II 110th CONGRESS 1st Session S. 2391 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.
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.
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Section 1324 of the Housing and Community Development Act of 1992 (12 U.S.C. 4544) is hereby repealed.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:
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.
.
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. .
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:
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.
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.
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.
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.
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. .
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. .
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. .
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:
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.
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.
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.
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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: C
Enforcement
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