Transforming Student Debt to Home Equity Act of 2022
Bill: H.R.7368 | Sponsor: Rep. Kaptur, Marcy (D-OH)
Policy area: Housing and Community Development

Summary:
Transforming Student Debt to Home Equity Act of 2022
This bill requires the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency to jointly establish and implement a pilot demonstration program to provide, to eligible applicants with federal student loan debt, assistance in purchasing eligible properties. Specifically, the program may provide for (1) discounts on the appraised value of eligible properties, (2) flexibility in certain underwriting standards, (3) the development of new mortgage products specifically targeted to eligible applicants, and (4) other appropriate assistance. The program must provide for the development of a program that uses actuarial information to determine how the repayment of federal student loans may be integrated into a mortgage repayment schedule to allow eligible applicants to accumulate home equity.
An eligible property is a property (1) that is designed as a dwelling for occupancy by one to four families; (2) that is safe and habitable; (3) the occupancy of which will promote community revitalization; and (4) that is owned by HUD, the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), a local land bank, the Department of Agriculture, or the Department of Veterans Affairs.

To direct the Secretary of Housing and Urban Development and the 
Director of the Federal Housing Finance Agency to develop a program to 
provide assistance to creditworthy borrowers with Federal student debt 
in purchasing certain foreclosed homes owned by the Federal Government, 
   the Federal National Mortgage Association, the Federal Home Loan 
  Mortgage Corporation, and local land banks, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Transforming Student Debt to Home 
Equity Act of 2022''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) In the third quarter of 2021, over 15,185,000 homes 
        remain vacant in the United States.
            (2) These extended vacancies depress neighborhood property 
        values and create a downward spiral in neighborhood stability 
        in already troubled communities.
            (3) Meanwhile, due to climbing expenses of higher 
        education, the total Federal student debt owed equals 
        $1,750,000,000,000.
            (4) More than 44,700,000 Americans have at least one 
        outstanding student loan.
            (5) Student loan repayments are forcing millions of young 
        families to delay purchasing their first home, as they cannot 
        afford to save for a downpayment or qualify for a mortgage 
        while also paying off student debt.
            (6) Data from the Federal Reserve shows that non-Hispanic 
        White households have a median net worth of $181,440, while 
        Black households have a median net worth of $20,730 and 
        Hispanic households have $36,180; providing innovative 
        financial products will allow the United States to reduce the 
        racial wealth gap and to ensure equitable access to housing and 
        economic mobility.
            (7) The COVID-19 pandemic has exacerbated the racial wealth 
        gap by increasing unemployment within already disadvantaged 
        communities and further reducing access to homeownership and 
        increasing the burden of student debt.
            (8) According to a report from the Joint Center for Housing 
        Studies of Harvard University, Black and Hispanic households 
        are more likely to have their household income decline and to 
        face hardship in paying rent and other monthly housing costs 
        due to the COVID-19 pandemic.
            (9) It is imperative to create a demonstration program to 
        design financial pathways to, where possible, systematically 
        convert some student debt streams into equity streams through 
        negotiation of mortgages; otherwise housing purchases will 
        continue to be sluggish among first-time home buyers and 
        thousands more Americans will enter their midyears saddled with 
        student loan debt never having had the opportunity to 
        accumulate equity.
            (10) It is in the interest of the Federal Government to use 
        the resources at its disposal, including both housing 
        properties held in trust and student debt obligations, to put 
        reverse pressure on these downward trends.
            (11) By arranging financing that recalculates terms, debt-
        to-income ratios, mortgage interest rates, and other factors, 
        short-term student debt could transition into longer-term home 
        ownership.
            (12) The goal is to connect creditworthy Federal student 
        debt holders with housing properties for sale and held by the 
        Federal Government and local land banks.
            (13) Over time, participants can help restore 
        neighborhoods, transform their debt to equity, and stabilize 
        secured property values locally and on the Federal ledger by 
        maintaining and investing in a home mortgage.

SEC. 3. PROGRAM TO EXPAND ACCESS TO MORTGAGES TO ELIGIBLE CREDITWORTHY 
              HOME BUYERS WITH FEDERAL STUDENT LOAN DEBT.

    (a) Establishment.--From amounts appropriated pursuant to 
subsection (g), the Secretary of Housing and Urban Development and the 
Director of the Federal Housing Finance Agency shall establish and 
carry out a pilot demonstration program to--
            (1) provide assistance to eligible applicants in purchasing 
        eligible properties; and
            (2) subsequently analyze the results of the provision of 
        such assistance.
    (b) Consultation.--In establishing and carrying out the program 
pursuant to subsection (a), the Secretary and the Director shall 
consult with--
            (1) the Director of the Consumer Financial Protection 
        Bureau;
            (2) the Secretary of Agriculture;
            (3) the Secretary of Veterans Affairs;
            (4) the Secretary of Education; and
            (5) the Secretary of the Treasury.
    (c) Eligible Applicants.--To be eligible for the program 
established pursuant to subsection (a), an applicant--
            (1) shall have an outstanding balance of principal or 
        interest owing on a Federal loan made, insured, or guaranteed 
        under title IV of the Higher Education Act of 1965 (20 U.S.C. 
        1070 et seq.);
            (2) shall have an area median income at or below 120 
        percent;
            (3) may not be subject to a judgment secured through 
        litigation with respect to such a loan under title IV of the 
        Higher Education Act of 1965 (20 U.S.C. 1070 et seq.), may not 
        be subject to an order for wage garnishment under section 488A 
        of such Act (20 U.S.C. 1095a), and at the time of application 
        for participation in the program under this section--
                    (A) such a loan shall be in repayment status as 
                determined under section 428(b)(7)(A) of such Act (20 
                U.S.C. 1078(b)(7)(A)); or
                    (B) such a loan shall be in a grace period 
                preceding repayment;
            (4) may not have owned a home during the 3-year period 
        immediately before the applicant purchases an eligible property 
        with assistance provided under this section;
            (5) shall complete a program of counseling with respect to 
        the responsibilities and financial management involved in 
        homeownership that is approved by the Secretary;
            (6) shall be creditworthy, as determined by the Secretary 
        and the Director;
            (7) shall agree to use an eligible property purchased with 
        assistance provided under this section as the applicant's 
        primary residence for not less than the 3-year period beginning 
        on the date of such purchase; and
            (8) shall be employed and earning sufficient income to 
        repay a mortgage loan, as determined by the Secretary and the 
        Director for the purposes of this program.
    (d) Types of Assistance.--
            (1) In general.--A program established under this section 
        may provide for any one or more of the following options:
                    (A) A discount on the appraised value of an 
                eligible property.
                    (B) Flexibility in underwriting standards related 
                to the purchase of eligible properties for mortgages 
                insured under title II of the National Housing Act (12 
                U.S.C. 1707 et seq.) or owned or guaranteed by the 
                Federal National Mortgage Association or the Federal 
                Home Loan Mortgage Corporation.
                    (C) The development of new mortgage products 
                specifically targeted to eligible applicants.
                    (D) Downpayment and private mortgage assistance to 
                eligible applicants.
                    (E) Pre-purchase counseling including related 
                credit and financial coaching to eligible applicants.
                    (F) Provision of a low- or no-interest mortgage 
                rate.
                    (G) Any other assistance that the Secretary and 
                Director jointly deem appropriate.
            (2) Repayment integration.--The Secretary shall establish a 
        program that will integrate repayment of loans described in 
        subsection (c)(1) into a mortgage repayment schedule to allow 
        an eligible applicant to accumulate equity in the eligible 
        property. The Secretary shall use actuarial data and risk 
        assessments to collateralize the mortgage provided through 
        Federal funds.
            (3) Collaboration.--In providing assistance described under 
        paragraph (1), the Secretary and the Director may collaborate 
        with--
                    (A) community banks having less than 
                $10,000,000,000 in total assets;
                    (B) credit unions (as defined in section 101 of the 
                Federal Credit Union Act);
                    (C) local fair housing organizations; and
                    (D) local land banks.
    (e) Geographical Diversity.--In selecting eligible applicants to 
receive assistance under this section, the Secretary and the Director 
shall, to the extent practicable, consider the location of the eligible 
property to be purchased by the eligible applicant, including whether 
the eligible property is located in a rural or urban area, to ensure 
geographic diversity of such eligible properties.
    (f) Reports.--
            (1) Interim report.--Not later than 180 days after the date 
        of the enactment of this section, the Secretary and the 
        Director shall submit to Congress an interim report describing 
        the type of assistance the Secretary and the Director shall 
        provide under the program established under this section.
            (2) Final report.--Not later than 3 years after the date of 
        the enactment of this section, the Secretary and the Director 
        shall submit to Congress a final report that--
                    (A) evaluates the impact of the program carried out 
                under this section and describes any findings;
                    (B) identifies other types of assistance the 
                Secretary and the Director may offer; and
                    (C) includes any recommendations the Secretary and 
                Director may have for improving the program.
    (g) Definitions.--In this section:
            (1) Director.--The term ``Director'' means the Director of 
        the Federal Housing Finance Agency.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of the Department of Housing and Urban Development.
            (3) Eligible property.--The term ``eligible property'' 
        means a property that is designed as a dwelling for occupancy 
        by 1 to 4 families--
                    (A) that is safe and habitable, as defined by the 
                Secretary and the Director;
                    (B) the occupancy of which, as determined by the 
                Secretary and the Director, will promote community 
                revitalization; and
                    (C) that--
                            (i) was previously subject to a mortgage 
                        loan insured by the Federal Housing 
                        Administration under title II of the National 
                        Housing Act (12 U.S.C. 1707 et seq.) and is 
                        owned by the Secretary pursuant to the payment 
                        of insurance benefits under such Act;
                            (ii) is a real estate owned property of the 
                        Federal National Mortgage Association or the 
                        Federal Home Loan Mortgage Corporation;
                            (iii) is owned by a local land bank;
                            (iv) is owned by the Department of 
                        Agriculture; or
                            (v) is owned by the Department of Veterans 
                        Affairs.
            (4) Local land bank.--The term ``local land bank'' means--
                    (A) a governmental or nongovernmental nonprofit 
                entity established, at least in part, to assemble, 
                temporarily manage, and dispose of vacant land for the 
                purpose of stabilizing neighborhoods and encouraging 
                re-use or redevelopment of urban property; or
                    (B) such other governmental or nongovernmental 
                entity as the Secretary and the Director may determine 
                appropriate.
    (h) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as necessary to carry out this section for 
fiscal years 2023, 2024, and 2025.
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