[DOCID: f:hr579.110]
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110th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 110-579
======================================================================
MARK-TO-MARKET EXTENSION AND ENHANCEMENT ACT OF 2007
_______
April 10, 2008.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 3965]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 3965) to extend the Mark-to-Market program of
the Department of Housing and Urban Development, and for other
purposes, having considered the same, report favorably thereon
with an amendment and recommend that the bill as amended do
pass.
CONTENTS
Page
Amendment........................................................ 1
Purpose and Summary.............................................. 6
Background and Need for Legislation.............................. 6
Hearings......................................................... 8
Committee Consideration.......................................... 8
Committee Votes.................................................. 9
Committee Oversight Findings..................................... 9
Performance Goals and Objectives................................. 9
New Budget Authority, Entitlement Authority, and Tax Expenditures 10
Committee Cost Estimate.......................................... 10
Congressional Budget Office Estimate............................. 10
Federal Mandates Statement....................................... 15
Advisory Committee Statement..................................... 15
Constitutional Authority Statement............................... 15
Applicability to Legislative Branch.............................. 15
Earmark Identification........................................... 15
Section-by-Section Analysis of the Legislation................... 15
Changes in Existing Law Made by the Bill, as Reported............ 18
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Mark-to-Market
Extension and Enhancement Act of 2007''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
Sec. 3. Definitions.
Sec. 4. Extension of Mark-to-Market program.
Sec. 5. Funding for tenant and other participation and capacity
building.
Sec. 6. Exception rents.
Sec. 7. Otherwise eligible projects.
Sec. 8. Disaster-damaged eligible projects.
Sec. 9. Period of eligibility for nonprofit debt relief.
Sec. 10. Acquisition of restructured projects by nonprofit
organizations.
Sec. 11. Mark-to-market for moderate rehabilitation projects.
Sec. 12. Enhanced voucher assistance upon contract termination.
Sec. 13. Correcting harm caused by late subsidy payments.
Sec. 14. Effective date.
SEC. 2. PURPOSES.
The purpose of this Act is to--
(1) continue the progress of the Multifamily Assisted Housing
Reform and Affordability Act of 1997, as amended by the Mark-
To-Market Extension Act of 2001;
(2) expand eligibility for Mark-to-Market restructuring so as
to further the preservation of affordable housing in a cost-
effective manner; and
(3) provide for the preservation and rehabilitation of
projects damaged by Hurricanes Katrina, Rita, and Wilma, or by
other natural disasters.
SEC. 3. DEFINITIONS.
Section 512 of the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by adding
at the end the following:
``(20) Disaster-damaged eligible project.--
``(A) In general.--The term `disaster-damaged
eligible project' means an otherwise eligible
multifamily housing project--
``(i) that is located in a county that was
designated a major disaster area on or after
January 1, 2005, by the President pursuant to
title IV of the Robert T. Stafford Disaster
Relief and Emergency Assistance Act (42 U.S.C.
5121 et seq.);
``(ii) whose owner carried casualty and
liability insurance covering such project in an
amount required by the Secretary;
``(iii) that suffered damages not covered by
such insurance that the Secretary determines is
likely to exceed $5,000 per unit in connection
with the natural disaster that was the subject
of the designation described in subparagraph
(A); and
``(iv) whose owner requests restructuring of
the project not later than 2 years after the
date that such damage occurred.
``(B) Rule of construction.--A disaster-damaged
eligible project shall be eligible for amounts under
this Act without regard to the relationship between
rent levels for the assisted units in such project and
comparable rents for the relevant market area.''.
SEC. 4. EXTENSION OF MARK-TO-MARKET PROGRAM.
Section 579 of the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by striking
``October 1, 2011'' each place such term appears and inserting
``October 1, 2012''.
SEC. 5. FUNDING FOR TENANT AND OTHER PARTICIPATION AND CAPACITY
BUILDING.
Paragraph (3) of section 514(f) of the Multifamily Assisted Housing
Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) is
amended--
(1) in subparagraph (A)--
(A) in the first sentence--
(i) by striking ``not more than'' and
inserting ``not less than'';
(ii) by striking ``of low-income housing for
which project-based rental assistance is
provided at below market rent levels and may
not be renewed'' and inserting the following:
``and improvement of low-income housing for
which project-based rental assistance,
subsidized loans, or enhanced vouchers under
section 8(t) are provided''; and
(iii) in the second parenthetical clause, by
inserting before the closing parenthesis the
following: ``, and predevelopment assistance to
enable such transfers''; and
(B) by inserting after the period at the end the
following: ``For outreach and training of tenants and
technical assistance, the Secretary shall implement a
grant program utilizing performance-based outcome
measures for eligible costs incurred. Recipients
providing capacity building or technical assistance
services to tenant groups shall be qualified nonprofit
Statewide, countywide, areawide or citywide
organizations with demonstrated experience including at
least a two-year recent track record of organizing and
providing assistance to tenants, and independence from
the owner, a prospective purchaser, or their managing
agents. The Secretary may provide assistance and
training to grantees in administrative and fiscal
management to ensure compliance with applicable Federal
requirements. The Secretary shall expedite the
provision of funding for fiscal year 2008 by entering
into new multi-year contracts with any prior grantee
without adverse audit findings or whose adverse audit
findings have been cleared, and by entering into an
interagency agreement for not less than $1,000,000 with
the Corporation for National and Community Service or
any other agency of the Federal Government, that is
selected by the Secretary and the Secretary determines
is qualified to conduct such program, to conduct a
tenant outreach and training program under the same or
similar terms and conditions as was most recently
conducted by the Corporation. The Secretary shall also
make available flexible grants to qualified nonprofit
organizations that do not own eligible multifamily
properties, for tenant outreach in underserved areas,
and to experienced national or regional nonprofit
organizations to provide specialized training or
support to grantees assisted under this section.
Notwithstanding any other provision of law, funds
authorized under this section for any fiscal year shall
be available for obligation in subsequent fiscal years.
The Secretary shall require each recipient of amounts
made available pursuant to this subparagraph to submit
to the Secretary reports, on a quarterly basis,
detailing the use of such funds and including such
information as the Secretary shall require.''; and
(2) by adding at the end the following new subparagraphs:
``(D) Prohibitions.--None of the funds made available
under subparagraph (A) may be used for any political
activities, political advocacy, or lobbying (as such
terms are defined by Circular A-122 of the Office of
Management and Budget, entitled `Cost Principles for
Non-Profit Organizations'), or for expenses for travel
to engage in political activities or preparation of or
provision of advice on tax returns.
``(E) Program compliance systems.--Each recipient of
amounts made available under subparagraph (A) shall
develop systems to ensure compliance with the program
and the requirements of this paragraph.
``(F) Penalties.--The Secretary may impose penalties
on any recipient of amounts made available under
subparagraph (A) that fails to comply with any
requirement under this paragraph or of the program
established pursuant to this paragraph, which penalties
may include--
``(i) ineligibility for further assistance
from amounts made available under subparagraph
(A); and
``(ii) requiring the recipient to reimburse
the Secretary for any amounts that were so
misused.''.
SEC. 6. EXCEPTION RENTS.
In the matter preceding clause (i) of section 514(g)(2)(A) of the
Multifamily Assisted Housing Reform and Affordability Act of 1997 (42
U.S.C. 1437f note) is amended--
(1) by inserting ``disaster-damaged eligible projects and''
after ``waive this limit for''; and
(2) by striking ``five percent'' and inserting ``9 percent''.
SEC. 7. OTHERWISE ELIGIBLE PROJECTS.
Section 514 of the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by adding
at the end the following:
``(i) Other Eligible Projects.--
``(1) In general.--Notwithstanding any other provision of
this subtitle, a project that meets the requirements of
subparagraphs (B) and (C) of section 512(2) but does not meet
the requirements of subparagraph (A) of section 512(2), may be
treated as an eligible multifamily housing project on an
exception basis if the Secretary determines, subject to
paragraph (2), that such treatment is necessary to preserve the
project in the most cost-effective manner in relation to other
alternative preservation options.
``(2) Owner request.--
``(A) Request required.--The Secretary shall not
treat an otherwise eligible project described under
paragraph (1) as an eligible multifamily housing
project unless the owner of the project requests such
treatment.
``(B) No adverse treatment if no request made.--If
the owner of a project does not make a request under
subparagraph (A), the Secretary shall not withhold from
such project any other available preservation option.
``(3) Cancellation.--
``(A) Timing.--At any time prior to the completion of
a mortgage restructuring under this subtitle, the owner
of a project may--
``(i) withdraw any request made under
paragraph (2)(A); and
``(ii) pursue any other option with respect
to the renewal of such owner's section 8
contract pursuant to any applicable statute or
regulation.
``(B) Documentation.--If an owner of a project
withdraws such owner's request and pursues other
renewal options under this paragraph, such owner shall
be entitled to submit documentation or other
information to replace the documentation or other
information used during processing for mortgage
restructuring under this subtitle.
``(4) Limitation.--The Secretary may exercise the authority
to treat projects as eligible multifamily housing projects
pursuant to this subsection only to the extent that the number
of units in such projects do not exceed 10 percent of all units
for which mortgage restructuring pursuant to section 517 is
completed.''.
SEC. 8. DISASTER-DAMAGED ELIGIBLE PROJECTS.
(a) Market Rent Determinations.--Section 514(g)(1)(B) of the
Multifamily Assisted Housing Reform and Affordability Act of 1997 (42
U.S.C. 1437f note) is amended by striking ``determined, are equal'' and
inserting the following: ``determined--
``(i) with respect to a disaster-damaged
eligible property, are equal to 100 percent of
the fair market rents for the relevant market
area (as such rents were in effect at the time
of such disaster); and
``(ii) with respect to other eligible
multifamily housing projects, are equal''.
(b) Owner Investment.--Section 517(c) of the Multifamily Assisted
Housing Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) is
amended by adding at the end the following:
``(3) Properties damaged by natural disasters.--With respect
to a disaster-damaged eligible property, the owner contribution
toward rehabilitation needs shall be determined in accordance
with paragraph (2)(C).''.
SEC. 9. PERIOD OF ELIGIBILITY FOR NONPROFIT DEBT RELIEF.
Section 517(a)(5) of the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by adding
at the end the following: ``If such purchaser acquires such project
subsequent to the date of recordation of the affordability agreement
described in section 514(e)(6)--
``(A) such purchaser shall acquire such project on or
before the later of--
``(i) 5 years after the date of recordation
of the affordability agreement; or
``(ii) 2 years after the date of enactment of
the Mark-to-Market Extension and Enhancement
Act of 2007; and
``(B) the Secretary shall have received, and
determined acceptable, such purchaser's application for
modification, assignment, or forgiveness prior to the
acquisition of the project by such purchaser.''.
SEC. 10. ACQUISITION OF RESTRUCTURED PROJECTS BY NONPROFIT
ORGANIZATIONS.
Paragraph (5) of section 517(a) of the Multifamily Assisted Housing
Reform and Affordability Act of 1997 (42 U.S.C. 1437 note) is amended
by inserting ``, or the sole general partner of the limited partnership
owning the project,'' after ``if the project''.
SEC. 11. MARK-TO-MARKET FOR MODERATE REHABILITATION PROJECTS.
(a) Renewal of Expiring Project-Based Section 8 Moderate
Rehabilitation Contracts.--Section 524 of the Multifamily Assisted
Housing Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) is
amended--
(1) in subsection (a)(4)(A)(iv)--
(A) in subclause (I), by inserting ``or'' after the
semicolon;
(B) by striking subclause (II); and
(C) by redesignating subclause (III) as subclause
(II); and
(2) in subsection (b), by striking paragraph (3).
(b) Rent Adjustments for Covered Projects.--
(1) Rent determination at initial renewal after enactment.--
Upon the first request by an owner of a covered housing project
for renewal of project-based assistance pursuant to section 524
of the Multifamily Assisted Housing Reform and Affordability
Act of 1997 made after the date of the enactment of this Act--
(A) the rent levels at which assistance will be
provided pursuant to such renewal shall be determined
as if such renewal were the initial renewal of a
contract for assistance under section 524, as amended
by subsection (a) of this section; and
(B) solely for purposes of determining the rent
levels at which assistance will be provided pursuant to
such first renewal after the date of the enactment of
this Act, in the case of a project for which contract
rents were reduced upon a prior renewal of an expiring
contract pursuant to subsection (b)(3) of section 524,
as in effect on the day before the date of the
enactment of this Act, the contract rent levels in
effect immediately prior to such first renewal after
the date of the enactment of this Act shall be the
considered to be the deemed rent levels described in
paragraph (3)(C).
(2) Rent adjustments after initial renewal after enactment.--
After the first renewal of a contract for assistance of a
covered housing project after the date of the enactment of this
Act in accordance with paragraph (1) of this subsection, the
Secretary of Housing and Urban Development shall adjust rents
in accordance with subsection (c) of section 524.
(3) Definitions.--For purposes of this subsection, the
following definitions shall apply:
(A) The term ``section 524'' means section 524 of the
Multifamily Assisted Housing Reform and Affordability
Act of 1997 (42 U.S.C. 1437f note).
(B) The term ``covered housing project'' means a
project that receives project-based assistance under
section 8 of the United States Housing Act of 1937 (42
U.S.C. 1437f) which was renewed prior to the date of
the enactment of this Act pursuant to subsection (b)(3)
of section 524, as in effect on the day before the date
of the enactment of this Act.
(C) The term ``deemed rent levels'' means the
contract rent levels in effect immediately prior to the
first renewal of assistance pursuant to subsection
(b)(3) of section 524, as in effect on the day before
the date of the enactment of this Act, upon which
contract rent levels were reduced, as adjusted by the
applicable operating cost adjustment factor established
by the Secretary at the date of such renewal and at the
date of any subsequent renewal pursuant to such
subsection (b)(3).
(D) The term ``Secretary'' means the Secretary of
Housing and Urban Development or any public housing
agency approved by the Secretary to serve as the
contracting party in lieu of the Secretary.
SEC. 12. ENHANCED VOUCHER ASSISTANCE UPON CONTRACT TERMINATION.
Subsection (d) of section 524 of the Multifamily Assisted Housing
Reform and Affordability Act of 1997 (42 U.S.C. 1437 note) is amended--
(1) in the subsection heading, by inserting ``or
Termination'' after ``Contract Expiration''; and
(2) in paragraph (1)--
(A) by inserting ``or termination'' after ``the date
of the expiration'';
(B) by striking ``shall make'' and inserting ``shall
provide'';
(C) by striking ``available on behalf of'' and
inserting ``for''; and
(D) by inserting ``or termination'' after ``the date
of such expiration''.
SEC. 13. CORRECTING HARM CAUSED BY LATE SUBSIDY PAYMENTS.
Section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f)
is amended by adding at the end the following new subsection:
``(ff) Late Payments.--
``(1) General.--The Secretary shall make payments of project-
based rental assistance provided under this section for each
month on or before the due date under paragraph (2) for the
payment.
``(2) Due date.--The due date under this paragraph for a
monthly payment is the first business day of the month.
``(3) Notification of late payment.--The Secretary shall
notify a project owner at least 10 days before the due date for
a housing assistance payment if such payment will be late and
shall inform the project owner of the approximate date the
payment will be made.
``(4) Use of reserves.--If a housing assistance payment for a
project has not been received before the expiration of the 10-
day period beginning upon the due date for such payment, the
project owner shall, after the expiration of such period, be
entitled to obtain funds from a project replacement reserve,
residual receipts reserve, or other project reserve in order to
pay operating and debt service costs for the project. Upon
receipt of the monthly housing assistance payment from the
Secretary, the project owner shall promptly replace or
replenish any such funds advanced pursuant to the preceding
sentence.
``(5) Interest payment.--If a monthly housing assistance
payment is not made before the expiration of the 30-day period
beginning upon the due date for such payment, the Secretary
shall pay to the owner simple interest on the amount of such
monthly payment, from the due date until the date of payment,
at a rate determined by the Secretary of Treasury in accordance
with section 12 of the Contract Disputes Act of 1978 (41 U.S.C.
611). Interest payments under this paragraph shall be made from
amounts made available for management and administration of the
Department of Housing and Urban Development.''.
SEC. 14. EFFECTIVE DATE.
This Act, and the amendments made by this Act, shall take effect on
the earlier of--
(1) the date of enactment of this Act; or
(2) September 30, 2008.
Purpose and Summary
H.R. 3965, the ``Mark-to-Market Extension and Enhancement
Act of 2007,'' reauthorizes the Mark-to-Market program, which
allows for mortgage and rent restructuring for certain section
8 projects. This legislation, which was introduced on October
25, 2007 by Representatives Waters, Frank (MA), and Pryce (OH),
would extend the Mark to Market program of the Multifamily
Assisted Housing Restructuring and Affordability Act of 1997
through the end of Fiscal Year 2012.
H.R. 3965 includes all the provisions from H.R. 647, the
``Mark to Market Extension Act,'' which was the subject of a
hearing by the Subcommittee on Housing and Community
Opportunity on October 23, 2007. In addition, H.R. 3965 as
introduced includes the following provisions: (1) extending the
program for one additional year, until October 1, 2012; (2)
changing the effective date of the bill to the earlier of the
date of enactment of the legislation or September 30, 2008; and
(3) adding a provision to address the problem of late housing
assistance payments by the Department of Housing and Urban
Development to owners of project-based Section 8 properties,
which was the subject of a separate hearing held by the
Subcommittee on October 17, 2007.
The Committee also notes that this bill is similar to
legislation introduced in the 109th Congress by Reps. Pryce
(OH), Frank (MA), Tiberi, and Waters (H.R. 6115), which passed
the House under suspension of the rules by a vote of 416 to 1
on September 27, 2006, but was not acted upon by the Senate
prior to adjournment.
During the markup of H.R. 3965, several amendments were
agreed to that improved the bill. These amendments are
described in Sections 5 and 9 through 12 of the Section-by-
Section analysis below.
Background and Need for Legislation
At the inception of the project-based Section 8 program,
the Department of Housing and Urban Development (HUD) allowed
owners to set rents higher than market rents in order to
encourage owner participation. Owners entered into 20 year
contracts, over the course of which, many of the rents were
adjusted to compensate for increased property costs.
A review of the portfolio of Federal Housing Administration
insured-properties receiving project-based assistance found
that by 1997, many of the properties had rents higher than
those charged for comparable units in the private market. In
addition, many of these properties were financially or
physically distressed, including a number that were mismanaged.
In 1997, Congress created the Mark-to-Market program
through the Multifamily Assisted Housing Reform and
Affordability Act (MAHRA), which was passed as Title V of the
VA-HUD Appropriations Act for Fiscal Year 1998 (Public Law 105-
65) and authorized the program through Fiscal Year 2001. The
program was amended and reauthorized through Fiscal Year 2006
in Title VI of the Labor, Health, and Human Services,
Education, and Related Appropriation Act for Fiscal Year 2002
(Public Law 107-116). The most recent reauthorization was in
H.J. Res. 20 (Public Law 110-5), which extended the program
through Fiscal Year 2011.
The Mark-to-Market program reduces Section 8 subsidies to
FHA-insured properties with above-market rents and restructures
the mortgages of these properties so that owners can operate
more effectively on less income and by charging more
competitive rents. The purpose of the program is to provide
cost savings for the government, encourage continued
participation by owners, and to protect tenants by maintaining
the low-income affordability of the properties.
Properties with expiring contracts are eligible for the
program if they are insured by an FHA mortgage or have a HUD-
held mortgage (excluding Section 202 properties or properties
financed by a state or local government), receive project-based
Section 8 assistance, have rents in excess of market rents, and
have an owner in good standing.
Through February 2008, 3,303 properties representing
248,696 units were restructured through the Mark-to-Market
program. Of those, 1,640 properties with 130,421 units received
full debt restructuring. An additional 126 properties
representing 10,990 units were in the restructuring pipeline as
of this date. Based on eligibility requirements, HUD estimated
that there were 772 properties with 83,253 units that could
potentially be restructured through the Mark-to-Market program.
In addition to these properties, HUD reported that it has
effectively reached the five percent portfolio cap limit on
exception rents. The portfolio cap limit applies to properties
that have rents that are above market (e.g. above market rents
can go up to 120 percent of the fair market rent). While the
exception rent authority is utilized when the restructured
transaction closes, HUD considers the authority utilized when
the transaction has received Department approval and a binding
restructuring commitment has been executed by both the
Department and the property owner. As of mid-March, all but 43
units have been utilized. Approximately 385 of the nearly 9,000
units in the current pipeline will require an increase in the
exception rent authority to be eligible for restructuring. As
such, HUD requested the Committee to act on this legislation,
which would increase the portfolio cap from five to nine
percent.
As noted above, the bill is similar to H.R. 647, the ``Mark
to Market Extension Act of 2007,'' which was the subject of a
hearing by the Subcommittee on Housing and Community
Opportunity on October 23, 2007.
Hearings
The Subcommittee on Housing and Community Opportunity held
a hearing on October 23, 2007, on H.R. 647, the ``Mark-to-
Market Extension Act of 2007.'' The following witnesses
testified:
PANEL ONE
<bullet> Mr. Theodore K. Toon, Deputy Assistant Secretary,
Office of Affordable Housing Preservation, U.S. Department of
Housing and Urban Development
PANEL TWO
<bullet> Ms. Amy Anthony, President and Executive Director,
Preservation of Affordable Housing, Inc.
<bullet> Ms. Sheila Malynowski, President, National Leased
Housing Association, and President of Preservation Management,
Inc.
<bullet> Mr. Bill Faith, Executive Director, Coalition on
Homelessness and Housing in Ohio
<bullet> Ms. Paula Foster, Vice President Western Region,
National Alliance of HUD Tenants
The Subcommittee also held a hearing on October 17, 2007,
entitled ``The Impacts of Late Housing Assistance Payments on
Tenants and Owners in the Project-Based Rental Assistance
Program.'' The following witnesses testified:
PANEL ONE
<bullet> Mr. John W. Cox, Chief Financial Officer, U.S.
Department of Housing and Urban Development
<bullet> Mr. David Wood, Director, Financial Markets and
Community Investment, U.S. Government Accountability Office
PANEL TWO
<bullet> Mr. Michael Bodaken, President, National Housing
Trust
<bullet> Mr. Lawrence J. Lipton, Chief Financial Officer,
Related Companies, Inc. on behalf of the National Leased
Housing Association
<bullet> Mr. J. Kenneth Pagano, President and Chief
Executive Officer, Essex Plaza Management on behalf of the
National Affordable Housing Management Association
<bullet> Mr. Donald L. Beebout, Vice President, Showe
Management Corporation
<bullet> Ms. Carolann Livingstone, President of 1890 House
Tenants Association and Vice President of the Eastern Region of
the National Alliance of HUD Tenants
<bullet> Dr. William L. Minnix, Jr., President and Chief
Executive Officer, American Association of Homes and Services
for the Aging
Committee Consideration
The Committee on Financial Services met in open session on
October 31, 2007, and ordered H.R. 3965, the ``Mark-to-Market
Extension and Enhancement Act of 2007'', as amended, favorably
reported to the House by a voice vote.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. No
record votes were taken in conjunction with the consideration
of this legislation. A motion by Mr. Frank (MA) to report the
bill, as amended, to the House with a favorable recommendation
was agreed to by a voice vote. During the consideration of the
bill, the following amendments were considered:
An amendment by Mr. Frank (MA), No. 1, regarding
acquisition of restructured projects by nonprofit
organizations, was agreed to by a voice vote.
An amendment by Mr. Frank (MA), No. 2, applying mark-to-
market for moderate rehabilitation projects, was agreed to by a
voice vote.
An amendment by Mr. Frank (MA), No. 3, making technical
corrections, was agreed to by a voice vote.
An amendment by Ms. Waters, No. 4, providing enhanced
voucher assistance upon contract termination, was agreed to by
a voice vote.
An amendment by Mr. Al Green (TX), No. 5, regarding funding
for tenant and other participation and capacity building, was
offered and withdrawn.
An amendment by Mr. Al Green (TX), No. 6, regarding funding
for tenant and other participation and capacity building
(revised), was agreed to by a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 3965, the Mark-to-Market Extension and Enhancement Act
of 2007, reauthorizes the Mark-to-Market program, which allows
for mortgage and rent restructuring for certain section 8
projects. The Mark-to-Market program reduces Section 8
subsidies to FHA-insured properties with above-market rents and
restructures the mortgages of these properties so that owners
can operate more effectively on less income and by charging
more competitive rents. The purpose of the program is to
provide cost savings for the government, encourage continued
participation by owners, and to protect tenants by maintaining
the low-income affordability of the properties.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
November 30, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3965, the Mark-to-
Market Extension and Enhancement Act of 2007.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Chad Chirico.
Sincerely,
Peter R. Orszag.
Enclosure.
H.R. 3965--Mark-to-Market Extension and Enhancement Act of 2007
Summary: H.R. 3965 would extend the Multifamily Assisted
Housing Restructuring and Affordability Act of 1997 (MAHRA) for
one year to September 30, 2012. The bill contains several
provisions that would affect loans and loan guarantees made by
the Department of Housing and Urban Development (HUD). The bill
also would change how rents are set and how HUD makes payments
to property owners.
CBO estimates that enacting H.R. 3965 would increase direct
spending by $137 million in 2008 because the bill would modify
the terms of existing federal loans and loan guarantees--
reducing the present value of expected cash flows for such
loans. We also estimate that implementing the bill would have a
discretionary cost of $227 million over the 2008-2012 period,
assuming appropriation of the necessary amounts.
H.R. 3965 contains an intergovernmental mandate as defined
in the Unfunded Mandates Reform Act (UMRA) because it would
extend an existing preemption of state and local law. CBO
estimates, however, that the mandate would impose no costs on
state, local, or tribal governments. The bill contains no new
private-sector mandates as defined by UMRA.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 3965 is shown in the following table.
The costs of this legislation fall within budget functions 370
(commerce and housing credit) and 600 (income security).
ESTIMATED BUDGETARY EFFECTS OF H.R. 3965
------------------------------------------------------------------------
By fiscal year, in millions of
dollars--
---------------------------------------
2008 2009 2010 2011 2012
------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Expand Debt Restructuring
Eligibility:
Estimated Budget Authority.. 77 0 0 0 0
Estimated Outlays........... 77 0 0 0 0
Nonprofit Debt Relief:
Estimated Budget Authority.. 60 0 0 0 0
Estimated Outlays........... 60 0 0 0 0
Total Changes in Direct
Spending:
Estimated Budget 137 0 0 0 0
Authority..........
Estimated Outlays... 137 0 0 0 0
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Moderate Rehabilitation Rents:
Estimated Authorization 50 46 43 39 35
Level......................
Estimated Outlays........... 30 48 44 41 37
Late Subsidy Payments:
Estimated Authorization 4 4 4 4 4
Level......................
Estimated Outlays........... 4 4 4 4 4
Exception Rents:
Estimated Authorization * 1 2 2 2
Level......................
Estimated Outlays........... * 1 2 2 2
Total Changes in
Spending Subject to
Appropriation:
Estimated 54 51 49 45 41
Authorization Level
Estimated Outlays... 34 53 50 47 43
------------------------------------------------------------------------
Note: * = less than $500,000.
Basis of estimate: For this estimate, CBO assumes that H.R.
3965 will be enacted near the beginning of calendar year 2008,
that the full amounts authorized will be appropriated for each
year and that outlays will follow historical patterns.
Components of the estimated costs are described below.
Background
In 1997, MAHRA was enacted to address financial problems in
the Section 8 program that provides affordable housing
assistance. At that time, over 4,000 multifamily properties
with mortgages insured by the Federal Housing Administration
were receiving project-based rent subsidies under Section 8 of
the United States Housing Act of 1937. The original rental
contracts for those properties typically ranged from 15 to 40
years and most properties had units with rents that exceeded
the rents for comparable units that did not receive rent
subsidies.
The mark-to-market process usually involves reducing a
property's rental rates to market levels and then either
modifying or refinancing the existing mortgage for an amount
that could be supported by the new lower rates. Specifically,
HUD prepays all or a portion of the owner's existing mortgage
debt through a partial payment of claim (PPC) and then issues a
secondary mortgage to recover some of the PPC. Property owners
can defer payments on the junior debt while the first mortgage
remains outstanding unless some excess project income remains
after the owner pays all other expenses. At least 75 percent of
any excess income must be applied to the second mortgage and
the full amount is due when the first mortgage is terminated or
the property is sold.
Direct spending
Because several provisions of the legislation would change
the expected cash flows associated with existing federal loans
and loan guarantees, those changes constitute a modification of
the existing loans. Under credit reform procedures, the costs
of loan modifications are estimated on a present value basis
and recorded as changes in direct spending in the year in which
the legislation is enacted. In total, CBO estimates that
enacting H.R. 3965 would increase direct spending by $137
million in 2008.
Expand Debt Restructuring Eligibility. Under section 7 of
the bill, properties that are otherwise eligible for debt
restructuring, but have rents that are at or below those for
comparable market units, would be eligible to have their
insured mortgages restructured. The provision would allow HUD
to exercise this authority for up to 10 percent of all units
for which mortgage restructuring is completed. Based on
information provided by HUD, CBO estimates that about 30
properties per year (out of 1,400 properties that would be
newly eligible) would have their debt restructured under this
provision.
Based on HUD data, CBO estimates that the average unpaid
principal balance for properties eligible for the mark-to-
market process is about $2 million. The average PPC for
properties that have had their debt restructured is about 80
percent of the unpaid balance and the repayment rate on the new
secondary mortgages averages about 2 percent per year. On
average, CBO estimates that for those properties that would
have defaulted on their loans, restructuring mortgage debt
would save about $1 million per project on a present value
basis. However, restructuring debt for properties that would
not have otherwise defaulted, would cost about $1 million per
project on a present value basis.
Because the properties made eligible by this provision
would either receive rent increases or maintain current rent
levels upon expiration of their Section 8 contracts, CBO
expects that they would have low default rates in the absence
of debt restructuring. As a result, CBO estimates such
restructurings would cost $77 million in 2008 on a present
value basis.
Nonprofit Debt Relief. Both section 9 and section 10 of the
bill would increase the number of properties that receive debt
relief. In total, CBO estimates that enacting those provisions
would cost $60 million in 2008 on a present value basis.
Section 9 would expand the period of eligibility for
qualified nonprofits to receive debt relief when acquiring a
property that has been through the mark-to-market debt
restructuring process. Under current law, HUD can forgive or
assign a property's secondary mortgage if the property is
acquired by a qualified nonprofit entity and HUD's guidelines
require that any transactions resulting in debt relief must
occur within three years of debt restructuring. The provision
would extend that period to the later of five years or two
years after the date of enactment.
HUD has completed 57 such transactions to date, the
majority of which were completed in the past few years. Based
on HUD data, CBO estimates that the federal government loses
about $700,000 of expected secondary mortgage payments (on a
present value basis) per property as a result of such debt
forgiveness. This loss is partially offset by HUD's requirement
that the seller of a restructured property pay at least half of
any cash-out proceeds at the time of sale as a partial
repayment of the second mortgage (such payments have averaged
about $290,000).
About 1,000 properties that are beyond the current three-
year window would be eligible for debt relief if acquired by a
qualified nonprofit. Based on the program's recent experience,
CBO estimates that about 5 percent of those properties would be
transferred to a qualified nonprofit and have their debt
forgiven or assigned. Thus, CBO estimates that expanding the
period of eligibility for nonprofit debt relief would cost $25
million in 2008 on a present value basis.
Similarly, section 10 would allow debt relief if a
qualified nonprofit becomes the general partner of a limited
partnership that owns a property (general partners may hold as
little as one-half of one percent interest in the limited
partnership). In some instances, CBO expects that becoming the
general partner would be a more attractive transaction for a
qualified nonprofit than acquiring title to the property. Based
on information from HUD and industry groups, CBO estimates that
this provision would roughly double the number of transactions
resulting in debt relief. CBO estimates that allowing debt
relief for such transactions would cost $35 million in 2008 on
a present value basis.
Spending subject to appropriation
CBO estimates that implementing provisions of H.R. 3965
would have a discretionary cost of $227 million over the 2008-
2012 period, assuming appropriation of the necessary amounts.
Moderate Rehabilitation Rents. Section 11 would change the
manner in which rents are determined upon contract renewal for
properties assisted through the Moderate Rehabilitation (Mod
Rehab) program which provides a rental subsidy to properties
that have been previously rehabilitated. Currently, rents for
such properties are renewed at the lesser of existing rents
(adjusted by an operating cost factor), 120 percent of the fair
market rent (as determined by HUD), or comparable market rents,
which are generally higher than the other options. The
provision would allow rents for those properties to be renewed
at comparable market rents.
About 29,000 units are currently assisted through the Mod
Rehab program and owners may choose to leave the program when
their contract expires and instead receive enhanced tenant-
based vouchers. A common reason for opting out of the Mod Rehab
program is that the rents under that program are often below
market rates and tenants with enhanced vouchers would pay
market rent. Based on data provided by the Government
Accountability Office (GAO) and HUD, CBO estimates that
approximately 5,000 units have left the program each year since
1998.
Allowing rents under the Mod Rehab program to be set at
market levels would increase the estimated cost of rental
assistance if the owner of that property would not have
otherwise opted to leave the program to take tenants with
enhanced vouchers. Based on HUD data, CBO estimates that about
70 percent of Mod Rehab units have rents that are about 25
percent below market rates. Increasing the rents to match
market rates would have an annual cost of about $2,500 per unit
for each year that the property would have stayed in the
program.
Assuming an attrition rate similar to the past few years
and appropriation of the necessary amounts, CBO estimates that
this provision would cost $200 million over the 2008-2012
period.
Late Subsidy Payments. Section 13 would require HUD to make
Housing Assistance Payments (HAP) for project-based rental
assistance by the first business day of each month. If a HAP
payment is not made within 30 days of the due date, HUD would
be required to pay the property owner simple interest on the
amount of such payment at a rate determined by the Secretary of
Treasury. Interest payments would be made from amounts made
available for the management and administration of HUD. Based
on data from GAO, CBO estimates that approximately 6 percent of
HAP payments are more than 30 days late with an average delay
of about 60 days. Assuming an average interest rate of 5.7
percent, CBO estimates that the payment of interest for late
HAP payments would cost about $20 million over the 2008-2012
period, assuming availability of the necessary amounts.
Exception Rents. Under current law, HUD can set rents above
120 percent of the fair market rent (FMR) for up to 5 percent
of all units subject to debt restructuring. Section 6 would
increase this authority for up to 9 percent of all such units.
Based on HUD data, CBO estimates that such exception rents are,
on average, about 14 percent higher (or $870 per year) than
they would be if limited to 120 percent of the FMR, and that
the expansion of this authority would affect about 500 units
per year, on average. CBO estimates that expanding the
exception rent authority would cost $7 million over the 2008-
2012 period, assuming availability of the necessary amounts.
Intergovernmental and private-sector impact: H.R. 3965
would extend an existing preemption of state and local law.
Under current law, state and local governments may not have
laws that conflict with federal regulations governing how
surplus funds are distributed from housing projects that
receive assistance under the mark-to-market program. Extending
that preemption would be an intergovernmental mandate as
defined by UMRA. However, because the preemption would simply
limit the application of state and local law, the mandate would
not impose costs on state, local, or tribal governments.
In general, state, local, and tribal governments that
participate in affordable housing projects and programs would
benefit from activities authorized in the bill. Any costs those
governments incur to comply with program conditions would be
incurred voluntarily. The bill contains no new private-sector
mandates as defined in UMRA.
Estimate prepared by: Federal Costs: Chad Chirico and
Susanne S. Mehlman; Impact on State, Local, and Tribal
Governments: Lisa Ramirez-Branum; Impact on the Private Sector:
Keisuke Nakagawa.
Estimate approved by: Keith Fontenot, Deputy Assistant
Director for Health and Human Resources, Budget Analysis
Division.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
Applicability To Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 3965 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-By-Section Analysis of the Legislation
Section 1. Short title
Short title identifying the bill as the ``Mark-to-Market
Extension and Enhancement Act of 2007.''
Section 2. Purposes
Sets forth purposes of the legislation: (1) continue the
progress of the Multifamily Assisted Housing Reform and
Affordability Act of 1997; (2) expand eligibility for Mark-to-
Market restructuring to further preservation in a cost-
effective manner; and (3) provide for the preservation and
rehabilitation of projects damaged by natural disasters,
including those damaged by Hurricanes Katrina, Rita, and Wilma.
Section 3. Definitions
Sets forth a definition for disaster-eligible projects.
Section 4. Extension of the Mark-to-Market Program
Amends the Multifamily Assisted Housing Reform and
Affordability Act of 1997 to reauthorize the following programs
until October 1, 2012: (1) the Mark-to-Market program; and (2)
provisions of the FHA-insured Multifamily Housing Mortgage and
Housing Assistance Restructuring program regarding projects and
programs for which binding commitments have been entered into
under such Act.
Section 5. Funding for tenant and other participation and capacity
building
Authorizes not less than $10 million in grant funds for
training and technical assistance. While current law provides
that HUD may make available up to $10 million, no funds have
been made available since 2002.
Requires HUD to: (1) make modifications to a new technical
assistance program called TRIO (Tenant Resources Information
and Outreach Program); (2) resume an inter-agency agreement
with the Corporation for National and Community Service (CNCS)
to restart the VISTA program, which helps to train volunteers
who provide technical assistance to residents; and (3) use $1
million of the $10 million in authorized funds for the VISTA
program. CNCS would match HUD's funding dollar-for-dollar
resulting in $2 million for technical assistance.
Establishes reporting requirements and other measures to
ensure that funds are used solely for authorized activities.
Specifically, this section requires each grant recipient to
submit to the HUD Secretary on a quarterly basis reports
detailing the use of such funds and including such information
as the Secretary requires. Also requires recipients to develop
systems to ensure compliance with the new TRIO program and
requirements. In addition, this section ensures that no funds
may be used for political activities, political advocacy or
lobbying, or for expenses to travel to engage in political
activities or preparation of or provision of advice on tax
returns.
Finally, this section authorizes the HUD Secretary to
impose penalties on any recipient of grant funds for failure to
comply with any requirement.
Section 6. Exception rents
Permits the Secretary of Housing and Urban Development to
waive rent level limits for up to 9 percent (currently 5
percent) of all units subject to restructured mortgages in any
fiscal year, based on certain findings of special need.
Section 7. Otherwise eligible projects
Revises requirements for an approved mortgage restructuring
and rental assistance sufficiency plan with respect to
modification or forgiveness of all or part of a second mortgage
held by the Secretary (debt relief) if the project concerned is
acquired by a tenant organization or tenant-endorsed community-
based nonprofit or public agency. Sets forth requirements for
alternative periods of eligibility for such nonprofit debt
relief if the purchaser acquires the project subsequent to the
date of recordation of the related affordability agreement, and
two years after the date of enactment of this Act.
Section 8. Disaster-damaged eligible properties
Declares disaster-damaged eligible projects eligible
without regard to the relationship between rent level for the
assisted units and comparable market rents.
Requires each mortgage restructuring and rental assistance
sufficiency plan to determine for units assisted with project-
based assistance in eligible multifamily housing projects, if
rents cannot be determined, adjusted rent levels: (1) for
disaster-damaged eligible projects equal to 100 percent of the
fair market rents for the relevant market area; and (2) for
other eligible multifamily housing projects equal to 90 percent
of the fair market rents for the relevant market area.
States that, with respect to a disaster-damaged eligible
project, the owner contribution toward rehabilitation needs
shall be determined in accordance with specified requirements.
Section 9. Period of eligibility for non-profit debt relief
Facilitates the transfer of properties from exiting owners
to qualified not-for-profit preservation owners by extending
the time for which the Secretary is authorized to exercise not-
for-profit purchase incentives from the later of five years
after the date of recordation of the affordability agreement
(currently it is three years) or two years after the date of
enactment of this title.
Section 10. Acquisition of restructured projects by nonprofit
organizations
Allows debt relief if a qualified nonprofit becomes the
general partner of a limited partnership that owns a multi-
family property. While HUD recognized that either acquisition
of title, or acquisition of control, of a property constitutes
a transfer of physical assets, HUD has expressed uncertainty as
to whether the term ``acquired'', as used in Section 517(a)(5)
of MAHRA, applies to the acquisition of control over the
ownership of a project. This provision would clarify that in
addition to acquiring title to restructured projects, a
qualified nonprofit organization may qualify for forgiveness or
modification of secondary debt held by HUD if it acquires
control over the limited partnership owning the project by
becoming the sole general partner of the partnership.
Section 11. Mark-to-market for moderate rehabilitation projects
Subjects properties assisted under HUD's Moderate
Rehabilitation program to the same standards that apply to
project-based Section 8 contracts by making such properties
eligible for the mark- to market process. This section also
would require that public agencies renew Section 8 moderate
rehabilitation contracts when requested by owners. This section
does not provide retroactive rent hikes for moderate
rehabilitation properties that have already been renewed.
Section 12. Enhanced voucher assistance upon contract termination
Clarifies that enhanced vouchers shall be made available to
residents if the project-based Section 8 housing assistance
contract is terminated by the owner. Thus, the provision
clarifies Congressional intent by ensuring that residents are
protected against being subject to rent increases in the event
a contract is terminated. Such protections already exist for
cases where a contract expires.
Section 13. Correcting harm caused by late subsidy payments
Requires HUD to make monthly project-based rental
assistance housing assistance payments to owners upon the first
day of each month. Also requires HUD to notify owners at least
10-days prior to the due date if the payment will be late and
when such payment will be made. Authorizes owners who have not
received the monthly housing assistance payment within 10-days
of the due date to use project replacement reserves, residual
receipt reserves or other project reserves for the purpose of
paying operating and debt service. Requires HUD to pay simple
interest on the amount of such monthly payment, from the due
date until the date of payment. Interest is determined by the
Secretary of Treasury in accordance with the Contract Disputes
Act of 1978 (currently, the interest rate is 5.750 percent).
Section 14. Effective date
Makes the bill effective upon the earlier of the date of
enactment of the legislation or September 30, 2008.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
MULTIFAMILY ASSISTED HOUSING REFORM AND AFFORDABILITY ACT OF 1997
TITLE V--HUD MULTIFAMILY HOUSING REFORM
* * * * * * *
Subtitle A--FHA-Insured Multifamily Housing Mortgage and Housing
Assistance Restructuring
* * * * * * *
SEC. 512. DEFINITIONS.
In this subtitle:
(1) * * *
* * * * * * *
(20) Disaster-damaged eligible project.--
(A) In general.--The term ``disaster-damaged
eligible project'' means an otherwise eligible
multifamily housing project--
(i) that is located in a county that
was designated a major disaster area on
or after January 1, 2005, by the
President pursuant to title IV of the
Robert T. Stafford Disaster Relief and
Emergency Assistance Act (42 U.S.C.
5121 et seq.);
(ii) whose owner carried casualty and
liability insurance covering such
project in an amount required by the
Secretary;
(iii) that suffered damages not
covered by such insurance that the
Secretary determines is likely to
exceed $5,000 per unit in connection
with the natural disaster that was the
subject of the designation described in
subparagraph (A); and
(iv) whose owner requests
restructuring of the project not later
than 2 years after the date that such
damage occurred.
(B) Rule of construction.--A disaster-damaged
eligible project shall be eligible for amounts
under this Act without regard to the
relationship between rent levels for the
assisted units in such project and comparable
rents for the relevant market area.
* * * * * * *
SEC. 514. MORTGAGE RESTRUCTURING AND RENTAL ASSISTANCE SUFFICIENCY
PLAN.
(a) * * *
* * * * * * *
(f) Tenant and Other Participation and Capacity Building.--
(1) * * *
* * * * * * *
(3) Funding.--
(A) In general.--The Secretary shall make
available [not more than] not less than
$10,000,000 annually in funding, which amount
shall be in addition to any amounts made
available under this subparagraph and carried
over from previous years, from which the
Secretary may make obligations to tenant
groups, nonprofit organizations, and public
entities for building the capacity of tenant
organizations, for technical assistance in
furthering any of the purposes of this subtitle
(including transfer of developments to new
owners), for technical assistance for
preservation [of low-income housing for which
project-based rental assistance is provided at
below market rent levels and may not be
renewed] and improvement of low-income housing
for which project-based rental assistance,
subsidized loans, or enhanced vouchers under
section 8(t) are provided (including transfer
of developments to tenant groups, nonprofit
organizations, and public entities, and
predevelopment assistance to enable such
transfers), for tenant services, and for tenant
groups, nonprofit organizations, and public
entities described in section 517(a)(5), from
those amounts made available under
appropriations Acts for implementing this
subtitle or previously made available for
technical assistance in connection with the
preservation of affordable rental housing for
low-income persons. For outreach and training
of tenants and technical assistance, the
Secretary shall implement a grant program
utilizing performance-based outcome measures
for eligible costs incurred. Recipients
providing capacity building or technical
assistance services to tenant groups shall be
qualified nonprofit Statewide, countywide,
areawide or citywide organizations with
demonstrated experience including at least a
two-year recent track record of organizing and
providing assistance to tenants, and
independence from the owner, a prospective
purchaser, or their managing agents. The
Secretary may provide assistance and training
to grantees in administrative and fiscal
management to ensure compliance with applicable
Federal requirements. The Secretary shall
expedite the provision of funding for fiscal
year 2008 by entering into new multi-year
contracts with any prior grantee without
adverse audit findings or whose adverse audit
findings have been cleared, and by entering
into an interagency agreement for not less than
$1,000,000 with the Corporation for National
and Community Service or any other agency of
the Federal Government, that is selected by the
Secretary and the Secretary determines is
qualified to conduct such program, to conduct a
tenant outreach and training program under the
same or similar terms and conditions as was
most recently conducted by the Corporation. The
Secretary shall also make available flexible
grants to qualified nonprofit organizations
that do not own eligible multifamily
properties, for tenant outreach in underserved
areas, and to experienced national or regional
nonprofit organizations to provide specialized
training or support to grantees assisted under
this section. Notwithstanding any other
provision of law, funds authorized under this
section for any fiscal year shall be available
for obligation in subsequent fiscal years. The
Secretary shall require each recipient of
amounts made available pursuant to this
subparagraph to submit to the Secretary
reports, on a quarterly basis, detailing the
use of such funds and including such
information as the Secretary shall require.
* * * * * * *
(D) Prohibitions.--None of the funds made
available under subparagraph (A) may be used
for any political activities, political
advocacy, or lobbying (as such terms are
defined by Circular A-122 of the Office of
Management and Budget, entitled ``Cost
Principles for Non-Profit Organizations''), or
for expenses for travel to engage in political
activities or preparation of or provision of
advice on tax returns.
(E) Program compliance systems.--Each
recipient of amounts made available under
subparagraph (A) shall develop systems to
ensure compliance with the program and the
requirements of this paragraph.
(F) Penalties.--The Secretary may impose
penalties on any recipient of amounts made
available under subparagraph (A) that fails to
comply with any requirement under this
paragraph or of the program established
pursuant to this paragraph, which penalties may
include--
(i) ineligibility for further
assistance from amounts made available
under subparagraph (A); and
(ii) requiring the recipient to
reimburse the Secretary for any amounts
that were so misused.
(g) Rent Levels.--
(1) In general.--Except as provided in paragraph (2),
each mortgage restructuring and rental assistance
sufficiency plan pursuant to the terms, conditions, and
requirements of this subtitle shall establish for units
assisted with project-based assistance in eligible
multifamily housing projects adjusted rent levels
that--
(A) * * *
(B) if those rents cannot be [determined, are
equal] determined--
(i) with respect to a disaster-
damaged eligible property, are equal to
100 percent of the fair market rents
for the relevant market area (as such
rents were in effect at the time of
such disaster); and
(ii) with respect to other eligible
multifamily housing projects, are equal
to 90 percent of the fair market rents
for the relevant market area.
(2) Exceptions.--
(A) In general.--A contract under this
section may include rent levels that exceed the
rent level described in paragraph (1) at rent
levels that do not exceed 120 percent of the
fair market rent for the market area (except
that the Secretary may waive this limit for
disaster-damaged eligible projects and not more
than [five percent] 9 percent of all units
subject to portfolio restructuring agreements,
based on a finding of special need), if the
participating administrative entity--
(i) * * *
* * * * * * *
(i) Other Eligible Projects.--
(1) In general.--Notwithstanding any other provision
of this subtitle, a project that meets the requirements
of subparagraphs (B) and (C) of section 512(2) but does
not meet the requirements of subparagraph (A) of
section 512(2), may be treated as an eligible
multifamily housing project on an exception basis if
the Secretary determines, subject to paragraph (2),
that such treatment is necessary to preserve the
project in the most cost-effective manner in relation
to other alternative preservation options.
(2) Owner request.--
(A) Request required.--The Secretary shall
not treat an otherwise eligible project
described under paragraph (1) as an eligible
multifamily housing project unless the owner of
the project requests such treatment.
(B) No adverse treatment if no request
made.--If the owner of a project does not make
a request under subparagraph (A), the Secretary
shall not withhold from such project any other
available preservation option.
(3) Cancellation.--
(A) Timing.--At any time prior to the
completion of a mortgage restructuring under
this subtitle, the owner of a project may--
(i) withdraw any request made under
paragraph (2)(A); and
(ii) pursue any other option with
respect to the renewal of such owner's
section 8 contract pursuant to any
applicable statute or regulation.
(B) Documentation.--If an owner of a project
withdraws such owner's request and pursues
other renewal options under this paragraph,
such owner shall be entitled to submit
documentation or other information to replace
the documentation or other information used
during processing for mortgage restructuring
under this subtitle.
(4) Limitation.--The Secretary may exercise the
authority to treat projects as eligible multifamily
housing projects pursuant to this subsection only to
the extent that the number of units in such projects do
not exceed 10 percent of all units for which mortgage
restructuring pursuant to section 517 is completed.
* * * * * * *
SEC. 517. RESTRUCTURING TOOLS.
(a) Mortgage Restructuring.--
(1) * * *
* * * * * * *
(5) The Secretary may modify the terms of the second
mortgage, assign the second mortgage to the acquiring
organization or agency, or forgive all or part of the
second mortgage if the Secretary holds the second
mortgage and if the project, or the sole general
partner of the limited partnership owning the project,
is acquired by a tenant organization or tenant-endorsed
community-based nonprofit or public agency, pursuant to
guidelines established by the Secretary. If such
purchaser acquires such project subsequent to the date
of recordation of the affordability agreement described
in section 514(e)(6)--
(A) such purchaser shall acquire such project
on or before the later of--
(i) 5 years after the date of
recordation of the affordability
agreement; or
(ii) 2 years after the date of
enactment of the Mark-to-Market
Extension and Enhancement Act of 2007;
and
(B) the Secretary shall have received, and
determined acceptable, such purchaser's
application for modification, assignment, or
forgiveness prior to the acquisition of the
project by such purchaser.
* * * * * * *
(c) Rehabilitation Needs and Addition of Significant
Features.--
(1) * * *
* * * * * * *
(3) Properties damaged by natural disasters.--With
respect to a disaster-damaged eligible property, the
owner contribution toward rehabilitation needs shall be
determined in accordance with paragraph (2)(C).
* * * * * * *
SEC. 524. RENEWAL OF EXPIRING PROJECT-BASED SECTION 8 CONTRACTS.
(a) In General.--
(1) * * *
* * * * * * *
(4) Renewal rents.--Except as provided in subsection
(b), the contract for assistance shall provide
assistance at the following rent levels:
(A) Market rents.--At the request of the
owner of the project, at rent levels equal to
the lesser of comparable market rents for the
market area or 150 percent of the fair market
rents, in the case only of a project that--
(i) * * *
* * * * * * *
(iv) is not--
(I) owned by a nonprofit
entity; or
[(II) subject to a contract
for moderate rehabilitation
assistance under section
8(e)(2) of the United States
Housing Act of 1937, as in
effect before October 1, 1991;
or]
[(III)] (II) a project for
which the public housing agency
provided voucher assistance to
one or more of the tenants
after the owner has provided
notice of termination of the
contract covering the tenant's
unit; and
* * * * * * *
(b) Exception Rents.--
(1) * * *
* * * * * * *
[(3) Moderate rehabilitation projects.--In the case
of a project with a contract under the moderate
rehabilitation program, other than a moderate
rehabilitation contract under section 441 of the
Stewart B. McKinney Homeless Assistance Act, pursuant
to the request of the owner of the project, the
contract for assistance for the project pursuant to
subsection (a) shall provide assistance at the lesser
of the following rent levels:
[(A) Adjusted existing rents.--The existing
rents under the expiring contract, as adjusted
by an operating cost adjustment factor
established by the Secretary (which shall not
result in a negative adjustment).
[(B) Fair market rents.--Fair market rents
(less any amounts allowed for tenant-purchased
utilities).
[(C) Market rents.--Comparable market rents
for the market area.]
* * * * * * *
(d) Enhanced Vouchers Upon Contract Expiration or
Termination.--
(1) In general.--In the case of a contract for
project-based assistance under section 8 for a covered
project that is not renewed under subsection (a) or (b)
of this section (or any other authority), to the extent
that amounts for assistance under this subsection are
provided in advance in appropriation Acts, upon the
date of the expiration or termination of such contract
the Secretary [shall make] shall provide enhanced
voucher assistance under section 8(t) of the United
States Housing Act of 1937 (42 U.S.C. 1437f(t))
[available on behalf of] for each low-income family
who, upon the date of such expiration or termination,
is residing in an assisted dwelling unit in the covered
project.
* * * * * * *
Subtitle C--Enforcement Provisions
* * * * * * *
PART 2--FHA Multifamily Provisions
* * * * * * *
SEC. 579. TERMINATION.
(a) Repeals.--
(1) Mark-to-market program.--Subtitle A (except for
section 524) is repealed effective October 1, [2011]
2012.
* * * * * * *
(b) Exception.--Notwithstanding the repeal under subsection
(a), the provisions of subtitle A (as in effect immediately
before such repeal) shall apply with respect to projects and
programs for which binding commitments have been entered into
under this Act before October 1, [2011] 2012.
* * * * * * *
----------
SECTION 8 OF THE UNITED STATES HOUSING ACT OF 1937
LOWER INCOME HOUSING ASSISTANCE
Sec. 8. (a) * * *
* * * * * * *
(ff) Late Payments.--
(1) General.--The Secretary shall make payments of
project-based rental assistance provided under this
section for each month on or before the due date under
paragraph (2) for the payment.
(2) Due date.--The due date under this paragraph for
a monthly payment is the first business day of the
month.
(3) Notification of late payment.--The Secretary
shall notify a project owner at least 10 days before
the due date for a housing assistance payment if such
payment will be late and shall inform the project owner
of the approximate date the payment will be made.
(4) Use of reserves.--If a housing assistance payment
for a project has not been received before the
expiration of the 10-day period beginning upon the due
date for such payment, the project owner shall, after
the expiration of such period, be entitled to obtain
funds from a project replacement reserve, residual
receipts reserve, or other project reserve in order to
pay operating and debt service costs for the project.
Upon receipt of the monthly housing assistance payment
from the Secretary, the project owner shall promptly
replace or replenish any such funds advanced pursuant
to the preceding sentence.
(5) Interest payment.--If a monthly housing
assistance payment is not made before the expiration of
the 30-day period beginning upon the due date for such
payment, the Secretary shall pay to the owner simple
interest on the amount of such monthly payment, from
the due date until the date of payment, at a rate
determined by the Secretary of Treasury in accordance
with section 12 of the Contract Disputes Act of 1978
(41 U.S.C. 611). Interest payments under this paragraph
shall be made from amounts made available for
management and administration of the Department of
Housing and Urban Development.
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