1.Modifications and increased
volume cap with respect to qualified mortgage bonds
(a)Use of
qualified mortgage bonds proceeds for subprime refinancing loansSection 143(k) of the Internal Revenue Code
of 1986 (relating to other definitions and special rules) is amended by adding
at the end the following new paragraph:
(12)Special rules
for subprime refinancings
(A)In the case of a residence which was originally financed
by the mortgagor through a qualified subprime loan, this section shall be
applied with the following modifications:
(i)Subsection (i)(1)
(relating to mortgages must be new mortgages) shall not apply.
(ii)Subsection
(a)(2)(D)(i) shall be applied by substituting 12-month period
for 42-month period
each place it appears.
(iii)Subsection (d)
(relating to 3-year requirement) shall not apply.
(iv)Subsection (e)
(relating to purchase price requirement) shall be applied by using the market
value of the residence at the time of refinancing in lieu of the acquisition
cost.
(B)
(i)The term qualified subprime loan means an
adjustable rate single-family residential mortgage loan originated after
December 31, 2001, and before January 1, 2008, that the bond issuer determines
has characteristics that suggest both a reasonably foreseeable risk of default
and a reasonable potential to avoid default with the benefit of a lower cost
refinancing.
(ii)In
making the determination under clause (i), the bond issuer may consider the
following characteristics:
(I)Loan payments
which are scheduled to increase by more than 10 percent after December 31,
2007, and before January 1, 2011.
(II)A loan-to-value
ratio of 97 percent or greater at the time of the original mortgage loan or at
the time of the refinancing of such loan after adjustment for any decline in
the fair market value of the residence.
(III)A borrower
whose creditworthiness is relatively low in comparison to a prime borrower,
based on a lower credit score, such as a Fair Isaac Credit Organization credit
score at the time of the original subprime loan of less than 660 and the
absence of an increase in such score by more than 10 percent since the time of
the original loan.
(IV)Whether loan
payments on the original mortgage loan generally have been made in a current,
timely manner, subject only to isolated late payments.
(C)This
paragraph shall not apply to any bonds issued after December 31,
2010.
.
(b)Increased
volume cap for qualified mortgage bonds
(1)Subsection (d) of section 146 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
paragraph:
(5)Increase and
set aside for qualified mortgage bonds for 2008
(A)The State ceiling for calendar year 2008 shall be
increased by $15,000,000,000.
(B)
(i)Not less than an amount equal to each State's allocable
share of the increase in the State ceiling under subparagraph (A) shall be
allocated solely for the purpose of a qualified mortgage issue which meets the
requirement clause (ii).
(ii)A
qualified mortgage issue meets the requirement of this clause if such issue
meets the requirement of section 143(a)(2)(D)(i) (determined by substituting
12-month period
for 42-month period
each place it
appears).
.
(2)Carryforward of
unused limitationsSubsection (f) of section 146 of such Code is
amended by adding at the end the following new paragraph:
(6)Special rules
for increased volume cap under subsection
(d)(5)No amount which is
attributable to the increase under subsection (d)(5) may be used—
(A)for a
carryforward purpose other than issuing qualified mortgage bonds, and
(B)to issue any bond
after calendar year
2010.
.
(c)
(1)Clause (ii) of section 57(a)(5)(C) of the Internal
Revenue Code of 1986 is amended by striking shall not include
and all that follows and inserting
shall not
include—(I)any qualified
501(c)(3) bond (as defined in section 145), or
(II)any qualified
mortgage bond (as defined in section 143(a)) or qualified veterans' mortgage
bond (as defined in section 143(b)) issued after December 31, 2007, and before
January 1,
2011.
.
(2)The heading for section 57(a)(5)(C)(ii) is amended by
striking qualified
501(c)(3) bonds
and
inserting certain
bonds
.
(d)The amendments made by this section shall apply to bonds
issued after December 31, 2007.