘‘(2) ANNUAL REPORT FROM HOUSING FINANCE 
AGENCIES.—Each State housing finance agency 
which allocates any home at last tax credit amount 
to any qualified lender for any calendar year shall 
make available to the public no later than November 
1 of the following year) an annual report speci-
fying—
‘‘(A) the home at last tax credit amount 
allocated to each qualified lender for such year, 
and 
‘‘(B) with respect to each qualified lend-
er—
‘‘(i) the principal amount of each 
qualified home at last loan made by such 
lender in such year, 
‘‘(ii) the number of qualified home at 
last loans made by such lender in such 
year, 
‘‘(iii) the interest rate prior to 
buydown and the effective interest rate 
after buydown of each qualified home at 
last loan, 
‘‘(iv) the status of each qualified 
homeownership 
loan 
defined 
as 
‘per-
forming’, ‘delinquent less than 60 days’, 
‘delinquent 60 days or more’, or ‘in fore-
closure’, 
‘‘(v) the household income as a per-
cent of area median household income of 
each qualified borrower, 
‘‘(vi) any other information the Sec-
retary may deem essential to assuring fair
mortgage pricing and that the benefit of 
the tax credit is being passed through the 
taxpayer to the qualified borrower in the 
form of a lower interest rate, and 
‘‘(vii) 
the 
penalty 
under 
section 
6652(j) shall apply to any failure to pro-
vide the report required by this paragraph 
on the date prescribed herein. 
‘‘(i) REGULATIONS.—The Secretary may prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section.’’
(b) LIMITATION ON CARRYBACK OF UNUSED CRED-
IT.—Subsection (d) of section 39 of the Internal Revenue 
Code of 1986 (relating to carryback and carryforward of 
unused credits) is amended by adding at the end the fol-
lowing: 
‘‘(11) NO CARRYBACK OF HOME AT LAST TAX 
CREDITS BEFORE EFFECTIVE DATE.—No portion of 
the unused business credit for any taxable year 
which is attributable to the home at last tax credit 
determined under section 45G may be carried back 
to a taxable year ending before the date of the en-
actment of section 45G.’’
(c) CONFORMING AMENDMENTS.—
(1) Section 38(b) of the Internal Revenue Code 
of 1986 is amended—
(A) by striking ‘‘plus’’ at the end of para-
graph (14), 
(B) by striking the period at the end of 
paragraph (15) and inserting ‘‘, plus’’, and 
(C) by adding at the end the following: 
‘‘(16) the home at last tax credit determined 
under section 45G.’’
(2) The table of sections for subpart D of part 
IV of subchapter A of chapter 1 of such Code is 
amended by adding at the end the following:
‘‘Sec. 45G. Home at last tax credit.’’
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar years after 2002.
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