I 111th CONGRESS 2d Session H. R. 5409 IN THE HOUSE OF REPRESENTATIVES May 26, 2010 Mr. Miller of North Carolina (for himself, Mr. Baca, and Mrs. Maloney) introduced the following bill; which was referred to the Committee on Financial Services A BILL To establish the Residential Construction Loan Guarantee Program to guarantee loans made to eligible home building companies for viable building projects.
1.
Short title
This Act may be cited as the Residential Construction Lending Act.
2.
Residential Construction Loan Guarantee Program
(a)
Establishment
There is established within the Department of the Treasury a program to be known as the Residential Construction Loan Guarantee Program (hereinafter referred to in this section as the Loan Guarantee Program). (b)
Loan Guarantee Program
(1)
Purpose
The purpose of the Loan Guarantee Program is to guarantee loans made to eligible home building companies for viable building projects. (2)
Application
An insured depository institution that wishes to make loans that are guaranteed under the Loan Guarantee Program may submit an application to the Secretary in such form and manner and containing such information as the Secretary may require. (3)
Selection criteria
(A)
In general
The Secretary shall approve any insured depository institution submitting a full and complete application under paragraph (2) for participation in the Loan Guarantee Program, and shall guarantee loans on a first-come-first-served basis. (B)
Submission of loans
Insured depository institutions approved for participation in the Loan Guarantee Program shall submit each loan made by such institution as part of the Loan Guarantee Program to the Secretary so the Secretary may confirm that such loan complies with the requirements of this section. (4)
Oversight
(A)
Loan terms
Not later than 7 days after a loan guaranteed under the Loan Guarantee Program is originated, the insured depository institution making such loan shall submit all information about the terms and conditions of such loan to the Secretary. (B)
Suspension and termination authority
Notwithstanding paragraph (3), the Secretary shall, not less than yearly, review all of the loans made by each insured depository institution that are guaranteed under the Loan Guarantee Program, and may suspend or terminate any insured depository institution's future participation in the Loan Guarantee Program if the Secretary finds that such institution has engaged in fraud or abuse with respect to the Loan Guarantee Program, or has consistently made loans guaranteed under the Loan Guarantee Program that are not repaid by the borrower in accordance with the terms of the loan. (5)
Loan eligibility
A loan may only be guaranteed under the Loan Guarantee Program if it meets the following criteria: (A)
Viable building project
The loan must be made for a viable building project, as determined by the Secretary. In making such determination, the Secretary shall consider housing demand, local government support, percentage of workforce, and speculative units. (B)
Eligible home building company
The loan must be made to an eligible home building company, as determined by the Secretary. In making such determination, the Secretary shall consider whether such company is creditworthy, reputable, and has a record of successful residential building projects. (C)
Loan guarantee amount limitation
The eligible home building company, or its principals, must have a minimum net worth equal to the loan amount to be guaranteed. (D)
Use of loan
The loan may only be used for the acquisition, development, and construction of residential developments that have locally approved development plans and that create immediate job opportunities. (E)
Term requirements
(i)
In general
The term of the loan shall be for no more than 5 years, but may have an option to extend. (ii)
Loan amount limitations
The loan shall be for an amount not to exceed— (I)75 percent loan-to-value on the land; (II)100 percent for construction and development costs; and (III)80 percent of the market value of the building project. (F)
Interest rates
Notwithstanding the provisions of the constitution of any State or the laws of any State limiting the rate or amount of interest which may be charged, taken, received, or reserved, the maximum legal rate of interest on the loan may not substantively differ from the current average market yield on outstanding marketable obligations of similar privately held loans with remaining periods to maturity comparable to such loan. (6)
Multiple guarantees permitted; Aggregate dollar amount limitation
A single eligible home building company is permitted to have more than one loan guaranteed under the Loan Guarantee Program, but the aggregate amount of all such loans guaranteed for a single eligible home building company may not exceed the net worth of such company. The Secretary may exempt an eligible home building company from the net worth limitation of this paragraph if the Secretary determines doing so will advance the purpose of this Loan Guarantee Program. (7)
Government guarantee
(A)
Level of participation
Loans guaranteed under the Loan Guarantee Program shall be guaranteed at 80 percent of the loan amount. (B)
Payment of accrued interest
(i)
In general
Any insured depository institution making a claim for payment on the guaranteed portion of a loan guaranteed under the Loan Guarantee Program shall be paid the accrued interest due on the loan from the earliest date of default to the date of payment of the claim at a rate not to exceed the rate of interest on the loan on the date of default, minus one percent. (ii)
Loans sold on secondary market
If a loan described under clause (i) is sold on the secondary market, the amount of interest paid to an insured depository institution described in that clause from the earliest date of default to the date of payment of the claim shall be no more than the agreed upon rate, minus one percent. (iii)
Interest rate
The rate of interest to be paid on a claim for payment on the guaranteed portion of a loan guaranteed under the Loan Guarantee Program shall be established commensurate with Federal Housing Administration rates, based on safety and soundness. (8)
One-third of guarantees to be made in areas with greatest unmet need
Notwithstanding any other provision of this section, not less than one-third of the funds made available under this section to guarantee loans shall be used to guaranteed loans in areas of the United States that have the greatest unmet need for residential construction financing, as determined by the Secretary. (9)
Regulations
The Secretary shall promulgate any regulations needed to carry out this section through a notice and public comment period of not more than 60 days. (c)
Definitions
For purposes of this section: (1)
Insured depository institution
The term insured depository institution has the meaning given such term under section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(2)). (2)
Secretary
The term Secretary means the Secretary of the Treasury. (d)
Authorization of appropriations
There are authorized to be appropriated to the Secretary $15,000,000,000 to carry out this section. (e)
Termination of authority
The Secretary’s authority to make new loan guarantees under the Loan Guarantee Program shall terminate after the 3-year period beginning on the date of the enactment of this section.