I
105TH CONGRESS
1ST SESSION
H. R. 2447
To reform the assisted multifamily rental housing programs of the Depart-
ment of Housing and Urban Development, protect the financial interests
of the Federal Government, maintain the affordability and availability
of low-income housing, enhance the effectiveness of enforcement provi-
sions relating to single family and multifamily housing, and consolidate
and reform the management of multifamily housing programs, and for
other purposes.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 10, 1997
Mr. LAZIO of New York introduced the following bill; which was referred to
the Committee on Banking and Financial Services
A BILL
To reform the assisted multifamily rental housing programs
of the Department of Housing and Urban Development,
protect the financial interests of the Federal Govern-
ment, maintain the affordability and availability of low-
income housing, enhance the effectiveness of enforcement
provisions relating to single family and multifamily hous-
ing, and consolidate and reform the management of mul-
tifamily housing programs, 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 AND TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Multifamily Housing Restructuring and Affordability Act
of 1997’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title and table of contents.
TITLE I—FHA-INSURED MULTIFAMILY HOUSING MORTGAGE AND
HOUSING ASSISTANCE RESTRUCTURING
Sec. 101. Findings and purposes.
Sec. 102. Performance measures.
Sec. 103. Definitions.
Subtitle A—Restructuring of Assistance
Sec. 111. Authority of participating administrative entities.
Sec. 112. Mortgage restructuring and rental assistance sufficiency plans.
Sec. 113. Section 8 renewals and affordability commitments by owners of
projects.
Sec. 114. Exemptions from and prohibitions on restructuring.
Sec. 115. Restructuring tools.
Sec. 116. Management standards.
Sec. 117. Monitoring of compliance.
Sec. 118. Review.
Sec. 119. GAO audit and review.
Sec. 120. Treatment of FHA multifamily restructuring demonstrations.
Sec. 121. Technical and conforming amendments.
Subtitle B—Office of Multifamily Housing Assistance Restructuring
Sec. 141. Establishment of Office of Multifamily Housing Assistance Restruc-
turing.
Sec. 142. Director.
Sec. 143. Duty and authority of Director.
Sec. 144. Personnel.
Sec. 145. Funding.
Sec. 146. Limitation on subsequent employment.
Sec. 147. Audits by GAO.
Sec. 148. Regulations and orders.
Sec. 149. Termination.
Subtitle C—Contracts Expiring After Termination of Program
Sec. 161. Tenant-based assistance.
TITLE II—MISCELLANEOUS PROVISIONS
Sec. 201. Rehabilitation grants for certain insured projects.
Sec. 202. Amendment to housing finance agency multifamily housing financing
pilot program.
Sec. 203. Conversion of direct loan elderly projects to project rental assistance
contracts.
Sec. 204. Rent limitation for non-FHA multifamily housing projects receiving
section 8 project-based assistance.
Sec. 205. GAO report on section 8 rental assistance for multifamily housing
projects.
TITLE III—ENFORCEMENT PROVISIONS
Sec. 301. Implementation.
Subtitle A—FHA Single Family and Multifamily Housing
Sec. 311. Authorization to immediately suspend mortgagees.
Sec. 312. Extension of equity skimming to other single family and multifamily
housing programs.
Sec. 313. Civil money penalties against mortgagees, lenders, and other partici-
pants in FHA programs.
Subtitle B—FHA Multifamily Provisions
Sec. 321. Civil money penalties against general partners, officers, directors, and
certain managing agents of multifamily projects.
Sec. 322. Civil money penalties for noncompliance with section 8 HAP con-
tracts.
Sec. 323. Extension of double damages remedy.
Sec. 324. Obstruction of Federal audits.
TITLE I—FHA-INSURED MULTI-
FAMILY HOUSING MORTGAGE
AND 
HOUSING 
ASSISTANCE
RESTRUCTURING
SEC. 101. FINDINGS AND PURPOSES.
(a) FINDINGS.—The Congress finds that—
(1) there exists throughout the Nation a need
for safe, clean, and healthy housing that is afford-
able to low-income families;
(2) housing is an essential element in holding a
job, getting an education, and strengthening commu-
nities;
(3) 23 years after the enactment of the section
8 rental housing assistance payments program, a
record number of contracts for such assistance are
expiring, including contracts covering 1,800,000
dwelling units in 1998 and contracts covering
2,700,000 units between 1999 and 2002;
(4) if the contracts expiring in 1998 alone are
not renewed, 4,400,000 Americans—90 percent of
whom are elderly persons, persons with disabilities,
and low-income families with children—are at risk of
losing their homes because of sharp rent increases;
(5) a substantial number of housing units re-
ceiving project-based assistance have rents that are
higher than the rents of comparable, unassisted
rental units in the same housing rental market;
(6) it is estimated that if no changes in the
terms and conditions of the contracts for project-
based assistance are made before fiscal year 2000,
the cost of renewing all expiring project-based rental
assistance contracts under section 8 of the United
States Housing Act of 1937 will increase from ap-
proximately $1,200,000,000 in fiscal year 1998 to
almost $8,000,000,000 by fiscal year 2006;
(7) absent new budget authority for the renewal
of expiring contracts for project-based assistance or
restructuring of FHA-insured mortgages, many of
the FHA-insured multifamily housing projects that
are assisted with project-based assistance will likely
default on their FHA-insured mortgage payments,
resulting in substantial claims to the FHA General
Insurance Fund and Special Risk Insurance Fund;
(8) more than 15 percent of federally assisted
multifamily housing projects are physically or finan-
cially distressed, including a number that suffer
from mismanagement; and
(9) due to Federal budget constraints, the
downsizing of the Department of Housing and
Urban Development, and diminished administrative
capacity, the Department lacks the ability to ensure
the continued economic and physical well-being of
the stock of federally insured and assisted multifam-
ily housing projects and to ensure proper oversight
of the multifamily housing restructuring process.
(b) PURPOSE.—The purpose of this title is to pro-
mote and preserve safe, clean, and healthy housing that
is affordable to low-income families while reducing the
long-term costs to the Federal Government, thereby con-
tributing to the supply of affordable housing, by—
(1) reforming the design and operation of rental
housing assistance programs of the Department to
promote greater project operating and cost effi-
ciencies and to end excessive taxpayer subsidies;
(2) promoting the use of vouchers and relation-
ships between landlords and tenants under the sec-
tion 8 rental assistance program that operate in a
manner that more closely resembles the private
housing market;
(3) protecting tenants and providing more
choice for tenants in a manner that creates hope and
opportunity and preserves communities;
(4) facilitating mixed-income communities;
(5) creating a new compact with owners of mul-
tifamily rental housing under which the owners con-
tinue to provide safe, clean, healthy, and affordable
housing;
(6) encouraging owners of eligible multifamily
housing projects to restructure their FHA-insured
mortgages and project-based rental assistance con-
tracts in a manner that is consistent with this title
before the year in which the contract expires;
(7) increasing accountability and rewarding ef-
fective management of affordable housing owners re-
ceiving project-based section 8 rental assistance;
(8) rehabilitating properties when necessary to
maintain safe, clean, and healthy living conditions;
(9) achieving greater accountability with respect
to taxpayer funds by empowering the Federal Gov-
ernment to take firmer, quicker, and more effective
action to eliminate fraud and abuse in Department
of Housing and Urban Development programs and
to pursue owners who take inappropriate actions;
and
(10) reforming, consolidating, and strengthen-
ing enforcement of the Department’s affordable
housing programs.
SEC. 102. PERFORMANCE MEASURES.
Consistent with the purposes and requirements of the
Government Performance and Results Act of 1993, the
program under this title and the implementation of the
program by the Department of Housing and Urban Devel-
opment shall comply with the following performance goals:
(1) The eligible multifamily housing projects re-
structured under this title shall be financially viable
after the restructuring.
(2) The Department of Housing and Urban De-
velopment shall receive a written commitment from
the owner of each restructured project that the
project will be retained as a valuable asset of the af-
fordable housing stock to serve low-income families.
(3) The process for restructuring shall pro-
tect—
(A) the financial interests of the taxpayers,
including the immediate costs to the Federal
Government recognized in restructuring the
mortgage (by payment of claim, refinancing, or
otherwise) and the long-term costs of Federal
subsidies required for the project to remain fi-
nancially viable;
(B) the financial interests of project own-
ers and managers, because they are partners of
the Federal Government in meeting the afford-
able housing needs of the Nation through the
section 8 rental housing assistance program;
and
(C) the interests of tenants residing in the
multifamily housing projects at the time of the
restructuring for the housing.
SEC. 103. DEFINITIONS.
For purposes of this title, the following definitions
shall apply:
(1) 
COMPARABLE
PROPERTIES.—The 
term
‘‘comparable properties’’ means, with respect to an
eligible multifamily property, other properties that
are—
(A) determined by a State-certified ap-
praiser pursuant to the Uniform Standards of
Professional Appraisal Practice to be—
(i) located in the same housing mar-
ket area as the eligible multifamily housing
project and similar to such project in
neighborhood (including risk of crime), lo-
cation, access, street appeal, age, property
size, apartment mix, physical configura-
tion, property and unit amenities, and util-
ities; or
(ii) if no such similar properties exist
in the same housing market area as the el-
igible multifamily housing project, located
in other housing market areas and similar
to such project in the matters referred to
in clause (i);
(B) unregulated by contractual encum-
brances or local rent-control laws; and
(C) occupied predominantly by renters who
receive no rent supplements or rental assist-
ance.
(2) DIRECTOR.—The term ‘‘Director’’ means
the Director of the Office of Multifamily Housing
Assistance Restructuring of the Department of
Housing and Urban Development.
(3) 
ELIGIBLE
MULTIFAMILY
HOUSING
PROJECT.—The term ‘‘eligible multifamily housing
project’’ means a property consisting of more than
4 dwelling units—
(A) having rents which, on an average per
unit basis, exceed the rent of comparable prop-
erties, as determined by the Director;
(B) that is covered in whole or in part by
a contract for project-based assistance under—
(i) the new construction and substan-
tial rehabilitation program under section
8(b)(2) of the United States Housing Act
of 1937 (as in effect before October 1,
1983);
(ii) the property disposition program
under section 8(b) of the United States
Housing Act of 1937;
(iii) the moderate rehabilitation pro-
gram under section 8(e)(2) of the United
States Housing Act of 1937;
(iv) the loan management assistance
program under section 8 of the United
States Housing Act of 1937;
(v) section 23 of the United States
Housing Act of 1937 (as in effect before
January 1, 1975);
(vi) the rent supplement program
under section 101 of the Housing and
Urban Development Act of 1965; or
(vii) section 8 of the United States
Housing Act of 1937, following conversion
from assistance under section 101 of the
Housing and Urban Development Act of
1965; and
(C) that is financed by a mortgage insured
or held by the Secretary under the National
Housing Act.
(4) EXPIRING CONTRACT.—The term ‘‘expiring
contract’’ means a project-based assistance contract
attached to an eligible multifamily housing project
which, under the terms of the contract, will expire.
(5) EXPIRATION DATE.—The term ‘‘expiration
date’’ means the date on which an expiring contract
expires.
(6) FAIR MARKET RENT.—The term ‘‘fair mar-
ket rent’’ means the applicable fair market rental es-
tablished under section 8(c) of the United States
Housing Act of 1937 for the appropriate size and
type of dwelling unit.
(7) LOW-INCOME FAMILIES.—The term ‘‘low-in-
come families’’ has the same meaning as provided
under section 3(b)(2) of the United States Housing
Act of 1937.
(8) NONPROFIT
ORGANIZATION.—The term
‘‘nonprofit organization’’ means any private organi-
zation that—
(A) is organized under State or local laws;
(B) has no part of its net earnings inuring
to the benefit of any member, shareholder,
founder, contributor, or individual; and
(C) has a long-term record of service in
providing and financing good-quality and af-
fordable 
housing 
for 
low-income 
families
through relationships with public entities.
(9) OFFICE.—The term ‘‘Office’’ means the Of-
fice of Multifamily Housing Assistance Restructur-
ing of the Department of Housing and Urban Devel-
opment.
(10) 
PARTICIPATING
ADMINISTRATIVE
EN-
TITY.—The term ‘‘participating administrative en-
tity’’ means a public agency, including a State hous-
ing finance agency, local housing agency, or private
nonprofit or for-profit organization, or combination
thereof, which is selected under section 111(b) to act
as a participating administrative entity for purposes
of this title.
(11) 
PORTFOLIO
RESTRUCTURING
AGREE-
MENT.—The term ‘‘Portfolio restructuring agree-
ment’’ means the agreement entered into between
the Director and a participating administrative en-
tity, as provided under section 111.
(12) PROJECT-BASED ASSISTANCE.—The term
‘‘project-based assistance’’ means rental assistance
under a program referred to in paragraph (3)(B)
that is attached to a multifamily housing project.
(13) 
QUALIFIED
MORTGAGEE.—The 
term
‘‘qualified mortgagee’’ means an entity that is ap-
proved by the Director, pursuant to guidelines estab-
lished by the Secretary, as capable of servicing and
originating mortgages 
for 
multifamily 
housing
projects insured under the National Housing Act
and that—
(A) is not suspended or debarred by the
Secretary;
(B) is not suspended or on probation im-
posed by the Mortgagee Review Board;
(C) is not in default under any Govern-
ment National Mortgage Association obligation;
and
(D) meets previous participation require-
ments promulgated by the Director.
(14) RENEWAL.—The term ‘‘renewal’’ means
the replacement of an expiring contract with a new
contract under section 8 of the United States Hous-
ing Act of 1937, consistent with the requirements of
this title.
(15) 
SECRETARY.—The 
term 
‘‘Secretary’’
means the Secretary of Housing and Urban Develop-
ment.
(16) STATE.—The term ‘‘State’’ has the same
meaning as in section 104 of the Cranston-Gonzalez
National Affordable Housing Act.
(17) TENANT-BASED
ASSISTANCE.—The term
‘‘tenant-based assistance’’ has the same meaning as
in section 8(f) of the United States Housing Act of
1937.
(18) UNIT
OF
GENERAL
LOCAL
GOVERN-
MENT.—The term ‘‘unit of general local govern-
ment’’ has the same meaning as in section 104 of
the Cranston-Gonzalez National Affordable Housing
Act.
(19) VERY
LOW-INCOME
FAMILY.—The term
‘‘very low-income family’’ has the same meaning as
in section 3(b) of the United States Housing Act of
1937.
Subtitle A—Restructuring of
Assistance
SEC. 111. AUTHORITY OF PARTICIPATING ADMINISTRATIVE
ENTITIES.
(a) PORTFOLIO RESTRUCTURING AGREEMENTS.—
(1) IN GENERAL.—The Director of the Office of
Multifamily Housing Assistance Restructuring shall
enter into portfolio restructuring agreements with
participating administrative entities for the imple-
mentation of mortgage restructuring and rental as-
sistance sufficiency plans under section 112 to re-
structure FHA-insured multifamily housing mort-
gages, to—
(A) reduce the costs of expiring contracts;
(B) address financially and physically trou-
bled projects; and
(C) correct management and ownership de-
ficiencies.
(2) CONTENTS.—Each portfolio restructuring
agreement entered into under this subsection shall—
(A) be a cooperative agreement between
the Director and a participating administrative
entity to establish the obligations and require-
ments between such parties;
(B) identify the particular geographic ju-
risdiction or particular classification or classi-
fications of eligible multifamily housing projects
for which the participating administrative entity
is authorized to approve and implement mort-
gage restructuring and rental assistance suffi-
ciency plans under section 112;
(C) require the participating administrative
entity to review and certify to the accuracy and
completeness of the evaluation of rehabilitation
needs required under section 112(e)(4) for each
eligible multifamily housing project included in
the portfolio restructuring agreement, in ac-
cordance with the regulations of the Director;
(D) identify the responsibilities of the par-
ticipating administrative entity and the Director
in approving and implementing a mortgage re-
structuring and rental assistance sufficiency
plan, including any actions proposed to be
taken under section 114 or 115;
(E) require, with respect to each eligible
multifamily housing project for which the par-
ticipating administrative entity has responsibil-
ity in approval and implementation of a mort-
gage restructuring and rental assistance suffi-
ciency plan, that each such plan be prepared in
accordance with the requirements of section
112; and
(F) include compensation for all reasonable
expenses incurred by the participating adminis-
trative entity necessary to perform its duties
under this subtitle.
(3) TERMS.—The Director shall, by regulation,
establish terms and conditions of portfolio restruc-
turing agreements under this subsection. Each such
agreement shall provide that the Director may im-
mediately terminate such an agreement with a par-
ticipating administrative entity if the Director deter-
mines that the entity has failed to comply with the
terms and conditions of the agreement.
(b) SELECTION OF PARTICIPATING ADMINISTRATIVE
ENTITIES.—
(1) IN GENERAL.—Subject to paragraph (4),
the Director shall select entities described in para-
graph (2) to act for purposes of this subtitle as par-
ticipating administrative entities. The Director shall
authorize each entity selected to act as a participat-
ing administrative entity with respect to a particular
geographic jurisdiction or particular classifications
of eligible multifamily housing projects, or both. The
Director may assign more than one participating ad-
ministrative entity to any geographic jurisdiction or
for any classification of eligible multifamily housing
project.
(2) ELIGIBLE ENTITIES.—An entity described
in this paragraph is a public agency (including a
State housing finance agency and a local housing
agency) or private nonprofit or for-profit organiza-
tions, or any combination thereof.
(3) SELECTION CRITERIA.—The Director shall
select entities described in paragraph (2) to act par-
ticipating administrative agencies based on the fol-
lowing criteria:
(A) The extent of the timeliness and effi-
ciency of the entity in restructuring a portfolio
of loans.
(B) The cost effectiveness of the entity
(relative to other entities) in managing a multi-
family housing portfolio, while maintaining the
public purpose of such housing.
ciency agreement unless such losses involved gross neg-
ligence or willful misconduct on the part of such entity
or mortgagee.
SEC. 112. MORTGAGE RESTRUCTURING AND RENTAL AS-
SISTANCE SUFFICIENCY PLANS.
(a) SUBMISSION, CONTENTS, AND APPROVAL.—
(1) PROCEDURES
AND
REQUIREMENTS.—The
Director shall develop procedures and requirements
for the submission, to the appropriate participating
administrative entity, of a mortgage restructuring
and rental assistance sufficiency plan for each eligi-
ble multifamily housing project with an expiring con-
tract.
(2) NOTICE AND TIMING.—The Director shall
provide written notice of expiration date for the ex-
piring contract for an eligible multifamily housing
project to the owner and the mortgagee of record for
the project not less than 12 months before the expi-
ration date. The Director shall establish deadlines
for submission of mortgage restructuring and rental
assistance sufficiency plans for eligible multifamily
housing projects to the appropriate participating ad-
ministrative entity, which shall be a reasonable pe-
riod after the notice of such expiration is received.
(3) DEVELOPMENT.—Except as provided in
paragraph (4), each mortgage restructuring and
rental assistance sufficiency plan submitted under
this subsection for an eligible multifamily housing
project shall be developed at the initiative of the
owner of the project, in conjunction with the quali-
fied mortgagee servicing the loan at such time, pur-
suant to guidelines for mortgage restructuring estab-
lished by the Director. The qualified mortgagee—
(A) shall assist the owner in determining
the appropriate restructuring tools under sec-
tion 115 to include in the plan to ensure com-
pliance with the performance goals under 102,
taking into consideration the specific character-
istics of the project and the mortgage on the
project and the type of rental assistance that
will be provided on behalf of tenants in the
project; and
(B) may underwrite the financing proposed
in the plan.
(4) ALTERNATIVE DEVELOPMENT.—In any case
that the mortgagee for a project is unable, for any
reason, to participate with the owner of the project
in developing a mortgage restructuring and rental
assistance sufficiency plan for the project, or the
mortgagee is not a qualified mortgagee, the partici-
pating administrative entity for the project, or a
qualified third party selected by such entity, shall
fulfill the responsibilities of the qualified mortgagee
under paragraph (3).
(5) CONSOLIDATION.—Mortgage restructuring
and rental assistance sufficiency plans submitted
under this subsection may be consolidated as part of
an overall strategy for more than one property.
(6) APPROVAL.—
(A) IN GENERAL.—The participating ad-
ministrative entity shall review and approve, re-
ject, or seek modifications to mortgage restruc-
turing and rental assistance sufficiency plans
submitted under this section in accordance with
terms and conditions as the Director shall pro-
vide.
(B) PREPAYMENT.—If a plan for a project
proposes to pay the mortgage in full and the
prepayment does not violate any existing con-
tracts, the participating administrative entity
may approve the plan notwithstanding its prep-
aration without the participation of the quali-
fied mortgagee or the lender.
(C) REQUIRED
MORTGAGE
RESTRUCTUR-
ING.—A participating administrative entity may
not approve a mortgage restructuring and rent-
al assistance sufficiency plan for an eligible
multifamily housing project unless the plan pro-
vides for restructuring of the mortgage for the
project under paragraph (8) or (9) of section
115(a).
(D) DIRECTOR
APPROVAL
IN
CASES
OF
FORECLOSURE OR SALE.—In the case of any
mortgage restructuring and rental assistance
sufficiency plan that involves—
(i) foreclosure of a mortgage on an el-
igible multifamily housing project, or
(ii) transfer of ownership of such a
project as described in section 114(b)(5),
the participating administrative entity may not
approve the plan without prior review and ap-
proval of the Director.
(b) NOTIFICATION OF TENANTS.—The Director shall
establish procedures for notifying tenants concerning the
expiration dates of expiring contracts for any eligible mul-
tifamily housing project.
(c) TEMPORARY EXTENSION OF CONTRACT TERM.—
Subject to agreement by a project owner, the Director
may, for any eligible multifamily housing project, extend
the term of any expiring contract or provide a section 8
contract with rent levels set in accordance with subsection
(h) for a period sufficient to facilitate the implementation
of a mortgage restructuring and rental assistance suffi-
ciency plan for the project, as determined by the Director.
(d) TENANT RENT PROTECTION.—If the owner of an
eligible multifamily housing project with an expiring con-
tract does not agree to extend the contract, not less than
6 months before terminating the contract, the following
requirements shall apply:
(1) NOTICE.—The project owner shall provide
written notice to the Director and the tenants of the
project of the failure to extend the contract.
(2) TENANT-BASED ASSISTANCE.—
(A) IN GENERAL.—The Director shall, to
the extent amounts are made available in ad-
vance in appropriation Acts, make tenant-based
assistance available to tenants residing in units
in the project assisted under the expiring con-
tract upon the expiration date.
(B) ENHANCED VOUCHERS FOR ELDERLY
AND DISABLED TENANTS.—If tenant-based as-
sistance is provided under this subsection for
any tenant of the project who is an elderly fam-
ily or a disabled family (as such terms are de-
fined in section 3(b) of the United States Hous-
ing Act of 1937) who continues residence in the
project and the rent for the dwelling unit in
which such tenant resides exceeds the fair mar-
ket rental or payment standard for the area, as
applicable, the amount of tenant-based assist-
ance provided on behalf of the tenant shall be
determined using a maximum monthly rent or
payment standard, as applicable, that (notwith-
standing sections 8(c)(1) and 8(o)(1) of the
United States Housing Act of 1937) is equal to
the amount of rent charged for the dwelling
unit; but only if the agency or entity admin-
istering the tenant-based assistance determines
that such rent charged is reasonable in com-
parison with rents charged for comparable un-
assisted housing units in the same market area.
If such tenant moves from the project and re-
tains the tenant-based assistance, the amount
of assistance provided on behalf of the tenant
shall be determined under existing laws and
rules and the first sentence of this subpara-
graph shall not apply.
(e) CONTENTS OF PLANS.—Each mortgage restruc-
turing and rental assistance sufficiency plan for an eligible
multifamily housing project shall—
(1) provide for tenant-based assistance for
project residents in accordance with subsection (g)
or restructure the project-based assistance rents for
the project in accordance with subsection (h);
(2) provide for any actions that are to be taken
pursuant to section 115 to restructure the mortgage
and rental assistance for the project;
(3) require the owner or purchaser of the
project to evaluate the rehabilitation needs of the
project, in accordance with the regulations of the Di-
rector, and notify the participating administrative
entity of such needs;
(4) require the owner or purchaser of the
project to provide or contract for competent manage-
ment of the project;
(5) require the owner or purchaser of the
project to take such actions as may be necessary to
rehabilitate the project, maintain adequate reserves
for the project, and maintain the project in decent
and safe condition, in accordance with—
(A) local housing codes or codes adopted
by public housing agencies, in the case of any
project that is subject to such a code that—
(i) meets or exceeds housing quality
standards established by the Secretary;
and
(ii) does not severely restrict housing
choice; or
(B) housing quality standards established
by the Secretary, in the case of any project not
subject to a housing code described in subpara-
graph (A);
(6) require the owner or purchaser of the
project to maintain affordability and use restrictions,
as the participating administrative entity determines
(in accordance with guidelines established by the Di-
rector) to be appropriate and consistent with any
rent levels established under subsection (h) and with
the long-term physical and financial viability char-
acter of the project as affordable housing; and
(7) require the owner or purchaser of the
project to meet such other requirements as the Di-
rector determines to be appropriate.
(f) TENANT AND COMMUNITY PARTICIPATION AND
CAPACITY BUILDING.—
(1) PROCEDURES.—
(A) IN GENERAL.—The Director shall es-
tablish procedures to provide an opportunity for
tenants of each eligible multifamily housing
project with an expiring contract and other af-
fected parties, including local government and
the community in which the project is located,
to comment on the restructuring process for the
project carried out under this subtitle.
(2) FUNDING.—
(A) IN GENERAL.—The Director may pro-
vide not more than $10,000,000 annually in
funding to tenant groups, nonprofit organiza-
tions, and public entities for building the capac-
ity of tenant organizations, for technical assist-
ance in furthering any of the purposes of this
subtitle (including transfer of developments to
new owners) and for tenant services, from those
amounts made available under appropriations
Acts for implementing this subtitle.
(B) ALLOCATION.—The Director may allo-
cate any funds made available under subpara-
graph (A) through existing technical assistance
programs pursuant to any other Federal law,
including the Low-Income Housing Preserva-
tion and Resident Homeownership Act of 1990
and the Multifamily Property Disposition Re-
form Act of 1994.
(C) PROHIBITION.—None of the funds
made available under subparagraph (A) may be
used directly or indirectly to pay for any per-
sonal service, advertisement, telegram, tele-
phone, letter, printed or written matter, or
other device, intended or designed to influence
in any manner a Member of Congress, to favor
or oppose, by vote or otherwise, any legislation
or appropriation by Congress, whether before or
after the introduction of any bill or resolution
proposing such legislation or appropriation.
(g) TENANT-BASED ASSISTANCE.—Except as pro-
vided in subsection (h), each mortgage restructuring and
rental assistance sufficiency plan for an eligible multifam-
ily housing project shall provide that tenant-based rental
assistance under section 8(o) of the United States Hous-
ing Act of 1937 shall be provided, subject to the availabil-
ity of amounts in appropriation Acts, to each assisted fam-
ily (other than a family already receiving tenant-based as-
sistance) residing in the project upon the expiration date
of the expiring contract for the project or the date that
the expiring contract is terminated pursuant to the plan,
whichever occurs earlier.
(h) PROJECT-BASED
ASSISTANCE
FOR
CERTAIN
PROJECTS.—
(1) PROJECTS
WITH
ELDERLY
OR
DISABLED
POPULATIONS, PROJECTS
IN
TIGHT
RENTAL
MAR-
KETS, AND COOPERATIVE PROJECTS.—
(A) IN GENERAL.—In the case of an eligi-
ble multifamily housing project described in
subparagraph (B), a mortgage restructuring
and rental assistance sufficiency plan for the
project shall provide for renewal or extension of
the expiring contract for the project at rent lev-
els established in accordance with paragraph
(3).
(B) PROJECTS COVERED.—An eligible mul-
tifamily housing project described in this sub-
paragraph is such a project—
(i) in which 90 percent or more of the
dwelling units are occupied by elderly fami-
lies or disabled families (as such terms are
defined in section 3(b) of the United
States Housing Act of 1937);
(ii) that is located in an area which
the Director has determined, based on
housing market indicators (such as excep-
tionally low vacancy rates or exceptionally
high absorption rates), has a shortage of
units suitable for families receiving tenant-
based assistance; or
(iii) that is a property held by a non-
profit cooperative ownership housing cor-
poration or nonprofit cooperative owner-
ship housing trust, the permanent occu-
pancy of the dwelling units of which is re-
stricted to members of such corporation or
to beneficiaries of such trust, and which
members or beneficiaries are restricted to
families eligible for rental assistance under
section 8 of the United States Housing Act
of 1937.
(2) PROJECT-BASED
ASSISTANCE
FOR
POR-
TIONS OF CERTAIN PROJECTS.—
(A) IN GENERAL.—In the case of an eligi-
ble multifamily housing project described in
subparagraph (B), a mortgage restructuring
and rental assistance sufficiency plan for the
project may provide for renewal or extension of
the expiring contract for the project, at rent
levels established in accordance with paragraph
(3), to cover only a portion of the dwelling units
in the project together with the provision of
tenant-based assistance under subsection (g) for
the remainder of families eligible under such
subsection for such assistance. Project-based
and tenant-based assistance pursuant to this
paragraph shall be in accordance with guide-
lines established by the Director and may be
provided only if the mortgage restructuring and
rental assistance sufficiency plan for the project
includes a transition plan (developed by the ap-
propriate participating administrative entity
and approved by the Director) providing for a
transition from project-based to tenant-based
assistance.
(B) PROJECTS COVERED.—An eligible mul-
tifamily housing project is a project described
in this subparagraph only if the appropriate
participating administrative entity has deter-
mined, and the Director has found such deter-
mination to be reasonable, that the project com-
plies with at least one of the following require-
ments:
(i) The project can be made finan-
cially viable only by phasing in tenant-
based assistance over a period not exceed-
ing 5 years in duration and continuing
project-based assistance for portions of the
project not covered by tenant-based assist-
ance during such period.
(ii) The project has, in the determina-
tion of the Director, a significant number
of the residents who are elderly families or
disabled families (as such terms are de-
fined in section 3(b) of the United States
Housing Act of 1937) and requires project-
based assistance for a period of a duration
not exceeding 5 years to prevent excessive
displacement of the elderly families.
(3) RENT LEVELS.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), the rent levels established in
accordance with this paragraph for an eligible
multifamily housing project are adjusted rent
levels that—
(i) are equivalent to rents derived
from comparable properties, if—
(I) the participating administra-
tive entity makes the rent determina-
tion after the owner submits a mort-
gage restructuring and rental assist-
ance sufficiency plan to the entity;
and
(II) the market rent determina-
tion is based on not less than 2 com-
parable properties; or
(ii) if rents for comparable properties
cannot be determined, are equal to 90 per-
cent of the fair market rents for the rel-
evant market area, which, in the case of
projects located in non-metropolitan areas,
the participating administrative entity may
determine to be the same as the fair mar-
ket rents for the county in which the
project is located or for the nearest metro-
politan area, as appropriate for purposes
of maintaining the financial viability of the
project.
(B) EXCEPTIONS.—
(i) IN GENERAL.—The rent levels es-
tablished in accordance with this para-
graph may be at levels that exceed the ap-
plicable levels determined under subpara-
graph (A), but shall in no event exceed
120 percent of the applicable fair market
rent (which, in the case of projects located
in non-metropolitan areas, the participat-
ing administrative entity may determine to
be the same as the fair market rents for
the county in which the project is located
or for the nearest metropolitan area, as ap-
propriate for purposes of maintaining the
financial viability of the project), if the
participating administrative entity—
(I) determines that the housing
needs of the tenants and the commu-
nity cannot be adequately addressed
through implementation of the rent
limitation required to be established
through a mortgage restructuring and
rental 
assistance 
sufficiency 
plan
under subparagraph (A); and
(II) establishes the rents in ac-
cordance with the procedures under
subparagraph (C).
(ii) 
GEOGRAPHIC
LIMITATION.—In
any fiscal year, a participating administra-
tive entity may approve exception rents on
not more than 10 percent of all dwelling
units that are covered in that fiscal year by
expiring contracts and restructured by the
entity under the entity’s portfolio restruc-
turing agreement under section 111 with
the Director. The Director may waive the
percentage limitation in the preceding sen-
tence for a specific geographical area or
for specific types of properties (including
properties serving populations with special
needs) upon a finding of special need for
exception rents in such area or for such
properties.
(C) BUDGET-BASED RENT LEVEL PROCE-
DURES FOR EXCEPTION PROJECTS.—Rent levels
that are determined in accordance with the pro-
cedures under this paragraph shall be estab-
lished based on the actual and projected costs
of operating the project, at a level that provides
income sufficient to support a budget-based
rent that consists of—
(i) the debt service of the project;
(ii) the operating expenses of the
project, as determined by the participating
administrative entity, including contribu-
tions to adequate reserves, the costs of
maintenance, and other eligible costs per-
mitted under section 8 of the United
States Housing Act of 1937;
(iii) such annual rent adjustments as
may be made necessary by future reason-
able increases in operating costs, which
shall be available only upon a showing by
the owner of the project of such increased
costs, in accordance with the operating
cost adjustment factor established by the
Secretary for purposes of the program
under the Low-Income Housing Preserva-
tion and Resident Homeownership Act of
1990;
(iv) an adequate allowance for poten-
tial operating losses due to vacancies and
failure to collect rents, as determined by
the 
participating 
administrative 
entity
under guidelines established by the Direc-
tor;
(v) an allowance for a reasonable rate
of return to the owner or purchaser of the
project in accordance with guidelines gov-
erning such rates, which shall be estab-
lished by the Director and may provide in-
centives for owners or purchasers to meet
benchmarks of quality for management
and housing quality; and
(vi) other expenses determined by the
participating administrative entity to be
necessary for the operation of the project.
SEC. 113. SECTION 8 RENEWALS AND AFFORDABILITY COM-
MITMENTS BY OWNERS OF PROJECTS.
(a) SECTION
8 RENEWALS
OF
RESTRUCTURED
PROJECTS.—Subject to the availability of amounts pro-
vided in advance in appropriations Acts, the Director shall
enter into contracts with participating administrative enti-
ties pursuant to which the participating administrative en-
tity shall offer to renew or extend an expiring contract
covering units in an eligible multifamily housing project
for which a mortgage restructuring and rental assistance
sufficiency plan has been approved under section 112, and
the owner of the project shall accept the offer, provided
the initial renewal is in accordance with the terms and
conditions specified in such plan for the project.
(b) LONG-TERM AFFORDABILITY COMMITMENT.—
After the initial renewal of an expiring contract pursuant
to this section, the owner shall accept each offer made to
renew the contract, for the remaining term of the existing
mortgage and, if applicable, the remaining term of an ex-
isting second mortgage, if the offer to renew is on terms
and conditions specified in the mortgage restructuring and
rental assistance sufficiency plan.
(c) NONDISCRIMINATION
AGAINST
CERTIFICATE
HOLDERS.—
(1) IN GENERAL.—Subject to paragraph (2), in
the case of any eligible multifamily housing project
for which a mortgage restructuring and rental as-
sistance sufficiency plan has been approved that pro-
vides for all project-based assistance for the project
to be converted to tenant-based assistance pursuant
to subsection (g) or (h)(2) of section 112, the owner
may not refuse to lease a reasonable number of units
to holders of certificates or vouchers under section
8 of the United States Housing Act of 1937 because
of the status of the prospective tenants as certificate
or voucher holders.
(2) APPLICABILITY.—The participating admin-
istrative entity shall establish reasonable time peri-
ods for applying the requirement under paragraph
(1), in accordance with guidelines which shall be es-
tablished by the Director and take into consideration
the total amount of the assistance described in sec-
tion 103(3) received by the project and the relative
share of the assistance compared to the total cost of
financing, developing, rehabilitating, or otherwise as-
sisting the project.
SEC. 114. EXEMPTIONS FROM AND PROHIBITIONS ON RE-
STRUCTURING.
(a) EXEMPTIONS FROM RESTRUCTURING AND RE-
NEWAL AT EXISTING OR BUDGET-BASED RENTS.—
(1) EXEMPTION.—Subject to subsection (b),
with respect to a multifamily housing project de-
scribed in paragraph (2)—
(A) such a project shall not be subject to
a mortgage restructuring and rental assistance
sufficiency plan under this subtitle;
(B) the Director shall, subject to the avail-
ability of amounts provided in advance in ap-
propriation Acts, renew the expiring contract
for the project—
(i) except as provided in clause (ii),
with rent levels at the lower of—
(I) existing rents, subject to such
annual rent adjustments as may be
made necessary by future reasonable
increases in operating costs, which
shall be available upon a showing by
the owner of the project of such in-
creased costs, in accordance with the
operating cost adjustment factor es-
tablished by the Secretary for pur-
poses of the program under the Low-
Income Housing Preservation and
Resident Homeownership Act of 1990;
or
(II) the budget-based rent levels
determined in accordance with the
procedures 
under 
section
112(h)(3)(C); or
(ii) in the case of a project covered by
paragraph (2)(A)(iii), the budget-based
rent levels determined in accordance with
the procedures under section 112(h)(3)(C);
and
(C) for each fiscal year through fiscal year
2003, the Director shall use 25 percent of any
amounts in residual receipt accounts for the
project in such fiscal year toward funding the
cost for such fiscal year of the contract renewed
under subparagraph (B).
(2) EXEMPT PROJECTS.—A multifamily housing
project described in this paragraph is a project that
is covered, in whole or in part, by an expiring con-
tract for project-based assistance under section 8 of
the United States Housing Act of 1937 and that
meets the requirements under one of the following
subparagraphs:
(A) ELIGIBLE
MULTIFAMILY
HOUSING
PROJECTS.—The project is an eligible multi-
family housing project and—
(i) was provided primary financing or
mortgage insurance by a State government
or a unit of general local government (or
an agency or instrumentality of a State
government or unit of general local govern-
ment);
(ii) the participating administrative
entity determines, under guidelines estab-
lished by the Director, that significant sav-
ings to the Federal Government in section
8 assistance amounts would not result
from restructuring the mortgage or rental
assistance for the project under this sub-
title; or
(iii) in the determination of the Direc-
tor, restructuring of the mortgage or rent-
al assistance for the project under this
subtitle would not ensure the continued fi-
nancial viability of the project and—
(I) the project is limited to occu-
pancy by elderly families or disabled
families (as such terms are defined in
section 3(b) of the United States
Housing Act of 1937), or both, or is
located in a rural area (as such term
is defined in section 520 of the Hous-
ing Act of 1949); or
(II) the Director determines that
there is not available in area in which
the project is located an adequate
supply of habitable, affordable hous-
ing for very low-income families and
other low-income families using ten-
ant-based assistance.
(B) NONELIGIBLE MULTIFAMILY HOUSING
PROJECTS.—The project does not qualify as an
eligible multifamily housing project pursuant to
section 103.
(b) 
PROHIBITION
ON
RESTRUCTURING
FOR
PROJECTS WITH OWNERS COMMITTING VIOLATIONS AND
PROJECTS IN POOR CONDITION.—
(1) IN GENERAL.—The Director shall not con-
sider any mortgage restructuring and rental assist-
ance sufficiency plan or request for contract renewal
for an eligible multifamily housing project and shall
not take actions under subsection (a) for the project
if the participating administrative entity determines
that—
(A) the owner or purchaser of the project
has engaged in material adverse financial or
managerial actions or omissions with regard to
the project (or with regard to other similar
projects if the Director determines that such
actions or omissions constitute a pattern of mis-
management that would warrant suspension or
debarment by the Secretary), including—
(i) materially violating any Federal,
State, or local law or regulation with re-
gard to the project or any other federally
assisted project, after receipt of notice and
an opportunity to cure;
(ii) 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;
(iii) materially violating any applicable
regulatory or other agreement with the
Secretary, the Director, or a participating
administrative entity, after receipt of no-
tice and an opportunity to cure;
(iv) repeatedly and materially violat-
ing any Federal, State, or local law or reg-
ulation with regard to the project or any
other federally assisted project;
(v) repeatedly and materially breach-
ing a contract for assistance under section
8 of the United States Housing Act of
1937;
(vi) repeatedly and materially violat-
ing any applicable regulatory or other
agreement with the Secretary, the Direc-
tor, or a participating administrative en-
tity;
(vii) repeatedly failing to make mort-
gage payments at times when project in-
come was sufficient to maintain and oper-
ate the property;
(viii) materially failing to maintain
the property according to housing quality
standards after receipt of notice and a rea-
sonable opportunity to cure; or
(ix) committing any actions or omis-
sions that would warrant suspension or de-
barment by the Secretary;
(B) 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
(C) the poor condition of the project can-
not be remedied in a cost effective manner, as
determined by the participating administrative
entity.
(2) OPPORTUNITY TO DISPUTE FINDINGS.—
(A) IN GENERAL.—During the 30-day pe-
riod beginning on the date on which the owner
or purchaser of an eligible multifamily housing
project receives notice of a rejection under
paragraph (1) of a mortgage restructuring and
rental assistance sufficiency plan under section
112, the Director or participating administra-
tive entity shall provide that owner or purchaser
with an opportunity to dispute the basis for the
rejection and an opportunity to cure.
(B) AFFIRMATION, MODIFICATION, OR RE-
VERSAL.—
(i) IN GENERAL.—After providing an
opportunity to dispute under subparagraph
(A), the Director or the participating ad-
ministrative entity may affirm, modify, or
reverse any rejection under paragraph (1)
or rejection of a mortgage restructuring
and rental assistance sufficiency plan
under section 112.
(ii) REASONS
FOR
DECISION.—The
Director or the participating administra-
tive entity, as applicable, shall identify the
reasons for any final decision under this
subparagraph.
(iii) REVIEW PROCESS.—The Director
shall establish an administrative review
process to appeal any final decision under
this subparagraph.
(3) FINAL DETERMINATION.—Any final deter-
mination under this subsection shall not be subject
to judicial review.
(4) DISPLACED
TENANTS.—Subject to the
availability of amounts provided in advance in appro-
priations Acts, any low-income tenant that, at the
time of rejection of contract renewal or mortgage re-
structuring under this subsection, is residing in unit
in a project that is assisted under the expiring con-
tract for the project shall be provided with tenant-
based assistance and reasonable moving expenses, as
determined by the Director.
(5) TRANSFER OF PROPERTY.—
(A) FACILITATION.—The Director shall es-
tablish procedures to facilitate the voluntary
sale or transfer, as part of a mortgage restruc-
turing and rental assistance sufficiency plan, of
eligible multifamily housing projects disqualified
from the consideration of a mortgage restruc-
turing and rental assistance sufficiency plan
under this section because of any action by an
owner or purchaser described in subparagraph
(A) or (B) of paragraph (1).
(B) PREFERENCE.—Such procedures shall
give preference to sale or transfer to tenant or-
ganizations and tenant-endorsed community-
based nonprofit and public agency purchasers
meeting such reasonable qualifications as may
be established by the Director.
(C) 
APPROVAL
OF
RESTRUCTURING
PLAN.—Notwithstanding paragraph (1), in the
case of any project—
(i) that is described in subparagraph
(A),
(ii) that is covered, in whole or in
part, by an expiring contract, and
(iii) for which the mortgage restruc-
turing and rental assistance sufficiency
plan provides for—
(I) transfer of ownership of the
project to a new owner who does not,
as determined by the Director, have
any identity of interest with the owner
whose actions resulted in the disquali-
fication, and
(II) assignment of all rights, obli-
gations, and interests of the previous
owner under the expiring contract to
the new owner,
the Director shall consider, under the provisions
of this subtitle, the mortgage restructuring and
rental assistance sufficiency plan for the project
and shall, subject to the approval in advance of
amounts in appropriation Acts and in accord-
ance with the requirements under this subtitle,
provide rental assistance in connection with the
approval under this subtitle of the plan for the
project.
(c) TREATMENT OF RESIDUAL RECEIPTS FOR CER-
TAIN NON-RESTRUCTURED PROJECTS.—In the case of
any eligible multifamily housing project for which an ex-
piring contract is not renewed because—
(1) the project is subject to subsection (b)(1),
(2) ownership of project is transferred and a
mortgage restructuring and rental assistance suffi-
ciency plan for the project cannot be approved under
subsection (b)(5), or
(3) the owner will prepay the mortgage in full
pursuant to section 112(a)(6)(B),
the Director shall recapture 90 percent of any amounts
in residual receipt accounts for the project and such
amounts shall be available for rehabilitation grants under
section 236(s) of the National Housing Act.
SEC. 115. RESTRUCTURING TOOLS.
(a) RESTRUCTURING TOOLS.—An approved mort-
gage restructuring and rental assistance sufficiency plan
for an eligible multifamily housing project 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 Hous-
ing Act.
(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 ex-
isting insurance contract and not through a new in-
surance contract.
(3) MORTGAGE
INSURANCE.—Providing FHA
multifamily mortgage insurance, reinsurance, or
other credit enhancement alternatives, including
multifamily risk-sharing mortgage programs as pro-
vided under section 542 of the Housing and Commu-
nity Development Act of 1992, except that—
(A) insurance, reinsurance, and other cred-
it enhancement pursuant to this paragraph
shall be available for an eligible multifamily
housing project only to the extent that the
owner demonstrates that the owner is unable to
secure reasonably comparable insurance, rein-
surance, or credit enhancement from other
sources;
(B) any limitations on the number of units
available for mortgage insurance under section
542 shall not apply to eligible multifamily hous-
ing projects; and
(C) any credit subsidy costs of providing
mortgage insurance shall be paid from the Gen-
eral Insurance Fund and the Special Risk In-
surance Fund.
(4) CREDIT
ENHANCEMENT.—Providing any
additional State or local mortgage credit enhance-
ments and risk-sharing arrangements established
with State or local housing finance agencies, the
Federal Housing Finance Board, the Federal Na-
tional Mortgage Association, and the Federal Home
Loan Mortgage Corporation, to a modified first
mortgage.
(5) COMPENSATION OF THIRD PARTIES.—En-
tering into agreements, incurring costs, or making
payments, as may be reasonably necessary, to com-
pensate the participation of participating adminis-
trative entities and other parties in undertaking ac-
tions authorized by this subtitle. Upon request, par-
ticipating administrative entities shall be considered
to be 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 suffi-
ciency plan. Subject to the availability of amounts
provided in advance in appropriations Acts for ad-
ministrative fees under section 8 of the United
States Housing Act of 1937, such fees shall be used
to compensate participating administrative entities
for compliance monitoring costs incurred under sec-
tion 117.
(6) USE
OF
PROJECT
ACCOUNTS.—Applying
any residual receipts, replacement reserves, and
amounts in any other project accounts not required
for project operations to maintain the long-term af-
fordability and physical condition of the project or of
other eligible multifamily housing projects. The par-
ticipating administrative entity may expedite the ac-
quisition of residual receipt, replacement reserves,
and other such amounts by entering into agreements
with owners of housing covered by an expiring con-
tract to provide an owner with a share of the re-
ceipts, not to exceed 10 percent.
(7) REHABILITATION NEEDS.—Assisting in ad-
dressing the rehabilitation needs of the project, sub-
ject to the following provisions:
(A) SOURCES OF ASSISTANCE.—Rehabilita-
tion assistance under this paragraph may be
paid from the provision of grants from residual
receipts, replacement reserves, and amounts in
any other project accounts not required for
project operations or, to the extent provided in
appropriations Acts, from budget authority pro-
vided for increases in amounts for assistance
contracts under section 8 of the United States
Housing Act of 1937, from the rehabilitation
grant program established under section 236(s)
of the National Housing Act, or through the
debt restructuring transaction.
(B) MATCHING REQUIREMENT.—
(i) Rehabilitation assistance under
this paragraph may be provided for a
project only if the owner of the project
contributes an amount equal to not less
than 25 percent of the amount of rehabili-
tation assistance received under this para-
graph from the sources described in sub-
paragraph (A) (excluding replacement re-
serves), except that such contribution re-
quirement not apply to any project owned
by a nonprofit cooperative ownership hous-
ing corporation or trust.
(ii) In the case of a project owned by
a nonprofit organization, the amount re-
quired to be contributed under clause (i)
by the owner may include—
(I) the value of any donated ma-
terial or building;
(II) the proceeds from bond fi-
nancing validly issued by a State or
unit of general local government,
agency, or instrumentality thereof,
and repayable with revenues derived
from projects assisted pursuant to
this title, except that not more than
25 percent of the amounts required to
be contributed under clause (i) may
result from this subclause; and
(III) the cost or value of any do-
nated goods or services (including
supportive service provided, but not
including the value of any time or
services contributed by volunteers).
(C) ELIGIBLE USE.—Rehabilitation assist-
ance under this paragraph shall be used only
for restoring the project to a nonluxury stand-
ard adequate for the rental market intended
upon the original approval of the project-based
assistance for the project.
(8) RESTRUCTURING OF MORTGAGE INTO FIRST
AND
SECOND
MORTGAGES.—Restructuring mort-
gages to provide for the following mortgages:
(A) FIRST MORTGAGE.—A structured first
mortgage having payments that can be covered
by project income with project rents at market
rate levels or the levels established in section
112(h), as applicable, which shall bear interest
at a rate not less than the applicable Federal
rate in effect on the date that the first mort-
gage being restructured was originated.
(B) SECOND MORTGAGE.—A second mort-
gage in an amount equal to the difference be-
tween the restructured first mortgage and the
mortgage balance of the eligible multifamily
housing project at the time of restructuring.
The second mortgage shall be subject to the fol-
lowing requirements:
(i) The second mortgage shall bear in-
terest at a rate not to exceed 1 percent an-
nually.
(ii) Subject to clause (vii)(II), the sec-
ond mortgage shall have a term that ex-
pires upon the termination of the first
mortgage on the project.
(iii) During the period in which the
first mortgage remains outstanding, pay-
ments of principal or interest on the sec-
ond mortgage shall be required only if
project income exceeds the amount nec-
essary for all reasonable and necessary op-
erating expenses (including deposits in a
reserve for replacement), debt service on
the first mortgage, a reasonable return on
equity investment to the owner (as deter-
mined pursuant to guidelines established
by the Director), and such other expendi-
tures as may be approved by the Director.
(iv) The Director may authorize dis-
tribution to the owner of up to 25 percent
of the excess project income described in
clause (iii) to the project owner if the Di-
rector determines that the project owner
meets benchmarks of quality for manage-
ment and housing quality.
(v) The second mortgage shall initially
be held by the Secretary as an obligation
of the General Insurance Fund or the Spe-
cial Risk Insurance Fund, as appropriate,
but shall be assumable by any subsequent
purchaser of any multifamily housing
project, pursuant to guidelines established
by the Director.
(vi) The Director may, under guide-
lines established by the Director, modify
the terms or forgive all or part of the sec-
ond mortgage upon acquisition by a tenant
organization or tenant-endorsed commu-
nity-based nonprofit or public agency.
(vii) The principal and accrued inter-
est due under the second mortgage shall be
subject to the following conditions:
(I) Such principal and interest
shall be immediately due and payable
upon full payment of the first mort-
gage, unless the mortgage is assumed
pursuant to clause (v) or the Director
provides for payment of the second
mortgage under subclause (II) of this
clause.
(II) The Director may permit the
owner of the project to begin repay-
ment of the second mortgage upon
full payment of the first mortgage, in
equal monthly installments of an
amount equal to the monthly principal
and interest payments formerly paid
under the first mortgage. If the Direc-
tor permits the owner to repay the
mortgage as provided in this sub-
clause, the second mortgage shall be-
come the senior mortgage on the
project upon full payment of the first
mortgage.
(III) Such principal and interest
shall be immediately due and payable
upon a finding by the Director that
an owner has failed to materially com-
ply with this subtitle or any require-
ments of the United States Housing
Act of 1937, as those requirements
apply to the applicable project, after
receipt of notice of such failure and a
reasonable opportunity to cure such
failure.
(viii) Any credit subsidy costs of pro-
viding a second mortgage shall be paid
from the General Insurance Fund or the
Special Risk Insurance Fund, as appro-
priate.
(9) SIMPLE RESTRUCTURING OF MORTGAGES.—
Restructuring mortgages in the manner such that—
(A) the principal amount outstanding
under the mortgage is not reduced;
(B) the term of the mortgage is not ex-
tended or is extended to a date that is—
(i) on or before the date occurring 30
years after the date of the expiration of
the original term of existing first mort-
gage; and
(ii) determined by the participating
administrative entity to be consistent with
the purposes of this Act; and
(C) the Director may authorize distribution
to the owner of up to 25 percent of any project
income that exceeds the amount described in
paragraph (8)(B)(iii) to the project owner if the
Director determines that the project owner
meets benchmarks of quality for management
and housing quality.
(b) 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) in the matter preceding paragraph (1), 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 Multi-
family Housing Restructuring and Affordability Act
of 1997.
‘‘(b) AFFORDABLE HOUSING GOALS.—Actions taken
under subsection (a)(5) shall constitute part of the con-
tribution of each entity in meeting their affordable hous-
ing goals under sections 1332, 1333, and 1334 for any
fiscal year, as determined by the Secretary.’’.
(c) PROHIBITION ON EQUITY SHARING BY DIRECTOR
AND PARTICIPATING ADMINISTRATIVE ENTITIES.—The
Director and any participating administrative entities may
not participate in any equity agreement or profit-sharing
agreement in conjunction with any eligible multifamily
housing project.
SEC. 116. MANAGEMENT STANDARDS.
Pursuant to guidelines established by the Director
and consistent with industry standards, each participating
administrative entity shall establish and implement man-
agement standards applicable to eligible multifamily hous-
ing projects that are subject to mortgage restructuring
and rental assistance sufficiency plans administered by
such entity, including requirements governing conflicts of
interest between owners, managers, contractors with an
identity of interest.
SEC. 117. MONITORING OF COMPLIANCE.
(a) COMPLIANCE AGREEMENTS.—Pursuant to regu-
lations issued by the Director after public notice and com-
ment, each participating administrative entity, through
binding contractual agreements with owners and other-
wise, shall ensure long-term compliance with the provi-
sions of this subtitle. Each agreement shall, at a mini-
mum, provide for—
(1) enforcement of the provisions of this sub-
title; and
(2) remedies for the breach of those provisions.
(b) PERIODIC MONITORING.—
(1) IN GENERAL.—Not less than annually, each
participating administrative entity shall review the
status of all multifamily housing projects for which
a mortgage restructuring and rental assistance suffi-
ciency plan has been implemented that is adminis-
tered by such entity.
(2) INSPECTIONS.—Each review under this sub-
section shall include on site inspection to determine
compliance with housing codes and other require-
ments as provided in this subtitle and the portfolio
restructuring agreements under section 101.
(c) AUDIT—The Comptroller General of the United
States, the Director, and the Inspector General of the De-
partment of Housing and Urban Development may con-
duct an audit at any time of any multifamily housing
project for which a mortgage restructuring and rental as-
sistance sufficiency plan has been implemented.
SEC. 118. REVIEW.
To ensure compliance with this subtitle, during the
5-year period beginning on the date of the enactment of
this Act the Director shall conduct an annual review and
report annually to Congress on actions taken under this
subtitle and the status of eligible multifamily housing
projects.
SEC. 119. GAO AUDIT AND REVIEW.
(a) INITIAL AUDIT.—Not later than 18 months after
the effective date of interim or final regulations promul-
gated under this subtitle, the Comptroller General of the
United States shall conduct an audit to evaluate a rep-
resentative sample of all eligible multifamily housing
projects and the implementation of all mortgage restruc-
turing and rental assistance sufficiency plans.
(b) REPORT.—
(1) IN GENERAL.—Not later than 18 months
after the completion of the audit conducted under
subsection (a), the Comptroller General of the Unit-
ed States shall submit to Congress a report on the
status of all eligible multifamily housing projects
and the implementation of all mortgage restructur-
ing and rental assistance sufficiency plans.
(2) CONTENTS.—The report submitted under
paragraph (1) shall include—
(A) a description of the initial audit con-
ducted under subsection (a); and
(B) recommendations for any legislative
action to increase the financial savings to the
Federal Government of the restructuring of eli-
gible multifamily housing projects balanced with
the continued availability of the maximum num-
ber of affordable low-income housing units.
SEC. 120. TREATMENT OF FHA MULTIFAMILY RESTRUCTUR-
ING DEMONSTRATIONS.
(a) TERMINATION OF 1997 DEMONSTRATION.—Sec-
tion 212 of the Departments of Veterans Affairs and
Housing and Urban Development, and Independent Agen-
cies Appropriations Act, 1997 (42 U.S.C. 1437f note) is
amended by striking subsection (k) and inserting the fol-
lowing new subsection:
‘‘(k) TERMINATION.—The demonstration program
under this section shall terminate upon publication in the
Federal Register of a finding by the Director of the Office
of Multifamily Housing Assistance Restructuring of the
Department of Housing and Urban Development that the
program under the Multifamily Housing Restructuring
and Affordability Act of 1997 has been implemented.’’.
(b) CONTINUATION OF FUNDING.—Section 212 of
the Departments of Veterans Affairs and Housing and
Urban Development, and Independent Agencies Appro-
priations Act, 1997 (42 U.S.C. 1437f note) is amended—
(1) 
in 
subsection 
(a)(1)(B), 
by 
striking
‘‘through the end of fiscal year 1997’’ and inserting
‘‘until the termination of the demonstration program
under this section pursuant to subsection (k)’’; and
(2) in subsection (l)—
(A) 
by 
inserting 
‘‘(1)’’ 
before
‘‘$10,000,000’’ and
(B) by striking ‘‘September 30, 1998.’’
and inserting the following: ‘‘the termination of
the demonstration program pursuant to sub-
section (k); and (2) only to the extent that the
other amounts referred to in this subsection
have been used, amounts in the General Insur-
ance Fund (established under section 519 of
the National Housing Act) and the Special Risk
Insurance Fund (established under section
238(b) of such Act) shall be available, until the
termination of the demonstration program pur-
suant to subsection (k), to cover such costs with
respect to multifamily projects subject to mort-
gages that are obligations of such Funds.’’.
(c) SAVINGS PROVISION.—Nothing in this section
shall be construed to affect any contract or commitment,
or the authority of the Secretary to carry out any contract
or commitment, entered into—
(1) under section 212 of the Departments of
Veterans Affairs and Housing and Urban Develop-
ment, and Independent Agencies Appropriations Act,
1997, before the termination of the demonstration
program under such section pursuant to subsection
(k) of such section; or
(2) under section 210 of the Departments of
Veterans Affairs and Housing and Urban Develop-
ment, and Independent Agencies Appropriations Act,
1996, before the date of the enactment of the Act
referred to in paragraph (1).