I
104TH CONGRESS
1ST SESSION
H. R. 1691
To provide for innovative approaches for homeownership opportunity and
provide for the temporary extension of the rural rental housing program,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 24, 1995
Mr. LAZIO of New York introduced the following bill; which was referred to
the Committee on Banking and Financial Services
A BILL
To provide for innovative approaches for homeownership op-
portunity and provide for the temporary extension of
the rural rental housing program, and for other pur-
poses.
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 ‘‘Homesteading and
Neighborhood Restoration Act of 1995’’.
SEC. 2. ASSISTANCE FOR HABITAT FOR HUMANITY AND
OTHER SELF-HELP HOUSING PROVIDERS.
(a) GRANT AUTHORITY.—The Secretary of Housing
and Urban Development shall, to the extent amounts are
available to carry out this section and the requirements
of this section are met, make grants for use in accordance
with this section to—
(1) Habitat for Humanity International, whose
organizational headquarters are located in Americus,
Georgia; and
(2) other national or regional organizations or
consortia that have experience in providing or facili-
tating self-help housing homeownership opportuni-
ties.
(b) GOALS
AND
ACCOUNTABILITY.—In making
grants under this section, the Secretary shall take such
actions as may be necessary to ensure that—
(1) assistance provided under this section is
used to facilitate and encourage innovative home-
ownership opportunities through the provision of
self-help housing, under which the homeowner con-
tributes a significant amount of sweat equity toward
the construction of the new dwelling;
(2) assistance provided under this section for
land acquisition and infrastructure development re-
sults in the development of not less than 5000 new
dwellings;
(3) the dwellings constructed in connection with
assistance provided under this section are quality
dwellings that comply with local building and safety
codes and standards and are available at prices
below the prevailing market prices;
(4) the provision of assistance under this sec-
tion establishes and fosters a partnership between
the Federal Government and Habitat for Humanity
International, its affiliates, and other organizations
and consortia, resulting in efficient development of
affordable housing with minimal Governmental inter-
vention, limited Governmental regulation, and sig-
nificant involvement by private entities;
(5) activities to develop housing assisted pursu-
ant to this section involve community participation
similar to the homeownership program carried out
by Habitat for Humanity International, in which
volunteers assist in the construction of dwellings;
and
(6) dwellings are developed in connection with
assistance under this section on a geographically di-
verse basis, which includes areas having high hous-
ing costs, rural areas, and areas underserved by
other homeownership opportunities that are popu-
lated by low-income families unable to otherwise af-
ford housing.
If, at any time, the Secretary determines that the goals
under this subsection cannot be met by providing assist-
ance in accordance with the terms of this section, the Sec-
retary shall immediately notify the applicable Committees
in writing of such determination and any proposed
changes for such goals or this section.
(c) ALLOCATION.—Of any amounts available for
grants under this section—
(1) 50 percent shall be used for a grant to the
organization specified in subsection (a)(1); and
(2) 50 percent shall be used for grants to orga-
nizations and consortia under subsection (a)(2).
(d) USE.—
(1) PURPOSE.—Amounts from grants made
under this section shall be used only for eligible ex-
penses in connection with developing new decent,
safe, and sanitary nonluxury dwellings in the United
States for families and persons who otherwise would
be unable to afford to purchase a dwelling.
(2) ELIGIBLE
EXPENSES.—For purposes of
paragraph (1), the term ‘‘eligible expenses’’ means
costs only for the following activities:
(A) LAND
ACQUISITION.—Acquiring land
(including financing and closing costs).
(B) INFRASTRUCTURE
IMPROVEMENT.—
Installing, extending, constructing, rehabilitat-
ing, or otherwise improving utilities and other
infrastructure.
Such term does not include any costs for the reha-
bilitation, improvement, or construction of dwellings.
(e) ESTABLISHMENT OF GRANT FUND.—
(1) IN
GENERAL.—Any amounts from any
grant made under this section shall be deposited by
the grantee organization or consortium in a fund
that is established by such organization or consor-
tium for such amounts, administered by such organi-
zation or consortium, and available for use only for
the purposes under subsection (d). Any interest,
fees, or other earnings of the fund shall be deposited
in the fund and shall be considered grant amounts
for purposes of this section.
(2) ASSISTANCE TO HABITAT FOR HUMANITY
AFFILIATES.—Habitat for Humanity International
may use amounts in the fund established for such
organization pursuant to paragraph (1) the purposes
under subsection (d) by providing assistance from
the fund to local affiliates of such organization.
(f) REQUIREMENTS FOR ASSISTANCE TO OTHER OR-
GANIZATIONS.—The Secretary may make a grant to an
organization or consortium under subsection (a)(2) only
pursuant to—
(1) an expression of interest by such organiza-
tion or consortia to the Secretary for a grant for
such purposes;
(2) a determination by the Secretary that the
organization or consortia has the capability and has
obtained financial commitments (or has the capacity
to obtain financial commitments) necessary to—
(A) develop not less than 50 dwellings in
connection with the grant amounts; and
(B) otherwise comply with a grant agree-
ment under subsection (i); and
(3) a grant agreement entered into under sub-
section (i).
(g) TREATMENT OF UNUSED AMOUNTS.—Upon the
expiration of the 6-month period beginning upon the Sec-
retary first providing notice of the availability of amounts
for grants under subsection (a)(2), the Secretary shall de-
termine whether the amount remaining from the aggre-
gate amount reserved under subsection (c)(2) exceeds the
amount needed to provide funding in connection with any
expressions of interest under subsection (f)(1) made by
such date that are likely to result in grant agreements
under subsection (i). If the Secretary determines that such
excess amounts remain, the Secretary shall provide the ex-
cess amounts to Habitat for Humanity International by
making a grant to such organization in accordance with
this section.
(h) GEOGRAPHICAL
DIVERSITY.—In using grant
amounts provided under subsection (a)(1), Habitat for
Humanity International shall make reasonable efforts to
ensure that the amounts are used in a manner that results
in national geographic diversity among housing developed
using such amounts. In making grants under subsection
(a)(2), the Secretary shall make reasonable efforts to en-
sure that grants are provided and grant amounts are used
in a manner that results in national geographic diversity
among housing developed using grant amounts under this
section.
(i) GRANT AGREEMENT.—A grant under this section
shall be made only pursuant to a grant agreement entered
into by the Secretary and the organization or consortia
receiving the grant, which shall—
(1) require such organization or consortia to
use grant amounts only as provided in this section;
(2) provide for the organization or consortia to
develop a specific and reasonable number of dwell-
ings using the grant amounts, which number shall
be established taking into consideration costs and
economic conditions in the areas in which the dwell-
ings will be developed, but in no case shall be less
than 50;
(3) require the organization or consortia to use
the grant amounts in a manner that leverages other
sources of funding (other than grants under this sec-
tion), including private or public funds, in developing
the dwellings;
(4) require the organization or consortia to
comply with the other provisions of this section;
(5) in the case only of a grant under subsection
(a)(2), provide that if the organization or consortia
has not used any grant amounts within 24 months
after such amounts are first disbursed to the organi-
zation or consortia, the Secretary shall recapture
such unused amounts; and
(6) contain such other terms as the Secretary
may require to provide for compliance with sub-
section (b) and the requirements of this section.
(j) GRANT PAYMENTS.—
(1) 1-STEP DISBURSEMENT.—With respect to
any grant under subsection (a)(2) in an amount less
than $8,000,000, the Secretary shall make the total
amount of the grant available to the grantee organi-
zation or consortia upon entering into the grant
agreement under subsection (i) and providing notice
under paragraph (3).
(2) 2-STEP DISBURSEMENT.—With respect to
the grant under subsection (a)(1) and any grant
under subsection (a)(2) in an amount equal to or ex-
ceeding $8,000,000, the Secretary shall disburse the
grant amounts in 2 equal payments, as follows:
(A) INITIAL PAYMENT.—The first payment
shall be made available to the grantee organiza-
tion or consortia upon entering into the grant
agreement under subsection (i) and providing
notice under paragraph (3).
(B) FINAL
PAYMENT.—The second pay-
ment shall be made available to the organiza-
tion or consortia subject to the following re-
quirements:
(i) NOTICE.—The amounts may not
be made available until 30 days after the
Secretary certifies to the applicable Com-
mittees that the grant amounts provided
under subparagraph (A) to the organiza-
tion or consortia have been used in accord-
ance with this section to develop the new
dwellings required under the grant agree-
ment.
(ii) FULFILLMENT OF GRANT AGREE-
MENT.—If the Secretary determines that
the organization or consortia has not, with-
in 24 months after amounts are first made
available under subparagraph (A) to the
organization or consortia, substantially ful-
filled the obligations under the grant
agreement, including development of the
appropriate number of dwellings under the
agreement, the Secretary shall provide any
undisbursed amounts remaining from such
grant to Habitat for Humanity Inter-
national by making a grant to such organi-
zation in accordance with this section.
(3) NOTIFICATION TO CONGRESS.—Notification
under this paragraph is written notification to the
applicable Committees of a grant, the amount of the
grant, and the terms of the grant agreement.
(4) FAILURE TO REPORT.—If at any time the
Secretary fails to report to the applicable Commit-
tees as required in this subsection, the Secretary
may not subsequently make any grant under this
section and may not subsequently disburse any
amounts under any grant previously made.
(k) RECORDS AND AUDITS.—During the period be-
ginning upon the making of a grant under this section
and ending upon close-out of the grant under subsection
(l)—
(1) the grantee organization or consortia shall
keep such records and adopt such administrative
practices as the Secretary may require to ensure
compliance with the provisions of this section and
the grant agreement; and
(2) the Secretary and the Comptroller General
of the United States, and any of their duly author-
ized representatives shall have access for the purpose
of audit and examination to any books, documents,
papers, and records of the grantee organization or
consortia and its affiliates that are pertinent to the
grant made under this section.
(l) CLOSE-OUT.—
(1) IN GENERAL.—The Secretary shall close out
a grant made under this section upon determining
that the aggregate amount of any assistance pro-
vided from the fund established under subsection
(d)(1) by the grantee organization or consortium ex-
ceeds the amount of the grant. For purposes of this
paragraph, any interest, fees, and other earnings of
the fund shall be excluded from the amount of the
grant.
(2) EFFECT.—After such close-out, no grantee
organization or consortia, or its affiliates, may be re-
quired to comply with any provision of this section
or the grant agreement or to account to the Sec-
retary for use of grant amounts.
(m) ENVIRONMENTAL REVIEW.—A grant under this
section shall be considered to be funds for a special project
for purposes of section 305(c) of the Multifamily Housing
Property Disposition Reform Act of 1994.
(n) REPORT TO CONGRESS.—Not later than 90 days
after close-out of all grants under this section is com-
pleted, the Secretary shall submit a report to the applica-
ble Committees describing the grants made under this sec-
tion, the grantees, the housing developed in connection
with the grant amounts, and the purposes for which the
grant amounts were used.
(o) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) APPLICABLE COMMITTEES.—The term ‘‘ap-
plicable Committees’’ means the Committee on
Banking and Financial Services of the House of
Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate.
(2) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Housing and Urban Development.
(3) 
UNITED
STATES.—The 
term 
‘‘United
States’’ includes the States of the United States, the
District of Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana
Islands, Guam, the Virgin Islands, American Samoa,
and any other territory or possession of the United
States.
(p) FUNDING.—Of any amounts previously made
available for annual contributions for assisted housing,
$50,000,000 shall be used by the Secretary to carry out
this section. Any such amounts shall remain available for
such purposes until expended.
(q) REGULATIONS.—The Secretary shall issue any
final regulations necessary to carry out this section not
later than 30 days after the date of the enactment of this
Act. The regulations shall take effect upon issuance and
may not exceed, in length, 5 full pages in the Federal Reg-
ister.
SEC. 3. EXTENSION OF MULTIFAMILY RURAL HOUSING
LOAN PROGRAM.
(a) 
AUTHORITY
TO
MAKE
LOANS.—Section
515(b)(4) of the Housing Act of 1949 (42 U.S.C.
1485(b)(4)) is amended by striking ‘‘September 30, 1994’’
and inserting ‘‘September 30, 1995’’.
(b) SET-ASIDE
FOR NONPROFIT ENTITIES.—The
first sentence of section 515(w)(1) of the Housing Act of
1949 is amended by striking ‘‘fiscal years 1993 and 1994’’
and inserting ‘‘fiscal year 1995’’.
SEC. 4. REFORMS FOR MULTIFAMILY RURAL HOUSING
LOAN PROGRAM.
(a) LIMITATION ON PROJECT TRANSFERS.—Section
515 of the Housing Act of 1949 (42 U.S.C. 1485) is
amended by inserting after subsection (g) the following
new subsection:
‘‘(h) PROJECT TRANSFERS.—After the date of the
enactment of the Homesteading and Neighborhood Res-
toration Act of 1995, any interest in the ownership of a
project for which a loan is made or insured under this
section may be transferred only if the Secretary deter-
mines that such transfer would be in the best interests
of the tenants of the housing for which the loan was made
or insured and of the Federal Government.’’.
(b) EQUITY LOANS.—Section 515(t) of the Housing
Act of 1949 is amended—
(1) by striking paragraphs (4) and (5); and
(2) by redesignating paragraphs (6) through
(8) as paragraphs (4) through (6), respectively.
(c) REPEAL OF PROHIBITIONS.—Section 515 of the
Housing Act of 1949 is amended by striking subsection
(z).
(d) LOCATION OF PROJECTS.—Section 532 of the
Housing Act of 1949 (42 U.S.C. 1490l) is amended—
(1) in subsection (a), by inserting ‘‘other than
assistance under section 515’’ after ‘‘in making as-
sistance’’; and
(2) by adding at the end the following new sub-
section:
‘‘(c) ALLOCATION OF SECTION 515 LOANS.—
‘‘(1) PROCEDURE.—The Secretary shall make
assistance under section 515 available pursuant to
an objective procedure established by the Secretary,
under which the Secretary shall identify counties
and communities having the greatest need for such
assistance and designate such counties and commu-
nities to receive such assistance. Under such proce-
dure, the Secretary shall use objective measures to
determine the need for rental housing assistance,
which may include the incidence of poverty, sub-
standard housing, lack of mortgage credit, lack or
insufficient amount of affordable housing, and other
factors demonstrating a need for affordable housing.
‘‘(2) INFORMATION.—The Secretary shall use
information from the decennial censuses of the
United States, relevant comprehensive affordable
housing strategies under section 105 of the Cran-
ston-Gonzalez National Affordable Housing Act, and
other reliable sources obtained by the Secretary
which demonstrate the need for affordable rental
housing in rural areas.
‘‘(3) DESIGNATION.—A designation under para-
graph (1) shall not be effective for a period of more
than 3 years, but may be renewed by the Secretary
under the procedure under paragraph (1). The Sec-
retary shall cause to be published in the Federal
Register a list of areas designated under paragraph
(1) and a reasonable timetable for submission of
preapplications. The Secretary shall take such other
reasonable actions as the Secretary considers appro-
priate to notify the public of such designations.’’.
(e) EQUITY TAKEOUT LOANS TO EXTEND LOW-IN-
COME USE.—
(1) AUTHORITY
AND
LIMITATION.—Section
502(c)(4)(B)(iv) of the Housing Act of 1949 (42
U.S.C. 1472(c)(4)(B)(iv)) is amended by inserting
before the period at the end the following: ‘‘or under
paragraphs (1) and (2) of section 514(j), except that
an equity loan referred to in this clause may not be
made available after the date of the enactment of
the Homesteading and Neighborhood Restoration
Act of 1995 unless the Secretary determines that
the other incentives available under this subpara-
graph are not adequate to provide a fair return on
the investment of the borrower, to prevent prepay-
ment of the loan insured under section 514 or 515,
or to prevent the displacement of tenants of the
housing for which the loan was made’’.
(2) APPROVAL OF ASSISTANCE.—Subparagraph
(C) of section 502(c)(4) of the Housing Act of 1949
is amended by striking the matter preceding clause
(i) and inserting the following:
‘‘(C) APPROVAL
OF ASSISTANCE.—The Secretary
may approve assistance under subparagraph (B) for as-
sisted housing only if the restrictive period has expired for
any loan for the housing made or insured under section
514 or 515 pursuant to a contract entered into after De-
cember 21, 1979, but before the date of the enactment
of the Department of Housing and Urban Development
Reform Act of 1989, and the Secretary determines that
the combination of assistance provided—’’.
(3) 
TECHNICAL
CORRECTION.—Section
515(c)(1) of the Housing Act of 1949 (42 U.S.C.
1485(c)(1)) is amended by striking ‘‘December 21,
1979’’ and inserting ‘‘December 15, 1989’’.
SEC. 5. LOAN GUARANTEES FOR MULTIFAMILY RENTAL
HOUSING IN RURAL AREAS.
(a) IN GENERAL.—Title V of the Housing Act of
1949 (42 U.S.C. 1471 et seq.) is amended by inserting
after section 537 the following 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 section 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 lend-
er.
‘‘(f) LOAN TERMS.—Each loan guaranteed pursuant
to this section shall—
‘‘(1) provide for complete amortization by peri-
odic payments to be made for a term not to exceed
40 years;
‘‘(2) involve a rate of interest agreed upon by
the borrower and the lender that does not exceed the
maximum allowable rate established by the Secretary
for purposes of this section and is fixed over the
term of the loan;
‘‘(3) involve a principal obligation (including
initial service charges, appraisal, inspection, and
other fees as the Secretary may approve) not to ex-
ceed—
‘‘(A) in the case of a borrower that is a
nonprofit organization or an agency or body of
any State or local government, 97 percent of
the development costs of the housing and relat-
ed facilities or the value of the housing and fa-
cilities, whichever is less;
‘‘(B) in the case of a borrower that is a
for-profit entity not referred to in subparagraph
(A), 90 percent of the development costs of the
housing and related facilities or the value of the
housing and facilities, whichever is less; and
‘‘(C) in the case of any borrower, for such
part of the property as may be attributable to
dwelling use, the applicable maximum per unit
dollar amount limitations under section 207(c)
of the National Housing Act;
‘‘(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)
conveyance to the Secretary of title to the security
property, (B) submission to the Secretary of a claim
for payment under the guarantee, and (C) assign-
ment to the Secretary of all the claims of the holder
of the guarantee against the borrower or others aris-
ing out of the loan transaction or foreclosure pro-
ceedings, except claims released with the consent of
the Secretary.
‘‘(3) ASSIGNMENT
BY
SECRETARY.—After re-
ceiving notice under paragraph (1), the Secretary
may accept assignment of the loan if the Secretary
determines that the assignment is in the best inter-
ests of the United States. Assignment of a loan
under this paragraph shall include conveyance to the
Secretary of title to the security property, assign-
ment to the Secretary of all rights and interests
arising under the loan, and assignment to the Sec-
retary of all claims against the borrower or others
arising out of the loan transaction. Upon assignment
of a loan under this paragraph, the holder of a guar-
antee certificate for the loan shall be entitled to pay-
ment by the Secretary under the guarantee (in the
amount provided under subsection (b)).
‘‘(4) REQUIREMENTS.—Before any payment
under a guarantee is made under paragraph (2) or
(3), the holder of the guarantee certificate shall ex-
haust all reasonable possibilities of collection on the
loan guaranteed. Upon payment, in whole or in part,
to the holder, the note or judgment evidencing the
debt shall be assigned to the United States and the
holder shall have no further claim against the bor-
rower or the United States. The Secretary shall then
take such action to collect as the Secretary deter-
mines appropriate.
‘‘(j) VIOLATION OF GUARANTEE REQUIREMENTS BY
LENDERS ISSUING GUARANTEES.—
‘‘(1) INDEMNIFICATION.—If the Secretary de-
termines that a loan guaranteed by an eligible lender
pursuant to delegation of authority under subsection
(h) was not originated in accordance with the re-
quirements under this section and the Secretary
pays a claim under the guarantee for the loan, the
Secretary may require the eligible lender authorized
under subsection (h) to issue the guarantee certifi-
cate for the loan—
‘‘(A) to indemnify the Secretary for the
loss, if the payment under the guarantee was
made within a reasonable period specified by
the Secretary; or
‘‘(B) to indemnify the Secretary for the
loss regardless of when payment under the
guarantee was made, if the Secretary deter-
mines that fraud or misrepresentation was in-
volved in connection with the origination of the
loan.
‘‘(2) TERMINATION OF AUTHORITY TO ISSUE
GUARANTEES.—The Secretary may cancel a delega-
tion of authority under subsection (h) to an eligible
lender if the Secretary determines that the lender
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