Department of Housing and Urban Development Reform Act of 1989
PL 101-235 (H.R.1), enacted 12/15/1989

PUBLIC LAW 101-235—DEC. 15,1989 
- 103 STAT. 1987 
Public Law 101-235 
101st Congress 
An Act 
To amend Federal laws to reform housing, community and neighborhood develop- 
Dec. 15,1989 
ment, and related programs, and for other purposes. 
[H.R. 1] 
Be it enacted by the Senate and House of Representatives of the 
United States of 
America in Congress assembled. 
Department of 
Housmg and 
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
Urban 
(a) SHORT TITLE.—This Act may be cited as the "Department of RefornfAc?of 
Housing and Urban Development Reform Act of 1989". 
1989. 
(b) TABLE OF CONTENTS.— 
42 use 3531 
note. 
Sec. 1. Short title and table of contents. 
TITLE I—REFORMS TO DEPARTMENT OF HOUSING AND URBAN 
DEVELOPMENT 
Subtitle A—Ethics 
Sec. 101. Allocation of housing assistance. 
Sec. 102. HUD accountability. 
Sec. 103. Prohibition of advance disclosure of funding decisions. 
Sec. 104. Reform of headquarters reserve. 
Sec. 105. Reform of CDBG discretionary fund and provision of technical assistance. 
Sec. 106. Waiver of regulation requirements and handbook provisions. 
Sec. 107. Civil money penalties against mortgagees and lenders. 
Sec. 108. Civil money penalties against multifamily mortgagors. 
Sec. 109. Civil money penalties against section 202 mortgagors. 
Sec. 110. Civil money penalties against GNMA issuers. 
Sec. 111. Civil money penalties for violations of Interstate Land Sales Full Disclo-
sure Act. 
Sec. 112. Registration of consultants. 
Subtitle B—Management Reform 
Sec. 121. Establishment of HUD Chief Financial Officer. 
Sec. 122. Establishment of FHA Comptroller. 
Sec. 123. Expediting rulemaking. 
Sec. 124. Funding for program evaluation and monitoring. 
Sec. 125. Refinancing of section 235 mortgages. 
Sec. 126. Sanctions for improper conveyances under urban homestead programs. 
Sec. 127. Reform of moderate rehiJiilitation program. 
Subtitle C—Federal Housing Administration Reforms 
: ' 
Sec. 131. Annual audited financial statements. 
Sec. 132. Credit reviews of persons acquiring mortgaged properties under single 
family program for life of mortgage. 
Sec. 133. Rei)eal of title X land development program. 
Sec. 134. Civil money penalties for improper dealer and loan broker participation in 
origination of property improvement loans. 
Sec. 135. Notification regiurding suspended mortgagees. 
Sec. 136. FHA foreclosed properties. 
Sec. 137. Report r^^arding providing foreclosed properties to 1989 disaster victims. 
Sec. 138. Rei^rt regarding actions to improve direct endorsement program. 
Sec. 139. Co-insurance amendments. 
Sec. 140. FHA management. 
Sec. 141. Contracting for financial management support. 
Sec. 142. FHA operations. 
103 STAT. 1988 
PUBLIC LAW 101-235—DEC. 15, 1989 
Sec. 143. Elimination of private investor-owneis from single family mortgage insur-
ance program. 
TITLE n—HOUSING PRESERVATION 
Sec 201. Limitations on prepayment. 
Sec. 202. Clarification of applicability to voluntary termination of insurance. 
Sec. 203. Incentives to extend low-income use. 
Sec 204. Preservation. 
Sec 205. Report on property disposition demonstration. 
Sec. 206. Prohibition on prepayment of new rural housing loans. 
Sec 207. Equity takeout incentive for new rural housing loans. 
TITLE m—HOUSING PROGRAM EXTENSIONS AND CHANGES 
Sec 301. Flexible subsidy program. 
Sec. 302. Continuation of public housing economic rent. 
Sec. 303. Extension of reciprocity in approval of housing subdivisions among Federal 
agencies. 
Sec. 304. HODAG Amendment 
TITLE IV—RURAL HOUSING 
Sec 401. Accountability in awards of assistance; remedies and penalties. 
Sec 402. Reuse of section 515 loan authority. 
TITLE V—NATIONAL COMMISSION ON SEVERELY DISTRESSED PUBUC 
HOUSING 
Sec. 501. Purpose. 
Sec. 502. Establishment of Commission. 
Sec 503. Membership of Commission. 
Sec. 504. Functions of the Commission. 
Sec 505. Powers of Commission. 
Sec 506. Authorization of appropriations. 
Sec. 507. Sunset 
TITLE VI—NATIONAL COMMISSION ON NATIVE AMERICAN, ALASKA 
NATIVE, AND NATIVE HAWAIIAN HOUSING 
Sec. 601. Establishment 
Sec. 602. Membership. 
Sec. 603. Functions (^ the Commission. 
Sec. 604. Powers of the Oammission. 
Sec. 605. Authorization of appropriations. 
TITLE Vn—MISCELLANEOUS 
Sec. 701. Nullification of right of redemption of single £amily mortgagors under sec-
tion 312 rehabilitation loan program. 
Sec 702. CDBG Grants to Indian tribes. 
TITLE Vm—SECTION 8 RENT ADJUSTMENTS 
Sec 801. Annual adjustment factors for section 8 rents. 
TITLE I—REFORMS TO DEPARTMENT OF 
HOUSING AND URBAN DEVELOPMENT 
Subtitle A—Ethics 
42 u s e 1439. 
Regulations. 
State and local 
governments. 
SEC 101. ALLOCATION OF HOUSING ASSISTANCE. 
(a) 
ASSISTANCE 
SUBJECT TO FORMULA 
ALLOCATION.—^Section 
213(dXl) of the Housing and Community Development Act of 1974 is 
amended to read as follows: 
"(dXlXA) Ehccept as provided by subparagraph (B), the Secretory 
shall allocate assistance referred to in subsection (aXl) the first time 
it is available for reservation on the basis of a formula that is 
contained in a regulation prescribed by the Secretary, and that is 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 1989 
Contracts. 
Indians. 
based on the relative needs of different States, areas, and commu-
nities, as reflected in data as to population, poverty, housing over-
crowding, housing vacancies, amount of substandard housing, and 
other objectively measurable conditions specified in the regulation. 
In allocating assistance imder this paragraph for each program of 
housing assistance under subsection (aXl), the Secretary shsdl apply 
the formula, to the extent practicable, in a manner so that the 
assistance under the prc^am is allocated according to the particu-
Isu- relative needs under the preceding sentence that are characteris-
tic of and related to the particular type of assistance provided under 
the program. Assistance under section 202 of the Housing Act of Aged persons. 
1959 shall be allocated in a manner that ensures that awards of the 
assistance under such section are made for projects of sufficient size 
to accommodate facilities for supportive services appropriate to the 
needs of frail elderly residents. 
"(B) The formula allocation requirements of subparagraph (A) 
shall not apply to— 
"(i) assistance that is approved in appropriation Acts for use 
under sections 9 or 14, or the rental reh^ilitation grant pro-
gram under section 17, of the United States Housing Act of 
1937, except that the Secretary shall comply with section 102 of 
the Department of Housing and Urban Development Reform 
Act of 1989 with respect to such assistance; or 
"(ii) other assistance referred to in subsection (a) that is 
approved in appropriation Acts for uses that the Secretary 
determines are incapable of ge(^aphic allocation, including 
amendments of existing contracts, renewal of assistance con-
tracts, assistance to families that would otherwise lose assist-
ance due to the decision of the project owner to prepay the 
project mortgage or not to renew the assistance contract, assist-
ance to prevent displacement or to provide replacement housing 
in connection witib the demolition or disposition of public and 
Indian housing, and assistance in support of the property dis-
position and loan management functions of the Secretary. 
"(C) Any allocation of assistance under subparagraph (A) shall, as 
determined by the Secretaiy, be made to the sinallest practicable 
area, consistent with the delivery of assistance through a meaning-
ful competitive process designed to serve areas with greater needs. 
"(D) Any amounts allocated to a State or areas or communities 
vdthin a State that are not likely to be used within a fiscal year 
shall not be reallocated for use in another State, unless the Sec-
retary determines that other areas or commimities (that are eligible 
for assistance under the program) within the same State cannot use 
the amounts within that same fiscal year.". 
(b) ALLOCATION TO NoNMETROPOLrrAN AREAS.—^The second sen-
tence of section 213(dX2) of the Housing and Community Develop-
ment Act of 1974 is amended by striMng "such assistance" and 
inserting "the assistance that is subject to allocation under para-
graph (IXA)". 
(c) COMPETITION FOR ASSISTANCE.—Section 213(d) of the Housing 
and Community Development Act of 1974 is amended by adding at 
the end the following new paragraph: 
"(5XA) The Secretary shall not reserve or obligate assistance 
subject to allocation under paragraph (IXA) to specific recipients, 
unless the assistance is first allocated on the basis of the formula 
contained in that paragraph and then is reserved and obligated 
pursuant to a comiwtition. 
42 use 1439. 
103 STAT. 1990 
PUBLIC LAW 101-235—DEC. 15, 1989 
Regulations. 
Federal 
Register, 
publication. 
Contracts. 
42 u s e 1437aa 
note. 
42 use 1439. 
42 u s e 3545. 
Federal 
Register, 
publication. 
"(B) Any competition referred to in subparagraph (A) shall be 
conducted pursuant to specific criteria for the selection of recipients 
of assistance. The criteria shall be contained in— 
"(D a r^ulation promulgated by the Secretary after notice 
and public comment; or 
"(ii) to the extent authorized by law, a notice published in the 
Federal R^pster. 
"(C) Subject to the times at which appropriations for assistance 
subject to paragraph (IXA) may become avaUable for reservation in 
any fiscal year, the Secretary shall take such steps as the Secretary 
deems appropriate to ensure that, to the maximum extent prac-
ticable, the process referred to in subparagraph (A) is carried out 
with similar frequency and at similar times for each fiscal year. 
"(D) This paragraph shall not apply to assistance referred to in 
paragraph (4)/\ 
(d) APPUCABILITT.—^In accordance with section 201(bX2) of the 
United States Housing Act of 1937, the amendments made by 
subsections (a), (b), and (c) of this section shall also apply to public 
housing developed or operated pursuant to a contract between the 
Secretary of Housing and Urban Development and an Indian hous-
ing authority. 
(e) CoNFOBMiNG AMENDMENT.—Sectiou 213(aXl) of the Housing 
and Community Development Act of 1974 is amended by striking 
"section 235 or 236 of the National Housing Act,". 
SEC 102. HUD ACCOUNTABILITY. 
(a) NoncE RBGABDING ASSISTFANCE.— 
(1) PuBUCATiON OF NOTICE OF AVAILABILITY.—-The Secretary 
shall publish in the Federal R^^ter notice of the availability of 
any assistance under any pr(^;ram or discretionary fund 
administered by the Secretary. 
(2) PuBUCATiON OF APPUCATiON FBOCEDUBES.—^The Secretary 
shall publish in the Federal Roister a description of the form 
and procedures by which application for the assistance may be 
made, and any deadlines relating to the award or allocation of 
the assistance. Such description shall be designed to help eli-
gible applicants to apply for such assistance. 
(3) PUBUCATION OF SELECTION CRITERIA.—^Not loSS than 30 
days before any deadline by which applications or requests for 
assistance under any program or discretionary fund adminis-
tered by the Secrettuy must be submitted, the Secretary shall 
publish in the Federal Roister the criteria by which selection 
for the assistance will be made. Subject to section 213 of the 
Houdng and Community Development Act of 1974, such criteria 
shall include any objective measures of housing need, project 
merit, or efiident use of resources that the Secretaiy deter-
mines are appropriate and consistent with the statute under 
which the assistance is made available. 
(4) DOCUMENTATION OF DECISIONS.— 
(A) The Secretary shall award or allocate assistance only 
in response to a written application in a form approved in 
advance by the Secretary, except where other award or 
allocation procedures are specified in statute. 
(B) The Secretary shall ensure that documentation and 
other information r^arding each application for assistance 
is sufficient to indicate the basis on which any award or 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 1991 
allocation was made or denied. The preceding sentence 
shall apply to— 
(i) any application for an award or allocation of 
assistance made by the Secretary to a State, unit of 
general local government, or other recipient of assist-
ance, and 
(ii) any application for a subsequent award or alloca-
tion of such assistance by such State, unit of general 
local government or other recipient. 
(CXi) The Secretary shall notify the public of all funding 
decisions made by the Department. The Secretary shall 
require any State or unit of general local government to 
notify the public of the award or allocation of such funding 
to subsequent recipients. The notification shall include the 
following elements for each funding decision: 
(I) the name and address of each funding recipient; 
(II) the name or other means of identifying the 
project, activity, or undertaking for each funding 
recipient; 
(III) the dollar amount of the funding for each 
project, activity, or undertaking; 
(IV) the citation to the statutory, regulatory, or other 
criteria under which the funding decision was made; 
and 
(V) such addition£il information as the Secretary 
deems appropriate for a clear and full understanding of 
the funding decision. 
(ii) The notification referred to in clause (i) of this subsec-
tion shall be published as a Notice in the Federal Register 
at least quarterly. 
(iii) For purposes of this subparagraph, the term 'funding 
decision' means the decision of the Secretary to make avail-
able grants, loans, or any other form of financial assistance 
to an individual or to an entity, including (but not limited 
to) a State or local government or agency thereof (including 
a public housing agency), an Indian tribe, or a nonprofit 
organization, under any program administered by the 
Department that provides, by statute, regulation, or other-
wise, for the competitive d^tribution of financial assist-
ance. 
(D) The Secretary shsill publish a notice in the Federsd 
Register at least annually informing the public of the 
allocation of assistance under section 213(dXlXA) of the 
Housing and Community Development Act of 1974. 
(E) Tlie Secretary shsdl ensure that each application and 
all related documentation and other information referred 
to in subparagraph (B), including each letter of support, is 
readily available for public inspection for a period of not 
less than 5 years, beginning not less than 30 days following 
the date on which the award or allocation is made. 
(5) EMERGENCY EXCEPTION.—The Secretary may waive the 
requirements of paragraphs (1), (2), and (3) if the Secretary 
determines that the waiver is required for appropriate response 
to an emergency. Not less than 30 days after providing a waiver 
under the preceding sentence, the Secretary shall publish in the 
Federal Register the Secretary's reasons for so doing. 
State and local 
governments. 
State and local 
governments. 
Public 
information. 
103 STAT. 1992 
PUBLIC LAW 101-235—DEC. 15, 1989 
state and local 
governments. 
Reports. 
(b) DISCLOSURES BY APPUCANTS.—The Secretary shall require the 
disclosure of information with respect to any application for assist-
ance within the jurisdiction of the Department for a project applica-
tion submitted to the Secretary or to any State or unit of general 
local government by any applicant who has received or, in the 
determination of the Secretary, can reasonably be expected to re-
ceive assistance within the jurisdiction of the Department in excess 
of $200,000 in the aggr^ate during any fiscal year or such lower 
amount as the Secretary may establish by regulation. Such informa-
tion shall include the following: 
(1) OTHER GOVERNMENT ASSISTANCE.—Information regarding 
any related assistance from the Federal Government, a State, or 
a unit of general local government, or any agency or instrumen-
tality thereof, that is expected to be made available with respect 
to the project or activities for which the applicant is seeking 
assistance. Such related assistance shall include but not be 
limited to any loan, grant, guarantee, insurance, payment, 
rebate, subsidy, credit, tax benefit, or any other form of direct or 
indirect assistance. 
(2) INTERESTED PARTIES.—The name and pecuniary interest of 
any person who has a pecuniary interest in the project or 
activities for which the applicant is seeking assistance. Persons 
with a pecuniary interest in the project or activity shall include 
but not be limited to any developers, contractors, and consult-
ants involved in the application for assistance or the planning, 
development, or implementation of the project or activity. For 
purposes of this paragraph, residency of an individual in hous-
ing for which assistance is being sought shall not, by itself, be 
considered a pecuniary interest. 
(3) EXPECTED SOURCES AND USES.—A report satisfactory to the 
Secretary of the expected sources and uses of funds that are to 
be made available for the project or activity. 
(c) UPDATING OF DISCLOSURE.—During the period when an applica-
tion is pending or assistance is being provided, the applicant shall 
update the disclosure required under the previous subsection within 
30 days of any substantia change. 
(d) LIMITATION OF ASSISTANCE.—^The Secretary shall certify that 
assistance within the jurisdiction of the Department to any housing 
project shall not be more than is necessary to provide affordable 
housing after taking account of assistance described in subsection 
(bXl). ITie Secretary shall adjust the amount of assistance awarded 
or allocated to an applicant to compensate in whole or in part, as the 
Secretary determines to be appropriate, for any changes reported 
under subsection (c). 
(e) ADMINISTRATIVE REMEDIES.—If the Secretary receives or ob-
tains information providing a reasonable basis to believe that a 
violation of subsection (b) or (c) has occurred, the Secretary shall— 
(1) in the case of a selection that has not been made, deter-
mine whether to terminate the selection process or take other 
appropriate actions; and 
(2) in the case of a selection that has been made, determine 
whether to— 
(A) void or rescind the selection, subject to review and 
determination on the record after opportunity for a hear-
ing; 
publication. 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 1993 
(B) impose sanctions upon the violator, including debar-
ment, si^ject to review and determination on the record 
after opportunity for a hearing; 
(C) recapture any funds that have been disbursed; 
(D) permit the violatmg applicant selected to continue to 
participate in the program; or 
(ED take any other actions that the Secretary considers 
appropriate. 
The Secretary shall publish in the Federal Roister a descriptive 
Federal 
statement of each determination made and action taken under this ^^^f;. 
subsection. 
it) CIVIL MONET PENALTIES.— 
(1) IN GENERAL.—^Whenever any person knowingly and mate-
rially violates any provision of subsection (b) or (c), the Sec-
retary may impose a civil money penalty on that person in 
accordance with the provisions of this section. This penalty 
shall be in addition to any other available civil remedy or any 
available criminal penalty, and may be imposed whether or not 
the Secretaiy imposes other administrative sanctions. 
(2) AMOUNT OF PENALTY.—^The amount of the penalty, as 
determined by the Secretaiy, may not exceed $10,000 for each 
violation. 
(gi AcENCT PHOCEDUBES.—<1) The Secretary shall establish stand-
ards and inrocedures governing the imposition of civil money pen-
alties under subsection (f). These standards and procedures— 
(A) shall provide for the Secretary to make the determination 
to impose the penalty or to use an administrative entity to 
make the determination; 
(B) shall provide for the imposition of a penalty only after the 
person has been given an opportunity for a hearing on the 
record and 
(C) may provide for review by the Secretaiy of any determina-
tion or order, or interlocutory ruling, arisii^ from a hearing. 
If no hearing is requested within 15 days of receipt of the notice of 
opportunity for hearing, the imposition of the penalty shall con-
stitute a final and unappealable determination. If the Secretary 
reviews the determination or order, the Secretary may affirm, 
modify, or reverse that determination or order. If the Secretary does 
not review the determination or order, the determination or order 
shall be finaL 
(2) FACTORS IN DETERMINING AMOUNT OF PENALTY.—^In determin-
ing the amount of a penalty under subsection (f), consideration shall 
be given to such factors as the gravity of the offense, ability to pay 
the penalty, iigury to the public, benefits receive, deterrence of 
future violations, and such other factors as the Secretary may 
determine in radiations to be appropriate. 
(3) REVIEWABILITY OF iMPOsmoN OF A PENALTY.—^The Secretary's 
determination or order imposing a penalty under subsection (f) shall 
not be subject to review, except as provided in subsection (h). 
(h) JUDICIAL REVIEW OF AGENCY DETERBONATION.— 
(1) IN GENERAL.—^Afler exhausting all administrative rem-
edies established by the Secretaiy under subsection (gXD, a 
person against whom the Secretary has imposed a civil money 
penalty under subsection if) may obtain a review of the penalty 
and such andllaiy issues as may be addressed in the notice of 
determination to impose a penalty under subsection (gXlXA) in 
the appropriate court of appeals of the United States, by filing 
103 STAT. 1994 
PUBLIC LAW 101-235—DEC. 15, 1989 
in such court, within 20 days after the entry of such order or 
determination, a written petition prajdng that the order or 
determination of the Secretary be modified or be set aside in 
whole or in part. 
(2) OBJECTIONS NOT RAISED IN HEARING.—The court shall not 
consider any objection that was not raised in the hearing con-
ducted pursuant to subsection (gXl) unless a demonstration is 
made of extraordinary circumstances causing the failure to 
raise the objection. If any party demonstrates to the satisfaction 
of the court that additional evidence not presented at the 
hearing is material and that there were reasonable grounds for 
the failure to present such evidence at the hearing, the court 
shall remand the matter to the Secretary for consideration of 
such additional evidence. 
(3) SCOPE OF REVIEW.—The decisions, findings, and determina-
tions of the Secretary shall be reviewed pursuant to section 706 
of title 5, United States Code. 
(4) ORDER TO PAY PENALTY.—Notwithstanding any other 
provision of law, in any such review, the court shall have the 
power to order pa3mient of the penalty imposed by the 
Secretary. 
(i) ACTION TO COLLECT THE PENALTY.—If any person fails to 
comply with the determination or order of the Secretary imposing a 
civil money penalty under subsection (f), after the determination or 
order is no longer subject to review as provided by subsections (gXl) 
and (h), the Secretary may request the Attorney General of the 
United States to bring an action in an appropriate United States 
district court to obtain a monetary judgment against the person and 
such other relief as may be available. The monetary judgment may, 
in the court's discretion, include the attorneys' fees and other 
expenses incurred by the United States in connection with the 
action. In an action under this subsection, the validity and appro-
priateness of the Secretary's determination or order imposing the 
penalty shall not be subject to review. 
0) SETTLEMENT BY THE SECRETARY.—The Secretary may com-
promise, modify, or remit any civil money penalty which may be, or 
has been, imposed under this section. 
(k) REGULATIONS.—The Secretary shall issue such regulations as 
the Secretary deems appropriate to implement this section. 
(1) DEPOSIT OF PENALTIES.—The Secretary shall deposit all civil 
money penalties collected under this section into miscellaneous 
receipts of the Treasury. 
(m) DEFINITIONS.—For the purpose of this section— 
(1) The term "Department" means the Department of Hous-
ing and Urban Development. 
(2) The term "Secretary" means the Secretary of Housing and 
Urban Development. 
(3) The term "person" means an individual (including a 
consultant, lobbyist, or lawyer), corporation, company, associa-
tion, 
authority, 
firm, 
partnersMp, 
society. 
State, 
local 
government, or any other organization or group of people. 
(4) The term "assistance within the jurisdiction of the Depart-
ment" includes any contract, grant, loan, cooperative agree-
ment, or other form of assistance, including the insurance or 
guarantee of a loan, mortgage, or pool of mortgages. 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 1995 
(5) The term "knowingly" means having actual knowledge of 
or acting with deliberate ignorance of or reckless disregard for 
the prohibitions under this section. 
(n) ErFBcnvE DATE.—This section shall take effect on the date 
specified in regulations implementing this section that are issued by 
the Secretary after notice and public comment. 
SEC. 103. PROHffiinON OF ADVANCE DISCLOSURE OF FUNDING DECI-
SIONS. 
The Department of Housing and Urban Development Act is 
amended by adding at the end the following new section: 
"PEOHIBinON OP ADVANCE DISCLOSURE OF FUNDING DECISIONS 
"SEC. 12. (a) PROHIBITED ACTIONS.—^During any selection process, 42 use 3537a. 
no officer or employee of the Department of Housing and Urban 
Development shall 
knowingly disclose any covered selection 
information r^arding such selection, directly or indirectly, to any 
person other than a person authorized by the Secretary to receive 
such information. 
"(b) ADMINISTRATIVE REMEDIES.—^If the Secretary receives or ob-
tains information providing a reasonable basis to believe that a 
violation of subsection (a) has occurred, the Secretary shall— 
"(1) in the case of a selection that has not been made, deter-
mine whether to terminate the selection process or take other 
appropriate actions; and 
"(2) in the case of a selection that has been made, determine 
whether to— 
"(A) void or rescind the selection, subject to review and 
determination on the record after opportunity for a hear-
ing; 
"(B) impose sanctions upon the violating applicant se-
lected, subject to review and determination on the record 
after opportunity for a hearing; 
"(CD permit the violating applicant selected to continue to 
participate in the program; or 
"(D) take any other actions that the Secretary considers 
appropriate. 
"(c) CIVIL MONEY PENALTIES.— 
"(1) IN GENERAL.—Whenever any employee of the Department 
knowingW and materially violates the prohibition in subsection 
(a), the Secretary may impose a civil money penalty on the 
employee in accordance with the provisions of this subsection. 
This penalty shall be in addition to any other available civil 
remedy or any available criminal penalty and may be imposed 
whether or not the Secretary takes other disciplinary actions. 
"(2) AMOUNT.—^The amount of the penalty, as determined by 
the Secretary, may not exceed $10,000 for each violation. 
"(3) AGENCY PROCEDURES.— 
"(A) ESTABLISHMENT.—^The Secretary shall establish 
standards and procedures governing the imposition of civil 
money penalties under this subsection. The standards and 
procedures— 
"(i) shall provide for the Secretary or other official of 
the Department to make the determination to impose a 
penalty or to use an administrative entity to make the 
determination; 
103 STAT. 1996 
PUBLIC LAW 101-235—DEC. 15, 1989 
"(ii) shall provide for the imposition of a penalty only 
after the employee has been given an opportunity for a 
hearing on the record; and 
"(iii) may provide for review of any determination or 
order, or interlocutory ruling, arising from a hearing. 
"(B) P^AL ORDERS.—If no hearing is requested within 15 
days of receipt of the notice of opportunity for hearing, the 
imposition of the penalty shall constitute a final and 
unappealable order. If the Secretary reviews the determina-
tion or order, the Secretary may affirm, modify, or reverse 
that determination or order. If the Secretary does not 
review the determination or order within 90 days of the 
issuance of the determination or order, the determination 
or order shall be final. 
"(O FACTORS IN DETERMINING AMOUNT OF PENALTY.—In 
determining the amount of a penalty under paragraph (2), 
consideration shall be given to such factors as the gravity of 
the offense, any history of prior disclosures of information 
on pending funding decisions made after the date of enact-
ment of tMs section, ability to pay the penalty, injury to the 
public, benefits received, deterrence of future violations, 
and such other factors as the Secretary may determine in 
r^ulations to be appropriate. 
"(D) REVIEWABILITy OF IMPOSITION OF A PENALTY.—The 
Secretary's determination or order imposing a penalty 
under paragraph (1) shall not be subject to review, except as 
provided in paragraph (4). 
"(4) JUDICIAL REVIEW OF AGENCY DETERMINATION.— 
"(A) IN GENERAL.—^After exhausting all administrative 
remedies established by the Secretary under paragraph 
(3XA), an employee against whom the Secretary has im-
posed a civil money penalty under paragraph (1) may obtain 
a review of the penalty and such ancillary issues (such as 
- any administrative sanctions under 24 C.F.R. part 25) as 
may be addressed in the notice of determination to impose a 
penalty imder paragraph (3XAXi) in the appropriate court 
of appeals of tJie United States, by filing in such court, 
within 20 days after the entry of such order or determina-
tion, a written petition praying that the Secretary's order 
or determination be modified or be set aside in whole or in 
part. 
"(B) OBJECTIONS NOT RAISED IN HEARING.—^The court shall 
not consider any objection that was not raised in the hear-
ing conducted pursuant to paragraph (3XA) unless a dem-
onstration is made of extraordinaxy circumstances causing 
the failure to raise the objection. If any party demonstrates 
to the satisfaction of the court that additional evidence not 
presented at such hearing is material and that there were 
reasonable grounds for the failure to present such evidence 
at the hearing, the court shall remand the matter to the 
Secretary for consideration of such additional evidence. 
"(O SCOPE OF REVIEW.—^The decisions, findings, and 
determinations of the Secretary shall be reviewed pursuant 
to section 706 of title 5, United States Code. 
"(D) ORDER TO PAY PENALTY.—^Notwithstanding any other 
provision of law, in any such review, the court shall have 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 1997 
the power to order payment of the penalty imposed by the 
Secrettuy. 
"(5) AcnoN T
O C
O
L
L
E
C
T PENALTY.—^If any employee fails to 
comply with the Secretary's determination or order imposing a 
c i ^ money penalty under paragraph (1), after the determina-
tion or order is no longer subject to review as provided by 
paragraphs (3XA) and (4), the Secretary may request the Attor-
ney General of the United States to bring an action in an 
appropriate United States district court to obtain a monetery 
judgment against the employee and such other relief as may be 
avaiM>le. Tlie monetary judgment may, in the court's discre-
tion, include the attorneys' fees and other expenses incurred by 
the United States in connection with the action. In an action 
under this subsection, the validity and appropriateness of the 
Secretary's determination or order imposing the penalty shall 
not be subject to review. 
"(6) SETTLEMENT BY SECRETARY.—^The Secretary may com-
promi^, modify, or remit any civil money penalty which may 
be, or has been, imposed under this subsection. 
"(7) DEPOSIT OF PENALTIES.—^The Secretary shall deposit all 
civil money penalties collected under this subsection into mis-
cellaneous receipts of the Treasury. 
"(d) CRIMINAL PENALTIES.—^Whoever willfully violates subsection 
(a) by making a disclosure prohibited by subsection (a) to any 
applicant, or any officer, employee, representative, agent, or consult-
ant of any applicant, shall be imprisoned not more than 5 years, or 
fined in accordance with title 18, United States Code, or both. 
"(e) DEFINITIONS.—^For purposes of this section: 
"(1) APPUCANT.—^The term 'applicant' means any applicant or 
candidate that is beii^consideml for receiving assistance. 
"(2) ASSISTANCE.—^The term 'assistance' means any grant, 
loan, subsidy, guarantee, or other financial assistance under a 
program administered by the ^cretary that provides by stat-
*
*
^ ute, r^rulation, or otherwise for the competitive distribution of 
such assistance. The term does not include any mortgage insur-
ance provided under a program administered by the Secretary. 
"(3) COVERED SELECTION INFORMATION.—^The term 'covered 
selection information' means— 
"(A) any information that is contained in any application 
or request for assistance, or any information regarding the 
decision of the Secretary to make available assistance or 
other information that is determined by the Secretary to be 
information that is not generally available to the public 
(not including program requirements and timing of the 
decision to make assistance available); and 
"(B) any information that is required by statute, regula-
tion, or order to be confidential. 
"(4) KNOWINGLY.—^The term 'knowingly' means having actual 
kno^edge of or acting with deliberate ignorance of or reckless 
disregard for the prohibitions under this section. 
"(5) SELECTION.—^The term 'selection' means the determina-
tion of which applicants for assistance are to receive assistance 
under the program. 
"(6) SELECTION PROCESS.—^The term 'selection process' means 
the period with respect to a selection for assistance that be^ns 
with the development, preparation, and issuance of a solicite-
tion or request for applications for the assistance and concludes 
103 STAT. 1998 
PUBLIC LAW 101-235—DEC. 15, 1989 
Disaster 
assistance. 
Desegregation. 
with the selection of recipients of assistance, and includes the 
evaluation of applications. 
"(f) REGULATR)NS.—^The Secretary shall issue such regulations as 
the Secretary deems appropriate to implement this section. 
"(g) APPUCABIUTT.—This section shall apply only with respect to 
violations that occur on or after the date of the enactment of the 
Department of Housing and Urban Development Reform Act of 
1989.". 
SEC 104. BEFORM OF HEADQUARTERS RESERVE. 
(a) FUNDING CATEGOBIES.—Section 213(dX4) of the Housing and 
42 use 1439. 
Community Development Act of 1974 is amended to read as follows: 
"(4XA) Notwiths^nding any other provision of law, with respect 
to fiscal years b^inning after September 30, 1990, the Secretary 
may retain not more than 5 percent of the financial assistance that 
becomes available under programs described in subsection (aXD 
during any fiscal year. Any such financial assistance that is retained 
shall be available for subsequent allocation to specific areas and 
communities, and may only be used for— 
"(i) unforeseen housing needs resulting from natural and 
other disasters; 
"(ii) housing needs resulting from emergencies, as certified by 
the Secretary, other than such disasters; 
"(iii) housing needs resulting from the settlement of litigation; 
and 
"(iv) housing in support of desegregation efforts. 
"(B) Any amounts retained in any fiscal year under subparagraph 
(A) that are unexpended at the end of such fiscal year shall remain 
available for the following fiscal year under the pro-am under 
subsection (aXD fix>m which the amount was retained. Such 
amounts shall be allocated on the basis of the formula under 
subsection (dXD.". 
(b) EFFECTIVE DATE.—Any assistance made available imder section 
213(dX4) of the Housing and Community Development Act of 1974 
before October 1, 1990, or pursuant to a commitment for such 
assistance entered into before such date, shall be governed by the 
provisions of section 213(dX4) as such section existed before the date 
of the enactment of this Act. 
(c) INDIAN HOUSING.—In accordance with section 201(bX2) of the 
United States Housing Act of 1937, the amendment made by subsec-
tion (a) and the provisions of subsection (b) of this section shall also 
apply to public housing developed or operated pursuant to a contract 
between the Secretary of Housing and Urban Development and an 
Indian housing authority. 
SEC. 105. REFORM OF CDBG DISCRETIONARY FUND AND PROVISION OF 
TECHNICAL ASSISTANCE. 
(a) SPECIAL PURPOSE GRANTS.—Section 107(a) of the Housing and 
42 use 5307. 
Community Development Act of 1974 is amended— 
(1) by striking "in a special discretionary fund" in the first 
• sentence; and 
(2) by striking all that follows the period at the end of the 
second sentence. 
(b) AUTHORIZED USES.—Section 107(b) of the Housing and Commu-
nity Development Act of 1974 is amended— 
(1) by striking paragraphs (1) and (3); 
42 use 1439 
note. 
eontracts. 
42 use 1437aa 
note. 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 1999 
(2) by striking the period at the end of paragraph (5) and 
inserting a semicolon; 
(3) by redesignating paragraphs (2) and (5) (as amended) as 
paragraphs (1) and (2), respectively; and 
(4) by inserting after paragraph (2) (as so redesignated) the 
following new paragraph: 
"(3) to historically Black collies; and"; and 
(5) in paragraph (4)— 
(A) by striking ''and" after the third semicolon and all 
that follows through "and" after the fourth semicolon; and 
(B) by striking "and" at the end and inserting the follow-
ing: "for purposes of this paragraph the term 'technical 
assistance means the facilitating of skills and knowledge in 
planning, developing, and administering activities under 
this title in entities that may need but do not possess such 
skills and knowledge, and includes assessing programs and 
activities under tins title; except that any recipient of a 
grant under this paragraph that provides technical assist-
ance pursuant to this paragraph shall provide for the 
notification of the availability of such assistance and shall 
have specific criteria for selection of recipients of such 
assistance that are published and publicly available.". 
(c) FUNDING CRITERIA.—Section 107 of the Housing and Commu-
nity Development Act of 1974 is amended by adding at the end the 
following new subsection: 
"(f) Any grant made under this section shall be made pursuant to 
criteria for selection of recipients of such grants that the Secretary 
shall by r^ulation estabUsh and which the Secretary shall publish 
together with any notification of availability of amounts under this 
section.". 
(d) APFUCABIUTy.— 
(1) IN GEMBRAL.—^Except as provided in this paragraph and 
paragraph (2), the amendments made by this section shall apply 
with respect to any grants made under section 107 of the 
Housing and Community Development Act of 1974 on or after 
the date of the enactment of this Act, except a grant made 
under the third sentence of section 107(a) of Housing and 
Community Development Act of 1974, as such sentence existed 
immediately before such date, and grants for specific activities 
(referred to in House Report Number 101-297) pursuant to the 
amount appropriated for use under section 107 by the enact-
ment of the bill, H.R 2916, of the One Hundred First Congress. 
(2) PRIOR GRANTS.—^Any grant made under section 107 of the 
Housing and Community Development Act of 1974 before the 
date of the enactment of this Act or pursuant to a grant award 
notification made before such date shall be governed by the 
provisions of sudi section as it existed immediately before the 
date of the enactment of this Act 
(e) CONFORMING AMENDMENT.—llie section heading of section 107 
of the Housing and Community Development Act of 1974 is 
amended to read as follows: 
Schools and 
colleges. 
42 use 5307. 
Grants. 
Regulations. 
42 u s e 5307 
note. 
Grants. 
103 STAT. 2000 
PUBLIC LAW 101-235—DEC. 15,1989 
SPECIAL PURPOSE GRANTS . 
42 u s e 3535. 
Federal 
Register, 
publication. 
Public 
information. 
Loans. 
12 use 
1735f-14. 
SEC. 106. WAIVER OF REGULATION REQUIREMENTS AND HANDBOOK 
PROVISIONS. 
Section 7 of the Department of Housing and Urban Development 
Act is amended by adding at the end the following new subsection: 
"(qXl) Any waiver of r^ulations of the Department shall be in 
writing and shall specify the grounds for approving the waiver. 
''(2) The Secretary may delegate authority to approve a waiver of 
a r^lulation only to an individual of Assistant Secretary rank or 
equivalent rank, who is authorized to issue the regulation to be 
waived. 
"(3) The Secretary shall notify the public of all waivers of regula-
tions approved by the Department. The notification shall be in-
cluded in a notice in the Federal Register published not less than 
quarterly. Each notification shall cover the period beginning on the 
day after the last date covered by the prior notification, and sh£dl— 
"(A) identify the project, activity, or undertaking involved; 
"(B) describe the nature of the requirement that has been 
waiv^ and specify the provision involved; 
"(C) specify the name and title of the official who granted the 
waiver request; 
"(D) include a brief description of the grounds for approval of 
the waiver; and 
"(E) state how more information about the waiver and a copy 
of the request and the approval may be obtained. 
"(4) Any waiver of a provision of a handbook of the Department 
shaU— 
"(A) be in writing 
"(B) specify the grounds for approving the waiver; and 
"(C) be maintained in indexed form and made available for 
public inspection for not less than the 3-year period beginning 
on the date of the waiver.''. 
SEC 107. CIVIL MONEY PENALTIES AGAINST MORTGAGEES AND LENDERS. 
(a) IN GENERAL.—^Title V of the National Housing Act is amended 
by adding at the end the following new section: 
"CIVIL M O N E Y PENALTIES AGAINST MORTGAGEES AND LENDERS 
"SEC. 536. (a) IN GENERAL.— 
"(1) AUTHORITY.—^Whenever a mortgagee approved under this 
Act, or a lender holding a contract of insurance under title I of 
this Act, knowingly and materially violates any of the provi-
sions of subsection (b), the SecretaiV may impose a civil money 
penalty on the mortgagee or lender in accordance with the 
provisions of this section. The penalty shall be in addition to 
any other available civil remedy or any available criminal 
penalty, and may be imposed whether or not the Secretary 
imposes other administrative sanctions. 
(2) AMOUNT OF PENALTY.—^The amount of the penalty, as 
determined by the Secretaxy, may not exceed $5,000 for each 
violation, except that the maximum penalty for all violations by 
any particular mortgagee or lender during any 1-year period 
shall not exceed $1,0CW,000. Elach violation of a provision of 
subsection (bXD shall constitute a separate violation with re-
spect to each mortgage or loan application. In the case of a 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2001 
continumg violation, as determined by the Secretary, each day 
shall constitute a separate violation. 
*(b) VIOLATIONS FOR WHICH A PENALTY MAY BE IMPOSED.— 
"(1) VIOLATIONS.—^The Secretary may impose a civil money 
penalty under subsection (a) for any knowing and material 
violation by a mortgagee or lender, as follows: 
"(A) Except where expressly permitted by statute, regula-
tion, or contract approved by the Secretary, transfer of a 
mortgage insured under this Act to a mortgagee not ap-
prove by the Secretary, or transfer of a loan to a trans-
feree that is not holding a contract of insurance under title 
I of this Act. 
"(B) Failure of a nonsupervised mortgagee, as defined by 
the Secretary— 
"(i) to s^r^ate all escrow funds received from a 
mor^agor for ground rents, taxes, assessments, and 
insurance premiums; or 
"(ii) to deposit these funds in a special account with a 
depository institution whose accounts are insured by 
the Federal Deposit Insurance Corporation through the 
Bank Insurance Fund for banks and through the Sav-
ings Association Insurance Fund for savings associa-
tions, or by the National Credit Union Administration. 
"(Q Use of escrow funds for any purpose other than that 
for which they were received. 
"(D) Submission to the Secretary of information that was 
false, in connection with any mortgage insured under this 
Act, or any loan that is covered by a contract of insurance 
under title I of this Act. 
"(E) With respect to an officer, director, principal, or 
employee— 
"(i) hiring such an individual whose duties will in-
volve, directly or indirectly, pn^rams administered by 
the Secretary, while that person was under suspension 
or withdrawal by the Secretary; or 
"(ii) retaining in employment such an individual who 
continues to be involved, directly or indirectly, in pro-
grams administered by the Secretary, while that 
person was under suspension or withdrawal by the 
Secretary. 
"(F) Falsely certifying to the Secretary or submitting to 
the Secretary a false certification by another person or 
entity. 
"((j) Failure to comply with an agreement, certification, 
or condition of approval set forth on, or applicable to— 
"(i) the application of a mortgagee or lender for 
approval by the Secretary; or 
'(ii) the notification by a mortgagee or lender to the 
Secretary concerning establishment of a branch office. 
"(H) Violation of any provisions of title I, II, or X (as such 
title existed immediately before the effective date of the 
Department of Housing and Urban Development Reform 
Act of 1989) of this Act or any implementing regulation or 
handbook that is issued under this Act. 
"(2) 
NOTIFICATION TO ATTORNEY GENERAL.—Before taking 
action to impose a civil money penalty for a violation under 
103 STAT. 2002 
PUBLIC LAW 101-235—DEC. 15, 1989 
paragraph (IXD) or paragraph (IXF), the Secretary shall inform 
the Attorney General of the United States. 
"(c) AGENCY F^OCEDURES.— 
"(1) ESTABLISHMENT.—The Secretary shall establish standards 
and procedures governing the imposition of civil money pen-
alties under subsection (a). These standards and procedures— 
"(A) shall provide for the Secretary to make the deter-
mination to impose the penalty or to use an administrative 
entity (such as the Mortgagee Review Board, established 
pursuant to section 202(c) of the National Housing Act) to 
make the determination; 
"(B) shall provide for the imposition of a penalty only 
after the mortgagee or lender has been given an oppor-
tunity for a hearing on the record; and 
"(C) may provide for review by the Secretary of any 
determination or order, or interlocutory ruling, arising 
fromahearing. 
"(2) FINAL ORDERS.—If no hearing is requested within 15 days 
of receipt of the notice of opportunity for hearing, the imposi-
tion of the penalty shall constitute a final and unappealable 
determination. If the Secretary reviews the determination or 
order, the Secretary may affirm, modify, or reverse that deter-
mination or order. If the Secretary does not review the 
determination or order within 90 days of the issuance of the 
determination or order, the determination or order shall be 
final. 
"(3) FACTORS IN DETERMINING AMOUNT OF PENALTY.—In deter-
mining the amount of a penalty under subsection (a), consider-
ation shall be given to such factors as the gravity of the ofTense, 
any history of prior offenses (including those before enactment 
of this section), ability to pay the penalty, injury to the public, 
benefits received, deterrence of future violations, and such other 
factors as the Secretary may determine in regulations to be 
appropriate. 
(4) REVIEWABILITY OF IMPOSITION OF PENALTY.—The Sec-
retary's determination or order imposing a penalty under 
subsection (a) shall not be subject to review, except as provided 
in subsection (d). 
"(d) JUDICIAL RE^OEW OF AGENCY DETERMINATION.— 
"(1) IN GENERAL.—^After exhausting all administrative rem-
edies established by the Secretary under subsection (cXD, a 
mortgagee or lender against whom the Secretary has imposed a 
civil money penalty under subsection (a) may obtain a review of 
the penal^ and such ancillary issues (such as any administra-
tive sanctions under 24 C.F.R. part 25) as may be addressed in 
the notice of determination to impose a penalty under subsec-
tion (cXlXA) in the appropriate court of appeals of the United 
States, by filing in such court, within 20 days after the entry of 
such order or determination, a written petition praying that the 
Secretary's determination or order be modified or be set aside in 
whole or in part. 
"(2) OBJECTIONS NOT RAISED IN HEARING.—^The court shall not 
consider any objection that was not raised in the hearing con-
ducted pursuant to subsection (cXD unless a demonstration is 
made of extraordinary circumstances causing the failure to 
raise the objection. If any party demonstrates to the satisfaction 
of the court that additional evidence not presented at the 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2003 
hearing is material and that there were reasonable grounds for 
the failure to pr^ent such evidence at the hearing, the court 
shall remand the matter to the Secretary for consideration of 
the additional evidence. 
"(3) SCOPE OP REVIEW.—^The decisions, findings, and deter-
minations of the Secretary shall be reviewed pursuant to section 
706 of title 5, United States Code. 
"(4) ORDER TO PAY PENALTY.—Notwithstanding any other 
provision of law, in any such review, the court shall have the 
power to order payment of the penalty imposed by the 
Secretary. 
"(e) ACTION TO COLLECT PENALTY.—K any mortgagee or lender 
fails to comply with the Secretary's determination or order imposing 
a civil money penalty under subsection (a), after the determination 
or order is no longer subject to review as provided by subsections 
(cXD and (d), the Secretary may request the Attorney General of the 
United States to bring an action in an appropriate United States 
district court to obtain a monetary judgment against the mortgagee 
or lender and such other relief as may be available. The monetary 
judgment may, in the court's discretion, include the attorneys fees 
and other expenses incurred by the United States in connection with 
the action. In an action under this subsection, the validity and 
appropriateness of the Secretary's determination or order imposing 
the penalty shall not be subject to review. 
"(f) SETTLEMENT BY SECRETARY.—^The Secretary may compromise, 
modify, or remit any civil money penalty which may be, or has been, 
imposed under this section. 
(^ DEFINITION OF KNOWiNGLY.^The term 'knowingly' means 
having actual knowledge of or acting with deliberate ignorance of or 
reckless disr^ard for the prohibitions under this section. 
"(h) REGULATIONS.—^The Secretary shall issue such regulations as 
the Secretary deems appropriate to implement this section. 
"(i) DEPOSIT OF FEALTIES IN INSURANCE FUNDS.—Notwithstand-
ing any other provision of law, all civil money penalties collected 
under this section shall be deposited in the appropriate insurance 
fund or funds established under this Act, as determined by the 
Secretary.". 
(b) APPLICABILITY.—^The amendment made by subsection (a) shall 
apply only with respect to— 
(1) violations referred to in the amendment that occur on or 
after the effective date of this section; and 
(2) in the case of a continuing violation (as determined by the 
Secretary of Housing and Urban Development), any portion of a 
violation referred to in the amendment that occurs on or after 
such date. 
SEC 108. a y i L MONEY PENALTIES AGAINST MULTIFAMILY MORTGA- 
Loans. 
GORS. 
(a) IN GENERAL.—^Title V of the National Housing Act (as amend-
ed by the preceding provisions of this Act) is furmer amended by 
adding at uie end the following new section: 
12 u s e 1735f-14 
note. 
d V n . MONEY PENALTIES AGAINST MULTIFAMILY MORTGAGORS 
"SEC. 537. (a) IN GENERAL.—The penalties set forth in this section 12 use 
shall be in addition to any other available civU remedy or any I'735f-15. 
available criminal penalty, and may be impeded whether or not the 
103 STAT. 2004 
PUBUC LAW 101-235—DEC. 15,1989 
Secretary imposes other adniinJstrative sanctions. The Secretary 
may not impose penalties und^r ^his section for violations a mate-
rial cause of which are the failiire of tiie Department, an agent of 
the Department, or a public housing agency to comply with existing 
agreements. 
"(b) PENALTY FOR VIOLATION OF AGREEMENT AS CONDITION OF 
TRANSFER OF PHYSICAL ASSETS, FLEXIBLE SUBSIDY LOAN, CAPITAL 
IMPROVEMENT LOAN, MODIFICATION OF MORTGAGE TERMS, OR WORK-
OUT AGREEMENT.— 
"(1) AUTHORITY.—Whenever a mortgagor of property that 
includes 5 or more living units and that has a mortgage insured, 
co-insured, or held p|ursuant to this Act, who has agreed in 
writing, as a condition of a transfer of physical assets, a flexible 
subsidy loan, a capital improvement loan, a modification of the 
inOrtgage terms, or a workout agreement, to use nonproject 
income to make cash contributions for payments due under the 
note and mortgage, for payments to the reserve for replace-
ments, to restore the project to good physical condition, or to 
pay other project liabilities, knowingly and materially fails to 
comply with any of these commitments, the Secretary may 
impose a dvil money penalty on that mortgagor in accordance 
with the provisions of this section. 
"(2) AMOUNT OF PENALTY.—^The amount of the penalty, as 
determined by the Secretary, for a violation of this subscNCtion 
may not exceed the amount of the loss the Secretary would 
experience at a foreclosure sale, or a sale after foreclosure, of 
the property involved. 
"(c) VIOLATIONS OF REGULATORY AGREEMENT FOR WHICH PENALTY 
MAY BE IMPOSED.— 
Real property. 
"(1) VIOLATIONS.—^The Secretary may also impose a civil 
money penalty under this section on any mortgagor of property 
that includes 5 or more living units and that has a mortgage 
insured, co-insured, or held pursuant to this Act for any know-
ing and material violation of the r^ulatory agreement executed 
by the morteagor, as follows: 
"(A) Conveyance, transfer, or encumbrance of any of the 
mortgaged property, or permitting the conveyance, trans-
fer, or encumbrance of such property, without the prior 
written approval of the Secret^. 
"(B) Assignment, transfer, disposition, or encumbrance of 
any personal property of tlie project, including rents, or 
paying out any funds, except for reasonable operating ex-
penses and necessary repairs, witho|ut the prior written 
approval of the Secretary. 
(C) Conveyance, assignment, or transfer of any bene-
ficial interest in any thist holdhig title to the property, or 
the interest of any general partner in a partnership owning 
the property, or any right to manage or receiy(| the rents 
and profits from the mortgaged property, with^ii the prior 
written approval (^ the Secretary. 
"(D) Remodeling, adding to, reconstructing, or demolish-
ing any part of the mortgaged property or subtracting; frbm 
an^ reied or personal property of the project, without the 
prior written approval of uie Secretary. 
"(E) Requixing, as a condition of the occupancy or leasing 
of any unit in the project, any consideration or deposit 
other than the prepayment <^ the first month's rent, plus a 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2005 
security deposit in an amount not in excess of 1 month's 
rent, to guarantee the performance of the covenants of the 
lease. 
"(F) Not holding any funds collected £is security deposits 
separate and apart from all other funds of the project in a 
trust account, the amount of which at all times equals or 
exceeds the aggregate of all outstanding obligations under 
the account. 
"(G) Payment for services, supplies, or materials which 
exceeds $500 and substantially exceeds the amount ordi-
narily paid for such services, supplies, or materials in the 
area where the services are rendered or the supplies or 
materials furnished. 
"(H) Failure to maintain at any time the mortgaged 
property, equipment, buildings, plans, offices, apparatus, 
devices, books, contracts, records, documents, and other 
related papers (including failure to keep copies of all writ-
ten contracts or other instruments which affect the mort-
gaged property) in reasonable condition for proper audit 
and for examination and inspection at any reasonable time 
by the Secretary or any duly authorized agents of the 
Secretary. 
"(I) Failure to maintain the books and accounts of the 
operations of the mortgaged property and of the project in 
accordance with requirements prescribed by the Secretary. 
"(J) Failure to furnish the Secretary, by the expiration of 
the 60-day period beginning on the 1st day after the comple-
tion of each fiscal year, with a complete annual financial 
report based upon an examination of the books and records 
of the mortgagor prepared and certified to by an independ-
ent public accountant or a certified public accountant and 
certified to by an officer of the mortgagor, unless the 
Secretary has approved an extension of the 60-day period in 
writing. The Secretary shall approve an extension where 
the mortgagor demonstrates that failure to comply with 
this subparagraph is due to events beyond the control of the 
mortgagor. 
"(K) At the request of the Secretary, the agents of the 
Secretary, the employees of the Secretary, or the attorneys 
of the Secretary, failure to furnish monthly occupancy 
reports or failure to provide specific answers to questions 
upon which information is sought relative to income, assets, 
liabilities, contracts, the operation and condition of the 
property, or the status of the mortgage. 
"(L) Failure to make promptly all payments due under 
the note and mortgage, including mortgage insurance pre-
miums, tax and insurance escrow payments, and payments 
to the reserve for replacements when there is adequate 
project income available to make such payments. 
The pay out of surplus cash, as defined by and provided for in 
the regulatory agreement, shall not constitute a violation of 
such agreement. 
"(2) AMOUNT OF PENALTY.—A penalty imposed for a violation 
under this subsection, £is determined by the Secretary, may not 
exceed $25,000. 
'(d) AGENCY PROCEDURES.— 
103 STAT. 2006 
PUBLIC LAW 101-235—DEC. 15,1989 
"(1) ESTABLISHMENT.—The Secretary shall establish standards 
and procedures governing the imposition of civil money pen-
alties under subsections (b) and (c). These standards and 
procedures— 
"(A) shall provide for the Secretary or other department 
official (such as the Assistant Secretary for Housing) to 
make the determination to impose a penalty; 
"(B) shall provide for the imposition of a penalty only 
after the mortgagor has been given an opportunity for a 
hearing on the record; and 
"(C) may provide for review by the Secretary of any 
determination or order, or interlocutory ruling, arising 
from a hearing. 
"(2) FINAL ORDERS.—If no hearing is requested within 15 days 
of receipt of the notice of opportunity for hearing, the imposi-
tion of the penalty shall constitute a final and unappealable 
determination. If the Secretary reviews the determination or 
order, the Secretary may affirm, modify, or reverse that deter-
mination or order. If the Secretary does not review the 
determination or order within 90 days of the issuance of the 
determination or order, the determination or order shall be 
final. 
"(3) FACTORS IN DETERMINING AMOUNT OF PENALTY.—In deter-
mining the amount of a penalty under subsection (b) or (c), 
consideration shall be given to such factors as the gravity of the 
offense, any history of prior offenses (including offenses occur-
ring before enactment of this section), ability to pay the penalty, 
iiyury to the tenants, injury to the public, benefits received, 
deterrence of future violations, and such other factors as the 
Secretary may determine in regulations to be appropriate. 
"(4) REVIEWABILITY OF IMPOSITION OF PENALTY.—The Sec-
retary's determination or order imposing a penalty under 
subsection (b) or (c) shall not be subject to review, except as 
provided in subsection (e). 
"(e) JUDICIAL REVIEW OF AGENCY DETERMINATION.— 
"(1) IN GENERAL.—After exhausting all administrative rem-
edies established by the Secretary under subsection (dXlX a 
mortgagor against whom the Secretary has imposed a civil 
money pencdty under subsection (b) or (c) may obtain a review of 
the penalty and such ancillary issues as may be addressed in 
the notice of determination to impose a penalty under subsec-
tion (dXlXA) in the appropriate court of appeals of the United 
States, by filing in such court, within 20 days after the entry of 
such order or determination, a written petition prajdng that the 
Secretary's order or determination be modified or be set aside in 
whole or in part. 
"(2) OBJECTIONS NOT RAISED IN HEARING.—The court shall not 
consider any objection that was not raised in the hearing con-
ducted pursuant to subsection (dXD unless a demonstration is 
made of extraordinary circumstances causing the failure to 
raise the objection. If any party demonstrates to the satisfaction 
of the court that additional evidence not presented at such 
hearing is material and that there were reasonable grounds for 
the failure to present such evidence at the hearing, the court 
shall remand the matter to the Secretary for consideration of 
such additional evidence. 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2007 
"(3) SCOPE OF REVIEW.—The decisions, jfindings, and deter-
minations of the Secretary shall be reviewed pursuant to section 
706 of title 5, United States Code. 
"(4) ORDER TO PAY PENALTY.—Notwithstanding any other 
provision of law, in any such review, the court shall have the 
power to order payment of the penalty imposed by the 
Secretary. 
"(f) ACTION TO COIXECT PENALTY.—If a mortgagor fails to comply 
with the Secretary's determination or order imposing a civil money 
penalty under subsection (b) or (c), after the determination or order 
is no longer subject to review as provided by subsections (dXl) and 
(e), the Secretary may request the Attorney General of the United 
States to brii^ an action in an appropriate United States district 
court to obtain a monetary judgment against the mortgagor and 
such other relief as may be available. The monetary judgment may, 
in the court's discretion, include the attorneys fees and other ex-
penses incurred by the United States in connection with the action. 
In an action under this subsection, the validity and appropriateness 
of the Secretary's determination or order imposing the penalty shall 
not be subject to review. 
"(g) SETTLEMENT BY SECRETARY.—The Secretary may compromise, 
modify, or remit any civil money penalty which may be, or has been, 
imposed under this section. 
(h) DEFiNmoN O
P KNOWINGLY.—^The term 'knowingly* means 
having actual knowledge of or acting with deliberate ignorance of or 
reckless disregard for me prohibitions under this section. 
"(i) REGULATIONS.—The Secretary shall issue such regulations as 
the Secretary deems appropriate to implement this section. 
"(j) DEPOsrr OF PENALTIES IN INSURANCE FUNDS.—Notwithstand-
ing any other provision of law, all civil money penalties collected 
under this section shall be deposited in the fimd established under 
section 201Q) of the Housing and Community Development Amend-
ments of 1978.". 
(b) i^>PUCABiLiTY.—The amendment made by subsection (a) shall 
apply only with respect to violations referred to in the amendment 
that occur on or after the effective date of this section. 
12 use 1735f-15 
note. 
SEC 109. CIVIL MONEY PENALTIES AGAINST SECTION 202 MORTGAGORS. Loans. 
(a) IN GENERAL.—Title n of the Housing Act of 1959 is amended by 
inserting after section 202 the following new section: 
"CIVIL MONEY PENALTIES AGAINST SECTION 202 MORTGAGORS 
"SEC. 202a. (a) IN GENERAL.—The penalties set forth in this sec- 1
2 use noiq-i. 
tion shall be in addition to any other available civil remedy or 
criminal penalty, and may be imposed whether or not the Secretary 
imposes other administrative sanctions. The Secretary may not 
impose penalties under this section for violations a material cause of 
wmch are the failure of the Department, an agent of the 
Department, or a public housing agency to comply with existing 
agreements. 
"(b) PENALTY FOR VIOLATION OF AGREEMENT AS CoNDmoN OF 
TRANSFER OF PHYSICAL AKETS, FLEXIBLE SuBsrov LOAN, CAPTTAL 
IMPROVEMENT LOAN, MODIFICATION OF MORTGAGE TERMS, OR WORK-
OUT AGREEMENT.— 
"(1) IN GENERAL.—^Whenever a mortgagor of property that Real property. 
includes 5 or more living units and that has a mortgage held 
103 STAT. 2008 
PUBLIC LAW 101-235—DEC. 15,1989 
pursuant to section 202, who has agreed in writing, as a condi-
tion of a transfer of physical assets, a flexible subsidy loan, a 
capital improvement loan, a modification of the mortgage 
terms, or a workout agreement, to use nonproject income to 
make cash contributions for payments due under the note and 
mortgage, for payments to the reserve for replacements, to 
restore the project to good physical condition, or to pay other 
project liabilities, knowingly and materially fails to comply with 
any of these commitments, the Secretary may impose a civil 
money penalty on the mortgagor in accordance with the provi-
sions of this section. 
"(2) AMOUNT.—The amount of the penalty, as determined by 
the Secretary, for a violation of this subsection may not exceed 
the amount of the loss the Secretary would incur at a fore-
closure sale, or sale after foreclosure, with respect to the prop-
erty involved. 
Real property. 
"(c) VIOLATIONS OF REGULATORY AGREEMENT.— 
"(1) IN GENERAL.—The Secretary may also impose a civil 
money penalty on a mortgagor or property that includes 5 or 
more living units and that has a mortgage held pursuant to 
section 202 for any knowing and material violation of the 
regulatory agreement executed by the mortgagor, as follows: 
"(A) Conveyance, transfer, or encumbrance of any of the 
mortgaged property, or permitting the conveyance, trans-
fer, or encumbrance of such property, without the prior 
written approval of the Secretary. 
"(B) Assignment, transfer, disposition, or encimibrance of 
any personal property of the project, including rents, or 
pajring out any funds, except for reasonable operating ex-
penses and necessary repairs, Mdthout the prior written 
approval of the Secretary. 
(C) Conveyance, assignment, or transfer of any bene-
ficial interest in any trust holding title to the property, or 
the interest of any general partner in a partnership owning 
the property, or any right to manage or receive the rents 
and profits 
firom 
the mortgaged property, without the prior 
,
^ 
written approval of the Secretary. 
^ 
"(D) Remodeling, adding to, reconstructing, or demolish-
^
~ 
ing any part of the mortgaged property or subtracting from 
an^ real or personal propertv of the project, without the 
prior written approval of the Secretary. 
"(E) Requiring, as a condition of the occupancy or leasing 
of any unit in the project, any consideration or deposit 
other than the prepa3mient of the first month's rent, plus a 
security deposit in an amount not in excess of 1 month's 
rent, to guarantee the performance of the covenants of the 
lease. 
"(F) Not holding any funds collected as security deposits 
separate and apart from all other funds of the project in a 
trust account, the amount of which at all times equals or 
exceeds the aggregate of all outstanding obligations under 
the account. 
"(G) Payment for services, supplies, or materials which 
exceeds $500 and substantially exceeds the amount ordi-
narily paid for such services, supplies, or materials in the 
area where the services are rendered or the supplies or 
materials furnished. 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2009 
"(H) Failure to maintain at any time the mortgaged 
property, equipment, buildings, plana, offices, apparatus, 
devices, books, contracts, records, documents, and other 
related papers (including failure to keep copies of all writ-
ten contracts or other instruments which affect the mort-
gaged property) in reasonable condition for proper audit 
and for examination and inspection at any reasonable time 
by the Secretary or any duly authorized agents of the 
Secretary. 
"(I) Failure to maintain the books and accounts of the 
operations of the mortgaged property and of the project in 
accordance with requirements prescribed by the Secretary. 
"(J) Failure to furnish the Secretary, by the expiration of 
the 60-day period beginning on the 1st day after the comple-
tion of each fiscal year, with a complete annual financial 
report based upon an examination of the books and records 
of the mortgagor prepared in accordance with requirements 
prescribed by the Secretary, and prepared and certified to 
by an independent public accountant or a certified public 
accountant and certified to by an officer of the mortgagor, 
unless the Secretary has approved an extension of the 60-
day period in writing. The Secretary shall approve an 
extension where the mortgagor demonstrates that failure to 
comply with this subparagraph is due to events beyond the 
control of the mortgagor. 
"(K) At the request of the Secretary, the agents of the 
Secretary, the employees of the Secretary, or the attorneys 
of the Secretary, failure to furnish monthly occupancy 
reports or failure to provide specific answers to questions 
upon which information is sought relative to income, assets, 
liabilities, contracts, the operation and condition of the 
property, or the status of the mortgage. 
"(L) Failure to make promptly all pajrments due under 
the note and mortgage, including tax and insurance escrow 
payments, and pajrments to the reserve for replacements 
when there is adequate project income available to make 
such payments. 
"(M) Amending the articles of incorporation or bylaws, 
other than £is permitted under the terms of the articles of 
incorporation as approved by the Secretary, without the 
prior written approval of the Secretary. 
"(2) AMOUNT OF PENALTY.—A penalty imposed for a violation 
under this subsection, as determined by the Secretary, may not 
exceed $25,000 for a violation of any of the subparagraphs of 
paragraph (1). 
'(d) AGENCY PROCEDURES.— 
"(1) ESTABLISHMENT.—The Secretary shall establish standards 
and procedures governing the imposition of civil money 
penalties under subsections (b) and (c). These standards and 
procedures— 
"(A) shall provide for the Secretary or other department 
official (such as the Assistant Secretary for Housing) to 
make the determination to impose a penalty; 
"(B) shall provide for the imposition of a penalty only 
after the mortgagor has been given an opportunity for a 
hearing on the record; and 
103 STAT. 2010 
PUBLIC LAW 101-235—DEC. 15, 1989 
"(C) may provide for review by the Secretary of any 
determination or order, or interlocutory ruling, arising 
from a hearing. 
"(2) FINAL ORDERS.—If no hearing is requested within 15 days 
of receipt of the notice of opportunity for hearing, the imposi-
tion of the penalty shall constitute a final and unappealable 
determination. If the Secretary reviews the determination or 
order, the Secretary may affirm, modify, or reverse that deter-
mination or order. If the Secretary does not review the 
determination or order within 90 days of the issuance of the 
determination or order, the determination or order shall be 
final. 
"(3) FACTORS IN DETERMINING AMOUNT OF PENALTY.—In deter-
mining the amount of a penalty under subsection (b) or (c), 
consideration shall be given to such factors as the gravity of the 
offense, any history of prior offenses (including offenses occur-
ring before enactment of this section), ability to pay the pensdty, 
injury to the tenants, injury to the public, benefits received, 
deterrence of future violations, and such other factors as the 
Secretary may determine in regulations to be appropriate. 
"(4) REVIEWABILITY OF IMPOSITION OF PENALTY.—The Sec-
retary's determination or order imposing a penalty under 
subsection (b) or (c) shall not be subject to review, except as 
provided in subsection (e). 
"(e) JUDICIAL REVIEW OF AGENCY DETERMINATION.— 
"(1) IN GENERAL.—After exhausting all administrative rem-
edies established by the Secretary under subsection (dXD, a 
mortgagor against whom the Secretary has imposed a civil 
money penalty under subsection (b) or (c) may obtain a review of 
the penalty and such ancillary issues as may be addressed in 
the notice of determination to impose a penalty under subsec-
tion (dXlXA) in the appropriate court of appeals of the United 
States, by filing in such court, within 20 days after the entry of 
such order or determination, a written petition praying that the 
Secretery's order or determination be modified or be set aside in 
whole or in part. 
"(2) OBJECTIONS NOT RAISED IN HEARING.—The court shall not 
consider any objection that was not raised in the hearing con-
ducted pursuant to subsection (dXD unless a demonstration is 
made of extraordinary circumstances causing the failure to 
raise the objection. If any party demonstrates to the satisfaction 
of the court that additional evidence not presented at such 
hearing is material and that there were reasonable grounds for 
the failure to present such evidence at the hearing, the court 
shall remand the matter to the Secretary for consideration of 
such additional evidence. 
1 
"(3) SCOPE OF REVIEW.—The decisions, findings, and deter-
minations of the Secretory shall be reviewed pursuant to section 
706 of title 5, United States Code. 
"(4) ORDER TO PAY PENALTY.—Notwithstanding any other 
provision of law, in any such review, the court shall have the 
power to order payment of the penalty imposed by the 
Secretory. 
"(f) ACTION TO CJOLLECT PENALTY.—If a mortgagor fails to comply 
with the Secretery's determination or order imposing a civil money 
penalty under subsection (b) or (c), after the determination or order 
is no longer subject to review as provided by subsections (dXD and 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2011 
(e), the Secretary may request the Attorney General of the United 
States to bring an action in an appropriate United States district 
court to obtain a monetary judgment against the mortgagor and 
such other relief as may be available. The monetary judgment may, 
in the court's discretion, include the attorneys fees and other ex-
penses incurred by the United States in connection with the action. 
In an action under this subsection, the validity and appropriateness 
of the Secretary's determination or order imposing the penalty shall 
12 use I70iq-i 
not be subject to review. 
^°^-
"(g) SETTLEMENT BY SECRETARY.—The Secretary may compromise, 
modify, or remit any civil money penalty which may be, or has been, 
imposed under this section. 
"(h) DEFINITION OF KNOWINGLY.—The term 'knowingly* means 
having actual knowledge of or acting with deliberate ignorance of or 
reckless disregard for the prohibitions under this section. 
"(i) REGULATIONS.—The Secretary shall issue such regulations as 
the Secretory deems appropriate to implement this section. 
"(j) DEPOSIT OF PENALTIES IN INSURANCE FUNDS.—Notwithstond-
ing any other provision of law, all civil money penalties collected 
under this section shall be deposited in the fund estoblished under 
section 201(j) of the Housing and Community Development Amend-
ments of 1978.". 
(b) APPUCABIUTY.—The amendment made by subsection (a) shall 
apply only with respect to violations referred to in the amendment 
that occur on or after the effective date of this section. 
(c) CONFORMING AMENDMENT.—Section 201(jX2) of the Housing 
and (Dommunity Development Amendments of 1978 is amended— 12 use 
(1) by striking "and" before "(D)"; and 
I7i5z-ia. 
(2) by inserting before the period at the end the following: 
", and (E) any amount received by the Secretery pursuant to 
section 537 of the National Housing Act and section 202a of the 
Housing Act of 1959". 
SEC. 110. CIVIL MONEY PENALTIES AGAINST GNMA ISSUERS. 
Loans. 
(a) IN GENERAL.—Title III of the National Housing Act is amended 
by adding at the end the following new section: 
"CIVIL MONEY PENALTIES AGAINST ISSUERS 
"SEC. 317. (a) IN GENERAL.— 
12 use i723i. 
"(1) AUTHORITY.—Whenever an issuer or custodian approved 
under section 306(g) knowingly and materially violates any 
provisions of subsection (b), the Secretory of Housing and Urban 
Development may impose a civil money penalty on the issuer or 
the custodian in accordance with the provisions of this section 
The penalty shall be in addition to any other available civil 
remedy or any available criminal penalty and may be imposed 
whether or not the Secretory imposes other administrative 
sanctions. 
"(2) AMOUNT OF PENALTY.—The amount of the penalty, as 
determined by the Secretory, may not exceed $5,000 for each 
violation, except that the maximum penalty for all violations by 
a particular issuer or custodian during any one-year period 
shall not exceed $1,000,000. Each violation of a provision of 
subsection (bXl) shall constitute a separate violation with re-
spect to each pool of mortgages. In the case of a continuing 
103 STAT. 2012 
PUBLIC LAW 101-235—DEC. 15, 1989 
violation, as determined by the Secretary, each day shall con-
stitute a separate violation. 
"Qai) VIOLATIONS FOR WHICH A PENALTY MAY BE IMPOSED.— 
"(1) VIOLATIONS.—The violations by an issuer or a custodicui 
for which the Secretary may impose a civil money penalty 
under subsection (a) are the following: 
"(A) Failure to make timely pa}mients of principal and 
interest to holders of securities guaranteed under section 
306(g). 
"(B) Failure to segregate cash 
flow 
from pooled mortgages 
or to deposit either principal and interest funds or escrow 
funds into special accounts with a depository institution 
whose accounts are insured by the National Credit Union 
Administration or by the Federal Deposit Insurance Cor-
poration through the Bank Insurance Fund for banks or 
through the Savings Association Insurance Fund for sav-
ings associations. 
"(C) Use of escrow funds for any purpose other than that 
for which they were received. 
"(D) Transfer of servicing for a pool of mortgages to an 
issuer not approved under this title, unless expressly per-
mitted by statute, regulation, or contract approved by the 
Secretary. 
"(E) Failure to maintain a minimum net worth in accord-
ance with requirements prescribed by the Association; 
"(F) Failure to promptly notify the Association in writing 
of any changes that materially affect the business status of 
an issuer. 
"(G) Submission to the Association of false information in 
connection with any securities guaranteed, or mortgages 
pooled, under section 306(g). 
"(H) Hiring, or retaining in emplo3rment, an officer, direc-
tor, principal, or employee whose duties involve, directly or 
indirectly, programs a^inistered by the Association while 
such person was imder suspension or debarment l^ the 
Secretary. 
"(I) Submission to the Association of a false certification 
either on its own behalf or on behalf of another person or 
entity. 
"(J) Failure to comply with an agreement, certification, 
or condition of approval set forth on, or applicable to, the 
application for approval as an issuer of securities under 
section 306(g). 
"(K) Violation of any provisions of this title or any im-
plementing regulation, handbook, or participant letter 
issued under authority of this title. 
"(2) NOTIFICATION TO ATTORNEY GENERAL.—Before taking 
action to impose a civil money penalty for a violation under 
paragraph (IXG) or paragraph (IXI), the Secretary shall inform 
the Attorney General of the u 
nited States. 
"(c) AGENCY PROCEDURES.— 
"(1) ESTABLISHMENT.—The Secretary shall establish standards 
and procedures governing the imposition of civil money pen-
alties under subsection (a). The standards and procedures— 
"(A) shall provide for the Secretary to make the 
determination to impose the penalty; 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2013 
"(B) shall provide for the imposition of a penalty only 
after an issuer or a custodian has been given notice of, and 
opportunity for, a hearing on the record; and 
(C) may provide for review by the Secretary of any 
determination or order, or interlocutory ruling, arising 
from a hearing. 
"(2) FINAL ORDERS.—If no hearing is requested within 15 days 
of receipt of a notice of opportunity for hearing, the imposition 
of a penalty shall constitute a final and unappealable deter-
mination. If the Secretary reviews the determination or order, 
the Secretary may affirm, modify, or reverse that determination 
or order. If the &cretanr does not review the determination or 
order within 90 days of the issuance of the determination or 
order, the determination or order shall be final. 
"(3) FACTORS IN DETERMINING AMOUNT OF PENALTY.—In deter-
mining the amount of a penalty under subsection (a), consider-
ation shall be given to such factors as the gravity of the offense, 
any history of prior offenses (including offenses occurring before 
enactment of this section), ability to pay the penalty, injury to 
the public, benefits received, deterrence of future violations, 
and such other factors as the Secretary may determine by 
regulations. 
(4) REVIEWABILITY OF IMPOSITION OF PENALTY.—The Sec-
retary's determination or order imposing a penalty under 
subsection (a) shall not be subject to review, except as provided 
in subsection (d). 
"(d) JUDICIAL REVIEW OF AGENCY DETERMINATION.— 
"(1) IN GENERAL.—After exhausting all administrative rem-
edies established by the Secretary under subsection (cXD, an 
issuer or a custodian against which the Secretary has imposed a 
civil money penalty under subsection (a) may obtain a review of 
the penalty and such ancillary issues as may be addressed in 
the notice provided under subsection (cXlXA) in the appropriate 
court of appeals of the United States, by filing in such court, 
within 20 days after the entry of such order or determination, a 
written petition praying that the Secretary's order or deter-
mination be modified or be set aside in whole or in part, 
"(2) OBJECTIONS NOT RAISED IN HEARING.—A court shall not 
consider any objection that was not raised in the hearing con-
ducted pursuant to subsection (cXD unless a demonstration is 
made of extraordinary circumstances causing the failure to 
raise the objection. If any party demonstrates to the satisfaction 
of the court that additional evidence, which was not presented 
at such hearing, is material and that there were reasonable 
grounds for the failure to present such evidence at the hearing, 
the court shall remand the matter to the Secretary for consider-
ation of such additional evidence. 
"(3) SCOPE OF REVIEW.—The decisions, findings, and deter-
minations of the Secretary shall be reviewed pursuant to section 
706 of title 5, United States Code. 
"(4) ORDER TO PAY PENALTY.—Notwithstanding any other 
provision of law, the court shall have the power in any such 
review to order payment of the penalty imposed by the 
Secretary. 
"(e) ACTION TO COLLECT PENALTY.—If any issuer or custodian fails 
to comply with the Secretary's determination or order imposing a 
civil money penalty under subsection (a), after the determination or 
103 STAT. 2014 
PUBLIC LAW 101-235—DEC. 15,1989 
order is no longer subject to review as provided by subsections (cXD 
and (d), the Secretary may request the Attorney Greneral of the 
United States to bring an action in an appropriate United States 
district court to obtain a monetary judgment against the issuer or 
custodian and such other relief as may be available. The monetary 
^ 
judgment may, in the discretion of the court, include any attorneys 
fees and other expenses incurred by the United States in connection 
with the action. In an action under this subsection, the validity and 
appropriateness of the Secretary's determination or order imposing 
the penalty shall not be subject to review. 
''(f) SETTLEMENT BY SECRETARY.—^The Secretary may compromise, 
modify, or remit any civil money penalty which may be, or has been, 
imposed under this section. 
"^) DEFINITION OF KNOWINGLY.—The term 'knowingl/ means 
having actual knowledge of or acting with deliberate ignorance of or 
reckless disr^ard for the prohibitions under this section. 
"(h) REGULATIONS.—The Secretary shall issue such regulations as 
the Secretary deems appropriate to implement this section. 
"(i) DEPOSIT OF PENALTIES.—The Secretary shall deposit all civil 
money penalties collected imder this section into moneys of the 
Association pursuant to section 307.". 
12 use 1
7
2
3
1 
(b) APPUCABIUTY.—-The amendment made by subsection (a) shall 
"°*® 
apply only with respect to— 
(1) violations referred to in the amendment that occur on or 
after the effective date of this section; and 
(2) in the case of a continuing violation (as determined by the 
Secretary of Housing and Urbsm Development), any portion of a 
violation referred to in the amendment that occurs on or after 
such date. 
SEC. 111. aVIL MONEY PENALTIES FOR VIOLATIONS OF INTERSTATE 
LAND SALES FULL DISCLOSURE ACT. 
(a) IN GENERAL.—The Interstate Land Sales Full Disclosure Act is 
amended by inserting after section 1418 the following new section: 
"aVIL MONEY PENALTIES 
15 use 1717a. 
"SEC. 1418a. (a) I N GENERAL.— 
"(1) AUTHORITY.—Whenever any person knowingly and mate-
rially violates any of the provisions of this title or any rule, 
regulation, or order issued under this title, the Secretary may 
impose a civil money penalty on such person in accordance with 
the provisions of this section. The penalty shall be in addition to 
any other available civil remedy or any available criminal 
penalty, and may be imposed whether or not the Secretary 
imposes other administrative sanctions. 
"(2) AMOUNT OF PENALTY.—The amount of the penalty, as 
determined by the Secretary, may not exceed $1,000 for each 
violation, except that the maximum penalt3r for all violations by 
a particular person during any 1-year period shall not exceed 
$1,000,000. Each violation of this title, or any rule, regulation, 
or order issued under this title, shall constitute a separate 
violation with respect to each sale or lease or offer to sell or 
lease. In Uie case of a continuing violation, as determined by the 
Secretary, each day shall constitute a separate violation. 
"(b) AGENCY PROCEDURES.— 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2015 
"(1) EsTABLiSHMENT.--The Secretary shall establish standards 
and procedures governing the imposition of civil money pen-
alties under subsection (a). The standards and procedures— 
"(A) shall provide for the imposition of a penalty only 
after a person has been given an opportunity for a hearing 
on the record; and 
"(B) may provide for review by the Secretary of any 
determination or order, or interlocutory ruling, arising 
from a hearing. 
"(2) FINAL ORDERS.—If no hearing is requested within 15 days 
of receipt of the notice of opportunity for hearing, the imposi-
tion of the penalty shall constitute a final and unappealable 
determination. If the Secretary reviews the determination or 
order, the Secretary may affirm, modify, or reverse that deter-
mination or order. If the Secretary does not review the 
determination or order within 90 days of the issuance of the 
determination or order, the determination or order shall be 
final. 
"(3) FACTORS IN DETERMINING AMOUNT OP PENALTY.—In deter-
mining the amount of a penalty under subsection (a), consider-
ation shall be given to such factors as the gravity of the offense, 
any history of prior offenses (including offenses occurring before 
enactment of this section), ability to pay the penalty, injury to 
the public, benefits received, deterrence of future violations, 
and such other factors as the Secretary may determine in 
regulations to be appropriate. 
"(4) REVIEWABIUTY OP IMPOSITION OP PENALTY.—The Sec-
retary's determination or order imposing a penalty under 
subsection (a) shall not be subject to review, except as provided 
in subsection (c). 
"(c) JUDICIAL REVIEW OP AGENCY DETERMINATION.— 
"(1) IN GENERAL.—After exhausting all administrative rem-
edies established by the Secretary under subsection (bXD, a 
person aggrieved by a final order of the Secretary assessing a 
penalty under this section may seek judicial review pursuant to 
section 1411. 
"(2) ORDER TO PAY PENALTY.—Notwithstanding any other 
provision of law, in any such review, the court shall have 
the power to order payment of the penalty imposed by the 
Secretary. 
"(d) ACTION TO COLLECT PENALTY.—If any person fails to comply 
Mrith the determination or order of the Secretary imposing a civil 
money penalty under subsection (a), after the determination or 
order is no longer subject to review as provided by subsections (b) 
and (c), the Secretary may request the Attorney General of the 
United States to bring an action in any appropriate United States 
district court to obtain a monetary judgment against the person and 
such other relief as may be available. The monetary judgment may, 
in the discretion of the court, include any attorneys fees and other 
expenses incurred by the United Stated in connection with the 
action. In an action under this subsection, the validity and appro-
priateness of the Secretary's determination or order imposing the 
penalty shall not be subject to review. 
"(e) SETTLEMENT BY SECRETARY.—The Secretary may compromise, 
modify, or remit any civil money penalty which may be, or has been, 
imposed under this section. 
- * 
103 STAT. 2016 
PUBLIC LAW 101-235—DEC. 15,1989 
"(f) DEFINITION OP KNOWINGLY.—The term 'knowingly' means 
having actual knowledge of or acting with deliberate ignorance of or 
reckless disregard for the prohibitions under this section. 
"(g) REGULATIONS.—The Secretary shall issue such regulations as 
the Secretary deems appropriate to implement this section. 
"(h) USE OF PENALTIES FOR ADMINISTRATION.—Civil money pen-
alties collected under this section shall be paid to the Secretary and, 
upon approval in an appropriation Act, may be used by the Sec-
retary to cover all or part of the cost of rendering services under this 
title.'^. 
15 use 1717a 
(b) AppucABiUTY.—The amendment made by subsection (a) shall 
^°^- 
apply only with respect to— 
(1) violations referred to in the amendment that occur on or 
after the effective date of this section; and 
(2) in the case of a continuing violation (as determined by the 
Secretary of Housing and Urban Development), any portion of 
violation referred to in the amendment that occurs on or after 
such date. 
SEC. 112. REGISTRATION OF CONSULTANTS. 
The Department of Housing and Urban Development Act, as 
amended by the preceding provisions of this Act, is further amended 
by adding at the end the following new section: 
"REGISTRATION OF CONSULTANTS 
42 use 3537b. 
"SEC. 13. (a) RECORD OF EXPENDITURES.— 
"(1) REQUIREMENT TO MAINTAIN.—Each person who makes an 
expenditure to influence the decision of any officer or employee 
of the Department, through communication with such ofncer or 
employee, with respect to— 
"(A) the aw£u*d of any financial assistance within the 
jurisdiction of the Department, or 
"(B) any management action involving a change in the 
terms and conditions or status of financial assistance 
awarded to any person, 
shall keep records, as required by this section. The preceding 
'
^ sentence shall not apply to expenditures incurred in complying 
with conditions, re<]^uirements, or procedures imposed by the 
Secretary in connection with any financisd assistance. 
"(2) (DovERED INFORMATION.—Each person referred to in para-
r graph (1) shall keep a detailed and exact accoimt of— 
"(A) all such expenditures made by or on behalf of such 
person; and 
"(B) the name and address of every person to whom any 
such expenditure is made and the date of the expenditure. 
"(3) MAINTENANCE OF RECORDS.—Each person making such an 
expenditure shall obtain a bill, stating the particulars, for eveiy 
such expenditure, and shall retain all records required by this 
section for not less than the 2-year period beginning on the date 
of the filing of the report required by subsection (b), which shall 
include the information under paragraph (2). 
"(4) LnoTATiON O
F FEES.—^Any person engaged for pay or 
other consideration for the purpose of attempting to influence 
any awturd or allocation of financial assistance within the juris-
diction of the Department shall not seek or receive any fee that 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2017 
"(A) based on the amount of assistance or number of 
units that may be provided by the Secretary, or 
"(B) contingent on an award of assistance by the Sec-
retary, except where— 
"(i) services are provided to a nonprofit entity apply-
ing for such award or allocation of assistance; and 
(ii) professional services related to a project are 
donated in whole or in part to a nonprofit entity in the 
event assistance for a project is not awarded. 
"(b) REPORTS OF EXPENDITURES FILED WITH THE SECRETARY.— 
"(1) REPORT.—Each person making an expenditure for the 
purposes designated in subsection (aXD shall file with the Sec-
retary, between the 1st and 10th day of each calendar year, a 
report specifjring the total expenditures made by or on behalf of 
such person during the year and the information required by 
subsection (aX2XB). 
"(2) REGULAR EMPLOYEES.—The requirements of this subsec-
tion shall not apply in the case of a payment of reasonable 
compensation made to any regularly employed officer or 
employee of the person who requests or receives assistance 
within the jurisdiction of the Department, or who is involved in 
any management action with respect to such assistance. 
"(3) MINIMUM DOLLAR REQUIREMENTS.—The requirements of 
this subsection shall not apply to any person whose total 
expenditures for purposes described in subparagraphs (A) and 
(B) of subsection (aXD are less than $10,000 in any calendar 
year. 
"(4) FiUNG AND RETENTION.—A report required by this sub-
section— 
"(A) shall be considered properlv filed when deposited in 
a post office within the prescribed time, stamped, reg-
istered, and addressed to the Secretary, but if the Secretary 
does not receive the report, the person shall promptly file a 
duplicate report when the Secretary notifies the person 
that the original report has not been received; and 
"(B) shall be retained by the Secretanr for the 2-year 
period beginning on the date of filing, shall constitute part 
of the public records of the Department, and shall be open 
to public inspection. 
"(5) PUBUCATION OF INFORMATION.—The Secretary shall com-
pile all expenditure information as soon as practicable after the 
close of the calendar year with respect to which the information 
is filed and shall publish it as a notice in the Federal Register. 
"(c) REGISTRATION BY PERSONS ATTEMPTING To INFLUENCE DEPART-
MENT DECISIONS.— 
"(1) REQUIREMENT AND INFORMATION.—Each person receiving 
payment or any consideration for the purpose described in 
subsection (aXD, shall, not later than 14 days after being re-
tained for such purpose, register with the Secretary. The reg-
istration shall be in writing and shall include the name and 
business address of the registrant, the name and address of the 
registrant's employer and of any person or entity in whose 
interest the registrant appears or works, and a statement of 
whether the registrant has been employed by the Federal 
Government during the 2-year period ending on the date of the 
registration and in what capacitv. Each registrant shall, be-
tween the 1st and 10th day of each calendar year, file with the 
Public 
information. 
Federal 
Register, 
publication. 
Reports. 
103 STAT. 2018 
PUBLIC LAW 101-235—DEC. 15, 1989 
Secretary a detailed report of all money received and expended 
by the registrant during the preceding year in carrying out the 
work, including information as to whom money was paid, and 
for what purposes. 
"(2) MINIMUM DOLLAR REQUIREMENT.—The requirements of 
the last sentence of paragraph (1) shall not apply with respect to 
any calendar year to any person whose total compensation for 
attempting to influence a decision with respect to assistance 
within the jurisdiction of the Department or a management 
action with respect to such assistance is less than $10,000 in 
such year. 
Federal Register, 
"(3) PuBUCATiON O
P INFORMATION.-The Secretary shall com-
publication. 
pjig jQi registration information as soon as practicable after the 
close of the calendar year with respect to which the information 
is filed and shall publish it annually as a notice in the Federal 
Register. 
"(d) CIVIL MONEY PENALTIES.— 
"(1) AUTHORITY.—Whenever any person knowingly fails to file 
a report required under subsection 0>), or any person knowingly 
fails to register and file a report required under subsection (c), 
the Secretary may impose a civil money penalty on that person 
in accordance with the provisions of this subsection. The pen-
alty shall be in addition to any other available civil remedy or 
any available criminal penalty, and may be imposed whether or 
not the Secretary imposes other administrative sanctions. 
"(2) AMOUNT OP PENALTY.—TTie amount of the penalty, as 
determined by the Secretary, shall not exceed the greater of— 
"(A) $10,000 for each violation; or 
"(B) the total amount received for any services performed 
for any applicant to which the violation under paragraph 
(1) relates. 
"(3) FACTORS IN DETERMINING AMOUNT OP PENALTY.—In deter-
mining the amount of a penalty under this subsection, consider-
ation shall be given to such factors as the gravity of the offense, 
any history of prior offenses (including offenses occurring before 
enactment of this section), ability to pay the penalty, injury to 
the public, benefits received, deterrence of future violations, 
and such other factors as the Secretory may determine in 
regulations to be appropriate. 
(4) AGENCY PROCEDURES.— 
"(A) EsTABUSHMENT.—The Secretory shall estoblish 
standards and procedures governing the imposition of civil 
money penalties under parsigraph (1). These stondards and 
procedures shall— 
"(i) provide for the Secretary or other department 
official to make the determination to impose the pen-
alty or for use of an administrative entity to make the 
determination; 
"(ii) provide for the imposition of a penalty only after 
the person has been given an opportunity for a hearing 
on the record; and 
"(iii) provide for review of any determination or 
order, or interlocutory ruling, arising from a hearing. 
"(B) FINAL ORDERS.—If no hearing is requested within 15 
days of receipt of the notice of opportunity for hearing, the 
imposition of the penalty shall constitute a final and 
unappealable determination. If the Secretory reviews the 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2019 
determination or order, the Secretary may affirm, modify, 
or reverse that determination or order. If the Secretary 
does not review the determination or order within 90 days 
of the issuance of the determination or order, the deter-
mination or order shall be final. 
"(C) REYIEWABILITY OP IMPOSITION OF PENALTY.—The Sec-
retary's determination or order imposing a penalty under 
paragraph (1) shall not be subject to review, except £is 
provided in paragraph (5). 
"(5) JUDICIAL REVIEW OF AGENCY DETERMINATION.— 
"(A) IN GENERAL.—After exhausting all administrative 
remedies established by the Secretary under paragraph 
(4XA), a person against whom the Secretary has imposed a 
civil money penalty under paragraph (1) may obtain a 
review of'the penalty and such ancillary issues as may be 
addressed in the notice of determination to impose a pen-
alty under paragraph (4XAXi) in the appropriate court of 
appeals of the United States, by filing in such court, within 
20 days after the entry of such order or determination, a 
written petition pra3ring that the Secretary's order or deter-
mination be modified or be set aside in whole or in part. 
"(B) OBJECTIONS NOT RAISED IN HEARING.—The court shall 
not consider any objection that was not raised in the hear-
ing conducted pursuant to paragraph (4XA) unless a dem-
onstration is made of extraordinary circumstances causing 
the failure to raise the objection. If any party demonstrates 
to the satisfaction of the court that additional evidence not 
presented at the hearing is material and that there are 
reasonable grounds for the failure to present such evidence 
at the hearing, the court shall remand the matter to the 
Secretary for consideration of such additional evidence. 
"(C) SCOPE OF REVIEW.—The decisions, findings, and 
determinations of the Secretary shall be reviewed pursuant 
to section 706 of title 5, United States Code. 
"(D) ORDER TO PAY PENALTY.—Notwithstanding any other 
provision of law, in any such review, the court shall have 
the power to order payment of the penalty imposed by the 
Secretary. 
"(6) ACTION TO COLLECT PENALTY.—If any person fails to 
comply with the Secretary's determination or order imposing a 
civil money penalty under paragraph (1), after the determina-
tion or order is no longer subject to review as provided by 
paragraphs (4XA) and (5), the Secretary may request the Attor-
ney General of the United States to bring an action in an 
appropriate United States district court to obtain a monetary 
judgment against the person and such other relief as may be 
available. Tlie monetary judgment may, in the discretion of the 
court, include any attorneys' fees and other expenses incurred 
by the United States in connection with the action. In an action 
under this paragraph, the validity and appropriateness of the 
Secretary's determination or order imposing the penalty shall 
not be subject to review. 
"(7) SETTLEMENT BY SECRETARY.—The Secretary may com-
promise, modify, or remit any civil money penalty which may 
be, or has been, imposed under this subsection. 
103 STAT. 2020 
PUBLIC LAW 101-235—DEC. 15, 1989 
"(8) DEPOSIT OP PENALTIES.—The Secretary shall deposit all 
civil money penalties collected under this subsection into mis-
cellaneous receipts of the Treasury. 
"(e) PROHIBITION ON CONSULTING ACTIVITIES.— 
"(1) IN GENERAL.—Whoever is fined under subsection (d) may 
be prohibited, for the 3-year period beginning on the date of the 
imposition of the fine, from receiving any payment or thing of 
value for performing any services (with respect to any applica-
tion for financial assistance within the jurisdiction of the 
Department) for any applicant. 
"(2) CRIMINAL PENALTY.—Whoever violates the prohibition 
under paragraph (1) shall, upon conviction, be guilty of a felony 
and shall be fined under title 18, United States Code, or impris-
oned not more than 5 years, or both. 
"(f) DEFINITIONS.—For purposes of this section: 
"(1) The term 'person' means an individual (including a 
consultant, lobbsdst, or lawyer), corporation, company, associa-
tion, authority, firm, partnership, society. State, local govern-
ment, or any other organization or group of people. 
"(2) The term 'expenditure' includes a payment, distribution, 
loan, advance, deposit, gift of money, or anything else of value, 
and includes a contract, promise, or agreement, whether or not 
legally enforceable, to make an expenditure. 
"(3) The term 'financial assistance within the jurisdiction of 
the Department' includes any contract, grant, loan, cooperative 
agreement, or other form of assistance, including the insurance 
or guarantee of a loan, mortgage, or pool of mortgages. 
"(4) The term 'knowingly' means having actual knowledge of 
or acting with deliberate ignorance of or reckless disregard for 
the prohibitions under this section. 
"(5) The term 'reasonable compensation' means, with respect 
to a regularly employed officer or employee of any person, 
compensation that is consistent with the normal compensation 
for such officer or employee for work that is not furnished to or 
not furnished in cooperation with the Department. 
"(6) The term'regularly employed'means, with respect to an 
officer or employee of a person requesting or receiving assist-
ance within the jurisdiction of the Department or who is in-
volved in a management action with respect to such assistance, 
an officer or employee who is employed by such person for at 
least 130 working da3rs within one year immediately before the 
date of the submission that initiates departmental consideration 
of such person for receipt of such assistance, or the date of 
initiation of any management action. 
"(g) REGULATIONS.—The Secretary shall issue any regulations 
necessary to implement this section. 
"(h) EFFECTIVE DATE.—This section shall take effect on the date 
specified in regulations implementing this section that are issued by 
the Secretary after notice and public comment. The regulations 
shall establish standards that include determinations of what types 
of activities constitute influence with respect to the decisions of the 
Department described in subsection (aXD (A) and (B).". 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2021 
Subtitle B—Management Reform 
SEC. 121. ESTABLISHMENT OF HUD CHIEF FINANCIAL OFFICER 
Section 4 of the Department of Housing and Urban Development 
Act is amended by adding at the end the following new subsection: 42 use 3533. 
"(e) There shall be in the Department a Chief Financial Officer, 
designated by the Secretary, who shall— 
"(1) serve as the principal advisor to the Secretary on finan-
cial management; 
"(2) develop and maintain a financial management system for 
the Department (including accounting and related transaction 
systems, internal control systems, financial reporting systems, 
credit, and cash and debt management); 
"(3) supervise and coordinate all financial management activi-
ties and operations of the Department; 
"(4) assist in the financial execution of the Department's Reports. 
budget in relation to actual expenditures and prepare timely 
performance reports for senior managers; and 
"(5) issue such policies and directives as may be necessary to 
carry out this secticm.". 
SEC. 122. ESTABLISHMENT OF FHA COMPTROLLER. 
Section 4 of the Department of Housing and Urban Development 
Act, as amended by section 121, is further amended by adding at the 
end the following new subsection: 
"(f) There shall be in the Department a Federal Housing Adminis-
tration (Comptroller, designated by the Secretary, who shall be 
responsible for overseeing the financial operations of the Federal 
Housing Administration.". 
SEC. 123. EXPEDITING RULEMAKING. 
Section 7(o) of the Department of Housing and Urban Develop- 42 use 3535. 
ment Act is amended— 
(1) in paragraph (2XA)— 
(A) by striking "first period of 15 calendar days of 
continuous session of Congress which occurs" in the first 
sentence and inserting "15-calendar day period beginning 
on the day"; and 
(B) by striking "of continuous session" in the second 
sentence; 
(2) in paragraph (2)(B), by striking "of continuous session of 
Congress"; 
(3) in paragraph (3)— 
(A) by striking "first period of 30 calendar days of 
continuous session of Congress which occurs" in the first 
sentence and inserting "expiration of the 30-calendar day 
period beginning on the day ; and 
(B) by striking all that follows the period at the end of the 
first sentence and inserting the following: "Any regulation 
implementing any provision of the Department of Housing 
and Urban Development Reform Act of 1989 that au-
thorizes the imposition of a civil money penalty may not 
become effective until after the expiration of a public com-
ment period of not less than 60 days."; and 
(4) by striking paragraphs (5) and (6). 
103 STAT. 2022 
PUBLIC LAW 101-235—DEC. 15,1989 
Grants. 
Contracts. 
Reports. 
Appropriation 
authorization. 
Loans. 
12 u s e 1715z. 
SEC. 124. FUNDING FOR PROGRAM EVALUATION AND MONITORING. 
Section 7 of the Department of Housing and Urban Development 
Act, as amended by section 106 of this Act, is further amended by 
adding at the end the following new subsection: 
"(rXD For the prc^ams listed in paragraph (2), amounts appro-
priated under this subsection shall be available to the Secretary for 
evaluating and monitoring of all such programs (including all as-
pects of the public housing and section 202 programs). The Secretary 
shall expend amounts made available under this subsection in 
accordcuice with the need and complexity of evaluating and monitor-
ing each such program. 
"(2) The programs subject to this subsection shall be the programs 
authorized under— 
"(A) titles I and n of the United States Housing Act of 1937; 
"(B) section 202 of the Housing Act of 1959; 
"(C) section 106 of the Housing and Urban Development Act 
of 1968; 
"(D) the Fair Housing Act; 
"(E) title I and section 810 of the Housing and Community 
Development Act of 1974; 
"(F) section 201 of the Housing and Community Development 
Amendments of 1978; 
"(G) the Congregate Housing Services Act of 1978; 
"(H) section 222 of the Housing and Urban-Rural Recovery 
Act of 1983; 
"(I) section 561 of the Housing and Community Development 
Act of 1987; and 
"(J) title IV of the Stewart B. McKinney Homeless Assistance 
Act. 
"(3) In conducting evaluations and monitoring pursuant to the 
authority under this subsection, the Secretary shall determine any 
need for additional staff and funding relating to evaluating and 
monitoring the programs under paragraph (2). 
"(4XA) Tlie Secretary may provide for evaluation and monitoring 
under this subsection directly or by grants, contracts, or interagency 
agreements. Not more than 50 percent of the amounts made avail-
able under paragraph (1) may be used for grants, contracts, or 
interagency agreements. 
"(B) Any amounts not used for grants, contracts, or interagency 
agreements under subparagraph (A) shedl be used in a manner that 
increases and strengthens the ability of the Department to monitor 
and evaluate the programs under paragraph (2) through officers and 
employees of the Department. 
(5) Not later than December 31 of each year, the Secretary shall 
submit to the Congress a report regarding the use of amounts made 
available under this subsection during the fiscal year ending on 
September 30 of that year, including an analysis of the ability of the 
Department to monitor and evaluate the programs under paragraph 
(2) and a statement of any needs determined under paragraph (3). 
"(6) There is authorized to be appropriated to carry out this 
subsection $25,000,000 for fiscal year 1991. Such amounts shall 
remain available until expended.". 
SEC. 125. REFINANCING OF SECTION 235 MORTGAGES. 
(a) IN GENERAL.—Section 235(r) of the National Housmg Act is 
amended to read as follows: 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2023 
"(rXD The Secretary is authorized, upon application of a mortga-
gee, to insure under this subsection a mortgage the proceeds of 
which are used to refinance a mortgage insured under this section. 
"(2) To be eligible for insurance under this subsection, a mortgage insurance, 
must be executed by a mortgagor meeting the requirements of 
paragraph (3) and shall— 
"(A) be a first lien on real estate held in fee simple, or on a 
leasehold under a lease— 
"(i) for not less than 99 years which is renewable; or 
"(ii) having a period of not less than 10 years to run 
beyond the maturity date of the mortgage; 
"(B) nave been made to, and held by, a mortgagee approved by 
the Secretary; 
"(C) be in an amoimt not exceeding the outstanding principal 
balance, including any unpaid interest, due on the mortgage 
being refinanced; 
"(D) have a maturity not exceeding the unexpired term of the 
mortgage being refinanced; 
"(E) bear an interest rate not exceeding such percent per 
annum on the amount of the principal obligation outstanding at 
any time as the Secretary finds necessary to meet the mortgage 
market, taking into consideration the yields on mortgages in 
the primary and secondary markets; to the extent that the 
amounts described in paragraphs (4) (A) and (B) are not other-
wise paid by the Secretary, the foregoing interest rate may be 
increased, in the discretion of the Secretary, to compensate the 
mortgagee for its payment to, or on behalf of, the mortgagor of 
such amounts; and 
"(F) meet the criteria for refinancing as determined by the 
Secretary. 
"(3) Notwithstanding the provisions of subsection (hX2), assistance 
pa3rments in connection with mortgages insured under paragraph (2) 
shall be made only with respect to a family who is eligible for, and 
receiving assistance payments with respect to, the insured mortgage 
being refinanced. 
"(4) The Secretary is authorized and, to the extent provided in 
appropriation Acts, may pay to the mor^agor (directly, through the 
mortgagee, or otherwise)-— 
'\A) an amoimt, as approved by the Secretary, as an incentive 
to the mortgagor to refinance a mortgage insured tmder this 
section; and 
"(B) an amoimt as approved by the Secretary for costs in-
curred in connection with the refinancing, including but not 
limited to discounts, loan ori^ation fees, and closing costs. 
"(5) Amounts of budget authority required for assistance pay- C
k
>
n
t
r
a
c
t
8
. 
ments contracts with respect to mortgages insured under this 
subsection shall be derivea from amounts recaptured from assist-
ance payments contracts relating to mortgages that are being 
refinanced. For purposes of subsection (cX3XAj, the amount of recap-
tured budget authority that the Secretaipr commits for assistance 
payments contracts relating to mortgages insured under this subsec-
tion shall not be construed as 'unused'. 
"(6) The Secretary is authorized to take any actions to identify Insurance. 
and communicate with any mortgagor of a mortgage insured under 
this section to implement the refinancing of such mortgages with 
insurance under this subsection. The Secretary may take such 
actions directly, or under contract. Notwithstanding the restriction 
103 STAT. 2024 
PUBLIC LAW 101-235—DEC. 15, 1989 
Federal 
Register, 
publication. 
12 u s e 1715z. 
Contracts. 
Contracts. 
12 u s e 1715z 
note. 
of section 552a(b) of title 5 of the United States Code, upon the 
request of an approved mortgagee, the Secretary may disclose to 
such mortgagee the name and address of any mortgagor of a mort-
gage insured under this section that meets the criteria for refinanc-
ing, pursuant to paragraph (2XF), and the unpaid principal balance 
and interest rate on such mortgage. 
"(7) The Secretary shall implement the provisions of this subsec-
tion by a notice published in the Federal Register.". 
(b) EXCESS RECAPTURED AMOUNTS.—Section 235(cX3XC) of the Na-
tional Housing Act is amended by inserting after the period at the 
end the following new sentence: "Notwithstanding the preceding 
sentence, any amounts of budget authority or contract authority 
recaptured from assistance payments contracts relating to mort-
gages that are being refinanced that are not required for assistance 
pajmients contracts relating to mortgages insured under this subsec-
tion, shall be rescinded.". 
(c) CONFORMING AMENDMENTS.—Section 235 of the National Hous-
ing Act is amended— 
(1) in subsection (cXl), by inserting ", other than a contract in 
connection with a refinancing under subsection (r)," in the 
second sentence after "any new contract"; 
(2) in subsection (cX3XA), by inserting "(except to the extent 
provided in subsection (r) for mortgages insured under such 
subsection)" in the second sentence after "refinanced,"; 
(3) in subsection (e), by striking "or (jX7)," and inserting "(jX^X 
or(r),"; 
(4) in subsection (hXl)— 
(A) by inserting "(other than obligations in connection 
with mortgages insured under subsection (r))" in the third 
sentence after "October 1,1983"; 
(B) by inserting "(except under subsection (r))" in the 
sixth sentence after "under this section" the first place it 
appears; and 
(C) by inserting "(other than a contract in connection 
with a mortgage insured under subsection (r))" in the sev-
enth sentence ^ t e r "under this section"; 
(5) in subsection (hX3), by inserting after the period at the end 
the following: "The preceding sentence shall not apply to con-
tracts in connection with mortgages insured under subsection 
(r)."; 
(6) in subsection (m), by inserting "(except a mortgage insured 
under subsection (r))" after "No mortgage"; and 
(7) in subsection (n), by inserting "or to a mortgage insured 
under subsection (r)" before the period at the end. 
(d) SAVINGS PROVISION.—Notwithstanding the termination of the 
program under section 235 pursuant to section 401(d) of the Housing 
and Community Development Act of 1987, the Secretary of Housing 
and Urban Development shall have authority to insure mortgages 
under section 235(r), to make assistance payments with respect to 
such insured mortgages, and to make any other pa3rment or take 
any other action related to the refinancing of mortgages insured 
under section 235. 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2025 
State and local 
governments. 
SEC. 126. SANCTIONS FOR IMPROPER CONVEYANCES UNDER URBAN 
HOMESTEAD PROGRAMS. 
(a) IN GENERAL.—Section 810 of the Housing and Community 
Development Act of 1974 is amended by adding at the end the l2USCl706e 
following new subsection: 
"(m) If the Secretary determines that any property transferred for 
use under an urban homestead prc^am under this section has been 
conveyed or used under the program in a manner contrary to the 
provisions of this section, the Secretary may take action as the 
Secretary considers appropriate, including tamng any of the follow-
ing actions: 
"(1) The Secretary may impose a civil penalty on the unit of 
general local government or the State or the qualified commu-
nity organization or public agency designated by a unit of 
general local government, or the transferee of such entity, as 
appropriate, in an amount not less than any profit realized with 
respect to the conveyance or use of the property contrary to the 
provisions of this section. 
"(2) The Secretary may revoke the conveyance of the property 
pursuant to subsection (bX4) and revoke the transfer of the 
property to the unit of general local government or State or the 
qualified community organization or public agency designated 
by a unit of general local government, except that the Secretaiy 
may not revoke the conveyance of any property under this 
paragraph if the Secretary determines that the conveyance was 
made to an individual or family who has substantially complied 
with the requirements of this section for participation in an 
urban homestead program and who has no knowledge of the 
conveyance or use of the property contrary to the provisions of 
this section. If any tenants of any property for which a convey-
ance is revoked under this paragraph would be displaced by 
such revocation and the Secretary determines that the tenants 
are not responsible for or involved in the actions for which the 
revocation has been imposed, the Secretary shall, if practicable, 
take actions that would allow the tenants to remain on the 
property and maintain the property under an urban homestead 
program.", 
flb) CONFORMING AMENDMENT.—Section 810(bX4) of the Housing 
and Community Development Act of 1974 is amended by inserting 
before the semicolon at the end the following: "or by the Secretary 
under subsection (mX2)". 
(c) APPUCABILTTY.—The amendments made by this section shall 
apply to any property transferred for use in an urban homestead 
prc^am under section 810 of the Housing and Community Develop-
ment Act of 1974 after January 1,1981. 
SEC 127. REFORM OF MODERATE REHABILITATION PROGRAM. 
Section 8(eX2) of the United States Housing Act of 1937 is 42USCl437f. 
amended— 
(1) by striking the period at the end of the first sentence and 
inserting the following: ", and which shall involve a minimum 
expenditure of $3,000 for a unit, including its prorated share of 
work to be accomplished on common areas or sjrstems."; 
(2) by inserting after the period at the end the following new 
sentence: "In order to maximize the availability of low-income 
housing, in providing assistance under this p£u*agraph, the Sec-
retary shall include in any calculation or determination regard-
12 u s e 1706e 
note. 
103 STAT. 2026 
PUBLIC LAW 101-235—DEC. 15, 1989 
ing the amount of the assistance to be made available the extent 
to which any proceeds are available from any tax credits pro-
vided under section 42 of the Internal Revenue Code of 1986 (or 
from any syndication of such credits) with respect to the hous-
ing."; and 
(3) by inserting after the period at the end (as inserted by 
paragraph (2)) the following: For each fiscal year, the Secretary 
may not provide assistance pursuant to this paragraph to any 
project for rehabilitation of more than 100 units. Assistance 
pursuant to this paragraph shall be allocated according to the 
formula established pursuant to section 213(d) of the Housing 
and Community Development Act of 1974, and awarded pursu-
ant to a competition under such section. The Secretary shall 
maintain a single listing of any assistance provided pursuant to 
this paragraph, which shall include a statement identifjdng the 
owner and location of the project to which assistance was made, 
the amount of the assistsoice, and the number of units 
assisted.". 
Subtitle C—Federal Housing Administration 
Reforms 
Public 
information. 
1
2 use 
1735f-16. 
Loans. 
Insurance. 
12 use 1709. 
SEC. 131. ANNUAL AUDITED FINANCIAL STATEMENTS. 
Title V of the National Housing Act (as amended by the preceding 
provisions of this Act) is further amended by adding at the end the 
following new section: 
"ANNUAL AUDITED FINANCIAL STATEMENTS 
"SEC. 538. With respect to fiscal year 1989 and for evenr fiscal year 
thereafter, the Secretary shall make available to the public a finsin-
cial statement of the insurance funds established under this Act 
that will present their financial condition on a cash and accrual 
basis, consistent with generally accepted accounting principles. 
Each financial statement shall be audited by an independent 
accounting firm selected by the Secretary and the results of such 
audit shall be made available to the public". 
SEC. 132. CREDIT REVIEWS OF PERSONS ACQUIRING MORTGAGED PROP-
ERTIES UNDER SINGLE FAMILY PROGRAM FOR LIFE OF 
MORTGAGE. 
(a) IN GENERAL.—Section 203(r) of the National Housing Act is 
amended— 
(1) by amending the first sentence to read as follows: "The 
Secretary shall take appropriate actions to reduce losses under 
the single-family mortgage insurance programs carried out 
under this title. ; and 
(2) by amending paragraphs (2) and (3) to read as follows: 
"(2) requiring that at least one person acquiring ownership of 
a one- to four-family residential property encumbered by a 
mortgage insured under this title be determined to be credit-
worthy under standards prescribed by the Secretary, whether or 
not such person assumes personal liability under the mortgage 
(except that acquisitions by devise or descent shall not be 
subject to this requirement); and 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2027 
"(3) in any case where personal liability under a mortgage is 
assumed, requiring that the original mortgagor be advised of 
the procedures by which he or she may be released from liabil-
ity.''. 
0)) APPUCABILTTY.—The amendments made by subsection (a) shall 
apply only with respect to— 
(1) mortgages insured— 
(A) pursuant to a conditional commitment issued on or 
after the date of the enactment of this Act; or 
(B) in accordance with the direct endorsement program 
(24 C.F.R. 200.163), if the approved underwriter of the 
mortgage signs the appraisal report for the property on or 
after the date of the enactment of this Act; and 
(2) the approval of substitute mortgagors, if the original mort-
gagor was subject to such amendments. 
(c) TRANsmoN F*ROVisiONS.—Any mortgage insurance provided 
under title II of the National Housing Act as it existed immediately 
before the date of the enactment of this Act, shall continue to be 
governed (to the extent applicable) by the provisions of section 203(r) 
of the National Housing Act, as such section existed immediately 
before such date. 
SEC. 133. REPEAL OF TITLE X LAND DEVELOPMENT PROGRAM. 
(a) REPEAL.—Title X of the National Housing Act is hereby re-
pealed. 
(b) APPUCABILTTY,—On or after the date of enactment of this Act, 
no mortgage may be insured under title X, as such title existed 
immediately before such date, except pursuant to a commitment to 
insure made before such date. 
(c) SAVINGS PROVISION.—Any contract of insurance entered into 
under title X before the date of enactment of this Act shall be 
governed by the provisions of such title as such title existed imme-
diately before such date. 
(d) CONFORMING AMENDMENTS.—The National Housing Act is 
amended— 
(1) in section 1, by striking "X," each place it appears; 
(2) in section 212(a), by striking the seventh sentence; 
(3) in section 512, by striking "X," in the first sentence; 
(4) in section 522, by inserting ", as such title existed imme-
diately before the date of the enactment of the Department of 
Housing and Urban Development Reform Act of 1989," after 
"title X of this Act"; and 
(5) in section 530, by striking "X,". 
SEC. 134. CIVIL MONEY PENALTIES FOR IMPROPER DEALER AND LOAN 
BROKER PARTICIPATION IN ORIGINATION OF PROPERTY 
IMPROVEMENT LOANS. 
(a) IN GENERAL.—Section 2(b) of the National Housing Act is 
amended by adding at the end the following new paragraph: 
"(7) With respect to the financing of alterations, repairs, and 
improvements to existing structures or the building of new struc-
tures as authorized under clause (i) of the first sentence of section 
2(a), any loan broker (as defined by the Secretery) or any other party 
having a financial interest in the making of such a loan or advance 
of credit or in providing assistance to the borrower in preparing the 
loan application or otherwise assisting the borrower in obteining the 
loan or advance of credit who knowingly (as defined in-section 536(g) 
12 u s e 1709 
note. 
12 u s e 1709 
note. 
12 use 
1749aa-1749//. 
12 u s e 1749aa 
note. 
Contracts. 
Insurance. 
12 u s e 1749aa 
note. 
12 u s e 1702. 
12 u s e 1715c. 
12 u s e 1731a. 
12 u s e 1735f. 
12 u s e 1735f-8. 
12 u s e 1703. 
103 STAT. 2028 
PUBLIC LAW 101-235—DEC. 15, 1989 
of this Act) submits to any such financial institution or to the 
Secretary false information shall be subject to a civil money penalty 
in the amount and manner provided under section 536 with respect 
to mortgagees and lenders under this Act.". 
12 use 1703 
(b) APPUCABILTTY.—The amendment made by subsection (a) shall 
^°^- 
apply only with respect to— 
(1) violations referred to in the amendment that occur on or 
after the date of the enactment of this Act; and 
(2) in the case of a continuing violation (as determined by the 
Secretary of Housing and Urban Development), any portion of a 
violation referred to in the amendment that occurs on or after 
such date. 
Loans. 
SEC. 135. NOTIFICATION REGARDING SUSPENDED MORTGAGEES. 
12 use 1709. 
Section 203 of the National Housing Act is amended by adding at 
the end the following new subsection: 
"(s) Whenever the Secretary has taken any discretionary action to 
suspend or revoke the approval of any mortgagee to participate in 
any mortgage insurance program under tlus title, the Secretary 
shall provide prompt notice of the action and a statement of the 
reasons for the action to— 
"(1) the Secretary of Veterans Affairs; 
"(2) the chief executive officer of the Federal National Mort-
gage Association; 
(3) the chief executive officer of the Federal Home Loan 
Mortg£^e Corporation; 
"(4) the Administrator of the Farmers Home Administration; 
"(5) if the mortgagee is a national bank or District bank, or a 
subsidisiry or afRliate of such a bank, the Comptroller of the 
Currency; 
"(6) if the mortgagee is a State bank that is a member of the 
Federal Reserve System or a subsidiary or affiliate of such a 
bank, or a bank holding company or a subsidia^ or afRliate of 
such a company, the Board of Governors of the Federal Reserve 
System; 
"(7) if the mortgagee is a State bank that is not a member of 
the Federal Reserve System or is a subsidiary or affiliate of such 
a bank, the Board of Directors of the Federal Deposit Insurance 
Corporation; and 
"(8) if the mortgagee is a Federal or State savings association 
or a subsidiary or ^filiate of a savings association, the Director 
of the Office of Thrift Supervision.". 
SEC. 136. FHA FORECLOSED PROPERTIES. 
12 use 1710. 
(a) MAINTENANCE.—Section 204(a) of the National Housing Act is 
amended by inserting after the period at the end of the third 
sentence the following new sentence: "As a condition of the receipt 
of such benefits, the mortgagee shall maintain or assure the mainte-
nance of the mortgaged property (in such manner as the Secretary 
shall by regulation provide) during the period beginning on the 
taking of the possession or other acquisition of the mortg^ed 
property by the mortgagee and ending on conveyance to the Sec-
retary or other disposition of the mortgaged property in accordance 
with this section, and funds expended by the mortgagee in meeting 
such obligation shall be included, to the extent provided in this 
subsection or in subsection (k), in debentures or other insurance 
payment pursu£mt to this section.". 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2029 
(b) DISPOSITION OP PROPERTIES ON CREDIT TERMS.—Section 204(g) of 
the Nation£d Housing Act is amended by inserting after the period 
12 use 1710. 
at the end of the first sentence the following new sentence: "The 
Secretary shall, by regulation, carry out a program of sales of such Regulations. 
properties and shall develop and implement appropriate credit 
terms and standards to be used in carrying out the program.". 
SEC. 137. REPORT REGARDING PROVIDING FORECLOSED PROPERTIES TO 
1989 DISASTER VICTIMS. 
(a) HUD.— 
(1) STUDY.—The Secretary of Housing and Urban Develop-
ment shall conduct a study regarding the feasibility of making 
available, to low-income persons whose homes in areas declared 
by the President as disaster areas as a result of hurricane Hugo 
or the Loma Prieta earthquake during 1989 were destroyed by 
such disasters, any available properties (including multifamily 
properties) owned by the Secretary. 
(2) REPORT.—The Secretary of Housing and Urban Develop-
ment shall submit to the Congress, not later than the expiration 
of the 90-day period beginning on the date of the enactment of 
this Act, a report regarding the results and conclusions of the 
study under paragraph (1), together with any recommendations 
for legislation regarding providing suchproperty. 
(b) FARMERS HOME ADMINISTRATION.—^TTie Secretary of Agri-
culture shall conduct a study regarding the feasibility of making 
available, as provided in sul»ection (aXl)» any available properties 
(including multifamily properties) owned by the Secretory through 
the Farmers Home Administration and shall submit a report 
regarding such study as provided in subsection (aX2). 
(c) CONSULTATION.—The Secretary of Housing and Urban Develop-
ment and the Secretary of Agriculture shall consult in conducting 
the studies under subsections (a) and (b) and may submit a single 
report meeting the requirements of subsections (aX2) and (b). 
SEC. 138. REPORT REGARDING ACTIONS TO IMPROVE DIRECT ENDORSE-
MENT PROGRAM. 
(a) IN GENERAL.—With respect to the direct endorsement program 
in connection with single-family mortgage insurance under title II of 
the National Housing Act, the Secretary shall submit to the Con-
gress a report describing any actions the Secretary determines are 
necessary to take, to— 
(1) improve monitoring and supervision imder the program; 
(2) reduce defaults under the program; and 
(3) decrease the potential for fraud under the program. 
(b) TIME OP SUBMISSION.—The Secretary shall submit the report 
under subsection (a) to the Congress not lator than the expiration of 
the 6-month period beginning on the date of the enactment of this 
Act. 
SEC. 139. CO-INSURANCE AMENDMENTS. 
(a) IN GENERAL.—Section 244 of the National Housing Act is 
amended by adding at the end thereof the following new subsection: 
"(i) The Secretary shall, by January 15 and July 15 of each year (1) 
review the adequacy of capital and other requirements for mortga-
gees under this section, (2) assess the compliance by mortgagees with 
such requirements, and (3) make such adjustment to such require-
ments as the Secretary, after providing opportimity for hearing. 
12 use 1715Z-9. 
103 STAT. 2030 
PUBLIC LAW 101-235—DEC. 15, 1989 
Reports. 
42 u s e 3533. 
Business and 
industry. 
42 u s e 3535. 
12 u s e 1708. 
determines to be appropriate to improve the long-term financial 
soundness of the Federal Housing Administration funds. Such 
requirements shall include the minimum capital or net worth of 
mortgagees; the ratio that mortgagees shall maintain between the 
mortgagee's capital and the volume of mortgages co-insured by such 
mortgagee; and such other requirements as the Secretary deter-
mines to be appropriate to ensure the long-term financial soundness 
of the Federal Housing Administration funds. The Secretary shall 
submit to the Committee on Banking, Housing, and Urban Affairs of 
the Senate and the Committee on Banking, Finance and Urban 
Affairs of the House of Representatives a report on the review and 
assessment under the previous sentence, and an explanation of the 
Secretary's reasons for making any adjustment in requirements 
authorized under this section.". 
0)) REPORT.—The Secretary of Housing and Urban Development 
shedl submit to the Congress not later than April 1,1990, a report on 
the disposition of coinsured multifamily housing projects held by the 
Government National Mortgage Association. Tlie report shall in-
clude a description of the guidelines governing the disposition of 
such properties, particularly as such guidelines relate to the objec-
tives of— 
(1) minimizing losses to the Federal Government; 
(2) preserving the projects in decent, safe, and sanitary condi-
tion; and 
(3) protecting lower-income tenants residing in such projects. 
The report shall also describe the status of such multifamily housing 
projects, including the name, address, and size of each project, and 
the date and conditions of any foreclosure sale. 
SEC. 140. FHA MANAGEMENT. 
Section 4 of the Department of Housing and Urbcin Development 
Act is amended— 
(1) by redesignating subsections 0>), (c), and (d) as subsections 
(c), (d), and (e), respectively; and 
(2) by redesignating the second sentence in subsection (a) as 
subsection (b) and adding at the end thereof the following: "The 
Secretary shall ensure, to the extent practicable, that managers 
of Federal Housing Administration programs, at each level of 
the Department, shall be accountable for program operation, 
risk management, management of cash and other Federal 
assets, and program financing related to activities over which 
such managers have responsibility.". 
SEC. 141. CONTRACTING FOR FINANCIAL MANAGEMENT SUPPORT. 
Section 7(e) of the Department of Housing and Urban Develop-
ment Act is amended by adding at the end thereof the following: 
"The Secretary is authorized to enter into contracts with private 
companies for the provision of such managerial support to the 
Federal Housing Administration as the Secretary determines to be 
appropriate, including but not limited to the management of insur-
ance risk and the improvement of the delivery of mortgage insur-
ance.". 
SEC 142. FHA OPERATIONS. 
Section 202 of the National Housing Act is amended by— 
:S^i»^---' 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2031 
(1) striking the heading "MUTUAL MORTGAGE INSURANCE 
FUND" and inserting "FEDERAL HOUSING ADMINISTRATION OPER-
ATIONS"; 
(2) striking "SEC. 202." and mserting: "SEC. 202. (a) MUTUAL 
MORTGAGE INSURANCE FUND.—"; and 
(3) adding at the end thereof the following new subsections: 
"
0
1
>
) ADVISORY BOARD.—There is created a Federal Housing 
Administration Advisory Board ("Board") that shall review oper-
ation of the Federal Housing Administration, including the activi-
ties of the Mortgagee Review Board, and shall provide advice to the 
Fedez^ Housing Commissioner with respect to the formulation of 
general policies of the Federal Housing Administration and such 
other matters as the Federal Housing Commissioner may deem 
appropriate. The Advisory Board shall, in all other respects, be 
subject to the provisions of the Federal Advisory Committee Act. 
"(1) The Advisory Board shall be composed of 15 members to 
be appointed from among individuals who have substantial 
expertise and broad experience in housing and mortgage lend-
ing of whom— 
"(A) 9 shall be appointed by the Secretary; 
"(B) 3 shall be appointed by the Chairman and Ranking 
Minority Member of the Subcommittee on Housing and 
Urban Affairs of the Committee on Banking, Housing, and 
Urban Affairs of the Senate; and 
"(C) 3 shall be appointed by the Chairman and Ranking 
Minority Member of the Subcommittee on Housing and 
Commimity Development of the Committee on Banking, 
Finance and Urban Affairs of the House of Representatives. 
"(2) Membership on the Advisory Board shall include— 
"(A) not less than 4 persons with distinguished private 
sector careers in housing finance, lending, management, 
development or insurance; 
"(B) not less than 4 persons with outstanding reputations 
as licensed actuaries, experts in actuarial science, or eco-
nomics related to housing; 
"(C) not less than 4 persons with backgrounds of leader-
ship in representing the interests of housing consumers; 
"(D) not less than 1 person with significant experience 
and a distinguished reputation for work in the enforcement, 
advocacy, or development of fair housing or civil rights 
legislation; and 
"(E) not less than 1 person with a background of leader-
ship representing rural housing interests. 
"(3) Members of the Advisory Board shall be selected to 
ensure, to the greatest extent practicable, geographical rep-
resentation or every region of the country. 
"(4) Not more than 8 members of the Advisory Board may be 
from any one political party. 
"(5) Membership of the Advisory Board shall not include any 
person who, during the previous 24-month period, was reqmred 
to register with the Secretary under section 112(c) of the Depart-
ment of Housing and Urban Development Reform Act of 1989 or 
employed a person for purposes that required such person to so 
register. 
(6) Of the members of the Advisory Board first appointed, 5 
shall have terms of 1 year, and 5 shall have terms of 2 years. 
103 STAT. 2032 
PUBLIC LAW 101-235—DEC. 15, 1989 
Their successors and all other appointees shall have terms of 3 
years. 
"(7) The Advisory Board is empowered to confer with, request 
information of, and make recommendations to the Federal 
Housing Commissioner. The Commissioner shall promptly pro-
vide the Advisory Board with such information as the Board 
determines to be necessary to carry out its review of the activi-
ties and policies of the Federal Housing Administration. 
Reports. 
"(8) The Board shall, not later than December 31 of each year, 
submit to the Secretary and the Congress a report of its assess-
ment of the activities of the Federal Housing Administration, 
including the soundness of underwriting procedures, the ade-
quacy of information systems, the appropriateness of staffing 
patterns, the effectiveness of the Mortgagee Review Board, and 
other matters related to the Federal Housing Administration's 
ability to serve the nation's homebuyers and renters. Such 
report shall contain the Board's recommendations for improve-
ment £md include any minority views. 
District of 
"(9) The Board shall meet in Washington, D.C., not less than 
Columbia. 
twice annually, or more frequently if requested by the Federal 
Housing Commissioner or a majority of the members. The 
Board shall elect a chair, vice-chair and secretary and adopt 
methods of procedure. The Board may establish committees and 
subcommittees as needed. 
"(10) Subject to the provisions of Section 7 of the Federal 
Advisory Committee Act, all members of the Board may be 
compensated and shall be entitled to reimbursement from the 
Department for traveling expenses incurred in attendance at 
meetings of the Board. 
"(c) MORTGAGEE REVIEW BOARD.— 
"(1) ESTABUSHMENT.—There is established within the Federal 
Housing 
Administration 
the 
Mortgagee 
Review 
Board 
("Board"). The Board is empowered to initiate the issuance of a 
letter of reprimand, the probation, suspension or withdrawal of 
any mortgagee found to be engaging in activities in violation of 
Federal Housing Administration requirements or the non-
discrimination requirements of the Equal Credit Opportunity 
Act, the Fair Housing Act, or Executive Order 11063. 
"(2) COMPOSITION.—The Board shall consist of— 
"(A) the Assistant Secretary of Housing/Federal Housing 
Commissioner; 
"(B) the General Counsel of the Department; 
"(C) the President of the Government National Mortgage 
Association; 
"(D) the Assistant Secretary for Administration; 
"(E) the Assistant Secretary for Fair Housing Enforce-
ment (in cases involving violations of nondiscrimination 
requirements); and 
(F) the Chief Financial Officer of the Department; 
or their designees. 
"(3) ACTIONS AUTHORIZED.—When any report, audit, investiga-
tion, or other information before the Board discloses that a basis 
for an administrative action against a mortgagee exists, the 
Board shall take one of the following administrative actions: 
"(A) LETTER OF REPRIMAND.—The Board may issue a 
letter of reprimand only once to a mortgagee without 
taking action under subparagraphs (B), (C), or (D) of this 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2033 
section. A letter of reprimand shall explain the violation 
and describe actions the mortgagee should take to correct 
the violation. 
"(B) PROBATION,—The Board may place a mortgagee on 
probation for a specified period of time not to exceed 6 
months for the purpose of evaluating the mortgagee's 
compliance with Federal Housing Administration require-
ments, the Equal Credit Opportunity Act, the Fair Housing 
Act, Executive Order 11063, or orders of the Board. During 
the probation period, the Board may impose reasonable 
additional requirements on a mortgagee including super-
vision of the mortgagee's activities by the Federal Housing 
Administration, periodic reporting to the Federal Housing 
Commissioner, or submission to Federal Housing Adminis-
tration audits of internal financial statements, audits by an 
independent certified public accountant or other audits. 
"(C) SUSPENSION.—The Board may issue an order 
suspending a mortgagee's approval for doing business with 
the Federal Housing Administration if there exists ade-
quate evidence of a violation or violations and continuation 
of the mortgagee's approval, pending or at the completion 
of any audit, investigation, or other review, or such 
administrative or other legal proceedings as may ensue, 
would not be in the public interest or in the best interests of 
the Department. A suspension shall last for not less than 6 
months. During the period of suspension, the Federal Hous-
ing Administration shall not commit to insure any mort-
gage originated by the suspended mortgagee. 
"(D) WITHDRAWAL.—TTie Board may issue an order 
withdrawing a mortgagee if the Board has made a deter-
mination of a serious violation or repeated violations by the 
mortgagee. The Board shall determine the terms of such 
withdrawal, but the term shall be not less than 1 year. 
Where the Board has determined that the violation is 
egregious or willful, the withdrawal shall be permanent. 
"(E) SETTLEMENTS,—The Bo£ird may at any time enter 
into a settlement agreement with a mortgagee to resolve 
any outstanding grounds for an action. Agreements may 
include provisions such as— 
"(i) cessation of any violation; 
"(ii) correction or mitigation of the effects of any 
violation; 
"(iii) repa3rment of any sums of money wrongfully or 
incorrectly paid to the mortgagee by a mortgagor, by a 
seller or by the Federal Housing Administration; 
"(iv) actions to collect sums of money wrongfully or 
incorrectly paid by the mortgagee to a third party; 
"(v) indemnification of the Federal Housing Adminis-
tration for mortgage insurance claims on mortgages 
originated in violation of Federal Housing Administra-
tion requirements; 
"(vi) modification of the length of the penalty 
imposed; or 
"(vii) implementation of other corrective measures 
acceptable to the Secretary. 
103 STAT. 2034 
PUBLIC LAW 101-235—DEC. 15, 1989 
Public 
information. 
Federal 
Register, 
publication. 
District of 
Columbia. 
Material failure to comply with the provisions of a settle-
ment agreement shall be sufficient cause for suspension or 
withdrawal. 
"(4) NOTICE AND HEARING.— 
"(A) The Board shall issue a written notice to the mortga-
gee at least 30 days prior to taking any action against the 
mortgagee under subparagraph (B), (C), or (D) of paragraph 
(3). The notice shall state the specific violations which have 
been alleged, and shall direct the mortgagee to reply in 
writing to the Board within 30 days. If the mortgagee fails 
to reply during such period, the Board may make a 
determination without considering any comments of the 
mortgagee. 
"(B) If the Board takes action against a mortgagee under 
subparagraph (B), (C), or (D) of paragraph (3), the Board 
shall promptly notify the mortgagee in writing of the 
nature, duration, and specific reasons for the action. If, 
within 30 days of receiving the notice, the mortgagee re-
quests a hearing, the Board shall hold a hearing on the 
record regarding the violations within 30 davs of receiving 
the request. If a mortgagee fails to request a hearing within 
such 30-day period, the right of the mortgagee to a hearing 
shall be considered waived. 
"(C) In any case in which the notification of the Board 
does not result in a hearing (including any settlement by 
the Board and a mortgagee), any information regarding the 
nature of the violation and the resolution of the action shall 
be available to thepublic. 
*'(5) PuBucATiON.—The Secretary shall establish and publish 
in the Federal Register a description of and the cause for 
administrative action against a mortgagee. 
"(6) CEASE-AND-DESIST ORDERS.— 
"(A) Whenever the Secretary, upon request of the Mort-
gagee Review Board, determines that there is reasonable 
cause to believe that a mortg£igee is violating, has violated, 
or is about to violate, a law, rule or regulation or any 
condition imposed in writing by the Secretary or the Board, 
and that such violation could result in significant cost to 
the Federal Government or the public, the Secretary may 
issue a temporary order requiring the mortgagee to cease 
and desist from any such violation and to tsike affirmative 
action to prevent such violation or a continuation of such 
violation pending completion of proceedings of the Board 
with respect to such violation. Such order shall include a 
notice of charges in respect thereof and shall become effec-
tive upon service to the mortgagee. Such order shall remain 
effective and enforceable for a period not to exceed 30 da3rs 
pending the completion of proceedings of the Board with 
respect to such violation, unless such order is set aside, 
limited, or suspended by a court in proceedings authorized 
by subparagraph (B) of this paragraph. The Board shall 
provide the mortgagee an opportunity for a hearing on the 
record, as soon as practicable but not later than 20 days 
after the temporary cease-and-desist order has been serv»i. 
"(B) Within 10 days after the mortgagee has been served 
with a temporary cease-and-desist order, the mortgagee 
may apply to the United States district court for the ju-
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2035 
dicial district in which the home office of the mortgagee is 
located, or the United States District Court for the District 
of Columbia, for an injunction setting aside, limiting of 
suspending the enforcement, operation, or effectiveness of 
such order pending the completion of the administrative 
proceedings pursuant to the notice of charges served upon 
the mortgagee, and such court shall have jurisdiction to 
issue such injunction. 
"(O In the case of violation or threatened violation of, or 
failure to obey, a temporary cease-and-desist order issued 
pursuant to this paragraph, the Secretary may apply to the 
United States district court, or the United States court of 
any territory, within the jurisdiction of which the home 
office of the mortgagee is located, for an injunction to 
enforce such order, and, if the court shall determine that 
there has been such violation or threatened violation or 
failure to obey, it shall be the duty of the court to issue such 
injunction. 
"(D) For purposes of this paragraph, the term 'mortgagee' 
means a mortgagee, a branch office or subsidiary of a 
mortgagee, or a director, officer, employee, agent, or other 
person participating in the conduct of the £d^airs of such 
mortgagee. 
"(7) RE^RT REQUIRED.—The Board, in consultation with the 
Federal Housii^ Administration Advisory Board, shall an-
nually recommend to the Secretary such amendments to statute 
or regulation as the Board determines to be appropriate to 
ensure the long term financial strength of the Federal Housing 
Administration fund and the adequate support for home mort-
gage credit. 
"(d) COORDINATION OP G N M A AND F H A WITHDRAWAL ACTION.— 
"(1) Whenever the Federal Housing Administration or 
Grovemment National Mortgage Association initiates proceed-
ings that could lead to withdrawing the mortgagee from partici-
pating in the program, the initiating agency shall— 
"(A) within 24 hours notify the other agency in writing of 
the action taken; 
"(B) provide to the other agency the factual basis for the 
action taken; and 
"(C) if a mortgagee is withdrawn, publish its decision in 
the Federal Roister. 
"(2) Within 60 days of receipt of a notification of action that 
could lead to withdrawal under subsection (1), the Federal 
Housing Administration or the Government National Mortgage 
Association shall— 
"(A) conduct and complete its own investigation; 
"(B) provide written notification to the other agency of its 
decision, including the factual basis for its decision; and 
"iO if a mortgagee is withdrawn, publish its decision in 
the Federal Roister. 
"(e) APPRAISAL STANDARDS.—(1) The Secretary shall prescribe 
standards for the appraisal of all property to be insured by the 
Federal Housing Administration. Such appraisals shall be per-
formed in accordance with uniform stands^xls, by individuals who 
have demonstrated comi)etence and whose professional conduct is 
subject to effective supervision. These standards shall require at a 
Federal 
Register, 
publication. 
Federsd 
Register, 
publication. 
103 STAT. 2036 
PUBLIC LAW 101-235—DEC. 15,1989 
"(A) that the appraisals of properties to be insured by the 
Federal Housing Administration shall be performed in accord-
ance with generally accepted appraisal standards, such as the 
appraisal standards promulgated by the Appraisal Foundation a 
not-for-profit corporation established on November 30, 1987 
under the laws of Illinois; and 
"(B) that each appraisal be a written statement used in 
connection with a real estate transaction that is independently 
an impartially prepared by a licensed or certified appraiser 
setting forth an opinion of defined value of an adequately 
described property as of a specific date, supported by presen-
tation and analysis of relevant market information. 
"(2) The Appraisal Subcommittee of the Federal Financial Institu-
tions Examination Council shall include the Secretary or his 
designee.". 
SEC. 143. EUMINATION OF PRIVATE INVESTOR-OWNERS FROM SINGLE 
FAMILY MORTGAGE INSURANCE PROGRAM. 
(a) RETENTION OP PUBUC AND NONPROFIT INVESTOR OWNERS.— 
12 use 1709. 
Section 203(gX3) of the National Housing Act is amended— 
State and local 
(1) in subparagraph (A), by striking the semicolon at the end 
governments. 
and inserting the following: ", or any other State or local 
government or an agency thereof;"; and 
(2) in subparagraph (B), by striking the semicolon at the end 
and inserting the following: ", or other private nonprofit 
organization that is exempt from taxation under section 
501(cX3) of the Internal Revenue Code of 1986 and intends to sell 
or lease the mortgaged property to low or moderate-income 
persons, as determined by the Secretary;". 
(b) ELIMINATION OP PRIVATE INVESTOR-OWNERS.—Section 203(g) of 
the National Housing Act, as amended by subsection (a), is further 
amended— 
(1) by striking paragraph (2); and 
(2) by redesignating paragraphs (3) and (4) as paragraphs (2) 
and (3), respectively. 
12 use 1709 
(c) APPUCABILITY,—The amendments made by this section shall 
note. 
apply only with respect to— 
(1) mortgages insured— 
(A) pursuant to a conditional commitment issued on or 
after the date of the enactment of this Act; or 
(B) in accordance with the direct endorsement program, if 
the approved underwriter of the mortg^ee signs the ap-
praisal report for the property on or after the date of the 
enactment of this Act; and 
(2) the approval of substitute mortgagors, if the original mort-
gagor was subject to such amendments. 
12 use 1709 
(d) TRANSITION PROVISIONS.—Any mortgage insurance provided 
^ote. 
under title II of the National Housing Act, as it existed immediately 
before the date of the enactment of this Act, shall continue to be 
governed (to the extent applicable) by the provisions amended by 
subsections (a) €uid (b) as such provisions existed immediately before 
such date. 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2037 
TITLE II—HOUSING PRESERVATION 
12 use 1715/ 
note. 
12 use 1715Z 
note. 
SEC. 201. LIMITATIONS ON PREPAYMENT. 
Section 203(a) of the Emergency Low Income Housing Preserva-
tion Act of 1987 is amended by striking "upon the expiration of the 
2-year period beginning on the date of the enactment of this Act" 
and inserting in lieu thereof "on September 30,1990". 
SEC. 202. CLARIFICATION OF APPLICABILITY TO VOLUNTARY TERMI-
NATION OF INSURANCE. 
(a) GENERAL PREPAYMENT LIMITATION.—Section 221(a) of the 
Emergency Low Income Housing Preservation Act of 1987 is amend-
ed by addmg at the end the following new sentence: "An insurance 
contract with respect to eligible low-income housing m&y be termi-
nated pursuant to section 229 of the National Housing Act only in 
accordance with a plan of action approved by the Secretary under 
this subtitle. 
(b) ALTERNATIVE PREPAYMENT LIMITATION.—Section 221(b) of the 
Emergency Low Income Housing Preservation Act of 1987 is 
amended— 
(1) by striking the first comma and insertmg "(1)"; and 
(2) by inserting before the period at the end of the sentence 
the following: ", and (2) an insurance contract with respect to 
eligible low-income housing located in the geographic area sub-
ject to the jurisdiction of such court may not be terminated 
pursuant to section 229 of the National Housing Act during the 
2-year period following the date of such invalidation". 
(c) NOTICE OF INTENT.—Section 222 of the Emergency Low Incpme 
Housing Preservation Act of 1987 is amended by inserting cufter 
"agreement" the following: "(including a request to terminate the 
insurance contract pursuant to section 229 of the National Housing 
Act)". 
(d) CONFORMING AMENDMENTS.— 
(1) Section 250(a) of the National Housing Act is amended by 
inserting after "project" the second place it appears the follow-
ing: "or permit a termination of an insurance contract pursucmt 
to section 229 of this Act". 
(2) Section 229 of the National Housing Act is amended b^ 
inserting after "section 2" the following: and except as speci-
fied imder section 250 of this Act and subtitle B of the Emer-
gency Low Income Housing Preservation Act of 1987,". 
SEC. 203. INCENTIVES TO EXTEND LOW-INCOME USE. 
(a) LOANS.— 
(1) ACQUISITIONS BY PUBUC ENTITIES.—Section 2360i>) of the 
National Housing Act is amended by inserting "public entity," 12 use I7i5z-i. 
before "or a cooperative housing corporation". 
(2) CAPITAL IMPROVEMENT LOANS.—(A) Section 201(mX2)(B) of 
the Housing and Community Development Amendments of 1978 12 use 
is amended by striking "Reduce" and inserting "Notwithstand- I7l5z-la. 
ing subsection (1X2XB), reduce". 
(B) Section 201(mX2) of the Housing and Community Develop-
ment Amendments of 1978 is amended— 
(i) by striking "not subject to paragraph (1)"; 
(ii) by inserting after "residents" the second place it 
appears the following: ", or where appropriate to imple-
1
2 use nibi 
note. 
12 use 
1715Z-15. 
12 use 1715t. 
103 STAT. 2038 
PUBLIC LAW 101-235—DEC. 15, 1989 
ment a plan of action under subtitle B of the Emei^ency 
Low Income Housing Preservation Act of 1987"; 
(iii) adding a new subparagraph after subparagraph (D): 
"(E) Permit repayment of the debt service to be deferred 
as long as the low and moderate income character of the 
project is maintained in accordance with subsection (d).". 
(b) APPROVAL OF PLAN OP ACTION.— 
(1) TENANT PROFILE.—Section 225(bX3XFXi) of the Emergency 
12 use 1715/ 
Low Income Housing Preservation Act of 1987 is amended by 
^°^- 
inserting before the semicolon the following: "Obased on the area 
median income limits established by the Secretary in February, 
1987), or the date the plan of action is approved, whichever date 
results in the highest proportion of very low-income families, 
except that this limitation shall not prohibit a higher propor-
tion of very low-income families from occupying the housing". 
(2) SECTION 8 RENTAL ASSISTANCE.—Section 225 of the Emer-
gency Low Income Housing Preservation Act of 1987 is amende4, 
by adding at the end the following new subsections: 
Ck)ntracts. 
"(c) SECTION 8 RENTAL ASSISTANCE.—When providing rental assist-
ance under section 8, the Secretary may enter into a contract with 
an owner, contingent upon the future availability of appropriations 
for the purpose of renewing expiring contracts for rental assistance 
as provided in appropriations Acts, to extend the term of such rental 
assistance for such additional period or periods as is necessary to 
carry out an approved plan of action. The contract and the approved 
plan of action shall provide that, if the Secretary is unable to extend 
the term of such rental assistance or is unable to develop a revised 
package of incentives providing benefits to the owner comparcd)le to 
those received under the original approved plan of action, the 
Secretary, upon the request of the owner, shall take the following 
actions (subject to the limitetions under the following para-
graphs):— 
"(1) Modification of the binding commitments made pursuant 
to subsection (b) that are dependent on such rental assistance. 
"(2) If action under paragraph (1) is not feasible, release of an 
owner from the binding commitments made pursuant to subsec-
tion (b) that are dependent on such rental assistance. 
"(3) If action under paragraphs (1) and (2) would, in the 
determination of the Secretary, result in the default of the 
insured loan, approval of the revised plan of action, notwith-
standing subsection (a), that involves the termination of low-
income affordability restrictions. 
At least 30. days prior to making a request under the preceding 
sentence, an owner shall n o t ^ the Secfttaxy of the owner's in-
tentiW to submit the nBquest.^rhe Secretary shall have a period of 
90 davs following recciipt of such notice to take action to extend the 
rental assistance contract and to continue the binding commitments 
under subsection (b). 
"(d) RELOCATION OF DISPLACED TENANTS.—Any plan of action shall 
specify actions that the Secretary and the owner shall take to 
ensure that any tenants, displaced as a result of a plan of action 
approved under subsection (a) or as a result of modifications tciken 
pursuant to subsection (c), are relocated to affordable housing.". 
(c) INSURANCE FOR SECOND MORTGAGE FINANCING.— 
(1) UNDERWRITING.—Section 241(fK2) of the Nationed Housing 
12 use 1715Z-6. 
Act is amended by adding at the end the following sentence: 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2039 
"When underwriting an equity loan under this subsection, the 
Secret£ury may assume that the rental assistance provided in accord-
ance with an approved plan of action under section 225(b) of the 
Emergency Low Income Housing Preservation Act of 1987 will be 
extended for the full term of the contract entered into under section 
225(c) of that Act. The Secretary may accelerate repayment of a loan 
under this section in the event rental assistance is not extended 
under section 225(c) of that Act or the Secretary is imable to develop 
a revised package of incentives to the owner comparable to those 
received under the original approved plan of action. . 
(2) ACQUISITIONS BY PUBUC ENTITIES.—Section 241(fK3) of the 
National Housing Act is amended by inserting "public entity," 
after "A". 
(d) LIMITATIONS ON FORECLOSURE.—Section 241(f) of the National 
Housing Act is amended by adding at the end the following new 
paragraph: 
"(6) If the Secretary is unable to extend the term of rental 
assistance for the full term of the contract entered into under 
section 225(c) of the Emergency Low Income Housing Preserva-
tion Act of 1987, the Secretary is authorized to take such actions 
as the Secretary deems to be appropriate to avoid default, avoid 
disruption of the sound ownership and management of the 
property or otherwise minimize the cost to the Federal Grovem-
ment.". 
SEC. 204. PRESERVATION. 
(a) MANAGEMENT AND PRESERVATION OF HUD-OWNED AND H U D -
HELD MULTIFAMILY HOUSING PROJECTS.—Section 203<k) of the Hous-
ing and (Community Development Amendments of 1978 is amended 
to read as follows: "The Secretary shall annually submit to the 
Congress on June 1 of each year a report describing the status of 
multifamily housing projects that are subject to subsection (a), 
which report shall include— 
"(1) the name, address, and size of each project; 
"(2) the nature and date of assignment; 
"(3) the status of the mortgage; 
"(4) the physical condition of the project; 
"(5) the proportion of units in a project that are vacant; 
"(6) the date on which the Secretary became mortgagee in 
possession or the date of imposition of any receivership; 
"(7) the date and conditions of any foreclosure sale; 
"(8) the date of acquisition by the Secretary; and 
"(9) the date and conditions of any property disposition sale. 
The report shall describe the activities carried out under subsection 
(e) during the preceding year, and shall contain a description and 
assessment of the rules, guidelines and practices governing the 
Department's assumption of management responsibilities in multi-
family housing projects subject to subsection (a) that are owned by 
the Secretary (or for which the Secretary is mortgagee in possession) 
as well OB the steps that the Secretary has taken or plans to take to 
expedite the assumption of management responsibilities of tne 
Department and improve the management performance of tne 
Department, including the expedited repair and turnover of vacant 
units.". 
(b) REHABIUTATION LOANS.—Section 241 of the National Housing 
Act is amended by inserting the following after subsection (f): 
12 use 1715Z-6. 
12 use 
ITOlz-ll. 
Reports. 
103 STAT. 2040 
PUBLIC LAW 101-235—DEC. 16,1989 
12 u s e 1715z-la 
note. 
Reports. 
Reports. 
"(gKD When underwritmg a rehabilitation loan under this section 
in connection with eligible multifamily housing, the Secretary may 
assume that any rental assistance provided for purposes of servicing 
the additional debt will be extended for the term of the rehabilita-
tion loan. The Secretary shall exercise prudent underwriting prac-
tices in insuring rehabilitation loans under this section. For pur-
poses of this subsection, the term 'eligible multifamily housing' 
means any housing financed by a loan or mortgage that is— 
"(A) insured or held by the Secretary under section 221(dX3) 
of the National Housing Act and assisted under section 101 of 
the Housing and Urban Development Act of 1965 or section 8 of 
the United States Housmg Act of 1937; 
"(B) insured or held by the Secretary and bears interest at a 
rate determined under the proviso of section 221(dX5) of the 
National Housing Act; or 
"(Q insured, assisted or held by the Secretary under section 
236 of the National Housing Act. 
"(2) A mortgagee approved by the Secretary may not withhold 
consent to a rehabilitation loan insured in connection with eligible 
multifamily housing on which that mortgagee holds a mortgage.", 
(c) CAPITAL ASSESSMENT STUDY,—(1) The Secretary of Housing and 
Urban Development shall conduct a study to determine the physical 
renovation needs of the Nation's federally-assisted multifamily 
housing inventory that is distressed and to estimate the cost of 
correcting deficiencies and subsequentiy maintaining that inventory 
in adequate physical condition. The Secretary shedl establish cri-
teria to determine what housing qualifies as distressed and such 
criteria shall include factors such as serious deficiencies in the 
original design, deferred maintenance, physical deterioration or 
obsolescence of major systems and other serious deficiencies in the 
physical plant of a project. The study shall examine and assess the 
adequacy of existing tools that are available to the Secretary for 
modernization efforts including— 
(A) mortgage insurance for rehabilitation loans under section 
241 of the National Housing Act; 
(B) operating assistance and capital improvement loans under 
section 201 of the Housing and Community Development 
Amendments of 1978 (the "Flexible Subsidy Program"); and 
(C) rental assistance under section 8. 
The study shall also examine and assess the effectiveness of sanc-
tions that are now avaUable to the Secretary. Not later than one 
year after the date of enactment of this Act, the Secretary shall 
submit to the Congress a detailed report setting forth the 
ffncUngs 
of 
the Secretary as a result of the study. The Secretary shall submit to 
the Congress an interim report containing the information required 
under paragraph (2) not later than April 1,1990. 
(2) The examination and assessment of the Flexible Subsidy Pro-
gram required by paragraph (1) shall include— 
(A) an accounting of all applications that have been approved 
or rejected since 1980; 
(B) an analysis of all applications that have not been acted 
upon since 1980 including the length of time such applications 
have been pending, the amount of assistance requested, and the 
number of units affected; 
(C) an estimate of the funding that will be made available to 
the Flexible Subsidy Fimd under section 201(j) of the Housing 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2041 
and Community Development Amendments of 1978 in the next 
three fiscal years; and 
(D) an assessment of what additional resources will be needed 
for the Fund in the next three 
fiscal 
years. 
(3) Hie term "federally-assisted multifamUy housing" means hous> 
ing 
financed 
by a loan or mortgage that is— 
(A) instu«d or held by the Secretary under section 221(dX3) of 
the National Housing Act and assisted under section 101 of the 
Housing and Urban Dc»velopment Act of 1965 or section 8 of the 
United States Housing Act of 1937; 
(B) insured or held l^ the Secretary and bears interest at a 
rate determined under the proviso of section 221(dX5) of the 
National Housing Act; or 
(Q insured, assisted or held by the Secretary under section 
236 of the National Housing Act. 
SEC 205. REPORT ON PROPERTY DISPOSITION DEMONSTRATION. 
The Secretary of Housing and Urban Development shall submit to 
the Congress, not later thim 30 days after the date of ^lactment of 
this Act, a report describing the steps that have been and will be 
taken to implement section 184 of the Housing and Community 
Development Act of 1987 including a detailed description o
f
— 
(1) the efforts taken by the Secretary to solicit participants in 
the demonstration; 
(2) any applications, responses or other expressions of interest 
submitted by State housing 
finance 
agencies; 
(3) the reasons for the Secretary's refusal, as oi the date of 
enactment of this Act, to approve such applications; and 
(4) the steps that the Seoretary has taken and plans to take to 
ensure that the demonstration is impl^nented in at least one 
State within 90 days after the date of enactment of this Act 
SEC 206. PROHIBITION ON PREPAYHENT OF NEW RURAL HOUSING 
LOANS. 
(a) IN GENERAL.—Section 502(cXl) of the Housing Act of 1949 is 1
2 use 1472. 
amended— 
(1) by inserting "(A)" after "(cXD"; 
(2) by redesignating subparagraphs (A) and (B) as clauses (i) 
and (ii), respectively; and 
(3) by adding at the end the following new subparagraph: 
"(B) Tlie Secretary may not accept an offer to prepay, or request 
refinancing in accordance with subsection (bX3) of, any loan made or 
insured under section 515 pursuant to a contract entered into on or 
after the date of the enactment of the Department oi Housing and 
Urban Development Reform Act of 1989.". 
O
i
>
) CONFORMING AMENDMENT.—Section 502(cXl) of the Housing 
Act of 1949 is amended— 
(1) by striking "after the date of enactment of this subsec-
tion," and inserting the following: "after December 21,1979, but 
before the date of the enactment of the Department of Housing 
and Urban Development Reform Act of 1989,"; and 
(2) by striking "after the date of enactment of this subsection 
and" and inserting the following: "after December 21,1979, but 
before the date of the enactment of the Departaient of Housing 
and Urban Dev^opment Reform Act of 1989, and". 
103 STAT. 2042 
PUBLIC LAW 101-235—DEC. 15, 1989 
SEC. 207. EQUITY TAKEOUT INCENTIVE FOR NEW RURAL HOUSING LOANS. 
42 use 1485. 
Section 515 of the Housing Act of 1949 is amended by adding at 
the end the following new subsection: 
"(t) EQUITY TAKEOUT LOANS.— 
"(1) AUTHORITY.—The Secretary is authorized to guarantee an 
equity loan (in the form of a supplemental loan) to an owner of 
housing financed with a loan made or insured under subsection 
(b), only if the Secretary determines, after taking into account 
local market conditions, that there is reasonable likelihood that 
the housing will continue as decent, S£ife, and sanitary housing 
for the remaining life of the original loan on the project made or 
insured under subsection (b) and that such an equity loan is— 
"(A) necessary to provide a fair return on the owner's 
investment in the housing; 
"(B) the least costly alternative for the Federal Govern-
ment that is consistent with carrying out the purposes of 
this subsection; and 
"(C) would not impose an undue hardship on tenants or 
an unreasonable cost to the Federal Grovemment. 
The amount of loans guarsuiteed under this subsection shall be 
subject to limits provided in appropriations Acts. 
"(2) TIMING.—The Secretary is authorized to guarantee an 
equity loan under this subsection after the expiration of the 20-
year period beginning on the date that an existing loan under 
subsection (b) of this section was made or insured. Not more 
than one equity loan under this subsection may be provided for 
any project. 
"(3) AMOUNT OP THE TAKEOUT.—The amount of an equity loan 
under this subsection shall not exceed the difference between 
the outstanding principal on debt secured by the project and 90 
percent of the appraised value of the project. The appraised 
value of the project shall be determined by 2 independent 
appraisers, 1 of whom shall be selected by the Secretary and 1 of 
whom shall be selected by the owner. If the 2 appraisers fail to 
agree on the value of the project, the Secretary and the owner 
shall jointly select a third appraiser whose appraisal shall be 
binding on the Secretary and the owner. The amount of the 
equity loan shall not exceed 30 percent of the amount of the 
original loan on the project made or insured under subsection 
(b). 
"(4) RESERVE ACCOUNT PAYMENTS.—For each loan made or 
insured under subsection (b) pursuant to a contract entered into 
after the date this subsection takes effect, the owner shedl make 
monthly pajrments from project income to the Secretary for 
deposit in a reserve account for the project. Such monthly 
pajrments shall, in the first year after the loan is made or 
insured, equal $2 for each unit in the project, and shall increase 
by $2 annually until the expiration of the 2()-year period begin-
ning on the date that the loan was made or insured, except that 
such annual incresuses shall not be required for a unit occupied 
by a low-income family or individual who is paying more than 
30 percent of the family's or individual's adjusted income in 
rent. The rent on a unit for which pajonent is made under this 
paragraph shall be increased by the amount of such payment. 
"(5) RESERVE ACCOUNT.— 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2043 
"(A) Pa3nnents under paragraph (4) shall be deposited m 
an interest bearing account that the Secretary shall estab-
lish for the project. 
"(B) The Secretary shall make available amounts in the 
reserve account only for payments of principal and interest 
on an equity loan under this subsection. Such payments 
shall be in amounts necessary to ensure that rent pajnnents 
made by low-income families residing in the housing do not 
exceed the maximum rent under section 521(aX2XA); 
"(C) Any payments to the account, and interest on such 
pa3mients, not expended in the project from which such 
payments were made, shall be used in other projects to 
make payments of principal and interest on an equity loan 
under this subsection. Such payments shall be in amounts 
necessary to ensure that rent pa3anents made by low-
income families residing in the housing do not exceed the 
maximum rent under section 521(aX2XA). 
"(D) The Secretary shall make payments from accounts 
under this paragraph only to the extent provided in appro-
priations Acts. 
"(6) SUBMISSION OF PLAN.—An owner requesting an equity 
loan under this subsection shall submit a plan acceptable to the 
Secretary to ensure that the cost of amortizing an equity loan 
under paragraph (1) does not result in the displacement of very-
low-income tenants or substantially alter the income mix of the 
tenants in the project. 
"(7) REGULATIONS.—The Secretary shall issue final regula-
tions within 180 days from the date of enactment of this sub-
section. 
"(8) EFFECTIVE DATE.—The requirements of this subsection 
shall apply to any applications for assistance under this section 
on or after the expiration of 180 days from the date of enact-
ment of this subsection.". 
TITLE III—HOUSING PROGRAM 
EXTENSIONS AND CHANGES 
SEC. 301. FLEXIBLE SUBSIDY PROGRAM. 
Section 236(fK3) of the National Housing Act is amended by 
12 use I7i5z-i. 
striking "September 30, 1989" and insertmg "September 30, 1991". 
SEC. 302. CONTINUATION OF PUBLIC HOUSING ECONOMIC RENT. 
Section 3(aX2) of the United States Housing Act of 1937 is 
42 use I437a. 
amended— 
(1) in subparagraph (A), by striking "3-year" and inserting 
"5-year"; and 
(2) in subparagraph (B)— 
(A) by striking "3-year" and inserting "5-year"; and 
(B) by adding at the end the following: "The terms of all 
ceiling rents established prior to the date of enactment of 
the Department of Housing and Urban Development 
Reform Act of 1989 shall be extended for the 5-year period 
beginning on such date of enactment.". 
103 STAT. 2044 
PUBLIC LAW 101-235—DEC. 15,1989 
SEC. 303. EXTENSION OF RECIPROCITY IN APPROVAL OF HOUSING SUB-
DIVISIONS AMONG FEDERAL AGENCIES. 
42 use I490o. 
Section 535(b) of the Housing Act of 1949 is amended by striking 
"1-year period beginning on the date of the enactment of the 
Stewart B. McKimiey Homeless Assistance Amendments Act of 
1988" and inserting the following: "6-month period beginning on the 
date of the enactment of the Department of Housing and Urban 
Development Reform Act of 1989". 
SEC. 304. HODAG AMENDMENT. 
42 use i437o. 
Section 17(d) of the United States Housing Act of 1987 is amended 
as follows: 
"(11) SALE OF UNITS.— 
"(A) IN GENERAL.—Notwithstanding any other provision of 
law, in the case of a project assisted by a development grant 
awarded pursuant to this section where (i) the grant was origi-
nally approved for a nonprofit cooperative, and (ii) a majority of 
the units in the approved project have 3 or more bedrooms, the 
nonprofit owner of such project may sell such units for fee 
simple or condominium ownership if the requirements of 
subparEigraph (B) are met. 
"(B) REQUIREMENTS.—The requirements of this subparagraph 
are that— 
"(i) at least 80 percent of the units in the project are 
initially sold to households with incomes that do not exceed 
80 percent of the median income of the area; 
(ii) housing cost to such households shall be initially 
calculated at not to exceed 30 percent of actual household 
income; 
"(iii) each purchaser agrees that, during the 20-year 
period following the initial sale, any subsequent resale of 
the unit shall be to a purchaser whose income does not 
exceed 80 percent of the median income for the area; and 
"(iv) after the 20-year period described in clause (iii), the 
pro rata grant attributable to a unit, which shall be secured 
by a deed of trust on the unit, shall be repaid upon any sale, 
lease, or transfer of any interest in the unit except for a 
sale of the unit to a purchaser whose income does not 
exceed 80 percent of the median income of the area. 
"(C) REFINANCING.—A refinancing of the unit involving an 
equity withdrawal shall require a repa3anent to the extent of 
the withdrawal not to exceed the pro rata amount of the grant 
attributable to the unit. A refinancing unrelated to a sale, 
equity withdrawal, lease, or transfer of interest shall not 
require repasrment. 
(D) ADMINISTRATION.—A homeowner may request grantee 
approval of a sale, equity withdrawal, or other transfer with 
postponement of the repajmient or without full or partial repay-
ment and grantee may approve if the grantee determines that— 
"(i) an undue hardship will result from the application of 
the repayment requirement, such as where the proceeds are 
insufficient to repay the loan in full; or 
"(ii) postponing repa^ent is in the interest of neighbor-
hood growth and stability. 
"(E) EFFECT OF REPAYMENT.—Upon repayment of the grant, 
any program requirements affecting the unit shall terminate. 
The grantee shcQl use repayments of the grant for low and 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2045 
moderate income housing as prescribed by the Secretary. Not-
withstanding any existing project covenants or inconsistencies 
with this section, the Secretary shall take all action necessary 
to implement this paragraph.". 
TITLE IV--RURAL HOUSING 
SEC, 401. ACCOUNTABILITY IN AWARDS OF ASSISTANCE; REMEDIES AND 
PENALTIES. 
(a) IN GENERAL.—Title V of the Housing Act of 1949 is amended 
by adding at the end the following: 
ACCOUNTABILITY 
"SEC. 536. (a) NOTICE REGARDING ASSISTANCE.— 
"(1) PuBUCATiON OF NOTICE OF AVAILABILITY.—The Secretary 
shall publish in the Federal Register notice of the availability of 
any assistance under any program or discretionary fund 
administered by the Secretary under this title. 
"(2) PuBUCATiON OF APPUCATiON PROCEDURES.—The Secretary 
shall publish in the Federal Register a description of the form 
and procedures by which application for the assistance may be 
made, and any deadlines relating to the award or allocation of 
the assistance. Such description shall be sufficient to enable any 
eligible applicant to apply for such assistance. 
"(3) PUBLICATION OF SELECTION CRITERIA.—Not less than 30 
days before any deadline by which applications or requests for 
assistance under any program or discretionary fund adminis-
tered by the Secretary must be submitted, the Secretary shall 
publish in the Federal Register the criteria by which selection 
for the assistance will be made. Such criteria shall include any 
objective measures of housing need, project merit, or efficient 
use of resources that the Secretary determines are appropriate 
and consistent with the statute under which the assistance is 
made available. 
"(4) DOCUMENTATION OF DECISIONS.— 
"(A) The Secretary shall award or allocate assistance only 
in response to a written application in a form approved in 
advance by the Secretary, except where other award or 
allocation procedures are specified in statute. 
"(B) The Secretary shall ensure that documentation and 
other information regarding each application for assistance 
is sufficient to indicate the basis on which any award or 
allocation was made or denied. The preceding sentence 
shall apply to— 
(i) £uiy application for an award or allocation of 
assistance made by the Secretary to a State, unit of 
general local government, or other recipient of assist-
ance, and 
"(ii) any application for a subsequent award or alloca-
tion of such assistance by such State, unit of genereil 
local government or other recipient. 
"(C) The Secretary shedl ensure that each application and 
all related documentation and other information referred 
to in subparagraph (B) is readily available for public inspec-
tion for a period of not less than 10 years, beginning not less 
Federal 
Register, 
publication. 
42 u s e 1490p. 
State and local 
governments. 
Public 
information. 
103 STAT. 2046 
PUBLIC LAW 101-235—DEC. 15,1989 
than 30 days following the date on which the award or 
allocation is made. 
"(5) EMERGENCY EXCEPTION.—The Secretary may waive the 
requirements of paragraphs (1), (2), and (3) if the Secretary 
determines that the waiver is required for adequate response to 
an emergency. Not less than 30 days after providing a wEuver 
under the preceding sentence, the Secretary shall publish in the 
Federal Register the Secretary's reasons for so doing. 
"(b) DISCLOSURES BY APPUCANTS.—The Secretary shall require the 
disclosure of information with respect to any application for assist-
ance under this title submitted by any applicant who has received 
or, in the determination of the Secretary, can regisonably be ex-
pected to receive assistance under this title in excess of $200,000 in 
the aggregate during any fiscal year. Such information shall include 
the following: 
"(1) OTHER GOVERNMENT ASSISTANCE.—Information regarding 
any related assistance from the Federal Government, a State, or 
a unit of general local government, or any agency or instrumen-
tality thereof, that is expected to be made available with respect 
to the project or activities for which the applicant is seeking 
assistance under this title. Such related assistance shall include 
but not be limited to any loan, grant, guarantee, insurance, 
pa3mient, rebate, subsidy, credit, tax benefit, or any other form 
of direct or indirect assistance. 
"(2) INTERESTED PARTIES.—The name and pecimiary interest of 
any person who has a pecuniary interest in the project or 
activities for which the applicant is seeking assistance. Persons 
with a pecuniary interest in the project or activity shall include 
but not be limited to any developers, contractors, and consult-
ants involved in the application for assistance under this title or 
the planning, development, or implementetion of the project or 
activity. For purposes of this paragraph, residency of an individ-
ual in housing for which assistance is being sought shall not, by 
itself, be considered a pecuniary interest. 
Reports. 
"(3) EXPECTED S
O
U
R
C
E
S AND USES.—A report satisfactory 
to 
the 
Secretary of the expected sources and uses of funds that are to 
be made available for the project or activity. 
"(c) UPDATING OF DISCLOSURE.—During the period when an ap-
plication is pending or assistance is being provided, the applicant 
shall update the disclosure required under the previous sul^ection 
within 30 days of any substantial change. 
"(d) REGULATION OP LOBBYISTS AND (JoNSULTANTS.— 
"(1) LIMITATION OF FEES.—Any person who is engaged for pay 
or for any consideration for the purpcKse of attempting to influ-
ence any award or allocation of assistance by the Secretary 
shall not seek or receive any fee that is— 
"(A) based on the amount of assistance or number of 
units that may be provided by the Secretary, or 
"(B) contingent on an award of assistance by the Sec-
retaiy, except that professional services related to a project 
may be donated in whole or in part to a community housing 
development organization in the event assistance for a 
project is not awcu:^ed. 
"(2) REGISTRATION.—Any person who will be engaged for pay 
or for any consideration for the purpose of attempting to influ-
ence any award or allocation of assistance by the Secretary 
shall, before doing anything in furtherance of such object. 
PUBLIC LAW 101-235~DEC. 15,1989 
103 STAT. 2047 
register by submitting to the Secretary a sworn statement 
containing— 
"(A) such person's name and business address, 
"(B) the nature and duration of any previous Federal 
employment, 
(C) the name and address of the person by whom such 
person is employed, and in whose interest such person 
appears or works, 
(D) the duration of such employment, 
"(E) how much such person is paid and is to receive, 
"(F) by whom such person is psdd or is to be paid, 
"(G) how much such person is to be paid for expenses, and 
"(H) what expenses are to be included. 
For purposes of this paragraph, ownership by an individual of a 
single family home financed under section 502 does constitute 
pav or consideration. 
(3) REPORTING.—Each person registering under paragraph (2) 
shall, between the first and tenth day of each calendar quarter, 
so long as such person's activity continues, file with the Sec-
retary a detailed report imder oath setting forth— 
"(A) all money received and expended by such person 
during the preceding calendar quarter in carrying on such 
person's work; 
"(B) an identification of the person or persons to whom 
funds were paid and the purposes of such pa3rments; 
"(C) all awards or allocations of assistance under this title 
that the person attempted to influence; and 
"(D) any contacts with any employee of the Department 
for the purpose of attempting to influence any award or 
allocation of eissistance by the Secretary. 
"(e) REMEDIES AND PENALTIES.— 
"(1) ADMINISTRATIVE REMEDIES.—If the Secretary receives or 
obtains information providing a reasonable basis to believe that 
a violation of subsection (b), (c), or (d) this section has occurred, 
the Secretary shall— 
"(A) in the case of a selection that has not been made, 
determine whether to terminate the selection process or 
take other appropriate actions; and 
"(B) in the case of a selection that has been made, deter-
mine whether to— 
"(i) void or rescind the selection, subject to review 
and determination on the record after opportunity for a 
hearing; 
"(ii) impose sanctions upon the violator, including 
debarment, subject to review and determination on the 
record after opportunity for a hearing; 
"(iii) recapture any funds that have been disbursed; 
"(iv) permit the violating applicant selected to con-
tinue to participate in the program; or 
"(v) take any other actions that the Secretary consid-
ers appropriate. 
The Secretary shall publish in the Federsd Register a descrip-
tive statement of each determination made and action taken 
under this paragraph. 
"(2) CJiviL PENALTIES.—Whoever violates any section of this 
section shall be subject to the imposition of a civil penalty in a 
civil action brought by the United States in an appropriate 
103 STAT. 2048 
PUBLIC LAW 101-235—DEC. 15,1989 
district court of the United States. A civil penalty under this 
paragraph may not exceed— 
"(A) $100,000 in the case of an individual; or 
"(B) $1,000,000 in the case of an applicant other than an 
individual. 
"(3) DEPOSIT OF PENALTIES IN INSURANCE FUNDS.—Notwith-
standing any other provision of law, all civil money penalties 
collected under this section shall be deposited in the Rural 
Housing Insurance Fund. 
"(4) NoNEXCLUsrvENESS OF REMEDIES.—This subsection may 
not be construed to limit the applicability of any requirements, 
sanctions, penalties, or remedies established under any other 
law. The Secretary shall not be relieved of any obligation to 
carry out the requirements of this section because such other 
requirements, sanctions, penalties, or remedies apply. 
"(f) LIMITATION OF ASSISTANCE.—The Secretary shall certify that 
assistance provided by the Secretary to any housing project shall not 
be more than is necessary to provide affordable housing after taking 
account of assistance from all Federal, State, and local sources. The 
Secretary shall adjust the amount of assistance provided to sua. 
applicant to compensate for any changes reported under subsection 
(0. 
"(g) REGULATIONS.—Not less than 180 days following enactment of 
this Act, the Secretary shall promulgate regulations to implement 
this section. 
"(h) DEFINITION.—For purposes of this section, the term 'assist-
ance' means any housing grant, loan, guarsmtee, insurance, rebate, 
subsidy, tax credit benefit, or other form of direct or indirect 
assistance. 
"(i) REPORT BY THE SECRETARY.—The Secretary shall submit to the 
Congress, not later than 180 days following the date of enactment of 
this section, a report describing actions taken to carry out this 
section, including actions to inform and educate of^cers and employ-
ees of the Department of Agriculture regarding the provisions of 
this section.". 
42 use I490p 
(b) EFFECTIVE DATE.—Section 536 of the Housing Act of 1949, as 
note. 
added by subsection (a), shall take effect on the effective date of 
regulations implementing such section. 
SEC. 402. REUSE OF SECTION 515 LOAN AUTHORITY. 
Section 515 of the Housing Act of 1949, as amended by section 207, 
is amended by adding at the end the following: 
"(u) REUSE OF LOAN AUTHORITY.—Loan authority that is obligated 
under this section but that is not expended due to any action that 
removes the original borrower, may be reallocated to a different 
borrower during the same fiscal year in which the loan authority 
was obligated.". 
i2usci7i5z-ia TITLE V—NATIONAL COMMISSION ON SE-
VERELY DISTRESSED PUBLIC HOUSING 
SEC. 501. PURPOSE. 
The purpose of this title is to establish a National Commission on 
Severely Distressed Public Housing— 
i^.,..^. 
PUBUC LAW 101-235—DEC. 15,1989 
103 STAT. 2049 
(1) to identify those public housing projects in the Nation that 
are in a severe state of distress; 
(2) to assess the most promising strat^es to improve the 
condition of severely distressed public housing projects that 
have been implemented by public housing authorities, other 
Government agencies at ^e Federal, State, and local level, 
public housing tenants, and the private sector, 
(3) to develop a national action plan to eliminate by the year 
2000 unfit living conditions in public housing projects deter-
mined by the Clommission to be the most severely distressed. 
SEC 502. ESTABUSHMENT OF COMMISSION. 
There is established a commission to be known as the National 
Commission on Severely Distressed Public Housing (hereinafter in 
this title referred to as the "Commission"). 
SEC 503. MEMBERSHIP OF COMMISSION. 
(a) APPOINTMENT.—(1) The Commission shall be composed of 18 
members, appointed not later than 60 days after amoimts are 
appropriated pursuant to section 506 or made available from non-
Federal sources. The members shall be as follows: 
(A) 6 members to be appointed by the Secretary of Housing 
and Urban Development; 
(B) 6 members appointed by the Chairman and Ranking 
Minority Member of the Subcommittee on Housing and Urban 
AfTairs of the Committee on Banking, Housing, and Urban 
Affairs of the Senate and the Chairman and Raiding Minority 
Member of the Subcommittee on VA, HUD, and Independent 
Agencies of the Committee on Appropriations of the Senate; and 
(C) 6 members appointed by the Chairman and Ranking 
Minority Member of the Subcommittee on Housing and Commu-
nity Development of the Committee on Banking, Finance and 
Urban Affairs of the House of Representatives and the Chair-
man and Ranking Minority Member of the Subcommittee on 
VA, HUD, and hidependent Agencies of the Committee on 
Appropriations of the House of Representatives. 
(2) The Secretary and the congressional leaders referred to in 
paragraph (1) shall each appoint as member of the Commission— 
(A) 2 individuals who are elected public officials at the Fed-
eral, State, or loccd level; 
(B) 2 individuals who are local public housing officials or 
representatives of public housing authorities with experience in 
eliminating unfit living conditions in severely distr^sed public 
housing projects; 
(C) 1 individual who is a tenant or a representative of tenants 
or a tenant organization; and 
(D) 1 individual who is a leader of business or labor or is a 
distinguished academic in the field of housing and urban devel-
opment. 
Q
>
) CHAIRPERSON.—The Commission shall elect a chairperson from 
among members of the Commission. 
(c) QUORUM.—A miyority of the members of the Commission shall 
constitute a quorum for the transaction of 
business. 
(d) VOTING.—Each member of the Commission shall be entitled to 
1 vote, which shall be equal to the vote of every other member of the 
Commission. 
103 STAT. 2050 
PUBLIC LAW 101-235—DEC. 15, 1989 
(e) VACANCIES.—Any vacancy on the Commission shall not affect 
its powers, but shall be filled in the manner in which the original 
appointment was made. 
(f) PROHIBITION ON ADDITIONAL PAY.—Members of the Commission 
shall serve without compensation, but shall be reimbursed for 
travel, subsistence, and other necessary expenses incurred in the 
performance of their duties as members of the Commission. 
SEC. 504. FUNCTIONS OF THE COMMISSION. 
(a) IDENTIFICATION OF SEVERELY DISTRESSED PUBUC HOUSING 
PROJECTS.—The Commission shall identify those public housing 
projects that are in a severe state of distress, giving special attention 
to projects that— 
(1) require major redesign to correct serious deficiencies in the 
original design (including inappropriately high population den-
sity), deferred maintenance, physical deterioration or obsoles-
cence of major systems and other deficiencies in the physicsd 
plant of the project; 
(2) are occupied predominantly by families with children who 
are in a severe state of distress, characterized by such factors as 
high rates of unemplojrment, teenage pregnancy, single-parent 
households, long-term dependency on public assistance and 
minimal educational achievement; 
(3) are locations for recurrent vandalism and criminal activity 
(including drug-related criminal activity); 
(4) suffer from management deficiencies, including absence of 
effective management systems to (A) repair and re-rent vacant 
units expeditiously; (B) maintain units and common areas; (C) 
terminate the tenancy of tenants engaged in activity that ad-
versely affects the health, safety, and right to quiet enjojrment 
of their neighbors; (D) collect rents; (E) encourage tenant 
participation and cooperation in management and mainte-
nance; and (F) maintain adequate security; and 
(5) meet such other criteria that the Commission determines 
to be evidence of unfit living conditions. 
(b) EVALUATION OF ALTERNATIVE STRATEGIES.—The Commission 
shall £issess the most promising strategies to eliminate unfit living 
conditions in severely distressed public housing projects that have 
been implemented by public housing authorities, other Government 
agencies at the Federal, State, and local level, public housing ten-
ants, and the private sector. Such strategies may include but shall 
not be limited to— 
(1) measures to correct management deficiencies; 
(2) the provision of supportive services to project residents, 
and, if necessary, the redesign of projects to accommodate such 
services; 
(3) the redesign of projects to reduce density and otherwise 
eliminate harmful design elements; 
(4) the conversion of projects to mixed-income housing devel-
opments; £md 
(5) the total or partial demolition or disposition of projects. 
Evaluation of such strategies shall consider efforts to provide 
for replacement of public housing dwelling units that were 
demolished, disposed of or otherwise removed from use by low-
income persons. 
(c) DEVELOPMENT OF NATIONAL ACTION PLAN.—The Commission 
shall establish a national action plan to eliminate by the year 2000 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2051 
unfit living conditions in public housing projects identified in 
subsection (a). The action plan shall— 
(1) specify objectives that the Department of Housing and 
Urban Development could achieve in cooperation with public 
housing authorities, public housing tenants, and other in-
terested parties; 
(2) provide a schedule by which such objectives could be 
achieved; 
(3) recommend any legislative or administrative action that is 
necessarv to achieve such objectives; 
(4) make recommendations regarding any necessary replace-
ment of public housing; and 
(5) calculate, in accordance with the schedule established 
above, any impact on Federal expenditures necessary to achieve 
such objectives. 
(d) FINAL REPORT.—Not later than 12 months after the Commis-
sion is established pursuant to section 503(a), the Commission shall 
submit to the Secretary and to the Congress a final report which 
shall contain the information, evaluations, and recommendations 
specified above. 
SEC. 505. POWERS OF COMMISSION. 
(a) HEARINGS.—The Commission may, for the purpose of carrying 
out this subtitle, hold such hearings and sit and act at such times 
and places as the Commission may find advisable. 
(b) RULES AND REGULATIONS.—The Commission may adopt such 
rules and regulations £is may be necessary to establish its procedures 
and to govern the manner of its operations, organization and 
personnel. 
(c) ASSISTANCE FROM FEDERAL AGENCIES.— 
(1) The Commission may secure directly from any department 
or agency of the United States such data and information as the 
Commission may require for the purpose of this subtitle, includ-
ing but not limited to comprehensive plans submitted by public 
housing authorities in accordance with section 14 of the United 
States Housing Act of 1937, and applications submitted by 
public housing authorities requesting funds for the major re-
construction of public housing projects in accordance with sec-
tion 5 of such Act. Upon request of the Commission, any such 
department or agency shall furnish such data or information. 
The Commission may acquire data or information directly from 
public housing authorities to the same extent the Secretary 
could acquire such data or information. 
(2) The Grenered Services Administration shedl provide to the 
Commission, on a reimbursable basis, such administrative sup-
port services as the Commission may request. 
(3) Upon the request of the chairperson of the Commission, 
the Secretary of Housing and Urban Development shall, to the 
extent possible and subject to the discretion of the Secretary, 
detail any of the personnel of the Department of Housing and 
Urban Development, on a nonreimbursable basis, to assist the 
Commission in carrying out its duties under this subtitle. 
(d) MAILS.—The Commission may use the United States mails in 
the same manner and under the same conditions as other Federal 
agencies. 
(e) CONTRACTING.—The Commission may, to such extent and in 
such amounts as are provided in appropriations Acts, enter into 
103 STAT. 2052 
PUBUC LAW 101-235—DEC. 15,1989 
contracts witii private firms, institutions, and individuals for the 
purpose of conducting research or surveys necessary to enable the 
Commission to discharge its duties under this subtitle. 
(f) STATF.—(1) The Commission shall appoint an executive director 
of the Commission who shall be compensated at a rate fixed by tiie 
Conmiission, but which shall not exceed the rate established for 
level V of the Executive Schedule under title 5, United States Code. 
(2) In addition to the executive director, the Commission may 
appoint and fix the compensation of such personnel as it deems 
advisable, in accordance with the provisions of title 5, United States 
Code, governing appointments to the competitive service, and the 
provisions of chapter 51 and subchapter ni of chapter 53 of such 
title, relating to classification and General Schedule pay rates. 
(g) ADVISORY COMMTTTEE.—^The Commission shall be considered an 
advisory committee within the meaning of the Federal Advisory 
Committee Act (5 U.S.C. App.). 
SEC 506. AUTHORIZATION OF APPROPRUTIONS. 
There are authorized to be appropriated to carry out this title not 
to exceed $2,000,000 for fiscal vear 1990 and $1,000,000 for fiscal 
year 1991. Funds appropriated under this section shall rraoain 
available imtil expended. 
SEC 507. SUNSET. 
The Commission shall terminate upcm the expiration of 18 months 
following the appointment of all the members under section 503(a). 
12 use 1437aa 
note. 
TITLE VI—NATIONAL COMMISSION ON 
NATIVE AMERICAN, ALASKA NATIVE, 
AND NATIVE HAWAIIAN HOUSING 
SEC 601. ESTABUSHMENT. 
There is established a Commission to be known as the National 
Commission on American Indian, Alaska Native, and Native Hawai-
ian Housing (hereinafter in ^is section referred to as the "Com-
mission"). 
SEC 602. MEMBERSHIP. 
(a) APPOINTMENT.—(1) The Commission shall be composed of 12 
members, appointed not later than 60 days after amounts are 
appropriated pursuant to section 605 of this Act or made available 
from non-Federal sources. The members shall be appointed as 
follows: 
(A) 2 members to be appointed by the Secretary of Housing 
and Urban Development; 
(B) 2 members appointed by the Chairman and the Ranking 
Minority Member of the Select Committee on Indian Affairs of 
the Senate; 
(Q 3 members appointed by the Chairman and the Ranking 
Minority Member of the Subcommittee on Housing and Commu-
nity Development of the Committee on Banking, Finance, and 
Urban AffauB oi the House of Representatives; 
(D) 3 m^nbers ^pointed by the Chairman and Ranking 
Minority Member of the Subcommittee on Housii^ and Urban 
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2053 
Affairs of the Committee on Banking, Housing, and Urban 
Affairs of the Senate; 
(E) 1 Native Hawaiian appointed by the Secretary of Housing 
and Urban Development; and 
(F) 1 Native Hawaiian appointed by the Chairman and Rank-
ing Minority Member of the Select Committee on Indian Affairs 
of the Senate. 
(2) Except as provided in paragraph (3), the Secretary and the 
congressional leaders referred to in subparagraphs (A) through (D) 
of paragraph (1) shall appoint as members of the Commission 
individuals who are elected officials of Indian tribes, who are offi-
cials of Indian housing authorities, or who have experience in 
Federal Indian housing programs. 
(3) The congressional leaders referred to in subparagraphs (C) and 
(D) paragraph (1) shall appoint 1 individual under each such clause 
with experience in housing development and finance. 
(4) The members appointed under subparagraphs (E) and (F) of 
paragraph (1) shall be individuals with experience in the Native 
Hawaiian community in housing programs available to beneficiaries 
of the Hawaiian Homes Commission Act of 1920. 
G
>
) CHAIRPERSON.—The Commission shall elect a chairperson from 
among the members of the Commission. 
(c) QUORUM.—A majority of the members shall constitute a 
quorum for the transaction of business. 
(d) VOTING.—Each member of the Commission shall be entitled to 
one vote, which shall be equal to the vote of every other member of 
the Commission. 
(e) VACANCIES.—Any vacancy on the Commission shall not affect 
its powers, but shall be filled in the original manner in which the 
appointment was made. 
(f) PROHIBITION ON ADDITIONAL PAY.—Members on the Commis-
sion shall serve without compensation, but shall be reimbursed for 
travel, subsistence, and other necessary expenses incurred in the 
performance of their duties as members of the Commission. 
(g) TERMINATION.—The Commission shall terminate upon the 
expiration of 18 months after all members of the Commission are 
appointed under paragraph (1). 
SEC. 603. FUNCTIONS OF THE COMMISSION. 
(a) EVALUATION OF CURRENT PROBLEMS.—The Commission shall 
evaluate the factors currently impeding the development of safe and 
affordable housing for American Indians, Alaska Natives, and 
Native Hawaiians, including factors related to tribal administrative 
capacity, property management, access to financial m€u*kets, infra-
structure development, and the adequacy of existing housing pro-
grams for Indians, Alaska Natives, and Native Hawaiians. 
0)) EVALUATION OF ALTERNATIVE STRATEGIES.—The Commission 
shall assess the most promising strategies for the development, 
management, and modernization of housing for Indians, Alaska 
Natives, and Native Hawaiians. The Commission shall, in particu-
lar, evaluate housing strategies that have been or could be carried 
out by Indian housing authorities, public housing authorities, other 
government agencies at the Federal, State and local level, and the 
private sector. 
(c) DEVELOPMENT OF AN ACTION PLAN.—The Commission shall 
establish an action plan for American Indian and Alaska Native 
103 STAT. 2054 
PUBLIC LAW 101-235—DEC. 15,1989 
housing based upon the assessment in subsections (a) and (b). The 
action plan shall— 
(1) specify objectives that the Department of Housing and 
Urban Development could achieve in cooperation with ^dian 
housing authorities, Indian tribes, Native Hawaiian organiza-
tions, and other interested parties; 
(2) provide a schedule by which such objectives could be 
achieved; and 
(3) recommend legislative, regulatory, or administrative 
action necessary to achieve such objectives. 
(d) FINAL REPORT.—Not later than 12 months after the appoint-
ment of members of the Commission under section 602(a), the 
Commission shall submit to the Secretary and to the Congress a 
final report which shall contain the information, evaluations, and 
recommendations specified above. 
(e) DEFINITION.—As used in this section, the term "Native Hawai-
ian organization" means any organization which is established and 
controlled by beneficiaries or eligible beneficiaries under the provi-
sions establ^hed by the Hawaiian Homes Commission Act of 1920. 
SEC. 604. POWERS OF THE COMMISSION. 
(a) HEARINGS.—The Commission may for the purpose of canning 
out this title, hold such hearings and sit and act at such times and 
places as the Commission may find advisable. 
0>) RULES AND REGULATIONS.—The Commission may adopt such 
rules and regulations as may be necess£iry to establish its procedures 
and to govern the manner of its operations, organization, and 
personnel. 
(c) ASSISTANCE FROM FEDERAL AGENCIES.— 
(1) The Commission may secure directly from any department 
or agency of the United States such data and information as the 
Commission may require for the purpose of this title. Upon 
request of the Commission, any such department or agency 
shall furnish such data or information. The Commission may 
require data or information directly from Indian housing 
authorities to the same extent the Secretary could acquire such 
data or information. 
(2) The General Services Administration shall provide to the 
Commission, on a reimbursable basis, such administrative sup-
port services as the Commission may request. 
(3) Upon the request of the chairperson of the Commission, 
the Secretary of Housing and Urban Development shall, to the 
extent possible and subject to the discretion of the Secretary, 
detail any of the personnel of the Department of Housing and 
Urban Development, on a nonreimbursable basis, to assist the 
Commission in carrying out its duties under this title. 
(d) MAILS. —The Commission may use the United States mails in 
the same manner and under the same conditions as other Federal 
agencies. 
(e) CONTRACTING. —The Commission may, to such extent and in 
such amounts as are provided in appropriations Acts, enter into 
contracts with private firms, institutions, and individuals for the 
purpose of conducting research or surve3rs necessary to enable the 
Commission to dischaprge its duties under this title. 
(f) STAFP.—<1) The Commission shall appoint an executive director 
of the Commission who shall be compensated at a rate fixed by the 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2055 
Commission, but which shall not exceed the rate established for 
level V of the Executive Schedule under title 5, United States Code. 
(2) In addition to the executive director, the Commission may 
appoint and fix the compensation of such personnel as it deems 
advisable, in accordance with the provisions of title 5, United States 
Code, governing appointments to the competitive service, and the 
provisions of chapter 51 and subchapter III of chapter 53 of such 
title, relating to classification and General Schedule pay rates. 
(3) ADVISORY COMMITTEE.—The Commission shall be considered an 
advisory committee within the meaning of the Federal Advisory 
Committee Act (5 U.S.C. App.). 
SEC. 605. AUTHORIZATION OF APPROPRIATIONS. 
There are authorized to be appropriated not to exceed $500,000 for 
each of the fiscal years 1990 and 1991. Any sums so appropriated 
shall remain available until expended. 
TITLE VII—MISCELLANEOUS 
SEC. 701. NULLIFICATION OF RIGHT OF REDEMPTION OF SINGLE FAMILY 
MORTGAGORS UNDER SECTION 312 REHABILITATION LOAN 
PROGRAM. 
(a) IN GENERAL.—Whenever with respect to a single family mort-
gage securing a loan under section 312 of the Housing Act of 1964, 
the Secretary of Housing and Urban Development or its foreclosure 
agent forecloses in any Federal or State court or pursuant to a 
power of sale in a mortgage, the purchaser at the foreclosure sale 
shall be entitled to receive a conveyance of title to, and possession of, 
the property, subject to any interests senior to the interests of the 
Secretary. With respect to properties that are vacant and aban-
doned, notwithstanding any State law to the contrary, there shall be 
no right of redemption (including all instances any right to posses-
sion based upon any right of redemption) in the mor^agor or any 
other person subsequent to the foreclosure sale in connection with 
such single family mortgage. The appropriate State official or the 
trustee, as the case may be, shall execute and deliver a deed or other 
appropriate instrument conveying title to the purchaser at the 
foreclosure sale, consistent with applicable procedures in the juris-
diction and without regard to any such right of redemption. 
O
t
>
) FORECLOSURE BY OTHERS.—Whenever with respect to a single 
family mortgage on a property that also has a single family mort-
gage securing a loan under section 312 of the Housing Act of 1964, a 
mortgagee forecloses in any Federal or Stete court or pursuant to a 
power of sale in a mortgage, the Secretary of Housing and Urban 
Development, if the Secretary is purchaser at the foreclosure sale, 
shall be entitled to receive a conveyance of title to, and possession of, 
the property, subject to the interests senior to the interests of the 
mortgagee. Notwithstanding any State law to the contrary, there 
shall be no right of redemption (including in all instances any right 
to possession based upon any right of redemption) if the mortgagor 
or any other person subsequent to the foreclosure sale to the Sec-
retory in connection with a property that secured a single family 
mortgage for a loan under section 312 of the Housing Act of 1964. 
The appropriate Stote official or the trustee, as the case may be, 
shall execute and deliver a deed or other appropriate instrument 
conveying title to the Secretory, who is the purcheiser at the fore-
Real property. 
State and local 
governments. 
42 use 1452c. 
103 STAT. 2056 
PUBLIC LAW 101-235—DEC. 15, 1989 
closure sale, consistent with applicable procedures in the jurisdic-
tion and without regard to any such right of redemption. 
(c) VERIFICATION OF TITLB.—The following actions shall be taken 
in order to verify title in the purchaser at the foreclosure sale: 
(1) In the case of a judicial foreclosure in any Federal or State 
court, there shall be included in the petition and in the judg-
ment of foreclosure a statement that the foreclosure is in 
accordance with this subsection and that there is no right of 
redemption in the mortgagor or any other person. 
(2) In the case of a loreclosure pursuant to a power of sale 
provision in the mortage, the statement required in paragraph 
(1) shall be included in the advertisement of the sale and eitiier 
in the recitals of the deed or other appropriate instrument 
conveying title to the purchaser at the foreclosure sale or in an 
affidavit or addendum to the deed. 
(d) DEFINITIONS.—For purposes of this section: 
(1) The term "mortgage" means a deed of trust, mortgage, 
deed to secure debt, security agreement, or any other form of 
instrument under which any interest in property, real, per-
sonal, or mixed, or any interest in propertv, including lease-
holds, life estat€»3, reversionai^ interests, and any other estates 
under applicable State law, is conveyed in trust, mortgaged, 
encumbered, pledged, or otherwise rendered subject to a Uen, 
for the purpose of securing the payment of money or the 
performance of an obligation. 
(2) The term "single family mortgage" means a mortgage that 
covers property that includes a 1- to 4-family residence. 
SEC. 702. CDBG GRANTS TO INDIAN TRIBES. 
(a) EuMiNATioN FROM DEFINITION OF NONENTITLEMENT AREAS.— 
Section 102(aX7) of the Housing and Community Development Act of 
42 use 5302. 
1974 is amended by striking the period at the end and inserting the 
following: "and does not indude Indian tribes.". 
(b) AiJLOCATiON.—Section 106 of the Housing and Community 
42 use 5306. 
Development Act of 1974 is amended— 
(1) in subsection (a)— 
(A) by inserting "and Indian tribes" before the period at 
the end of the first sentence; and 
(B) by striking the period at the end and inserting the 
following: "Indian tribes shall receive grants from such 
allocation pursuant to subsection 0>X7)."; 
(2) in subsection (bXl)> by striking "The" and inserting "After 
taking into account the set-aside for Indian tribes under para-
graph (7), the"; 
(3) in subsection O
i
>
X
2
)
, by striking "The" and inserting "After 
taking into account tiie set-aside for Indian tribes under para-
graph (7), the"; 
(4) in subsection 0
1
>
)
, by adding at the end the following new 
paragraphs: 
"(7XA) For each fiscal year, the Secretary shall reserve for grants 
to Indian tribes, from amoimts approved in appropriation Acts 
under section 103 for grants for the year under subsection (a), 
not more than 1 percent of the amounts appropriated under such 
section. 
"(B) The Secreta:^ shall provide for distribution of amounts under 
this paragraph to Indian tribes on the basis of a competition con-
ducted pursuant to specific criteria for the selection of Indian tribes 
PUBLIC LAW 101-235—DEC. 15, 1989 
103 STAT. 2057 
to receive such amounts. The criteria shall be contained in a regula-
tion promulgated by the Secretary after notice and public com-
ment."; and 
(5) in subsection (d), by striking paragraph (4). 
(c) OFFICE OF INDIAN AND ALASKA NATIVE PROGRAMS.—The Sec- 
42 use 5306 
retary of Housing and Urban Development shall administer grants "^^^ 
to Indian tribes under title I of the Housing and Community Devel-
opment Act of 1974 through the Office of Indian and Alaska Native 
Programs of the Department of Housing and Urban Development. 
(d) REGULATIONS.—The Secretary shall issue any regulations nee- 
42 use 5306 
essary to carry out this section and the amendments made by this 
"o^^. 
section in a manner and by such time to provide for the effectiveness 
of such regulations with respect to amounts appropriated for fisced 
year 1991 under section 103 of the Housing and Community Devel-
opment Act of 1974. 
(e) APPUCABILTFY.—The amendments made by this section shall 
42 use 5306 
apply to amounts approved in any appropriation Act under section 
note. 
103 of the Housing and Community Development Act of 1974 for 
fiscal year 1991 and each fiscal year thereafter. 
TITLE VIII—SECTION 8 RENT 
ADJUSTMENTS 
SEC. 801. ANNUAL ADJUSTMENT FACTORS FOR SECTION 8 RENTS. 
Contracts. 
(a) EFFECT OF PRIOR COMPARABILITY STUDIES.— 
42 use i437f 
(1) IN GENERAL.—In any case in which, in implementing 
note. 
section 8(cX2) of the United States Housing Act of 1937— 
(A) the use of comparability studies by the Secretary of 
Housing and Urban Development or the appropriate State 
agency as an independent limitation on the amount of 
rental adjustments resulting from the application of an 
annual adjustment factor under such section has resulted 
in the reduction of the maximum monthly rent for units 
covered by the contract or the failure to increase such 
contract rent to the full amount otherwise permitted under 
the annual adjustment factor, or 
(B) an assistance contract requires a project owner to 
make a request before becoming eligible for a rent adjust-
ment under the annual adjustment factor and the project 
owner certifies that such a request w£is not made because of 
anticipated negative adjustment to the project rents, 
for fiscal year 1980, and annually thereafter until regulations 
implementing this section take effect, rental adjustments shall 
be calculated as an amoimt equal to the annual adjustment 
factor multiplied by a figure equal to the contract rent minus 
the amount of contract rent attributable to debt service. Upon 
the request of the project owner, the Secretary shall pay to the 
project owner the amount, if any, by which the total rental 
adjustment calculated under the preceding sentence exceeds the 
total adjustments the Secretary or appropriate State agency 
actually approved, except that solely for purposes of calculating 
retroactive payments under this subsection, in no event shall 
any project owner be paid an amount less than 30 percent of a 
figure equal to the aggregate of the annual adjustment factor 
multiplied by the full contract rent for each year on or after 
103 STAT. 2058 
PUBLIC LAW 101-235—DEC. 15, 1989 
42 use 1437f 
note. 
Appropriation 
authorization. 
Regulations. 
42 use 1437f 
note. 
fiscal year 1980, minus the sum of the rental pa3rments the 
Secretary or appropriate State sigency actually approved for 
those years. The method provided by this subsection shall be the 
exclusive method by which retroactive payments, whether or 
not requested, may be made for projects subject to this subsec-
• tion for the period from fiscal year 1980 until the regulations 
issued under subsection (e) take effect. For purposes of this 
paragraph, "debt service" shall include interest, principal, and 
mortage insurance premium if any. 
(2) APPUCABIUTY.— 
(A) IN GENERAL.—Subsection (a) shall apply with respect 
to any use of comparability studies referred to in such 
subsection occurring before the effective date of the regula-
V tions issued under subsection (e). 
(B) FINAL LITIGATION.—Subsection (a) shall not apply to 
any project with respect to which litigation regarding the 
authority of the Secretary to use comparabilitv studies to 
limit rental adjustments under section 8(cX2) of the United 
States Housing Act of 1937 has resulted in a iudgment 
before the effective date of this Act that is finsJ and not 
appealable (including any settlement agreement). 
(b) 3-YEAR PAYMENTS.—The Secretary shall provide the amounts 
under subsection (a) over the 8-year period beginning on the effec-
tive date of the regulations issued under subsection (e). The Sec-
retary shall provide the pa3rment3 authorized under subsection (a) 
only to the extent approved in subsequent appropriations Acts. 
There are authorized to be appropriated such sums as may be 
necessary for this purpose. 
(c) COMPARABILITY SruDiES.^—Section 8(cX2XC) of the United States 
Housing Act of 1937 (42 U.S.C. 1437f(cX2XC)) is amended by inserting 
after the p|eriod at the end of the first sentence the following: "In 
implementing the limitation established under the preceding sen-
tence, the Secretary shall establish regulations for conducting com-
parability studies for projects where the Secretary has reeison to 
believe that the application of the formula adjustments under 
subparagraph (A) would result in such material differences. "Hie 
Secreta^ shall conduct such studies upon the request of any owner 
of any project, or as the Secretary determines to be appropriate by 
establishing, to the extent practicable, a modified annual adjtist-
ment factor for such market area, as the Secretary sh£ill designate, 
that is geographically smaller than the applicable hotising area used 
for the establishment of the annual adjustment factor under 
subparagraph (A). The Secretary shall establish such modified 
annual adjustment factor on the basis of the results of a study 
conducted by the Secretary of the rents charged, and any change in 
such rents over the previous year, for assisted units ana unassisted 
units of similar quality, type, and age in the smaller market area. 
Where the Secretary determines that such modified annual adjust-
ment factor cannot be established or that such factor when applied 
to a particular project would result in material differences between 
the rents charged for assisted units and unassisted units of similar 
quality, type, and age in the same market area, the Secretary may 
apply an alternative methodol(^^ for conducting comparability 
studies in order to establish rents that are not materially different 
from rents charged for comparable unassisted units.". 
(d) DETERMINATION OF CONTRACT RENT.—(1) The Secretary shall 
upon the request of the project owner, make a one-time determina-
PUBLIC LAW 101-235—DEC. 15,1989 
103 STAT. 2059 
tion of the contract rent for each project owner referred to m 
subsection (a). The contract rent shall be the greater of the contract 
rent— 
(A) currently approved by tiie Secretary under section 8(cX2) 
of the United States Housing Act of 1937, or 
(B) calculated in accordance with the first sentence of subsec-
tion (aXD. 
(2) All adjustments in contract rents under section 8(cX2) of the 
United States Housing Act of 1937, including adjustments involving 
projects referred to in subsection (a), that occur beginning with the 
first anniversary date of the contract after the regulations issued 
under subsection (e) take effect shall be made in accordance with the 
annual adljustment and comparability provisions of sections 
8(cX2XA) and 8(cX2XC) of such Act, respectively, using the one-time 
contract rent determination imder paragraph (1). 
(e) REGULATIONS.—The Secretary shall issue r^ulations to carry 
out this section and the amendments made by this section, including 
the amendments made by subsection (c) with regard to annusd 
adjustment factors and comparability studies. The Secretary shall 
issue such regulations not later than the expiration of the 180-day 
period beginning on the date of the enactment of this Act. 
(f) REPORT.—Not later than March 1, 1990, the Secretary shall 
report to the Congress on the feasibility and desirability, and the 
budgetary, legal, and administrative aspects, of acijusting contract 
rents under section 8(cX2XC) of the United States Housing Act of 
1937 on the basis of any sdtemative methodologies that are simpler 
in application than individual project comparability studies. 
(g) TECHNICAL AMENDMENT.—The first sentence of section 
8(cX2XC) of the United States Housing Act of 1937 is amended by 
inserting ", type," after "quality". 
Approved December 15, 1989. 
42 use 1437f 
note. 
42 use 1437f. 
LEGISLATIVE HISTORY—H.R. 1: 
CONGRESSIONAL RECORD. Vol. 135 (1989): 
Nov. 14, considered and passed House. 
Nov. 21, considered and passed Senate, amended. House concurred in Senate 
amendment. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 25 (1989): 
Dec. 15, Presidential statement.