I
104TH CONGRESS
1ST SESSION
H. R. 66
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 rural rental housing for low- and mod-
erate-income families in rural areas.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 4, 1995
Mr. BEREUTER introduced the following bill; which was referred to the
Committee on Banking and Financial Services
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 rural 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 (42 U.S.C. 1471
et seq.) is amended by inserting after section 537 the fol-
lowing new section:
‘‘SEC. 538. 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 the total of the amount of the un-
paid principal and interest of the loan for which the guar-
antee 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 portion 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
housing is acquired by foreclosure (or instrument in
lieu of foreclosure) or the Secretary waives the appli-
cability of such requirement for the loan only after
determining, based on objective information, that—
‘‘(A) there is no longer a need for low- and
moderate-income housing in the market area in
which the housing is located;
‘‘(B) housing opportunities for low-income
households and minorities will not be reduced
as a result of the waiver; and
‘‘(C) additional Federal assistance will not
be necessary as a result of the waiver; and
‘‘(4) is located in a rural area.
‘‘(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 and the Federal Home Loan
Mortgage Corporation, to make loans for multi-
family housing that are to be sold to such cor-
porations; or
‘‘(C) 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
lender.
‘‘(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
exceed—
‘‘(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;
‘‘(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; and
‘‘(5) for at least 20 percent of the loans made
under this section, the Secretary shall provide the
borrower with assistance in the form of credits pur-
suant to section 521(a)(1)(B) to the extent nec-
essary to reduce the rate of interest under para-
graph (2) to the applicable Federal rate, as such
term is used in section 42(i)(2)(D) of the Internal
Revenue Code of 1986.
‘‘(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)
(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
has violated the requirements and procedures for
guaranteed loans under this section or for other
good cause. Any such cancellation shall be made by
giving notice to the eligible lender and shall take ef-
fect upon receipt of the notice by the mortgagee or
at a later date, as the Secretary may provide. A de-
cision by the Secretary to cancel a delegation shall
be final and conclusive and shall not be subject to
judicial review.
‘‘(k) REFINANCING.—Any loan guaranteed under this
section may be refinanced and extended in accordance
with terms and conditions that the Secretary shall pre-
scribe, but in no event for an additional amount or term
that exceeds the limitations under subsection (f).
‘‘(l) NONASSUMPTION.—The borrower under a loan
that is guaranteed under this section and under which any
portion of the principal obligation or interest remains out-
standing may not be relieved of liability with respect to
the loan, notwithstanding the transfer of property for
which the loan was made.
‘‘(m) GEOGRAPHICAL TARGETING.—
‘‘(1) STUDY.—The Secretary shall provide for
an independent entity to conduct a study to deter-
mine the extent to which borrowers in the United
States will utilize loan guarantees under this section,
the rural areas in the United States in which bor-
rowers can best utilize and most need loans guaran-
teed under this section, and the rural areas in the
United States in which housing of the type eligible
for a loan guarantee under this section is most need-
ed by low- and moderate-income families. The Sec-
retary shall require the independent entity conduct-
ing the study to submit a report to the Secretary
and to the Congress describing the results of the
study not later than the expiration of the 90-day pe-
riod beginning on the date of the enactment of the
Rural Multifamily Rental Housing Loan Guarantee
Demonstration Act.
‘‘(2) TARGETING.—In providing loan guaran-
tees under this section, the Secretary shall establish
standards to target and give priority to rural areas
in which borrowers can best utilize and most need
loans guaranteed under this section, as determined
by the Secretary based on the results of the study
under paragraph (1) and any other information the
Secretary considers appropriate.
‘‘(n) 
INAPPLICABILITY
OF
CREDIT-ELSEWHERE
TEST.—Section 501(c) shall not apply to guarantees, or
loans guaranteed, under this section.
‘‘(o) TENANT PROTECTIONS.—The Secretary shall
establish standards for the treatment of tenants of hous-
ing developed using amounts from a loan guaranteed
under this section, which shall incorporate, to the extent
applicable, existing standards applicable to tenants of
housing developed with loans made under section 515.
Such standards shall include standards for fair housing
and equal opportunity, lease and grievance procedures,
and tenant appeals of adverse actions.
‘‘(p) HOUSING STANDARDS.—The standards estab-
lished under section 515(m) for housing and related facili-
ties assisted under section 515 shall apply to housing and
related facilities the development costs of which are fi-
nanced in whole or in part with a loan guaranteed under
this section.
‘‘(q) LIMITATION ON COMMITMENTS TO GUARANTEE
LOANS.—
‘‘(1) REQUIREMENT OF APPROPRIATIONS.—The
authority of the Secretary to enter into commit-
ments to guarantee loans under this section, and to
guarantee loans, shall be effective for any fiscal year
only to the extent or in such amounts as are or have
been provided in appropriations Acts for such fiscal
year.
‘‘(2) LIMITATION
ON
PROJECTS
AND
OUT-
STANDING
AGGREGATE
PRINCIPAL
AMOUNT.—Sub-
ject to the limitation in paragraph (1), the Secretary
may enter into commitments to guarantee loans
under this section for not more than 25 housing
projects in each of fiscal years 1995 and 1996, hav-
ing an aggregate outstanding principal amount not
exceeding $50,000,000 in each of such fiscal years.
‘‘(r) REPORT.—
‘‘(1) IN GENERAL.—The Secretary shall submit
a report to the Congress, not later than the expira-
tion of the 2-year period beginning on the date of
the enactment of the Rural Multifamily Rental
Housing Loan Guarantee Demonstration Act, de-
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.
‘‘(s) 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).
‘‘(t) 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.
‘‘(u) TERMINATION DATE.—A loan may not be guar-
anteed under this section after September 30, 1996.’’.
Æ