I 111th CONGRESS 2d Session H. R. 6562 IN THE HOUSE OF REPRESENTATIVES December 21, 2010 Ms. Corrine Brown of Florida introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To revitalize home ownership by establishing a shared equity appreciation homeownership pilot program.

1.

Short title

This Act may be cited as the American Residential Housing Recovery Act of 2010.

2.

Declaration of purpose

The Congress hereby declares that a national emergency exists that is producing widespread disruption of the owned residential real estate markets, which burdens interstate and foreign commerce, affects the public welfare, and undermines the standard of living of the American people. The Congress hereby declares a national policy to remove obstructions to the free flow of interstate and foreign commerce in the owned residential housing sector of the American economy; and to provide for the general welfare by promoting the flow of equity capital into the residential housing sector through innovative methods, including the use of shared equity appreciation financing methods.

3.

Shared equity appreciation pilot program

(a)

Establishment

The Secretary of the Treasury (in this section referred to as the Secretary) shall carry out a shared equity appreciation financing pilot program under this section to analyze the effectiveness, including as a step in the economic recovery of the United States, of shared equity finance methods that stimulate the flow of private equity capital into the housing sector, while mitigating risk to borrowers. (b)

Structure

Under the pilot program under this section, the Secretary shall— (1)provide for entities, individuals, and governmental agencies to assist homeowners to acquire, refinance, or maintain ownership of 1- to 4-family residences with funding provided through shared equity appreciation arrangements under which private or public sector investors, or both, invest equity funds for such residences and thereby share in the equity appreciation of such residences; (2)encourage public and private sector investment in such shared equity appreciation arrangements through— (A)provision of upfront financial assistance to participants in the pilot program, including payments for administrative expenses and operating capital; (B)insurance under subsection (h) of risks of loss to private investors in such arrangements; (C)direct investment by public investors in contracts for such arrangements; and (D)tax credits to private investors in such arrangements under section 45S of the Internal Revenue Code of 1986 (as added by subsection (g)); and (3)evaluate the effectiveness of whether the actions taken by the Secretary under the pilot program pursuant to paragraph (2) encourage investment in shared equity appreciation arrangements. (c)

Application and selection

(1)

Eligibility and applications

The Secretary shall establish eligibility requirements for financial institutions, nonprofit organizations, housing associations, investment pools, and other appropriate public and private capital sources and individuals to participate in the pilot program under this section and originate agreements for shared equity appreciation arrangements under the program, and shall provide for eligible entities and individuals to apply to the Secretary for such participation. Such applications shall include such information as the Secretary considers appropriate. (2)

Selection; criteria

Not later than 180 days after the date of the enactment of this Act, the Secretary shall select participants in the pilot program, from among persons applying for such participation, using criteria established by the Secretary, which shall include— (A)whether, under the pilot program, the applicant— (i)can provide relief to homeowners without modifying the original mortgage and securitization; (ii)can provide homeowners with a long-term stimulus for as long as the shared equity arrangement is in effect; (iii)will empower homeowners to have a stake in the solution; (iv)has a streamlined process for originating and servicing contracts under the pilot program for shared equity appreciation arrangements; (v)can materially reduce default and foreclosure risk on mortgages of homeowners; (vi)can effectively reduce interest rates on mortgages of homeowners; (vii)can effectively reduce debt-to-income ratios and re-default rates on mortgages of homeowners; (viii)will credit homeowners with 100 percent of the increase in the value of homeowners’ residences resulting from improvements made to their properties; (ix)will provide periodic payments based on current home value to the homeowners or to the homeowners’ lenders on behalf of the homeowner; (x)will make equity-sharing payments available to new home purchasers to increase the percentage of approved loan applications; and (xi)will make equity-sharing payments available to senior homeowners to reduce the rate of forced sales of their properties; (B)whether investors in mortgage-backed securities deem equity-sharing payments to homeowners under the applicant’s program as an incentive to providing principal forbearance; (C)whether mortgage loan servicers deem equity-sharing payments to homeowners under the applicant’s program as a suitable loss mitigation tool; (D)whether institutions regulated under the Community Reinvestment Act of 1977 (12 U.S.C. 2901) and the Federal financial supervisory agencies deem equity-sharing payments to homeowners as an investment eligible for credit under such Act; and (E)whether providing Government-sponsored insurance against loss in property value under the applicant’s program will increase participation by private investors. (d)

Limitation to principal residence

Only mortgages for residences that are occupied as the principal residence of the mortgagee shall be eligible under the pilot program under this section. (e)

Rights of parties

The Secretary shall establish the rights, privileges and responsibilities of the respective parties to transactions under the pilot program under this section. (f)

Geographic diversity

The Secretary shall carry out the pilot program on a regional basis in five regional areas of the United States, as follows: (1)

Northeast

The Northeast region, consisting of the States of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont. (2)

Southeast

The Southeast region, consisting of the States of Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia, and the District of Columbia. (3)

Central

The Central region, consisting of the States of Arkansas, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Missouri, Nebraska, Ohio, and Wisconsin. (4)

Southwest

The Southwest region, consisting of the States of Arizona, California, Colorado, Hawaii, Nevada, New Mexico, Oklahoma, and Texas. (5)

Northwest

The Northwest region, consisting of the States of Alaska, Idaho, Minnesota, Montana, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming. (g)

Tax credit for private investment in shared equity appreciation contracts

(1)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

45S.

Credit for private investment in shared equity appreciation contracts

For purposes of section 38, the shared equity appreciation contract credit determined under this section for the taxable year is 39 percent of the aggregate amount paid or incurred by the taxpayer during such taxable year as an investment in any shared appreciation contract of a participant in the pilot program under the American Residential Housing Recovery Act of 2010.

. (2)

Credit To be part of general business credit

Subsection (b) of section 38 of such Code is amended by striking plus at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting , plus , and by adding at the end the following new paragraph: (37)the shared equity appreciation contract credit determined under section 45S(a). . (3)

Clerical amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 45S. Credit for private investment in shared equity appreciation contracts. . (4)

Effective date

The amendments made by this subsection shall apply to taxable years ending after the date of the enactment of this Act. (h)

Insurance of risks to investors

From any amounts made available for carrying out the pilot program under this section, the Secretary shall set aside amounts sufficient to insure investments of private funds in shared equity appreciation arrangements fully against any losses arising from participation in the pilot program. (i)

Monitoring and reporting

(1)

Monitoring

The Secretary shall provide for such monitoring under the pilot program under this section as may be necessary and appropriate to determine its effectiveness, and the structure and requirements of such monitoring. (2)

Reports to congress

Not later than the expiration of the 18-month period beginning on the date of the enactment of this Act, the Comptroller General of the United States shall submit a report to the Congress analyzing effectiveness of the pilot program under this section and making recommendations regarding expansion or improvements thereof. (j)

Waiver

The Secretary may waive, or specify alternative requirements for, any provision of any statute, regulation, or guideline that the Secretary administers upon a determination by the Secretary that such waiver is appropriate to carry out the pilot program under this section. (k)

Authorization of appropriations

There is authorized to be appropriated for assistance under the pilot program under this section and any costs of carrying out this section such sums as may be necessary for each of fiscal years 2010 through 2015.

4.

Regulatory oversight of shared equity appreciation contracts by Bureau of Consumer Financial Protection

(a)

Treatment as consumer financial product

Section 1002 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5481) is amended— (1)in paragraph (5)— (A)in subparagraph (A), by striking or at the end; (B)in subparagraph (B), by striking the period at the end and inserting or; and (C)by adding at the end the following new subparagraph: (C)is a shared equity appreciation contract ; (2)by redesignating paragraphs (27) through (29) as paragraphs (28) through (30), respectively; and (3)by inserting after paragraph (26) the following new paragraph: (27)

Shared equity appreciation contract

The term shared equity appreciation contract means an agreement between private or public sector investors, or both, and homeowners under which such investors provide funds to assist the homeowners to acquire, refinance, or maintain ownership of 1- to 4-family residences and under which the investors share in the equity appreciation of such residence. . (b)

Oversight

Subtitle C of title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act is amended— (1)by redesignating section 1037 (12 U.S.C. 5531 note) as section 1038; and (2)by inserting after section 1036 (12 U.S.C. 5536) the following new section:

1037.

Shared equity appreciation contracts

In carrying out its duties under this title with respect to shared equity appreciation contracts, the Bureau shall issue and enforce regulations governing the establishment and servicing of shared appreciation contracts to ensure that— (1)consumers receive clear and balanced information about the risks and benefits of shared equity appreciation financing, including information about available alternatives; (2)appropriate eligibility and underwriting guidelines are applied; (3)consumers demonstrate they understand their rights and obligations, as well as the risks and benefits, before entering into shared equity appreciation contracts; (4)consumers receive qualified independent counseling before entering into shared equity appreciation contracts; (5)the terms of such contracts, including pricing, homeowner payments and percentage of equity shared, are not predatory; (6)consumers are protected from being sold shared equity contracts to fund inappropriate annuities, investments, and other financial products, (7)contract portfolio and individual loan level audit review standards are established and followed; and (8)shared equity appreciation contract providers are certified for financial strength, comply with rules and regulations promulgated by the Bureau, and follow procurement policies consistent with public sector practice.

.