[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2391 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 2391

   To provide for affordable housing relief, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           November 16, 2007

   Mr. Reed introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
   To provide for affordable housing relief, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Government 
Sponsored Enterprise Mission Improvement Act'' or the ``GSE Mission 
Improvement Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Annual housing report regarding enterprises.
Sec. 3. Public use database.
Sec. 4. Revision of housing goals.
Sec. 5. Duty to serve underserved markets.
Sec. 6. Monitoring and enforcing compliance with housing goals.
Sec. 7. Affordable housing programs.
Sec. 8. Enforcement.

SEC. 2. ANNUAL HOUSING REPORT REGARDING ENTERPRISES.

    (a) Repeal.--Section 1324 of the Housing and Community Development 
Act of 1992 (12 U.S.C. 4544) is hereby repealed.
    (b) Annual Housing Report.--The Housing and Community Development 
Act of 1992 is amended by inserting after section 1323 the following:

``SEC. 1324. ANNUAL HOUSING REPORT REGARDING ENTERPRISES.

    ``(a) In General.--After reviewing and analyzing the reports 
submitted under section 309(n) of the Federal National Mortgage 
Association Charter Act and section 307(f) of the Federal Home Loan 
Mortgage Corporation Act, the Secretary shall submit a report, not 
later than October 30 of each year, to the Committee on Banking, 
Housing, and Urban Affairs of the Senate and the Committee on Financial 
Services of the House of Representatives, on the activities of each 
enterprise.
    ``(b) Contents.--The report required under subsection (a) shall--
            ``(1) discuss--
                    ``(A) the extent to and manner in which--
                            ``(i) each enterprise is achieving the 
                        annual housing goals established under subpart 
                        B;
                            ``(ii) each enterprise is complying with 
                        its duty to serve underserved markets, as 
                        established under section 1335;
                            ``(iii) each enterprise is complying with 
                        section 1337; and
                            ``(iv) each enterprise is achieving the 
                        purposes of the enterprise established by law; 
                        and
                    ``(B) the actions that each enterprise could 
                undertake to promote and expand the purposes of the 
                enterprise;
            ``(2) aggregate and analyze relevant data on income to 
        assess the compliance of each enterprise with the housing goals 
        established under subpart B;
            ``(3) aggregate and analyze data on income, race, and 
        gender by census tract and other relevant classifications, and 
        compare such data with larger demographic, housing, and 
        economic trends;
            ``(4) identify the extent to which each enterprise is 
        involved in mortgage purchases and secondary market activities 
        involving subprime loans; and
            ``(5) compare the characteristics of subprime loans 
        purchased and securitized by each enterprise to other loans 
        purchased and securitized by each enterprise.
    ``(c) Data Collection and Reporting.--
            ``(1) In general.--To assist the Secretary in analyzing the 
        matters described in subsection (b), the Secretary shall 
        conduct, on a monthly basis, a survey of mortgage markets in 
        accordance with this subsection.
            ``(2) Data points.--Each monthly survey conducted by the 
        Secretary under paragraph (1) shall collect data on--
                    ``(A) the characteristics of individual mortgages 
                that are eligible for purchase by the enterprises and 
                the characteristics of individual mortgages that are 
                not eligible for purchase by the enterprises including, 
                in both cases, information concerning--
                            ``(i) the price of the house that secures 
                        the mortgage;
                            ``(ii) the loan-to-value ratio of the 
                        mortgage, which shall reflect any secondary 
                        liens on the relevant property;
                            ``(iii) the terms of the mortgage;
                            ``(iv) the creditworthiness of the borrower 
                        or borrowers; and
                            ``(v) whether the mortgage, in the case of 
                        a conforming mortgage, was purchased by an 
                        enterprise;
                    ``(B) the characteristics of individual subprime 
                mortgages that are eligible for purchase by the 
                enterprises and the characteristics of borrowers under 
                such mortgages, including the credit worthiness of such 
                borrowers and determination whether such borrowers 
                would qualify for prime lending; and
                    ``(C) such other matters as the Secretary 
                determines to be appropriate.
            ``(3) Public availability.--The Secretary shall make any 
        data collected by the Secretary in connection with the conduct 
        of a monthly survey available to the public in a timely manner, 
        provided that the Secretary may modify the data released to the 
        public to ensure that the data--
                    ``(A) is not released in an identifiable form; and
                    ``(B) is not otherwise obtainable from other 
                publicly available data sets.
            ``(4) Definition.--For purposes of this subsection, the 
        term `identifiable form' means any representation of 
        information that permits the identity of a borrower to which 
        the information relates to be reasonably inferred by either 
        direct or indirect means.''.

SEC. 3. PUBLIC USE DATABASE.

    Section 1323 of the Housing and Community Development Act of 1992 
(42 U.S.C. 4543) is amended--
            (1) in subsection (a)--
                    (A) by striking ``(a) In General.--The Secretary'' 
                and inserting the following:
    ``(a) Availability.--
            ``(1) In general.--The Secretary''; and
                    (B) by adding at the end the following new 
                paragraph:
            ``(2) Census tract level reporting.--Such data shall 
        include the data elements required to be reported under the 
        Home Mortgage Disclosure Act of 1975, at the census tract 
        level.'';
            (2) in subsection (b)(2), by inserting before the period at 
        the end the following: ``or with subsection (a)(2)''; and
            (3) by adding at the end the following new subsection:
    ``(d) Timing.--Data submitted under this section by an enterprise 
in connection with a provision referred to in subsection (a) shall be 
made publicly available in accordance with this section not later than 
September 30 of the year following the year to which the data 
relates.''.

SEC. 4. REVISION OF HOUSING GOALS.

    (a) Repeal.--Sections 1331 through 1334 of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4561 through 4564) are 
hereby repealed.
    (b) Housing Goal.--The Housing and Community Development Act of 
1992 is amended by inserting before section 1335 the following:

``SEC. 1331. ESTABLISHMENT OF HOUSING GOALS.

    ``(a) In General.--The Secretary shall, by regulation, establish 
effective for the first calendar year that begins after the date of 
enactment of the Government Sponsored Enterprise Mission Improvement 
Act, and each year thereafter, annual housing goals, as described in 
sections 1332, 1333, and 1334, with respect to the mortgage purchases 
by the enterprises.
    ``(b) Special Counting Requirements.--
            ``(1) In general.--The Secretary shall determine whether an 
        enterprise shall receive full, partial, or no credit for a 
        transaction toward achievement of any of the housing goals 
        established pursuant to this section or sections 1332 through 
        1334.
            ``(2) Considerations.--In making any determination under 
        paragraph (1), the Secretary shall consider whether a 
        transaction or activity of an enterprise is substantially 
        equivalent to a mortgage purchase and either (A) creates a new 
        market, or (B) adds liquidity to an existing market, provided 
        however that the terms and conditions of such mortgage purchase 
        is neither determined to be unacceptable, nor contrary to good 
        lending practices, and otherwise promotes sustainable 
        homeownership and further, that such mortgage purchase actually 
        fulfills the purposes of the enterprise and is in accordance 
        with the chartering Act of such enterprise.
    ``(c) Eliminating Interest Rate Disparities.--
            ``(1) In general.--In establishing and implementing the 
        housing goals under this subpart, the Secretary shall require 
        the enterprises to disclose appropriate information to allow 
        the Secretary to assess if there are any disparities in 
        interest rates charged on mortgages to borrowers who are 
        minorities, as compared with borrowers of similar 
        creditworthiness who are not minorities, as evidenced in 
        reports pursuant to the Home Mortgage Disclosure Act of 1975.
            ``(2) Report to congress and remedy required on 
        disparities.--Upon a finding by the Secretary that a pattern of 
        disparities in interest rates exists pursuant to the 
        information provided by an enterprise under paragraph (1), the 
        Secretary shall--
                    ``(A) forward to the Committee on Banking, Housing, 
                and Urban Affairs of the Senate and the Committee on 
                Financial Services of the House of Representatives a 
                report detailing the disparities; and
                    ``(B) require the enterprise to take such actions 
                as the Secretary deems appropriate pursuant to this 
                Act, to remedy such identified interest rate 
                disparities.
            ``(3) Identity of individuals not disclosed.--In carrying 
        out this subsection, the Secretary shall ensure that no 
        personally identifiable financial information that would enable 
        an individual borrower to be reasonably identified shall be 
        made public.
    ``(d) Timing.--The Secretary shall establish an annual deadline for 
the establishment of housing goals described in subsection (a), taking 
into consideration the need for the enterprises to reasonably and 
sufficiently plan their operations and activities in advance, including 
operations and activities necessary to meet such goals.

``SEC. 1331A. DISCRETIONARY ADJUSTMENT OF HOUSING GOALS.

    ``(a) Authority.--An enterprise may petition the Secretary in 
writing at any time during a year to reduce the level of any goal for 
such year established pursuant to this subpart.
    ``(b) Standard for Reduction.--The Secretary may reduce the level 
for a goal pursuant to such a petition only if--
            ``(1) market and economic conditions or the financial 
        condition of the enterprise require such action; or
            ``(2) efforts to meet the goal would result in the 
        constraint of liquidity, over investment in certain market 
        segments, or other consequences contrary to the intent of this 
        subpart, section 301(3) of the Federal National Mortgage 
        Association Charter Act (12 U.S.C. 1716(3)), or section 301(3) 
        of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 
        1451 note), as applicable.
    ``(c) Determination.--
            ``(1) 30-day period.--The Secretary shall make a 
        determination regarding any proposed reduction within 30 days 
        of receipt of the petition regarding the reduction.
            ``(2) Extension.--The Secretary may extend the period 
        described in paragraph (1) for a single additional 15-day 
        period, but only if the Secretary requests additional 
        information from the enterprise.

``SEC. 1332. SINGLE-FAMILY HOUSING GOALS.

    ``(a) Establishment of Goals.--
            ``(1) In general.--The Secretary shall establish annual 
        goals for the purchase by each enterprise of conventional, 
        conforming, single-family, owner-occupied, purchase money 
        mortgages financing housing for each of the following:
                    ``(A) Low-income families.
                    ``(B) Families that reside in low-income areas.
                    ``(C) Very low-income families.
            ``(2) Goals as percentage of total purchase money mortgage 
        purchases.--The goals established under paragraph (1) shall be 
        established as a percentage of the total number of single-
        family dwelling units financed by single-family purchase money 
        mortgages of the enterprise.
    ``(b) Determination of Compliance.--
            ``(1) In general.--The Secretary shall determine, for each 
        year that the housing goals under this section are in effect 
        pursuant to section 1331(a), whether each enterprise has 
        complied with the single-family housing goals established under 
        this section for such year.
            ``(2) Compliance requirements.--An enterprise shall be 
        considered to be in compliance with a goal described under 
        subsection (a) for a year, only if, for each of the types of 
        families described in subsection (a), the percentage of the 
        number of conventional, conforming, single-family, owner-
        occupied, purchase money mortgages purchased by each enterprise 
        in such year that serve such families, meets or exceeds the 
        target established under subsection (c) for the year for such 
        type of family.
    ``(c) Annual Targets.--
            ``(1) In general.--The Secretary shall establish annual 
        targets for each goal described in subsection (a).
            ``(2) Considerations.--In establishing annual targets under 
        paragraph (1), the Secretary shall consider--
                    ``(A) national housing needs;
                    ``(B) economic, housing, and demographic 
                conditions;
                    ``(C) the performance and effort of the enterprises 
                toward achieving the housing goals under this section 
                in previous years;
                    ``(D) the ability of the enterprise to lead the 
                industry in making credit available;
                    ``(E) recent information submitted in compliance 
                with the Home Mortgage Disclosure Act of 1975 and such 
                other mortgage data as may be available for non 
                metropolitan areas regarding conventional, conforming, 
                single-family, owner-occupied, purchase money mortgages 
                originated and purchased;
                    ``(F) the size of the purchase money conventional 
                mortgage market serving each of the types of families 
                described in subsection (a), relative to the size of 
                the overall purchase money mortgage market; and
                    ``(G) the need to maintain the sound financial 
                condition of the enterprises.
    ``(d) Notice of Determination and Enterprise Comment.--
            ``(1) Notice.--Within 30 days of making a determination 
        under subsection (b) regarding compliance of an enterprise for 
        a year with the housing goals established under this section 
        and before any public disclosure thereof, the Secretary shall 
        provide notice of the determination to the enterprise, which 
        shall include an analysis and comparison, by the Secretary, of 
        the performance of the enterprise for the year and the targets 
        for the year under subsection (c).
            ``(2) Comment period.--The Secretary shall provide each 
        enterprise an opportunity to comment on the determination 
        during the 30-day period beginning upon receipt by the 
        enterprise of the notice.
    ``(e) Use of Borrower Income.--In monitoring the performance of 
each enterprise pursuant to the housing goals under this section and 
evaluating such performance (for purposes of section 1336), the 
Secretary shall consider a mortgagor's income to be the income of the 
mortgagor at the time of origination of the mortgage.

``SEC. 1333. SINGLE-FAMILY HOUSING REFINANCE GOALS.

    ``(a) Prepayment of Existing Loans.--
            ``(1) In general.--The Secretary shall establish annual 
        goals for the purchase by each enterprise of mortgages on 
        conventional, conforming, single-family, owner-occupied housing 
        given to pay off or prepay an existing loan served by the same 
        property for each of the following:
                    ``(A) Low-income families.
                    ``(B) Families that reside in low-income areas.
                    ``(C) Very low-income families.
            ``(2) Goals as percentage of total refinancing mortgage 
        purchases.--The goals described under paragraph (1) shall be 
        established as a percentage of the total number of single-
        family dwelling units refinanced by mortgage purchases of each 
        enterprise.
    ``(b) Determination of Compliance.--
            ``(1) In general.--The Secretary shall determine, for each 
        year that the housing goals under this section are in effect 
        pursuant to section 1331(a), whether each enterprise has 
        complied with the single-family housing refinance goals 
        established under this section for such year.
            ``(2) Compliance.--An enterprise shall be considered to be 
        in compliance with the goals of this section for a year, only 
        if, for each of the types of families described in subsection 
        (a), the percentage of the number of conventional, conforming, 
        single-family, owner-occupied refinancing mortgages purchased 
        by each enterprise in such year that serve such families, meets 
        or exceeds the target for the year for such type of family that 
        is established under subsection (c).
    ``(c) Annual Targets.--
            ``(1) In general.--The Secretary shall establish annual 
        targets for each goal described in subsection (a).
            ``(2) Considerations.--In establishing annual targets under 
        paragraph (1), the Secretary shall consider--
                    ``(A) national housing needs;
                    ``(B) economic, housing, and demographic 
                conditions;
                    ``(C) the performance and effort of the enterprises 
                toward achieving the housing goals under this section 
                in previous years;
                    ``(D) the ability of the enterprise to lead the 
                industry in making credit available;
                    ``(E) recent information submitted in compliance 
                with the Home Mortgage Disclosure Act of 1975 and such 
                other mortgage data as may be available for non 
                metropolitan areas regarding mortgages on conventional, 
                conforming, single-family, owner-occupied, refinanced 
                mortgages originated and purchased;
                    ``(F) the size of the refinance conventional 
                mortgage market serving each of the types of families 
                described in subsection (a) relative to the size of the 
                overall refinance conventional mortgage market; and
                    ``(G) the need to maintain the sound financial 
                condition of the enterprises.
    ``(d) Notice of Determination and Enterprise Comment.--
            ``(1) Notice.--Within 30 days of making a determination 
        under subsection (b) regarding compliance of an enterprise for 
        a year with the housing goals established under this section 
        and before any public disclosure thereof, the Secretary shall 
        provide notice of the determination to the enterprise, which 
        shall include an analysis and comparison, by the Secretary, of 
        the performance of the enterprise for the year and the targets 
        for the year under subsection (c).
            ``(2) Comment period.--The Secretary shall provide each 
        enterprise an opportunity to comment on the determination 
        during the 30-day period beginning upon receipt by the 
        enterprise of the notice.
    ``(e) Use of Borrower Income.--In monitoring the performance of 
each enterprise pursuant to the housing goals under this section and 
evaluating such performance (for purposes of section 1336), the 
Secretary shall consider a mortgagor's income to be the income of the 
mortgagor at the time of origination of the mortgage.

``SEC. 1334. MULTIFAMILY SPECIAL AFFORDABLE HOUSING GOAL.

    ``(a) Establishment.--
            ``(1) In general.--The Secretary shall establish, by 
        regulation, by unit or dollar volume, as determined by the 
        Secretary, an annual goal for the purchase by each enterprise 
        of:
                    ``(A) Mortgages that finance dwelling units 
                affordable to very low-income families.
                    ``(B) Mortgages that finance dwelling units 
                assisted by the low-income housing tax credit under 
                section 42 of the Internal Revenue Code of 1986.
            ``(2) Additional requirements for smaller projects.--The 
        Secretary shall establish additional requirements for the 
        purchase by each enterprise of mortgages described in paragraph 
        (1) for multifamily housing projects of a smaller or limited 
        size, which may be based on the number of dwelling units in the 
        project or the amount of the mortgage, or both, and shall 
        include multifamily housing projects of 5 to 50 units (as 
        adjusted by the Secretary), or with mortgages of up to 
        $5,000,000 (as adjusted by the Secretary).
            ``(3) Factors.--In establishing the goal under this section 
        relating to mortgages on multifamily housing for an enterprise, 
        the Secretary shall consider--
                    ``(A) national multifamily mortgage credit needs;
                    ``(B) the performance and effort of the enterprise 
                in making mortgage credit available for multifamily 
                housing in previous years;
                    ``(C) the size of the multifamily mortgage market;
                    ``(D) the most recent information available for the 
                Residential Survey published by the Census Bureau, and 
                such other data as may be available regarding 
                multifamily mortgages;
                    ``(E) the ability of the enterprise to lead the 
                industry in expanding mortgage credit availability at 
                favorable terms, especially for underserved markets, 
                such as for--
                            ``(i) small multifamily projects;
                            ``(ii) multifamily properties in need of 
                        preservation and rehabilitation; and
                            ``(iii) multifamily properties located in 
                        rural areas; and
                    ``(F) the need to maintain the sound financial 
                condition of the enterprise.
    ``(b) Units Financed by Housing Finance Agency Bonds.--The 
Secretary may give credit toward the achievement of the multifamily 
special affordable housing goal under this section (for purposes of 
section 1336) to dwelling units in multifamily housing that otherwise 
qualify under such goal and that is financed by tax-exempt or taxable 
bonds issued by a State or local housing finance agency, but only if--
            ``(1) such bonds are secured by a guarantee of the 
        enterprise; or
            ``(2) are not investment grade and are purchased by the 
        enterprise.
    ``(c) Use of Tenant Income or Rent.--
            ``(1) In general.--The Secretary shall monitor the 
        performance of each enterprise in meeting the goals established 
        under this section and shall evaluate such performance (for 
        purposes of section 1336) based on--
                    ``(A) if such data is available, the income of the 
                prospective or actual tenants of the property; or
                    ``(B) if such data is not available, the rent 
                levels affordable to low-income and very low-income 
                families.
            ``(2) Rent level.--A rent level shall be considered to be 
        affordable for purposes of this subsection for an income 
        category referred to in this subsection if it does not exceed 
        30 percent of the maximum income level of such income category, 
        with appropriate adjustments for unit size as measured by the 
        number of bedrooms.
    ``(d) Determination of Compliance.--
            ``(1) In general.--The Secretary shall, for each year that 
        the housing goal under this section is in effect pursuant to 
        section 1331(a), determine whether each enterprise has complied 
        with such goal and the additional requirements under subsection 
        (a)(2).
            ``(2) Compliance.--An enterprise shall be considered to be 
        in compliance with the goal of this section for a year only if 
        for each of the properties described in subsection (a), the 
        percentage of the number of multifamily mortgages purchased by 
        each enterprise in such year, that serve such families, meets 
        or exceeds the goals for the year for such type of properties 
        that are established under subsection (a).
    ``(e) Consideration of Units in Single-Family Rental Housing.--In 
establishing any goal under this section, the Secretary may take into 
consideration the number of housing units financed by any mortgage on 
single-family rental housing purchased by an enterprise.''.
    (c) Conforming Amendments.--The Housing and Community Development 
Act of 1992 is amended--
            (1) in section 1335(a) (12 U.S.C. 4565(a)), in the matter 
        preceding paragraph (1), by striking ``low- and moderate-income 
        housing goal'' and all that follows through ``section 1334'' 
        and inserting ``housing goals established under this subpart'';
            (2) in section 1336 (12 U.S.C. 4566)--
                    (A) in section (a)(1), by striking ``sections 1332, 
                1333, and 1334,'' and inserting ``this subpart''; and
                    (B) in subsection (b)(1), by striking ``section 
                1332, 1333, or 1334,'' and inserting ``this subpart''.
    (d) Definitions.--Section 1303 of the Housing and Community 
Development Act of 1992 (12 U.S.C. 4502) is amended--
            (1) in paragraph (19), by striking ``60 percent'' each 
        place such term appears and inserting ``50 percent''; and
            (2) by adding at the end the following:
            ``(20) Conforming mortgage.--The term `conforming mortgage' 
        means, with respect to an enterprise, a conventional mortgage 
        having an original principal obligation that does not exceed 
        the dollar limitation, in effect at the time of such 
        origination, under--
                    ``(A) section 302(b)(2) of the Federal National 
                Mortgage Association Charter Act; or
                    ``(B) section 305(a)(2) of the Federal Home Loan 
                Mortgage Corporation Act.
            ``(21) Low-income area.--The term `low-income area' means a 
        census tract or block numbering area in which the median income 
        does not exceed 80 percent of the median income for the area in 
        which such census tract or block numbering area is located, 
        and, for the purposes of section 1332(a)(2), shall include 
        families having incomes not greater than 100 percent of the 
        area median income who reside in minority census tracts.
            ``(22) Very low-income.--
                    ``(A) In general.--The term `very low-income' 
                means--
                            ``(i) in the case of owner-occupied units, 
                        income in excess of 30 percent but not greater 
                        than 50 percent of the area median income; and
                            ``(ii) in the case of rental units, income 
                        in excess of 30 percent but not greater than 50 
                        percent of the area median income, with 
                        adjustments for smaller and larger families, as 
                        determined by the Secretary.
                    ``(B) Rule of construction for purposes of housing 
                goals.--Notwithstanding subparagraph (A), for purposes 
                of any housing goal established under sections 1331 
                through 1334, the term `very low-income' means--
                            ``(i) in the case of owner-occupied units, 
                        families having incomes not greater than 50 
                        percent of the area median income;
                            ``(ii) in the case of rental units, 
                        families having incomes not greater than 50 
                        percent of the area median income, with 
                        adjustments for smaller and larger families, as 
                        determined by the Secretary.
            ``(23) Extremely low-income.--The term `extremely low-
        income' means--
                    ``(A) in the case of owner-occupied units, income 
                not in excess of 30 percent of the area median income; 
                and
                    ``(B) in the case of rental units, income not in 
                excess of 30 percent of the area median income, with 
                adjustments for smaller and larger families, as 
                determined by the Secretary.
            ``(24) Shortage of standard rental units both affordable 
        and available to extremely low-income renter households.--
                    ``(A) In general.--The term `shortage of standard 
                rental units both affordable and available to extremely 
                low-income renter households' means the gap between--
                            ``(i) the number of units with complete 
                        plumbing and kitchen facilities with a rent 
                        that is 30 percent or less of 30 percent of the 
                        adjusted area median income as determined by 
                        the Secretary that are occupied by extremely 
                        low-income renter households or are vacant for 
                        rent; and
                            ``(ii) the number of extremely low-income 
                        renter households.
                    ``(B) Rule of construction.--If the number of units 
                described in subparagraph (A)(i) exceeds the number of 
                extremely low-income households as described in 
                subparagraph (A)(ii), there is no shortage.
            ``(25) Shortage of standard rental units both affordable 
        and available to very low-income renter households.--
                    ``(A) In general.--The term `shortage of standard 
                rental units both affordable and available to very low-
                income renter households' means the gap between--
                            ``(i) the number of units with complete 
                        plumbing and kitchen facilities with a rent 
                        that is 30 percent or less of 50 percent of the 
                        adjusted area median income as determined by 
                        the Secretary that are occupied by either 
                        extremely low- or very low-income renter 
                        households or are vacant for rent; and
                            ``(ii) the number of extremely low- and 
                        very low-income renter households.
                    ``(B) Rule of construction.--If the number of units 
                described in subparagraph (A)(i) exceeds the number of 
                extremely low- and very low-income households as 
                described in subparagraph (A)(ii), there is no 
                shortage.''.

SEC. 5. DUTY TO SERVE UNDERSERVED MARKETS.

    (a) Establishment and Evaluation of Performance.--Section 1335 of 
the Housing and Community Development Act of 1992 (12 U.S.C. 4565) is 
amended--
            (1) in the section heading, by inserting ``duty to serve 
        underserved markets and'' before ``other'';
            (2) by striking subsection (b);
            (3) in subsection (a)--
                    (A) in the matter preceding paragraph (1), by 
                inserting ``and to carry out the duty under subsection 
                (a) of this section,'' before ``, each enterprise 
                shall'';
                    (B) in paragraph (3), by inserting ``and'' after 
                the semicolon at the end;
                    (C) in paragraph (4), by striking ``; and'' and 
                inserting a period;
                    (D) by striking paragraph (5); and
                    (E) by redesignating such subsection as subsection 
                (b);
            (4) by inserting before subsection (b) (as redesignated by 
        paragraph (3)(E) of this subsection) the following new 
        subsection:
    ``(a) Duty To Serve Underserved Markets.--
            ``(1) Duty.--In accordance with the purpose of the 
        enterprises under section 301(3) of the Federal National 
        Mortgage Association Charter Act (12 U.S.C. 1716) and section 
        301(b)(3) of the Federal Home Loan Mortgage Corporation Act (12 
        U.S.C. 1451 note) to undertake activities relating to mortgages 
        on housing for very low-, low-, and moderate-income families 
        involving a reasonable economic return that may be less than 
        the return earned on other activities, each enterprise shall 
        have the duty to purchase or securitize mortgage investments 
        and improve the distribution of investment capital available 
        for mortgage financing for underserved markets.
            ``(2) Underserved markets.--To meet its duty under 
        paragraph (1), each enterprise shall comply with the following 
        requirements with respect to the following underserved markets:
                    ``(A) Manufactured housing.--The enterprise shall 
                lead the industry in developing loan products and 
                flexible underwriting guidelines to facilitate a 
                secondary market for mortgages on manufactured homes 
                for very low-, low-, and moderate-income families.
                    ``(B) Affordable housing preservation.--The 
                enterprise shall lead the industry in developing loan 
                products and flexible underwriting guidelines to 
                facilitate a secondary market to preserve housing 
                affordable to extremely low-, very low-, and low-income 
                families, including housing projects subsidized under--
                            ``(i) the project-based and tenant-based 
                        rental assistance programs under section 8 of 
                        the United States Housing Act of 1937;
                            ``(ii) the program under section 236 of the 
                        National Housing Act;
                            ``(iii) the below-market interest rate 
                        mortgage program under section 221(d)(4) of the 
                        National Housing Act;
                            ``(iv) the supportive housing for the 
                        elderly program under section 202 of the 
                        Housing Act of 1959;
                            ``(v) the supportive housing program for 
                        persons with disabilities under section 811 of 
                        the Cranston-Gonzalez National Affordable 
                        Housing Act; and
                            ``(vi) the rural rental housing program 
                        under section 515 of the Housing Act of 1949.
                    ``(C) Subprime borrowers.--The enterprises shall 
                lead the industry in making mortgage credit available 
                to low- and moderate-income families with credit 
                impairment, and shall develop underwriting guidelines 
                that preclude the purchase of loans with unacceptable 
                terms and conditions, or which are contrary to good 
                lending practices or to sustainable homeownership, 
                including--
                            ``(i) mandatory arbitration provisions;
                            ``(ii) single premium credit insurance 
                        financed into the mortgages;
                            ``(iii) unreasonable prepayment penalties 
                        and up front fees;
                            ``(iv) introductory rates that expire in 
                        less than 10 years; and
                            ``(v) any other such loans with 
                        unacceptable terms and conditions, or which are 
                        contrary to good lending practices or to 
                        sustainable homeownership.
                    ``(D) Community development financial 
                institutions.--The enterprises shall--
                            ``(i) lead the industry in developing loan 
                        products and flexible underwriting guidelines 
                        to facilitate a secondary market for mortgages 
                        on unconventional affordable housing loans made 
                        or purchased by Treasury certified community 
                        development financial institutions and other 
                        nonprofit housing lenders; and
                            ``(ii) utilize credit facilities, capital 
                        and loss reserves, credit enhancements, 
                        securitization, and other methods to facilitate 
                        a secondary market for mortgages on 
                        unconventional affordable housing loans made or 
                        purchased by community development financial 
                        institutions certified by the Secretary of the 
                        Treasury, as determined by the Secretary and 
                        consistent with the Federal National Mortgage 
                        Association Charter Act, the Federal Home Loan 
                        Mortgage Corporation Act, and the provisions of 
                        this Act.
                    ``(E) Community reinvestment act considerations.--
                The enterprise shall take affirmative steps to assist 
                depository institutions to meet their obligations under 
                the Community Reinvestment Act, which shall include 
                developing appropriate underwriting standards, business 
                practices, repurchase requirements, pricing, fees, and 
                procedures.
                    ``(F) Rural and other underserved markets.--
                            ``(i) In general.--The enterprises shall 
                        lead the industry in developing loan products 
                        and flexible underwriting guidelines to 
                        facilitate a secondary market for mortgages on 
                        housing for very low-, low-, and moderate-
                        income families in rural areas, and for 
                        mortgages for housing for any other underserved 
                        market for very 
                        low-, low-, and moderate-income families that 
                        the Secretary identifies as lacking adequate 
                        credit through conventional lending sources.
                            ``(ii) Identification of underserved 
                        markets.--Underserved markets may be identified 
                        for purposes of this paragraph by borrower 
                        type, market segment, or geographic area.
                    ``(G) Other underserved markets.--The Secretary 
                may, by rule, determine other underserved markets that 
                the enterprises shall be required to lead the market in 
                facilitating the availability of investment capital for 
                mortgage financing for such markets.''; and
            (5) by adding at the end the following new subsection:
    ``(c) Evaluation and Reporting of Compliance.--
            ``(1) Evaluating compliance.--
                    ``(A) In general.--Not later than 6 months after 
                the date of enactment of the Government Sponsored 
                Enterprise Mission Improvement Act, the Secretary shall 
                establish through notice and comment rulemaking, a 
                manner for evaluating whether, and the extent to which, 
                the enterprises have complied with the duty under 
                subsection (a) to serve underserved markets, and for 
                rating the extent of such compliance.
                    ``(B) Rating compliance.--Using the evaluation 
                method established under subparagraph (A), the 
                Secretary shall, for each year, evaluate such 
                compliance and rate the performance of each enterprise 
                as to the extent of compliance.
                    ``(C) Evaluations and ratings included in annual 
                report of the secretary.--The Secretary shall include 
                such evaluation and rating for each enterprise for a 
                year in the report for that year submitted pursuant to 
                section 1319B(a).
            ``(2) Separate evaluations.--In determining whether an 
        enterprise has complied with the duty referred to in paragraph 
        (1), the Secretary shall separately evaluate whether the 
        enterprise has complied with such duty with respect to each of 
        the underserved markets identified in subsection (a), taking 
        into consideration--
                    ``(A) the development of loan products and more 
                flexible underwriting guidelines;
                    ``(B) the volume of loans purchased in each of such 
                underserved markets; and
                    ``(C) such other factors as the Secretary may 
                determine.''.
    (b) Enforcement.--Section 1336(a) of the Housing and Community 
Development Act of 1992 (12 U.S.C. 4566(a)) is amended--
            (1) in paragraph (1), by inserting ``and with the duty 
        under section 1335(a) of each enterprise with respect to 
        underserved markets'' before ``, as provided in this 
        section,''; and
            (2) by adding at the end the following new paragraph:
            ``(4) Enforcement of duty to provide mortgage credit to 
        underserved markets.--
                    ``(A) In general.--The duty under section 1335(a) 
                of each enterprise to serve underserved markets (as 
                determined in accordance with section 1335(c)) shall be 
                enforceable under this section to the same extent and 
                under the same provisions that the housing goals 
                established under sections 1332, 1333, and 1334 are 
                enforceable.
                    ``(B) Limitation.--The duty under section 1335(a) 
                shall not be enforceable under any other provision of 
                this title (including subpart C of this part) other 
                than this section or under any provision of the Federal 
                National Mortgage Association Charter Act or the 
                Federal Home Loan Mortgage Corporation Act.''.

SEC. 6. MONITORING AND ENFORCING COMPLIANCE WITH HOUSING GOALS.

    Section 1336 of the Housing and Community Development Act of 1992 
(12 U.S.C. 4566) is amended--
            (1) in subsection (b)--
                    (A) in the subsection heading, by inserting 
                ``Preliminary'' before ``Determination'';
                    (B) by striking paragraph (1) and inserting the 
                following new paragraph:
            ``(1) Notice.--If the Secretary preliminarily determines 
        that an enterprise has failed, or that there is a substantial 
        probability that an enterprise will fail to meet any housing 
        goal established under this subpart, the Secretary shall 
        provide written notice to the enterprise of such a preliminary 
        determination, the reasons for such determination, and the 
        information on which the Secretary based the determination.'';
                    (C) in paragraph (2)--
                            (i) in subparagraph (A), by inserting 
                        ``finally'' before ``determining'';
                            (ii) by striking subparagraphs (B) and (C) 
                        and inserting the following new subparagraph:
                    ``(B) Extension or shortening of period.--The 
                Secretary may--
                            ``(i) extend the period under subparagraph 
                        (A) for good cause for not more than 30 
                        additional days; and
                            ``(ii) shorten the period under 
                        subparagraph (A) for good cause.''; and
                            (iii) by redesignating subparagraph (D) as 
                        subparagraph (C); and
                    (D) in paragraph (3)--
                            (i) in subparagraph (A), by striking 
                        ``determine'' and inserting ``issue a final 
                        determination of'';
                            (ii) in subparagraph (B), by inserting 
                        ``final'' before ``determinations''; and
                            (iii) in subparagraph (C)--
                                    (I) by striking ``Committee on 
                                Banking, Finance and Urban Affairs'' 
                                and inserting ``Committee on Financial 
                                Services''; and
                                    (II) by inserting ``final'' before 
                                ``determination'' each place such term 
                                appears; and
            (2) in subsection (c)--
                    (A) by striking the subsection designation and 
                heading and all that follows through the end of 
                paragraph (1) and inserting the following:
    ``(c) Cease-and-Desist Orders, Civil Money Penalties, and Remedies 
Including Housing Plans.--
            ``(1) Requirement.--
                    ``(A) Housing plan.--If the Secretary finds, 
                pursuant to subsection (b), that there is a substantial 
                probability that an enterprise will fail, or has 
                actually failed to meet any housing goal under this 
                subpart and that the achievement of the housing goal 
                was or is feasible, the Secretary may require that the 
                enterprise submit a housing plan under this subsection.
                    ``(B) Refusal to submit housing plan.--If the 
                Secretary makes such a finding and the enterprise 
                refuses to submit such a plan, submits an unacceptable 
                plan, fails to comply with the plan or the Secretary 
                finds that the enterprise has failed to meet any 
                housing goal under this subpart, in addition to 
                requiring an enterprise to submit a housing plan, the 
                Secretary may--
                            ``(i) issue a cease-and-desist order in 
                        accordance with section 1341;
                            ``(ii) impose civil money penalties in 
                        accordance with section 1345; or
                            ``(iii) order other remedies as set forth 
                        in paragraph (7) of this subsection.'';
                    (B) in paragraph (2)--
                            (i) by striking ``Contents.--Each housing 
                        plan'' and inserting ``Housing plan.--If the 
                        Secretary requires a housing plan under this 
                        section, such a plan''; and
                            (ii) in subparagraph (B), by inserting 
                        ``and changes in its operations'' after 
                        ``improvements'';
                    (C) in paragraph (3)--
                            (i) by inserting ``comply with any remedial 
                        action or'' before ``submit a housing plan''; 
                        and
                            (ii) by striking ``under subsection (b)(3) 
                        that a housing plan is required'';
                    (D) in paragraph (4), by striking the first 2 
                sentences and inserting the following:
                    ``(A) Review.--The Secretary shall review each 
                submission by an enterprise, including a housing plan 
                submitted under this subsection, and not later than 30 
                days after submission, approve or disapprove the plan 
                or other action.
                    ``(B) Extension of time.--The Secretary may extend 
                the period for approval or disapproval for a single 
                additional 30-day period if the Secretary determines 
                such extension necessary.
                    ``(C) Approval.--''; and
                    (E) by adding at the end the following new 
                paragraph:
            ``(7) Additional remedies for failure to meet goals.--In 
        addition to ordering a housing plan under this section, issuing 
        cease-and-desist orders under section 1341, and ordering civil 
        money penalties under section 1345, the Secretary may--
                    ``(A) seek other actions when an enterprise fails 
                to meet a goal; and
                    ``(B) exercise appropriate enforcement authority 
                available to the Secretary under this Act.''.

SEC. 7. AFFORDABLE HOUSING PROGRAMS.

    (a) Repeal.--Sections 1337 of the Housing and Community Development 
Act of 1992 (12 U.S.C. 4562 note) is hereby repealed.
    (b) Annual Housing Report.--The Housing and Community Development 
Act of 1992 is amended by inserting after section 1336 the following:

``SEC. 1337. AFFORDABLE HOUSING ALLOCATIONS.

    ``(a) Set Aside and Allocation of Amounts by Enterprises.--Subject 
to subsection (b), in each fiscal year--
            ``(1) the Federal Home Loan Mortgage Corporation shall--
                    ``(A) set aside an amount equal to 4.2 basis points 
                for each dollar of unpaid principal balance of its 
                total new business purchases; and
                    ``(B) allocate or otherwise transfer--
                            ``(i) 65 percent of such amounts to the 
                        Secretary of Housing and Urban Development to 
                        fund the affordable housing block grant program 
                        established under section 1338; and
                            ``(ii) 35 percent of such amounts to fund 
                        the Capital Magnet Fund established pursuant to 
                        section 1339; and
            ``(2) the Federal National Mortgage Association shall--
                    ``(A) set aside an amount equal to 4.2 basis points 
                for each dollar of unpaid principal balance of its 
                total new business purchases; and
                    ``(B) allocate or otherwise transfer--
                            ``(i) 65 percent of such amounts to the 
                        Secretary of Housing and Urban Development to 
                        fund the affordable housing block grant program 
                        established under section 1338; and
                            ``(ii) 35 percent of such amounts to fund 
                        the Capital Magnet Fund established pursuant to 
                        section 1339.
    ``(b) Suspension of Contributions.--The Secretary shall temporarily 
suspend allocations under subsection (a) by an enterprise upon a 
finding by the Secretary that such allocations--
            ``(1) are contributing, or would contribute, to the 
        financial instability of the enterprise;
            ``(2) are causing, or would cause, the enterprise to be 
        classified as undercapitalized; or
            ``(3) are preventing, or would prevent, the enterprise from 
        successfully completing a capital restoration plan under 
        section 1369C.
    ``(c) Prohibition of Pass-Through of Cost of Allocations.--The 
Secretary shall, by regulation, prohibit each enterprise from 
redirecting the costs of any allocation required under this section, 
through increased charges or fees, or decreased premiums, or in any 
other manner, to the originators of mortgages purchased or securitized 
by the enterprise.
    ``(d) Enforcement of Requirements on Enterprise.--Compliance by the 
enterprises with the requirements under this section shall be 
enforceable under subpart C. Any reference in such subpart to this part 
or to an order, rule, or regulation under this part specifically 
includes this section and any order, rule, or regulation under this 
section.

``SEC. 1338. AFFORDABLE HOUSING BLOCK GRANT PROGRAM.

    ``(a) Establishment and Purpose.--The Secretary of Housing and 
Urban Development shall establish and manage an affordable housing 
block grant program, which shall be funded with amounts allocated by 
the enterprises under section 1337. The purpose of the block grant 
program under this section is to provide grants to States for use--
            ``(1) to increase and preserve the supply of rental housing 
        for extremely low- and very low-income families, including 
        homeless families; and
            ``(2) to increase homeownership for extremely low- and very 
        low-income families.
    ``(b) Affordable Housing Block Grant Allocations for Homeownership 
Preservation in Fiscal Year 2008.--
            ``(1) Assistance for homeowners facing foreclosure.--
                    ``(A) In general.--To help address the subprime 
                mortgage crisis, in fiscal year 2008, 100 percent of 
                the amounts allocated for grants under this section 
                shall be used to make grants to States to--
                            ``(i) facilitate loan modification and 
                        refinance options for low- and moderate-income 
                        borrowers facing foreclosure; and
                            ``(ii) expeditiously make available to low- 
                        and moderate-income homebuyers, properties that 
                        have been foreclosed upon.
                    ``(B) Distribution.--The amounts allocated to help 
                address the subprime mortgage crisis under subparagraph 
                (A) shall be distributed according to a formula 
                established by the Secretary.
            ``(2) Permissible designees.--A State receiving grant 
        amounts under this subsection may designate a State housing 
        finance agency, housing and community development entity, 
        tribally designated housing entity (as such term is defined in 
        section 4 of the Native American Housing Assistance and Self-
        Determination Act of 1997 (25 U.S.C. 4103)), or any other 
        qualified instrumentality of the State to receive such grant 
        amounts.
            ``(3) Development of distribution formula.--Not later than 
        3 months after the date of enactment of the Government 
        Sponsored Enterprise Mission Improvement Act, the Secretary 
        shall develop the distribution formula required under paragraph 
        (1)(B). Such formula shall be based on the following factors:
                    ``(A) The population of the State based on the most 
                recent estimate of the resident population of such 
                State as determined by the Bureau of the Census.
                    ``(B) The 90-day delinquency rate of the State.
                    ``(C) The ratio of foreclosures to owner-occupied 
                households within the State.
            ``(4) Eligible loan uses.--
                    ``(A) Loans to homeowners to preserve 
                homeownership.--
                            ``(i) In general.--A State or State 
                        designated entity shall use any grant amounts 
                        made available under this subsection to--
                                    ``(I) support the refinancing of 
                                loans of eligible homeowners, only if 
                                such loans have a loan-to-value ratio 
                                of not greater than 100 percent of 
                                current appraised value of the home on 
                                which such loan was taken;
                                    ``(II) reduce the outstanding loan 
                                balances of eligible homeowners, but 
                                only if the lender, servicer, investor, 
                                or other appropriate entity reduces 
                                such balance by the amount necessary to 
                                bring the combined loan value 
                                (including first and second mortgages) 
                                at or below 100 percent of the 
                                appraised value of the home; and
                                    ``(III) pay off any outstanding 
                                amounts owed by eligible homeowners for 
                                taxes and insurance.
                            ``(ii) Program requirements for eligible 
                        homeowners.--
                                    ``(I) Development by states.--Each 
                                State or State designated entity that 
                                is a recipient of a grant amount under 
                                this subsection shall develop program 
                                requirements for eligible homeowners 
                                seeking a loan under this subparagraph.
                                    ``(II) Required content.--The 
                                program requirements required to be 
                                developed under this clause shall, at a 
                                minimum, include the following:
                                            ``(aa) The annual income of 
                                        the homeowner is no greater 
                                        than the annual income 
                                        established by the Secretary as 
                                        being of low- or moderate-
                                        income.
                                            ``(bb) That any loan under 
                                        this paragraph may be provided 
                                        for up to a 4-family owner-
                                        occupied residence, including 
                                        1-family units in a condominium 
                                        project or a membership 
                                        interest and occupancy 
                                        agreement in a cooperative 
                                        housing project, that is used, 
                                        or is to be used, as the 
                                        principal residence of the 
                                        applicant seeking such grant or 
                                        loan.
                                            ``(cc) The homeowner has a 
                                        loan with unsustainable loan 
                                        terms, as determined by a State 
                                        housing finance agency or other 
                                        designated State agency. For 
                                        purposes of this item, the term 
                                        `unsustainable loan terms' 
                                        includes such activities as the 
                                        lack of escrow of taxes and 
                                        insurance, the inclusion of 
                                        prepayment penalties, and the 
                                        lack of the ability of the 
                                        homeowner to pay at the fully 
                                        indexed interest rate because 
                                        the debt-to-income ratio on 
                                        such home loan is greater than 
                                        45 percent.
                            ``(iii) Loan requirements.--In order for a 
                        State or State designated entity to use the 
                        amounts made available under this subsection to 
                        assist eligible homeowners, a loan under this 
                        subparagraph--
                                    ``(I) shall--
                                            ``(aa) have a fixed 
                                        interest rate;
                                            ``(bb) be affordable, so 
                                        that the maximum debt-to-income 
                                        ratio of such loan is not 
                                        greater than 45 percent;
                                            ``(cc) require mandatory 
                                        escrow of taxes and insurance;
                                            ``(dd) have no prepayment 
                                        penalties;
                                            ``(ee) have no mandatory 
                                        arbitration clauses; and
                                            ``(ff) if the loan-to-value 
                                        ratio of the original mortgage 
                                        loan is greater than 100 
                                        percent, require the lender to 
                                        reduce such balance by the 
                                        amount necessary to bring the 
                                        loan value at or below 100 
                                        percent of the appraised value 
                                        of the home;
                                    ``(II) shall not be due and payable 
                                unless--
                                            ``(aa) the real property 
                                        securing such loan is sold, 
                                        transferred, or refinanced; or
                                            ``(bb) the last surviving 
                                        homeowner of such real property 
                                        dies;
                                    ``(III) shall not exceed 10 percent 
                                of the principal balance; and
                                    ``(IV) may be subordinated.
                            ``(iv) Existing loan funds.--Any State or 
                        State designated entity with a previously 
                        existing fund established to make loans to 
                        assist homeowners in satisfying any amounts 
                        past due on their home loan may use funds 
                        appropriated for purposes of this subparagraph 
                        for that existing loan fund, even if the 
                        eligibility, application, program, or use 
                        requirements for that loan program differ from 
                        the eligibility, application, program, and use 
                        requirements of this subparagraph, unless such 
                        use is expressly determined by the Secretary to 
                        be inappropriate.
                            ``(v) No foreclosure if notice of 
                        application for home preservation loan.--A 
                        mortgagee shall not initiate a foreclosure--
                                    ``(I) upon receipt of a written 
                                confirmation from the State or other 
                                State designated entity that the 
                                homeowner has applied for a home 
                                preservation loan under this 
                                subparagraph; and
                                    ``(II) for the 2-month period after 
                                receipt of such written confirmation or 
                                until the mortgagee is informed, in 
                                writing, that the homeowner is not 
                                eligible for a home preservation loan, 
                                whichever occurs first.
                    ``(B) Loans to nonprofit developers for the 
                rehabilitation and sale of foreclosed properties to 
                low- and moderate-income homebuyers.--
                            ``(i) In general.--A State or State 
                        designated entity may use up to 20 percent of 
                        the grant amounts made available under this 
                        subsection for homeownership preservation to 
                        provide loans to nonprofit affordable housing 
                        developers for the purposes of assisting low- 
                        and moderate-income homebuyers to purchase 
                        properties that are in the process of being 
                        foreclosed upon or have been acquired by the 
                        mortgage holder through the foreclosure 
                        process.
                            ``(ii) Program requirements for nonprofit 
                        affordable housing developers.--
                                    ``(I) In general.--Each State or 
                                State designated entity that is a 
                                recipient of a grant under this 
                                subsection shall, if they choose to use 
                                part of their grant award to make loans 
                                under this subparagraph, develop 
                                program requirements for nonprofit 
                                affordable housing developers for the 
                                purposes of assisting low- and 
                                moderate-income homebuyers to purchase 
                                properties that are in the process of 
                                being foreclosed upon or have been 
                                acquired by the mortgage holder through 
                                the foreclosure process.
                                    ``(II) Required content.--The 
                                program requirements developed under 
                                subclause (I) shall, at a minimum, 
                                include the following:
                                            ``(aa) That any loan under 
                                        this clause may be provided for 
                                        up to a 4-family owner-occupied 
                                        residence, including 1-family 
                                        units in a condominium project 
                                        or a membership interest and 
                                        occupancy agreement in a 
                                        cooperative housing project, 
                                        that is used, or is to be used, 
                                        as the principal residence of a 
                                        low- or moderate-income 
                                        homebuyer.
                                            ``(bb) The annual income of 
                                        the low- or moderate-income 
                                        homebuyer is not greater than 
                                        the annual income established 
                                        by the Secretary as being of 
                                        low- or moderate-income.
                                            ``(cc) The property is in 
                                        foreclosure or has been 
                                        acquired by the mortgage holder 
                                        through the foreclosure 
                                        process, the property has been 
                                        appraised, and the sales price 
                                        of the property does not exceed 
                                        100 percent of the appraised 
                                        value of the property.
                            ``(iii) Loan requirements.--In order for a 
                        State or State designated entity to use the 
                        amounts made available under this subsection, a 
                        loan under this subparagraph--
                                    ``(I) may be used for--
                                            ``(aa) downpayment and 
                                        closing costs;
                                            ``(bb) financing the 
                                        difference between the sales 
                                        price of a home and the 
                                        mortgage for which the low- or 
                                        moderate-income homebuyer 
                                        qualifies; and
                                            ``(cc) repairs of a home 
                                        not to exceed 10 percent of the 
                                        appraised value of the home;
                                    ``(II) shall carry a zero percent 
                                interest rate;
                                    ``(III) shall not be due and 
                                payable by the low- or moderate-income 
                                homebuyer unless--
                                            ``(aa) the real property 
                                        securing such loan is sold, 
                                        transferred, or refinanced; or
                                            ``(bb) the last surviving 
                                        homeowner of such real property 
                                        dies; and
                                    ``(IV) may be subordinated.
                            ``(iv) Existing loan funds.--Any State or 
                        State designated entity with a previously 
                        existing fund established to make loans for the 
                        purposes of this subparagraph may use funds 
                        appropriated for purposes of this subparagraph 
                        for that existing loan fund, even if the 
                        eligibility, application, program, or use 
                        requirements for that loan program differ from 
                        the eligibility, application, program, and use 
                        requirements of this subparagraph, unless such 
                        use is expressly determined by the Secretary to 
                        be inappropriate.
    ``(c) Allocation for Affordable Housing Block Grants in 2009 and 
Subsequent Years.--
            ``(1) In general.--Except as provided in subsection (b), 
        during each fiscal year the Secretary of Housing and Urban 
        Development shall distribute the amounts allocated for the 
        affordable housing block grant program under this section to 
        provide affordable housing as described in this subsection.
            ``(2) Permissible designees.--A State receiving grant 
        amounts under this subsection may designate a State housing 
        finance agency, housing and community development entity, 
        tribally designated housing entity (as such term is defined in 
        section 4 of the Native American Housing Assistance and Self-
        Determination Act of 1997 (25 U.S.C. 4103)), or any other 
        qualified instrumentality of the State to receive such grant 
        amounts.
            ``(3) Distribution to states by needs-based formula.--
                    ``(A) In general.--The Secretary of Housing and 
                Urban Development shall, by regulation, establish a 
                formula within 12 months of the date of enactment of 
                the Government Sponsored Enterprise Mission Improvement 
                Act, to distribute amounts made available under this 
                subsection to each State to provide affordable housing 
                to extremely low- and very low-income households.
                    ``(B) Basis for formula.--The formula required 
                under subparagraph (A) shall include the following:
                            ``(i) The ratio of the shortage of standard 
                        rental units both affordable and available to 
                        extremely low-income renter households in the 
                        State to the aggregate shortage of standard 
                        rental units both affordable and available to 
                        extremely low-income renter households in all 
                        the States.
                            ``(ii) The ratio of the shortage of 
                        standard rental units both affordable and 
                        available to very low-income renter households 
                        in the State to the aggregate shortage of 
                        standard rental units both affordable and 
                        available to very low-income renter households 
                        in all the States.
                            ``(iii) The ratio of extremely-low income 
                        renter households in the State living with 
                        either (I) incomplete kitchen or plumbing 
                        facilities, (II) more than 1 person per room, 
                        or (III) paying more than 50 percent of income 
                        for housing costs, to the aggregate number of 
                        extremely low-income renter households living 
                        with either (IV) incomplete kitchen or plumbing 
                        facilities, (V) more than 1 person per room, or 
                        (VI) paying more than 50 percent of income for 
                        housing costs in all the States.
                            ``(iv) The ratio of very low-income renter 
                        households in the State paying more than 50 
                        percent of income on rent relative to the 
                        aggregate number of very low-income renter 
                        households paying more than 50 percent of 
                        income on rent in all the States.
                            ``(v) The resulting sum calculated from the 
                        factors described in clauses (i) through (iv) 
                        shall be multiplied by the relative cost of 
                        construction in the State. For purposes of this 
                        subclause, the term `cost of construction'--
                                    ``(I) means the cost of 
                                construction or building rehabilitation 
                                in the State relative to the national 
                                cost of construction or building 
                                rehabilitation; and
                                    ``(II) shall be calculated such 
                                that values higher than 1.0 indicate 
                                that the State's construction costs are 
                                higher than the national average, a 
                                value of 1.0 indicates that the State's 
                                construction costs are exactly the same 
                                as the national average, and values 
                                lower than 1.0 indicate that the 
                                State's cost of construction are lower 
                                than the national average.
                    ``(C) Priority.--The formula required under 
                subparagraph (A) shall give priority emphasis and 
                consideration to the factor described in subparagraph 
                (B)(i).
            ``(4) Allocation of grant amounts.--
                    ``(A) Notice.--Not later than 60 days after the 
                date that the Secretary of Housing and Urban 
                Development determines the formula amounts described in 
                paragraph (3), the Secretary shall caused to be 
                published in the Federal Register a notice that such 
                amounts shall be so available.
                    ``(B) Grant amount.--In each fiscal year other than 
                fiscal year 2008, the Secretary of Housing and Urban 
                Development shall make a block grant to each State in 
                an amount that is equal to the formula amount 
                determined under paragraph (3) for that State.
                    ``(C) Minimum state allocations.--If the formula 
                amount determined under paragraph (3) for a fiscal year 
                would allocate less than $3,000,000 to any State, the 
                allocation for such State shall be $3,000,000, and the 
                increase shall be deducted pro rata from the 
                allocations made to all other States.
            ``(5) Allocation plans required.--
                    ``(A) In general.--For each year that a State or 
                State designated entity receives an affordable housing 
                block grant under this subsection, the State or State 
                designated entity shall establish an allocation plan. 
                Such plan shall--
                            ``(i) set forth a plan for the distribution 
                        of grant amounts received by the State or State 
                        designated entity for such year;
                            ``(ii) be based on priority housing needs, 
                        as determined by the State or State designated 
                        entity in accordance with the regulations 
                        established under subsection (g)(2)(C);
                            ``(iii) comply with paragraph (6); and
                            ``(iv) include performance goals that 
                        comply with the requirements established by the 
                        Secretary pursuant to subsection (g)(2).
                    ``(B) Establishment.--In establishing an allocation 
                plan under this paragraph, a State or State designated 
                entity shall--
                            ``(i) notify the public of the 
                        establishment of the plan;
                            ``(ii) provide an opportunity for public 
                        comments regarding the plan;
                            ``(iii) consider any public comments 
                        received regarding the plan; and
                            ``(iv) make the completed plan available to 
                        the public.
                    ``(C) Contents.--An allocation plan of a State or 
                State designated entity under this paragraph shall set 
                forth the requirements for eligible recipients under 
                paragraph (8) to apply for such grant amounts, 
                including a requirement that each such application 
                include--
                            ``(i) a description of the eligible 
                        activities to be conducted using such 
                        assistance; and
                            ``(ii) a certification by the eligible 
                        recipient applying for such assistance that any 
                        housing units assisted with such assistance 
                        will comply with the requirements under this 
                        section.
            ``(6) Selection of activities funded using affordable 
        housing fund grant amounts.--Grant amounts received by a State 
        or State designated entity under this subsection may be used, 
        or committed for use, only for activities that--
                    ``(A) are eligible under paragraph (7) for such 
                use;
                    ``(B) comply with the applicable allocation plan of 
                the State or State designated entity under paragraph 
                (5); and
                    ``(C) are selected for funding by the State or 
                State designated entity in accordance with the process 
                and criteria for such selection established pursuant to 
                subsection (g)(2)(C).
            ``(7) Eligible activities.--Grant amounts allocated to a 
        State or State designated entity under this subsection shall be 
        eligible for use, or for commitment for use, only for 
        assistance for--
                    ``(A) the production, preservation, and 
                rehabilitation of rental housing, including housing 
                under the programs identified in section 1335(a)(2)(B) 
                and for operating costs, except that such grant amounts 
                may be used for the benefit only of extremely low- and 
                very low-income families; and
                    ``(B) the production, preservation, and 
                rehabilitation of housing for homeownership, including 
                such forms as downpayment assistance, closing cost 
                assistance, and assistance for interest rate buy-downs, 
                that--
                            ``(i) is available for purchase only for 
                        use as a principal residence by families that 
                        qualify both as--
                                    ``(I) extremely low- and very low-
                                income families at the times described 
                                in subparagraphs (A) through (C) of 
                                section 215(b)(2) of the Cranston-
                                Gonzalez National Affordable Housing 
                                Act (42 U.S.C. 12745(b)(2)); and
                                    ``(II) first-time homebuyers, as 
                                such term is defined in section 104 of 
                                the Cranston-Gonzalez National 
                                Affordable Housing Act (42 U.S.C. 
                                12704), except that any reference in 
                                such section to assistance under title 
                                II of such Act shall for purposes of 
                                this subsection be considered to refer 
                                to assistance from affordable housing 
                                fund grant amounts;
                            ``(ii) has an initial purchase price that 
                        meets the requirements of section 215(b)(1) of 
                        the Cranston-Gonzalez National Affordable 
                        Housing Act;
                            ``(iii) is subject to the same resale 
                        restrictions established under section 
                        215(b)(3) of the Cranston-Gonzalez National 
                        Affordable Housing Act and applicable to the 
                        participating jurisdiction that is the State in 
                        which such housing is located; and
                            ``(iv) is made available for purchase only 
                        by, or in the case of assistance under this 
                        subsection, is made available only to 
                        homebuyers who have, before purchase completed 
                        a program of counseling with respect to the 
                        responsibilities and financial management 
                        involved in homeownership that is approved by 
                        the Secretary;
            ``(8) Eligible recipients.--Grant amounts allocated to a 
        State or State designated entity under this subsection may be 
        provided only to a recipient that is an organization, agency, 
        or other entity (including a for-profit entity or a nonprofit 
        entity) that--
                    ``(A) has demonstrated experience and capacity to 
                conduct an eligible activity under paragraph (7), as 
                evidenced by its ability to--
                            ``(i) own, construct or rehabilitate, 
                        manage, and operate an affordable multifamily 
                        rental housing development;
                            ``(ii) design, construct or rehabilitate, 
                        and market affordable housing for 
                        homeownership; or
                            ``(iii) provide forms of assistance, such 
                        as downpayments, closing costs, or interest 
                        rate buy-downs for purchasers;
                    ``(B) demonstrates the ability and financial 
                capacity to undertake, comply, and manage the eligible 
                activity;
                    ``(C) demonstrates its familiarity with the 
                requirements of any other Federal, State, or local 
                housing program that will be used in conjunction with 
                such grant amounts to ensure compliance with all 
                applicable requirements and regulations of such 
                programs; and
                    ``(D) makes such assurances to the State or State 
                designated entity as the Secretary shall, by 
                regulation, require to ensure that the recipient will 
                comply with the requirements of this subsection during 
                the entire period that begins upon selection of the 
                recipient to receive such grant amounts and ending upon 
                the conclusion of all activities under paragraph (8) 
                that are engaged in by the recipient and funded with 
                such grant amounts.
            ``(9) Limitations on use.--
                    ``(A) Required amount for homeownership 
                activities.--Of the aggregate amount allocated to a 
                State or State designated entity under this subsection 
                not more than 10 percent shall be used for activities 
                under subparagraph (B) of paragraph (7).
                    ``(B) Deadline for commitment or use.--Grant 
                amounts allocated to a State or State designated entity 
                under this subsection shall be used or committed for 
                use within 2 years of the date that such grant amounts 
                are made available to the State or State designated 
                entity. The Secretary shall recapture any such amounts 
                not so used or committed for use and reallocate such 
                amounts under this subsection in the first year after 
                such recapture.
                    ``(C) Use of returns.--The Secretary shall, by 
                regulation, provide that any return on a loan or other 
                investment of any grant amount used by a State or State 
                designated entity to provide a loan under this 
                subsection shall be treated, for purposes of 
                availability to and use by the State or State 
                designated entity, as a block grant amount authorized 
                under this subsection.
                    ``(D) Prohibited uses.--The Secretary shall, by 
                regulation--
                            ``(i) set forth prohibited uses of grant 
                        amounts allocated under this subsection, which 
                        shall include use for--
                                    ``(I) political activities;
                                    ``(II) advocacy;
                                    ``(III) lobbying, whether directly 
                                or through other parties;
                                    ``(IV) counseling services;
                                    ``(V) travel expenses; and
                                    ``(VI) preparing or providing 
                                advice on tax returns;
                            ``(ii) provide that, except as provided in 
                        clause (iii), affordable housing block grant 
                        amounts of a State or State designated entity 
                        may not be used for administrative, outreach, 
                        or other costs of--
                                    ``(I) the State or State designated 
                                entity; or
                                    ``(II) any other recipient of such 
                                grant amounts; and
                            ``(iii) limit the amount of any affordable 
                        housing block grant amounts for a year that may 
                        be used by the State or State designated entity 
                        for administrative costs of carrying out the 
                        program required under this subsection to a 
                        percentage of such grant amounts of the State 
                        or State designated entity for such year, which 
                        may not exceed 10 percent.
                    ``(E) Prohibition of consideration of use for 
                meeting housing goals or duty to serve.--In determining 
                compliance with the housing goals under this subpart 
                and the duty to serve underserved markets under section 
                1335, the Secretary may not consider any affordable 
                housing block grant amounts used under this section for 
                eligible activities under paragraph (7). The Secretary 
                shall give credit toward the achievement of such 
                housing goals and such duty to serve underserved 
                markets to purchases by the enterprises of mortgages 
                for housing that receives funding from such block grant 
                amounts, but only to the extent that such purchases by 
                the enterprises are funded other than with such grant 
                amounts.
    ``(d) Reduction for Failure To Obtain Return of Misused Funds.--If 
in any year a State or State designated entity fails to obtain 
reimbursement or return of the full amount required under subsection 
(e)(1)(B) to be reimbursed or returned to the State or State designated 
entity during such year--
            ``(1) except as provided in paragraph (2)--
                    ``(A) the amount of the grant for the State or 
                State designated entity for the succeeding year, as 
                determined pursuant to this section, shall be reduced 
                by the amount by which such amounts required to be 
                reimbursed or returned exceed the amount actually 
                reimbursed or returned; and
                    ``(B) the amount of the grant for the succeeding 
                year for each other State or State designated entity 
                whose grant is not reduced pursuant to subparagraph (A) 
                shall be increased by the amount determined by applying 
                the formula established pursuant to this section to the 
                total amount of all reductions for all State or State 
                designated entities for such year pursuant to 
                subparagraph (A); or
            ``(2) in any case in which such failure to obtain 
        reimbursement or return occurs during a year immediately 
        preceding a year in which grants under this section will not be 
        made, the State or State designated entity shall pay to the 
        Secretary for reallocation among the other grantees an amount 
        equal to the amount of the reduction for the entity that would 
        otherwise apply under paragraph (1)(A).
    ``(e) Accountability of Recipients and Grantees.--
            ``(1) Recipients.--
                    ``(A) Tracking of funds.--The Secretary shall--
                            ``(i) require each State or State 
                        designated entity to develop and maintain a 
                        system to ensure that each recipient of 
                        assistance under this section uses such amounts 
                        in accordance with this section, the 
                        regulations issued under this section, and any 
                        requirements or conditions under which such 
                        amounts were provided; and
                            ``(ii) establish minimum requirements for 
                        agreements, between the State or State 
                        designated entity and recipients, regarding 
                        assistance under this section, which shall 
                        include--
                                    ``(I) appropriate periodic 
                                financial and project reporting, record 
                                retention, and audit requirements for 
                                the duration of the assistance to the 
                                recipient to ensure compliance with the 
                                limitations and requirements of this 
                                section and the regulations under this 
                                section; and
                                    ``(II) any other requirements that 
                                the Secretary determines are necessary 
                                to ensure appropriate administration 
                                and compliance.
                    ``(B) Misuse of funds.--
                            ``(i) Reimbursement requirement.--If any 
                        recipient of assistance under this section is 
                        determined, in accordance with clause (ii), to 
                        have used any such amounts in a manner that is 
                        materially in violation of this section, the 
                        regulations issued under this section, or any 
                        requirements or conditions under which such 
                        amounts were provided, the State or State 
                        designated entity shall require that, within 12 
                        months after the determination of such misuse, 
                        the recipient shall reimburse the State or 
                        State designated entity for such misused 
                        amounts and return to the State or State 
                        designated entity any such amounts that remain 
                        unused or uncommitted for use. The remedies 
                        under this clause are in addition to any other 
                        remedies that may be available under law.
                            ``(ii) Determination.--A determination is 
                        made in accordance with this clause if the 
                        determination is made by the Secretary or made 
                        by the State or State designated entity, 
                        provided that--
                                    ``(I) the State or State designated 
                                entity provides notification of the 
                                determination to the Secretary for 
                                review, in the discretion of the 
                                Secretary, of the determination; and
                                    ``(II) the Secretary does not 
                                subsequently reverse the determination.
            ``(2) Grantees.--
                    ``(A) Report.--
                            ``(i) In general.--The Secretary shall 
                        require each State or State designated entity 
                        receiving grant amounts in any given year under 
                        this section to submit a report, for such year, 
                        to the Secretary that--
                                    ``(I) describes the activities 
                                funded under this section during such 
                                year with such grant amounts; and
                                    ``(II) the manner in which the 
                                State or State designated entity 
                                complied during such year with any 
                                allocation plan established pursuant to 
                                subsection (c).
                            ``(ii) Public availability.--The Secretary 
                        shall make such reports pursuant to this 
                        subparagraph publicly available.
                    ``(B) Misuse of funds.--If the Secretary 
                determines, after reasonable notice and opportunity for 
                hearing, that a State or State designated entity has 
                failed to comply substantially with any provision of 
                this section, and until the Secretary is satisfied that 
                there is no longer any such failure to comply, the 
                Secretary shall--
                            ``(i) reduce the amount of assistance under 
                        this section to the State or State designated 
                        entity by an amount equal to the amount of 
                        block grant amounts which were not used in 
                        accordance with this section;
                            ``(ii) require the State or State 
                        designated entity to repay the Secretary an 
                        amount equal to the amount of the amount block 
                        grant amounts which were not used in accordance 
                        with this section;
                            ``(iii) limit the availability of 
                        assistance under this section to the State or 
                        State designated entity to activities or 
                        recipients not affected by such failure to 
                        comply; or
                            ``(iv) terminate any assistance under this 
                        section to the State or State designated 
                        entity.
    ``(f) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Extremely low-income renter household.--The term 
        `extremely low-income renter household' means a household whose 
        income is not in excess of 30 percent of the area median 
        income, with adjustments for smaller and larger families, as 
        determined by the Secretary.
            ``(2) Recipient.--The term `recipient' means an individual 
        or entity that receives assistance from a State or State 
        designated entity from amounts made available to the State or 
        State designated entity under this section.
            ``(3) Shortage of standard rental units both affordable and 
        available to extremely low-income renter households.--
                    ``(A) In general.--The term `shortage of standard 
                rental units both affordable and available to extremely 
                low-income renter households' means for any State or 
                other geographical area the gap between--
                            ``(i) the number of units with complete 
                        plumbing and kitchen facilities with a rent 
                        that is 30 percent or less of 30 percent of the 
                        adjusted area median income as determined by 
                        the Secretary that are occupied by extremely 
                        low-income renter households or are vacant for 
                        rent; and
                            ``(ii) the number of extremely low-income 
                        renter households.
                    ``(B) Rule of construction.--If the number of units 
                described in subparagraph (A)(i) exceeds the number of 
                extremely low-income households as described in 
                subparagraph (A)(ii), there is no shortage.
            ``(4) Shortage of standard rental units both affordable and 
        available to very low-income renter households.--
                    ``(A) In general.--The term `shortage of standard 
                rental units both affordable and available to very low-
                income renter households' means for any State or other 
                geographical area the gap between--
                            ``(i) the number of units with complete 
                        plumbing and kitchen facilities with a rent 
                        that is 30 percent or less of 50 percent of the 
                        adjusted area median income as determined by 
                        the Secretary that are occupied by very low-
                        income renter households or are vacant for 
                        rent; and
                            ``(ii) the number of very low-income renter 
                        households.
                    ``(B) Rule of construction.--If the number of units 
                described in subparagraph (A)(i) exceeds the number of 
                very low-income households as described in subparagraph 
                (A)(ii), there is no shortage.
            ``(5) Very low-income family.--The term `very low-income 
        family' has the meaning given such term in section 1303, except 
        that such term includes any family that resides in a rural area 
        that has an income that does not exceed the poverty line (as 
        such term is defined in section 673(2) of the Omnibus Budget 
        Reconciliation Act of 1981 (42 U.S.C. 9902(2)), including any 
        revision required by such section) applicable to a family of 
        the size involved.
            ``(6) Very low-income renter households.--The term `very 
        low-income renter households' means a household whose income is 
        in excess of 30 percent but not greater than 50 percent of the 
        area median income, with adjustments for smaller and larger 
        families, as determined by the Secretary.
    ``(g) Regulations.--
            ``(1) In general.--The Secretary of Housing and Urban 
        Development, shall issue regulations to carry out this section.
            ``(2) Required contents.--The regulations issued under this 
        subsection shall include--
                    ``(A) a requirement that the Secretary ensure that 
                the use of block grant amounts under this section by 
                States or State designated entities is audited not less 
                than annually to ensure compliance with this section;
                    ``(B) authority for the Secretary to audit, provide 
                for an audit, or otherwise verify a State or State 
                designated entity's activities to ensure compliance 
                with this section;
                    ``(C) requirements for a process for application 
                to, and selection by, each State or State designated 
                entity for activities meeting the State or State 
                designated entity's priority housing needs to be funded 
                with block grant amounts under this section, which 
                shall provide for priority in funding to be based 
                upon--
                            ``(i) geographic diversity;
                            ``(ii) ability to obligate amounts and 
                        undertake activities so funded in a timely 
                        manner;
                            ``(iii) in the case of rental housing 
                        projects under subsection (c)(7)(A), the extent 
                        to which rents for units in the project funded 
                        are affordable, especially for extremely low-
                        income families;
                            ``(iv) in the case of rental housing 
                        projects under subsection (c)(7)(A), the extent 
                        of the duration for which such rents will 
                        remain affordable;
                            ``(v) the extent to which the application 
                        makes use of other funding sources; and
                            ``(vi) the merits of an applicant's 
                        proposed eligible activity;
                    ``(D) requirements to ensure that block grant 
                amounts provided to a State or State designated entity 
                under this section that are used for rental housing 
                under subsection (c)(7)(A) are used only for the 
                benefit of extremely low- and very low-income families; 
                and
                    ``(E) requirements and standards for establishment, 
                by a State or State designated entity, for use of block 
                grant amounts in 2009 and subsequent years of 
                performance goals, benchmarks, and timetables for the 
                production, preservation, and rehabilitation of 
                affordable rental and homeownership housing with such 
                grant amounts.
    ``(h) Affordable Housing Trust Fund.--If, after the date of 
enactment of the Government Sponsored Enterprise Mission Improvement 
Act, in any year, there is enacted any provision of Federal law 
establishing an affordable housing trust fund other than under this 
title for use only for grants to provide affordable rental housing and 
affordable homeownership opportunities, and the subsequent year is a 
year referred to in subsection (c), the Secretary shall in such 
subsequent year and any remaining years referred to in subsection (c) 
transfer to such affordable housing trust fund the aggregate amount 
allocated pursuant to subsection (c) in such year. Notwithstanding any 
other provision of law, assistance provided using amounts transferred 
to such affordable housing trust fund pursuant to this subsection may 
not be used for any of the activities specified in clauses (i) through 
(vi) of subsection (c)(9)(D).
    ``(i) Funding Accountability and Transparency.--Any grant under 
this section to a grantee by a State or State designated entity, any 
assistance provided to a recipient by a State or State designated 
entity, and any grant, award, or other assistance from an affordable 
housing trust fund referred to in subsection (h) shall be considered a 
Federal award for purposes of the Federal Funding Accountability and 
Transparency Act of 2006 (31 U.S.C. 6101 note). Upon the request of the 
Secretary of the Office of Management and Budget, the Secretary shall 
obtain and provide such information regarding any such grants, 
assistance, and awards as the Secretary of the Office of Management and 
Budget considers necessary to comply with the requirements of such Act, 
as applicable, pursuant to the preceding sentence.

``SEC. 1339. CAPITAL MAGNET FUND.

    ``(a) Establishment.--There is established in the Treasury of the 
United States a trust fund to be known as the Capital Magnet Fund, 
which shall be a special account within the Community Development 
Financial Institutions Fund.
    ``(b) Deposits to Trust Fund.--The Capital Magnet Fund shall 
consist of--
            ``(1) any amounts transferred to the Fund pursuant to 
        section 1337; and
            ``(2) any amounts as are or may be appropriated, 
        transferred, or credited to such Fund under any other 
        provisions of law.
    ``(c) Expenditures From Trust Fund.--Amounts in the Capital Magnet 
Fund shall be available to the Secretary of the Treasury to carry out a 
competitive grant program to attract private capital for and increase 
investment in--
            ``(1) the development, preservation, rehabilitation, and 
        purchase of affordable housing for primarily extremely low-, 
        very low-, and low-income families; and
            ``(2) economic development activities or community service 
        facilities, such as day care centers, workforce development 
        centers, and health care clinics, which in conjunction with 
        affordable housing activities implement a concerted strategy to 
        stabilize or revitalize a low-income area or underserved rural 
        area.
    ``(d) Federal Assistance.--All assistance provided using amounts in 
the Capital Magnet Fund shall be considered to be Federal financial 
assistance.
    ``(e) Eligible Grantees.--A grant under this section may be made, 
pursuant to such requirements as the Secretary of the Treasury shall 
establish for experience and success in attracting private financing 
and carrying out the types of activities proposed under the application 
of the grantee, only to--
            ``(1) a community development financial institution; or
            ``(2) a nonprofit organization having as 1 of its principal 
        purposes the development or management of affordable housing.
    ``(f) Eligible Uses.--Grant amounts awarded from the Capital Magnet 
Fund pursuant to this section may be used for the purposes described in 
paragraphs (1) and (2) of subsection (c), including for the following 
uses:
            ``(1) To provide loan loss reserves.
            ``(2) To capitalize a revolving loan fund.
            ``(3) To capitalize an affordable housing fund.
            ``(4) To capitalize a fund to support activities described 
        in subsection (c)(2).
            ``(5) For risk-sharing loans.
    ``(g) Applications.--
            ``(1) In general.--The Secretary of the Treasury shall 
        provide, in a competitive application process established by 
        regulation, for eligible grantees under subsection (e) to 
        submit applications for Capital Magnet Fund grants to the 
        Secretary at such time and in such manner as the Secretary 
        shall determine.
            ``(2) Content of application.--The application required 
        under paragraph (1) shall include a detailed description of--
                    ``(A) the types of affordable housing, economic, 
                and community revitalization projects that support or 
                sustain residents of an affordable housing project 
                funded by a grant under this section for which such 
                grant amounts would be used, including the proposed use 
                of eligible grants as authorized under this section;
                    ``(B) the types, sources, and amounts of other 
                funding for such projects; and
                    ``(C) the expected timeframe of any grant used for 
                such project.
    ``(h) Grant Limitation.--
            ``(1) In general.--Any 1 eligible grantee and its 
        subsidiaries and affiliates may not be awarded more than 15 
        percent of the aggregate funds available for grants during any 
        year from the Capital Magnet Fund.
            ``(2) Geographic diversity.--
                    ``(A) Goal.--The Secretary of the Treasury shall 
                seek to fund activities in geographically diverse areas 
                of economic distress, including metropolitan and 
                underserved rural areas in every State.
                    ``(B) Diversity defined.--For purposes of this 
                paragraph, geographic diversity includes those areas 
                that meet objective criteria of economic distress 
                developed by the Secretary of the Treasury, which may 
                include--
                            ``(i) the percentage of low-income families 
                        or the extent of poverty;
                            ``(ii) the rate of unemployment or 
                        underemployment;
                            ``(iii) extent of blight and disinvestment;
                            ``(iv) projects that target extremely low-, 
                        very low-, and low-income families in or 
                        outside a designated economic distress area; or
                            ``(v) any other criteria designated by the 
                        Secretary of the Treasury.
            ``(3) Leverage of funds.--Each grant from the Capital 
        Magnet Fund awarded under this section shall be reasonably 
        expected to result in eligible housing, or economic and 
        community development projects that support or sustain an 
        affordable housing project funded by a grant under this section 
        whose aggregate costs total at least 10 times the grant amount.
            ``(4) Commitment for use deadline.--Amounts made available 
        for grants under this section shall be committed for use within 
        2 years of the date of such allocation. The Secretary of the 
        Treasury shall recapture into the Capital Magnet Fund any 
        amounts not so used or committed for use and allocate such 
        amounts in the first year after such recapture.
            ``(5) Lobbying restrictions.--No assistance or amounts made 
        available under this section may be expended by an eligible 
        grantee to pay any person to influence or attempt to influence 
        any agency, elected official, officer or employee of a State or 
        local government in connection with the making, award, 
        extension, continuation, renewal, amendment, or modification of 
        any State or local government contract, grant, loan, or 
        cooperative agreement as such terms are defined in section 1352 
        of title 31, United States Code.
            ``(6) Prohibition of consideration of use for meeting 
        housing goals or duty to serve.--In determining the compliance 
        of enterprises with the housing goals under this section and 
        the duty to serve underserved markets under section 1335, the 
        Secretary of Housing and Urban Development may not consider any 
        Capital Magnet Fund amounts used under this section for 
        eligible activities under subsection (f). The Secretary of 
        Housing and Urban Development shall give credit toward the 
        achievement of such housing goals and such duty to serve 
        underserved markets to purchases by the enterprises of 
        mortgages for housing that receives funding from Capital Magnet 
        Fund grant amounts, but only to the extent that such purchases 
        by the enterprises are funded other than with such grant 
        amounts.
            ``(7) Accountability of recipients and grantees.--
                    ``(A) Tracking of funds.--The Secretary of the 
                Treasury shall--
                            ``(i) require each grantee to develop and 
                        maintain a system to ensure that each recipient 
                        of assistance from the Capital Magnet Fund uses 
                        such amounts in accordance with this section, 
                        the regulations issued under this section, and 
                        any requirements or conditions under which such 
                        amounts were provided; and
                            ``(ii) establish minimum requirements for 
                        agreements, between the grantee and the Capital 
                        Magnet Fund, regarding assistance from the 
                        Capital Magnet Fund, which shall include--
                                    ``(I) appropriate periodic 
                                financial and project reporting, record 
                                retention, and audit requirements for 
                                the duration of the grant to the 
                                recipient to ensure compliance with the 
                                limitations and requirements of this 
                                section and the regulations under this 
                                section; and
                                    ``(II) any other requirements that 
                                the Secretary determines are necessary 
                                to ensure appropriate grant 
                                administration and compliance.
                    ``(B) Misuse of funds.--If the Secretary of the 
                Treasury determines, after reasonable notice and 
                opportunity for hearing, that a grantee has failed to 
                comply substantially with any provision of this section 
                and until the Secretary is satisfied that there is no 
                longer any such failure to comply, the Secretary 
                shall--
                            ``(i) reduce the amount of assistance under 
                        this section to the grantee by an amount equal 
                        to the amount of Capital Magnet Fund grant 
                        amounts which were not used in accordance with 
                        this section;
                            ``(ii) require the grantee to repay the 
                        Secretary an amount equal to the amount of the 
                        amount of Capital Magnet Fund grant amounts 
                        which were not used in accordance with this 
                        section;
                            ``(iii) limit the availability of 
                        assistance under this section to the grantee to 
                        activities or recipients not affected by such 
                        failure to comply; or
                            ``(iv) terminate any assistance under this 
                        section to the grantee.
    ``(i) Periodic Reports.--
            ``(1) In general.--The Secretary of the Treasury shall 
        submit a report, on a periodic basis, to the Committee on 
        Banking, Housing, and Urban Affairs of the Senate and the 
        Committee on Financial Services of the House of Representatives 
        describing the activities to be funded under this section.
            ``(2) Reports available to public.--The Secretary of the 
        Treasury shall make the reports required under paragraph (1) 
        publicly available.
    ``(j) Affordable Housing Trust Fund.--If, after the date of 
enactment of the Government Sponsored Enterprise Mission Improvement 
Act, in any year, there is enacted any provision of Federal law 
establishing an affordable housing trust fund other than under this 
title for use only for grants to provide affordable rental housing and 
affordable homeownership opportunities, the Secretary of the Treasury 
shall in such year and any subsequent years transfer to that affordable 
housing trust fund the aggregate amount allocated pursuant to this 
section in such year or years. Notwithstanding any other provision of 
law, assistance provided using amounts transferred to such affordable 
housing trust fund pursuant to this subsection may not be used for any 
of the activities specified in subsection (h)(5).
    ``(k) Regulations.--
            ``(1) In general.--The Secretary of the Treasury shall 
        issue regulations to carry out this section.
            ``(2) Required contents.--The regulations issued under this 
        subsection shall include--
                    ``(A) authority for the Secretary to audit, provide 
                for an audit, or otherwise verify an enterprise's 
                activities, to ensure compliance with this section;
                    ``(B) a requirement that the Secretary ensure that 
                the allocation of each enterprise is audited not less 
                than annually to ensure compliance with this section; 
                and
                    ``(C) requirements for a process for application 
                to, and selection by, the Secretary for activities to 
                be funded with amounts from the Capital Magnet Fund, 
                which shall provide that--
                            ``(i) funds be fairly distributed to urban, 
                        suburban, and rural areas;
                            ``(ii) selection shall be based upon 
                        specific criteria, including a prioritization 
                        of funding based upon--
                                    ``(I) the ability to use such funds 
                                to generate additional investments;
                                    ``(II) affordable housing need 
                                (taking into account the distinct needs 
                                of different regions of the country); 
                                and
                                    ``(III) ability to obligate amounts 
                                and undertake activities so funded in a 
                                timely manner.''.

SEC. 8. ENFORCEMENT.

    (a) Cease-and-Desist Proceedings.--Section 1341 of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4581) is amended--
            (1) by striking subsection (a) and inserting the following 
        new subsection:
    ``(a) Grounds for Issuance.--The Secretary may issue and serve a 
notice of charges under this section upon an enterprise if the 
Secretary determines--
            ``(1) the enterprise has failed to meet any housing goal 
        established under subpart B, following a written notice and 
        determination of such failure in accordance with section 1336;
            ``(2) the enterprise has failed to submit a report under 
        section 1314, following a notice of such failure, an 
        opportunity for comment by the enterprise, and a final 
        determination by the Secretary;
            ``(3) the enterprise has failed to submit the information 
        required under subsection (m) or (n) of section 309 of the 
        Federal National Mortgage Association Charter Act, or 
        subsection (e) or (f) of section 307 of the Federal Home Loan 
        Mortgage Corporation Act;
            ``(4) the enterprise has violated any provision of this 
        part or any order, rule, or regulation under this part;
            ``(5) the enterprise has failed to submit a housing plan 
        that complies with section 1336(c) within the applicable 
        period; or
            ``(6) the enterprise has failed to comply with a housing 
        plan under section 1336(c).'';
            (2) in subsection (b)(2), by striking ``requiring the 
        enterprise to'' and all that follows through the end of the 
        paragraph and inserting the following: ``requiring the 
        enterprise to--
                    ``(A) comply with the goal or goals of this 
                subpart;
                    ``(B) submit a report under section 1314;
                    ``(C) comply with any provision of this part or any 
                order, rule, or regulation under such part;
                    ``(D) submit a housing plan in compliance with 
                section 1336(c);
                    ``(E) comply with a housing plan submitted under 
                section 1336(c); or
                    ``(F) provide the information required under 
                subsection (m) or (n) of section 309 of the Federal 
                National Mortgage Association Charter Act or subsection 
                (e) or (f) of section 307 of the Federal Home Loan 
                Mortgage Corporation Act, as applicable.'';
            (3) in subsection (c), by inserting ``date of the'' before 
        ``service of the order''; and
            (4) by striking subsection (d).
    (b) Authority of Secretary To Enforce Notices and Orders.--Section 
1344 of the Housing and Community Development Act of 1992 (12 U.S.C. 
4584) is amended by striking subsection (a) and inserting the following 
new subsection:
    ``(a) Enforcement.--
            ``(1) In court.--The Secretary may, in the discretion of 
        the Secretary, apply to the United States District Court for 
        the District of Columbia, or the United States district court 
        within the jurisdiction of which the headquarters of the 
        enterprise is located, for the enforcement of any effective and 
        outstanding notice or order issued under section 1341 or 1345, 
        or request that the Attorney General of the United States bring 
        such an action.
            ``(2) Court authority.--A court described under paragraph 
        (1) shall have jurisdiction and power to order and require 
        compliance with any notice or order issued pursuant to 
        paragraph (1).''.
    (c) Civil Money Penalties.--Section 1345 of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4585) is amended--
            (1) by striking subsections (a) and (b) and inserting the 
        following new subsections:
    ``(a) Authority.--The Secretary may impose a civil money penalty, 
in accordance with the provisions of this section, on any enterprise 
that has failed to--
            ``(1) meet any housing goal established under subpart B, 
        following a written notice and determination of such failure in 
        accordance with section 1336(b);
            ``(2) submit a report under section 1314, following a 
        notice of such failure, an opportunity for comment by the 
        enterprise, and a final determination by the Secretary;
            ``(3) submit the information required under subsection (m) 
        or (n) of section 309 of the Federal National Mortgage 
        Association Charter Act, or subsection (e) or (f) of section 
        307 of the Federal Home Loan Mortgage Corporation Act;
            ``(4) comply with any provision of this part or any order, 
        rule, or regulation under this part;
            ``(5) submit a housing plan pursuant to section 1336(c) 
        within the required period; or
            ``(6) comply with a housing plan for the enterprise under 
        section 1336(c).
    ``(b) Amount of Penalty.--The amount of a civil money penalty under 
subsection (a), as determined by the Secretary, may not exceed--
            ``(1) for any failure described in paragraph (1), (5), or 
        (6) of subsection (a), $50,000 for each day that the failure 
        occurs; and
            ``(2) for any failure described in paragraph (2), (3), or 
        (4) of subsection (a), $20,000 for each day that the failure 
        occurs.'';
            (2) in subsection (c)--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A), by inserting 
                        ``and'' after the semicolon at the end;
                            (ii) in subparagraph (B), by striking ``; 
                        and'' and inserting a period; and
                            (iii) by striking subparagraph (C); and
                    (B) in paragraph (2), by inserting after the period 
                at the end the following: ``In determining the penalty 
                under subsection (a)(1), the Secretary shall give 
                consideration to the length of time the enterprise 
                should reasonably take to achieve the goal.'';
            (3) in the first sentence of subsection (d)--
                    (A) by striking ``request the Attorney General of 
                the United States to'' and inserting ``, in the 
                discretion of the Secretary,''; and
                    (B) by inserting ``, or request that the Attorney 
                General of the United States bring such an action'' 
                before the period at the end;
            (4) by striking subsection (f); and
            (5) by redesignating subsection (g) as subsection (f).
    (d) Enforcement of Subpoenas.--Section 1348(c) of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4588(c)) is amended--
            (1) by striking ``request the Attorney General of the 
        United States to'' and inserting ``, in the discretion of the 
        Secretary,''; and
            (2) by inserting ``or request that the Attorney General of 
        the United States bring such an action,'' after ``District of 
        Columbia,''.
    (e) Conforming Amendment.--The heading for subpart C of part 2 of 
subtitle A of title XIII of the Housing and Community Development Act 
of 1992 is amended to read as follows:

                      ``Subpart C--Enforcement''.

                                 <all>