[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3774 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 3774

   To amend the Internal Revenue Code of 1986 to provide a credit to 
          promote homeownership among low-income individuals.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 14, 2002

  Mr. Jefferson (for himself and Mr. Rangel) introduced the following 
      bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to provide a credit to 
          promote homeownership among low-income individuals.

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

SECTION 1. SHORT TITLE; FINDINGS; PURPOSES.

    (a) Short Title.--This Act may be cited as the ``Home at Last Tax 
Credit Act of 2002''.
    (b) Findings.--Congress finds the following:
            (1) Homeownership is of primary importance in building 
        wealth in low-income families.
            (2) 67 percent of the wealth that is owned by nonelderly 
        low-income households consists of the equity in their 
        residences, and the median wealth of such non-elderly low-
        income households is 12 times greater than the median wealth of 
        nonelderly renters with the same level of income.
            (3) The national homeownership rate hit a record 68.1 
        percent in September 2001, but the homeownership rates for 
        lower-income households are considerably less. While 82.2 
        percent of households earning 100 percent or more of the 
        national median income now own homes, only 52.6 percent of 
        households earning less than the national median are 
        homeowners. Homeownership rates among households earning less 
        than 80 percent of the national median are substantially less.
            (4) According to the Bureau of the Census, in 1993, 88 
        percent of all renters and 93 percent of renters earning less 
        than $20,000 could not afford a house selling for half of the 
        regional median house price.
            (5) There is a 23 percentage point difference in 
        homeownership rates between central cities and suburban cities, 
        which is largely the result of the concentration of low-income 
        households in central cities. This concentration of low-income 
        housing in central cities makes these areas uniquely 
        susceptible to the negative effects of recession, such as job 
        loss, which has historically led to a concentration of 
        foreclosures in central city neighborhoods. Such concentrations 
        of foreclosures depress area housing value and deplete the 
        equity wealth of surrounding homeowners.
            (6) The cost of the largest Federal tax incentives for 
        homeownership, the mortgage interest deduction and the real 
        estate tax deduction, is equal to approximately twice the 
        amount of Federal expenditures for direct Federal housing 
        assistance which benefits low-income households.
            (7) The mortgage interest deduction and the real estate tax 
        deduction have little value to low-income households because 
        the itemized tax deductions of low-income households generally 
        do not exceed the standard deduction.
            (8) Over 90 percent of the total benefits of the mortgage 
        interest deduction accrue to home buyers with incomes greater 
        than $40,000.
            (9) Current provisions in the Internal Revenue Code of 1986 
        to promote homeownership among low-income households, such as 
        the mortgage revenue bond program, the mortgage credit 
        certificate program, and the low-income housing credit, fail to 
        simultaneously attack the twin constraints of lack of wealth 
        and low income that prevent many low-income households from 
        becoming homeowners.
    (c) Purposes.--The purposes of this Act are--
            (1) to establish a decentralized, market-driven approach to 
        increasing homeownership among households earning less than 80 
        percent of household median income; and to increase mixed-
        income home ownership in new or newly renovated households 
        located in census tracts targeted for investment and 
        redevelopment by the United States Department of Housing and 
        Urban Development (HUD), typically referred to as Difficult to 
        Develop Areas (DDAs);
            (2) to enable these low-income households to overcome 
        income constraints that frequently prevent them from becoming 
        homeowners and building wealth through home equity; and
            (3) to reduce the disparities in homeownership between low-
        income households and higher-income households and between 
        central cities and suburban cities, and attract investment into 
        the Nation's central cities.

SEC. 2. HOME AT LAST TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following:

``SEC. 45G. HOME AT LAST TAX CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--For purposes of section 38, the amount 
        of the home at last tax credit determined under this section 
        for any taxable year in the credit period shall be an amount 
        equal to the applicable percentage of the home at last tax 
        credit amount allocated such taxpayer by a State housing 
        finance agency in the credit allocation year under subsection 
        (b).
            ``(2) Applicable percentage.--For purposes of this section, 
        the Secretary shall prescribe the applicable percentage for any 
        year in which the taxpayer is a qualified lender. Such 
        percentage with respect to any financial reporting period in 
        the credit period with respect to such taxpayer shall be 
        percentages which will yield over such period amounts of credit 
        under paragraph (1) which have a present value equal to 100 
        percent of the home at last tax credit amount allocated such 
        taxpayer under subsection (b).
            ``(3) Method of discounting.--For purposes of paragraph 
        (2), present value shall be determined in the same manner as 
        the low-income housing tax credit under section 42(b)(2)(C), 
        except that clause (i) thereof shall be applied as if it read 
        `as of the last day of the credit period (as defined in section 
        45G(f)(1))'.
    ``(b) Allocation of Home at Last Tax Credit Amounts.--
            ``(1) Amount of credit.--Each qualified State shall receive 
        a home at last tax credit dollar amount for each calendar year 
        in an amount equal to the sum of--
                    ``(A) an amount equal to--
                            ``(i) 40 cents multiplied by the State 
                        population, multiplied by
                            ``(ii) 10, plus
                    ``(B) the unused home at last tax credit dollar 
                amount (if any) of such State for the preceding 
                calendar year or years.
            ``(2) Qualified state.--For purposes of this section--
                    ``(A) In general.--The term `qualified State' means 
                a State that has 1 or more housing credit agencies with 
                an allocation plan that complies with the general 
                provisions set forth in subparagraph (B). If there is 
                more than 1 housing credit agency of a State, all such 
                agencies shall be treated as a single agency.
                    ``(B) Allocation plan.--For purposes of this 
                paragraph, the term `allocation plan' means a written 
                plan, submitted to the Secretary by October 15, which 
                includes--
                            ``(i) selection criteria for the allocation 
                        of credits to qualified lenders--
                                    ``(I) based on a process in which 
                                lenders submit bids for the value of 
                                the credit, and
                                    ``(II) which gives priority to 
                                qualified lenders who will originate 
                                qualified home at last loans during the 
                                calendar year for which the tax credits 
                                are allocated for use,
                            ``(ii) an assurance that the State will not 
                        allocate in excess of 10 percent of the home at 
                        last tax credit amount for the calendar year 
                        for qualified home at last loans which are 
                        neighborhood revitalization project loans,
                            ``(iii) an assurance that the State will 
                        not allocate in excess of 15 percent of the 
                        home at last tax credit amount for the calendar 
                        year to one qualified lender,
                            ``(iv) an assurance that the State will not 
                        allow more than 25 percent of the home at last 
                        tax credit amount for the calendar year to be 
                        used to subsidize home purchases or new home 
                        construction for qualified borrowers earning in 
                        excess of 120 percent of household median 
                        income,
                            ``(v) a procedure that the agency (or an 
                        agent or other private contractor of such 
                        agency) will follow in monitoring for 
                        noncompliance with the provisions of this 
                        section and in notifying the Internal Revenue 
                        Service of such noncompliance with respect to 
                        which such agency becomes aware, and
                            ``(vi) such other assurances as the 
                        Secretary may require.
            ``(3) Qualified lender.--For purposes of this section, the 
        term `qualified lender' means a lender which--
                    ``(A) is an insured depository institution (as 
                defined in section 3 of the Federal Deposit Insurance 
                Act), an insured credit union (as defined in section 
                101(7) of the Federal Credit Union Act), community 
                development financial institution (as defined in 
                section 103 of the Community Development Banking and 
                Financial Institutions Act of 1994 (12 U.S.C. 4702)), 
                or nonprofit community development corporation (as 
                defined in section 613 of the Community Economic 
                Development Act of 1981 (42 U.S.C. 9802)), and
                    ``(B) during the 1-year period beginning on the 
                date of the credit allocation, uses its own funds to 
                buy down the interest rate charged of a qualified 
                borrower such that the aggregate amount of funds 
                applied as prepaid points is not less than the amount 
                of the bid of such lender for such credit allocation.
            ``(4) Carryover of credit.--A home at last tax credit 
        amount received by a State for any calendar year and not 
        allocated in such year shall remain available to be allocated 
        in the succeeding calendar year.
            ``(5) Population.--For purposes of this section, population 
        shall be determined in accordance with section 146(j).
            ``(6) Cost-of-living adjustment.--
                    ``(A) In general.--In the case of a calendar year 
                after 2002, the 40 cent amount contained in paragraph 
                (1)(A)(i) shall be increased by an amount equal to--
                            ``(i) such amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for such 
                        calendar year by substituting `calendar year 
                        2001' for `calendar year 1992' in subparagraph 
                        (B) thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of 5 cents, such 
                amount shall be rounded to the next lowest multiple of 
                5 cents.
    ``(c) Qualified Home at Last Loan Defined.--For purposes of this 
section, the term `qualified home at last loan' means a first mortgage 
single-family residential loan funded by a qualified lender to finance 
the purchase or construction or purchase and construction of a 
residence by a qualified borrower which has a lower-than-market 
interest rate as a result of a lender rate `buydown', but only if--
            ``(1) the requirements of subsections (d) and (e) are met,
            ``(2) subject to paragraph (6), the proceeds from such loan 
        are applied exclusively--
                    ``(A) to acquire such residence, or
                    ``(B) to acquire and substantially improve such 
                residence in connection with a neighborhood 
                revitalization project, or
                    ``(C) to build a residence,
            ``(3) the principal amount of the loan is not greater than 
        105 percent of the purchase price of the residence securing the 
        loan,
            ``(4) the loan results in a monthly housing expense-to-
        income ratio with respect to such residence of not more than 33 
        percent at the time of closing,
            ``(5) the total of prepaid points used to buy down the 
        effective interest rate is not more than--
                    ``(A) $10,000 for qualified borrowers earning 
                greater than 70 percent of area household median 
                income,
                    ``(B) $20,000 for qualified borrowers earning 70 
                percent or less of area household median income,
                    ``(C) in the case of a neighborhood revitalization 
                project loan, subparagraph (A) shall be applied by 
                substituting `$15,000' for `$10,000', and subparagraph 
                (B) shall be applied by substituting `$25,000' for 
                `$20,000', or
                    ``(D) in the case of a below-market-rate loan 
                offered by a State housing finance agency in 
                conjunction with a mortgage revenue bond program, 
                subparagraph (A) shall be applied by substituting 
                `$5,000' for `$10,000', and subparagraph (B) shall be 
                applied by substituting `$10,000' for `$20,000',
            ``(6) the loan has a term of 30 years,
            ``(7) the loan has a fixed interest rate and fully 
        amortizes over the term of the mortgage,
            ``(8) the loan is a conventional single-family first 
        mortgage, a government-guaranteed single-family first mortgage, 
        or a single-family first mortgage originated under a program 
        which is administered by the State and which is in existence on 
        the date of enactment of this section, and
            ``(9) the loan is in an amount not greater than the maximum 
        principal obligation amount eligible for insurance under 
        section 203(b)(2) of the National Housing Act (12 U.S.C. 
        1709)(b)(2)) for a 1-family dwelling.
    ``(d) Mortgagor.--
            ``(1) In general.--A loan meets the requirements of this 
        subsection if it is made to a mortgagor--
                    ``(A) whose household income for the year in which 
                the mortgagor applies for the loan is 80 percent or 
                less of the area median gross household income for the 
                area in which the residence which secures the mortgage 
                is located, or
                    ``(B) who is buying a home or duplex for owner-
                occupancy in a census tract targeted for reinvestment 
                and redevelopment by the Department of Housing and 
                Urban Development, regardless of household income,
                    ``(C) for whom the monthly housing expense-to-
                income ratio with respect to a market-rate single-
                family mortgage would exceed 28 percent,
                    ``(D) but for whom a qualified home at last loan 
                would not result in a monthly housing expense-to-income 
                ratio greater than 33 percent at the time of closing,
                    ``(E) who has not owned a home within the three 
                years prior to the date of applying for a qualified 
                home at last loan, and
                    ``(F) who attends pre-purchase homeownership 
                counseling provided by a qualified nonprofit 
                organization consistent with standards established by 
                the American Homeownership Education and Counseling 
                Institute (AHECI).
            ``(2) Determination of household income.--For purposes of 
        this subsection and subsection (h), the household income of a 
        mortgagor and area median gross income shall be determined in 
        accordance with section 143(f)(2).
    ``(e) Residence Requirements.--A loan meets the requirements of 
this subsection if it is secured by a residence that is--
            ``(1) a single-family residence which is the principal 
        residence (within the meaning of section 121) of the mortgagor, 
        or can reasonably be expected to become the principal residence 
        of the mortgagor within a reasonable time after the financing 
        is provided,
            ``(2) purchased by the mortgagor with a down payment in an 
        amount not less than the lesser of--
                    ``(A) 1 percent of the purchase price, or
                    ``(B) $1,000, and
            ``(3) in the case of a mortgagor with a household income 
        greater than 50 percent of the area median gross income, as 
        determined under subsection (d)(1)(A), not financed in 
        connection with a qualified mortgage issued under section 143. 
        For purposes of paragraph (1), a manufactured home shall not be 
        treated as a single-family residence unless such home meets the 
        requirements of section 604(h) of the Housing and Community 
        Development Act of 1974.
    ``(f) Definition and Special Rules.--
            ``(1) Credit period defined.--For purposes of this section, 
        the term `credit period' means the taxable year in which a home 
        at last tax credit amount is allocated to the taxpayer.
            ``(2) Disposition of home at last loans.--If a qualified 
        home at last loan is disposed of in the 12 months following its 
        closing date as a result of a borrower default, the taxpayer 
        forfeits the credit making it available for reallocation by the 
        State.
            ``(3) Prepayment of home at last loans.--If, during the 12 
        months following its closing date, a qualified home at last 
        loan is fully repaid by the borrower, the lender may claim only 
        a portion of the tax credit with the remainder being forfeited 
        and available for reallocation. The portion of tax credit that 
        can be claimed is determined by dividing the number of days 
        that have passed between the closing date and the date of 
        payoff by 365 and multiplying that number by the value of the 
        tax credit allocated to the lender for the purposes of 
        originating the prepaid home at last loan.
    ``(g) Other Definitions.--For purposes of this section--
            ``(1) Neighborhood revitalization project loan.--
                    ``(A) In general.--The term `neighborhood 
                revitalization project loan' means a loan secured by a 
                first mortgage on a one- to four-family residence, the 
                proceeds of which are used to substantially improve 
                such residence in connection with a neighborhood 
                revitalization project.
                    ``(B) Neighborhood revitalization project.--The 
                term `neighborhood revitalization project' means a 
                project of sufficient size and scope to alleviate 
                physical deterioration and stimulate investment in--
                            ``(i) a geographic location within the 
                        jurisdiction of a unit of local government (but 
                        not the entire jurisdiction) designated in 
                        comprehensive plans, ordinances, or other 
                        documents as a neighborhood, village, or 
                        similar geographic designation, or
                            ``(ii) the entire jurisdiction of a unit of 
                        local government if the population of such 
                        jurisdiction is not in excess of 25,000.
            ``(2) State.--The term `State' includes a possession of the 
        United States.
            ``(3) State housing finance agency.--The term `State 
        housing finance agency' means the public agency, authority, 
        corporation, or other instrumentality of a State that has the 
        authority to provide residential mortgage loan financing 
        throughout the State.
    ``(h) Certification and Other Reports to the Secretary.--
            ``(1) Certification with respect to state allocation of 
        home at last tax credits.--The Secretary may, upon a finding of 
        noncompliance, revoke the certification of a qualified State 
        and revoke any qualified home at last tax credit amounts 
        allocated to such State or allocated by such State to a 
        qualified lender.
            ``(2) Annual report from housing finance agencies.--Each 
        State housing finance agency which allocates any home at last 
        tax credit amount to any qualified lender for any calendar year 
        shall make available to the public no later than November 1 of 
        the following year) an annual report specifying--
                    ``(A) the home at last tax credit amount allocated 
                to each qualified lender for such year, and
                    ``(B) with respect to each qualified lender--
                            ``(i) the principal amount of each 
                        qualified home at last loan made by such lender 
                        in such year,
                            ``(ii) the number of qualified home at last 
                        loans made by such lender in such year,
                            ``(iii) the interest rate prior to buydown 
                        and the effective interest rate after buydown 
                        of each qualified home at last loan,
                            ``(iv) the status of each qualified 
                        homeownership loan defined as `performing', 
                        `delinquent less than 60 days', `delinquent 60 
                        days or more', or `in foreclosure',
                            ``(v) the household income as a percent of 
                        area median household income of each qualified 
                        borrower,
                            ``(vi) any other information the Secretary 
                        may deem essential to assuring fair mortgage 
                        pricing and that the benefit of the tax credit 
                        is being passed through the taxpayer to the 
                        qualified borrower in the form of a lower 
                        interest rate, and
                            ``(vii) the penalty under section 6652(j) 
                        shall apply to any failure to provide the 
                        report required by this paragraph on the date 
                        prescribed herein.
    ``(i) Regulations.--The Secretary may prescribe such regulations as 
may be necessary or appropriate to carry out the purposes of this 
section.''.
    (b) Limitation on Carryback of Unused Credit.--Subsection (d) of 
section 39 of the Internal Revenue Code of 1986 (relating to carryback 
and carryforward of unused credits) is amended by adding at the end the 
following:
            ``(11) No carryback of home at last tax credits before 
        effective date.--No portion of the unused business credit for 
        any taxable year which is attributable to the home at last tax 
        credit determined under section 45G may be carried back to a 
        taxable year ending before the date of the enactment of section 
        45G.''
    (c) Conforming Amendments.--
            (1) Section 38(b) of the Internal Revenue Code of 1986 is 
        amended--
                    (A) by striking ``plus'' at the end of paragraph 
                (14),
                    (B) by striking the period at the end of paragraph 
                (15) and inserting ``, plus'', and
                    (C) by adding at the end the following:
            ``(16) the home at last tax credit determined under section 
        45G.''
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following:

                              ``Sec. 45G. Home at last tax credit.''
    (d) Effective Date.--The amendments made by this section shall 
apply to calendar years after 2001.
                                 <all>