[Congressional Record Volume 142, Number 118 (Tuesday, September 3, 1996)]
[Senate]
[Pages S9746-S9750]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          AMENDMENTS SUBMITTED

                                 ______
                                 

THE DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, 
           AND INDEPENDENT AGENCIES APPROPRIATIONS ACT, 1997

                                 ______
                                 

                     BOND AMENDMENTS NOS. 5157-5159

  Mr. BOND proposed three amendments to the bill (H.R. 3666) making 
appropriations for the Departments of Veterans Affairs and Housing and 
Urban Development, and for sundry independent agencies, boards, 
commissions, corporations, and offices for the fiscal year ending 
September 30, 1997, and for other purposes; as follows:

                           Amendment No. 5157

       On page 72, line 10, in lieu of the sum proposed by the 
     Committee amendment, insert ``$1,275,000,000''.
                                                                    ____


                          Amendment No.  5158

       On page 85, line 15, before the period insert the 
     following: ``: Provided further, That in addition to any 
     other payments which it is required to make under subchapter 
     III of chapter 83 or chapter 84 of title 5, United States 
     Code, NASA shall remit to the Office of Personnel Management 
     for deposit in the Treasury of the United States to the 
     credit of the Civil Service Retirement and Disability Fund an 
     amount equal to 15 percent of the final basic pay of each 
     employee who is covered under subchapter III of chapter 83 or 
     chapter 84 of title 5 to whom a voluntary separation 
     incentive has been paid under this paragraph''.
                                                                    ____


                           Amendment No. 5159

       In lieu of the matter stricken on page 104, lines 18 
     through 20, insert the following:

[[Page S9747]]

     SEC. 423. CALCULATION OF DOWN PAYMENT.

       Section 203(b) of the National Housing Act (12 U.S.C. 
     1709(b)) is amended by adding at the end the following new 
     paragraph:
       ``(10) Alaska and Hawaii.--
       ``(A) In general.--Notwithstanding any other provision of 
     this subsection, with respect to a mortgage originated in the 
     State of Alaska or the State of Hawaii, involve a principal 
     obligation not in excess of the sum of--
       ``(i) the amount of the mortgage insurance premium paid at 
     the time the mortgage is insured; and
       ``(ii) (I) in the case of a mortgage for a property with an 
     appraised value equal to or less than $50,000, 98.75 percent 
     of the appraised value of the property;
       ``(II) in the case of a mortgage for a property with an 
     appraised value in excess of $50,000 but not in excess of 
     $125,000, 97.65 percent of the appraised value of the 
     property; or
       ``(III) in the case of a mortgage for a property with an 
     appraised value in excess of $125,000, 97.15 percent of the 
     appraised value of the property.''.

     SEC. 424. DELEGATION OF SINGLE FAMILY MORTGAGE INSURING 
                   AUTHORITY TO DIRECT ENDORSEMENT MORTGAGEES.

       Title II of the National Housing Act (12 U.S.C. 1707 et 
     seq.) Is amended by adding at the end the following new 
     section:


  ``delegation of insuring authority to direct endorsement mortgagees

       ``Sec. 256. (A) Authority.--The Secretary may delegate, to 
     one or more mortgages approved by the Secretary under the 
     direct endorsement program, the authority of the Secretary 
     under this Act to insure mortgages involving property upon 
     which there is located a dwelling designed principally for 
     occupancy by 1 to 4 families.
       ``(b) Considerations.--In determining whether to delegate 
     authority to a mortgagee under this section, the Secretary 
     shall consider the experience and performance of the 
     mortgagee compared to the default rate of all insured 
     mortgages in comparable markets, and such other factors as 
     the Secretary determines appropriate to minimize risk of loss 
     to the insurance funds under this Act.
       ``(c) Enforcement of Insurance Requirements.--
       ``(1) In general.--If the Secretary determines that a 
     mortgage insured by a mortgagee pursuant to delegation of 
     authority under this section was not originated in accordance 
     with the requirements established by the Secretary, and the 
     Secretary pays an insurance claim with respect to the 
     mortgage within a reasonable period specified by the 
     Secretary, the Secretary may require the mortgagee approved 
     under this section to indemnify the Secretary for the loss.
       ``(2) Fraud or misrepresentation.--If fraud or 
     misrepresentation was involved in connection with the 
     origination, the Secretary may require the mortgagee approved 
     under this section to indemnify the Secretary for the loss 
     regardless of when an insurance claim is paid.
       ``(d) Termination of Mortgagee's Authority.--If a mortgagee 
     to which the Secretary has made a delegation under this 
     section violates the requirements and procedures established 
     by the Secretary or the Secretary determines that other good 
     cause exists, the Secretary may cancel a delegation of 
     authority under this section to the mortgagee by giving 
     notice to the mortgagee. Such a cancellation shall be 
     effective upon receipt of the notice by the mortgagee or at a 
     later date specified by the Secretary. A decision by the 
     Secretary to cancel a delegation shall be final and 
     conclusive and shall not be subject to judicial review.
       ``(e) Requirements and Procedures.--Before approving a 
     delegation under this section, the Secretary shall issue 
     regulations establishing appropriate requirements and 
     procedures, including requirements and procedures governing 
     the indemnification of the Secretary by the mortgagee.''.
                                 ______
                                 

                   BOND (AND BYRD) AMENDMENT NO. 5160

  Mr. BOND (for himself and Mr. Byrd) proposed an amendment to the 
bill, H.R. 3666, supra; as follows:

       On page 77, line 22, after the sentence ending ``September 
     30, 1998.'' insert:
       The first sentence of section 1376(c) of the National Flood 
     Insurance Act of 1968, as amended (42 U.S.C. 4026), as 
     amended by striking all after ``this subchapter'' and 
     inserting: ``such sums as may be necessary through September 
     30, 1997 for studies under this title.''
       On page 78, line 5, after the sentence ending ``Insurance 
     Reform Act of 1994.'' insert:
       Section 1319 of the National Flood Insurance Act of 1968, 
     as amended (42 U.S.C. 4026), is amended by striking out 
     September 30, 1996.'', and inserting ``September 30, 1997.''
                                 ______
                                 

                  BOND (AND OTHERS) AMENDMENT NO. 5161

  Mr. BOND (for himself, Mr. Cohen, and Ms. Snowe) proposed an 
amendment to the bill, H.R. 3666, supra; as follows:

       On page 72, line 15, before the period, insert: ``: 
     Provided further, That the funds made available in Public Law 
     103-327 for a grant to the City of Bangor, Maine, in 
     accordance with House Report 103-715, shall be available for 
     a grant to that city for meeting combined sewer overflow 
     requirements''.
                                 ______
                                 

                  BOND (AND OTHERS) AMENDMENT NO. 5162

  Mr. BOND (for himself, Mr. Burns, and Ms. Mikulski) proposed an 
amendment to the bill, H.R. 3666, supra; as follows:

       At the end of title IV, add the following:

     SEC. 4  . SENSE OF THE SENATE WITH REGARD TO COMPLIANCE WITH 
                   INTERNATIONAL OBLIGATIONS.

       (a) Findings.--Congress finds that--
       (1) in response to a dispute settlement finding against the 
     United States by the World Trade Organization, the United 
     States informed the World Trade Organization on June 19, 
     1996, that the United States intends to meet its 
     international obligations to the World Trade Organization 
     with respect to the Environmental Protection Agency's 
     requirements on imported reformulated and conventional 
     gasoline;
       (2) the Environmental Protection Agency has initiated an 
     open process to examine any and all options for compliance 
     with international obligations of the United States in which 
     a key criterion will be fully protecting public health and 
     the environment; and
       (3) many United States environmental and industrial 
     organizations are concerned about the ``Regulation of Fuels 
     and Fuel Additives: Individual Foreign Refinery Baseline 
     Requirements for Reformulated Gasoline'' proposed on May 3, 
     1994 (59 Fed. Reg. 84).
       (b) Sense of the Senate.--It is the sense of the Senate 
     that, in evaluating any option for compliance with 
     international obligations, the Administrator of the 
     Environmental Protection Agency should--
       (1) take fully into account the protection of public health 
     and the environment and the international obligations of the 
     United States as a member of the World Trade Organization;
       (2) ensure that the compliance review process not result in 
     the degradation of the gasoline quality required by the Clean 
     Air Act (42 U.S.C. 7401 et seq.) with respect to conventional 
     and reformulated gasoline;
       (3) not recognize individual foreign refiner baselines 
     unless the Administrator determines that the issues of 
     auditing, inspection of foreign facilities, and enforcement 
     have been adequately addressed; and
       (4) provide a full and open administrative process in the 
     formulation of any final rule.
                                 ______
                                 

                  MACK (AND OTHERS) AMENDMENT NO. 5163

  Mr. BOND (for Mr. Mack for himself, Mr. Graham, and Mr. Lieberman) 
proposed an amendment to the bill, H.R. 3666, supra; as follows:

       At the end of title IV, add the following:

     SEC. 4  . IMPLEMENTATION OF COMPREHENSIVE CONSERVATION AND 
                   MANAGEMENT PLANS.

       Notwithstanding section 320(g) of the Federal Water 
     Pollution Control Act (33 U.S.C. 1330(g)), funds made 
     available pursuant to authorization under such section for 
     fiscal year 1997 and prior fiscal years may be used for 
     implementing comprehensive conservation and management plans.
                                 ______
                                 

                 CRAIG (AND OTHERS) AMENDMENT NO. 5164

  Mr. BOND (for Mr. Craig, for himself, Mr. Sarbines, Ms. Moseley-
Braun, Mr. Kerry, and Mrs. Murray) proposed an amendment to the bill, 
H.R. 3666, supra; as follows:

       On page 30, line 14, strike ``$6,590,000,000'', and insert 
     ``$6,740,000,000''.
       On page 31, strike the proviso beginning on line 16, and 
     insert the following: ``Provided further, That of the total 
     amount provided under this head, $500,000,000 shall be 
     available for use in conjunction with properties that are 
     eligible for assistance under the Low Income Housing 
     Preservation and Resident Homeownership Act of 1990 (LIHPRHA) 
     or the Emergency Low-Income Housing Preservation Act of 1987 
     (ELIPHA): Provided further, that amounts recaptured from 
     interest reduction payment contracts for section 236 projects 
     whose owners prepay their mortgages during fiscal year 1997 
     shall be rescinded.''
                                 ______
                                 

                KERRY (AND DOMENICI) AMENDMENT NO. 5165

  Mr. BOND (for Mr. Kerry, for himself, and Mr. Domenici) proposed an 
amendment to the bill, H.R. 3666, supra; as follows:

       On page 30, line 9, delete the period and insert the 
     following: ``; Provided, that of the total amount made 
     available under this head, $50,000,000 shall be made 
     available to nonelderly disabled families affected by the 
     designation of a public housing development under section 7 
     of such Act or the establishment of preferences in accordance 
     with section 651 of the Housing and Community Development Act 
     of 1992 [42 U.S.C. 13611].''
                                 ______
                                 

                        BOND AMENDMENT NO. 5166

       Mr. BOND proposed an amendment to the bill, H.R. 3666, 
     supra; as follows:

       On page 72, line 15, before the period, insert: ``: 
     Provided further, That, notwithstanding any other provision 
     of law, a State that

[[Page S9748]]

     did not receive, in fiscal year 1996, grants under title VI 
     of the Federal Water Pollution Control Act, as amended, that 
     obligated all the funds allotted to it from the $725,000,000 
     that became available for that purpose on August 1, 1996, may 
     receive reallotted funds from the fiscal year 1966 
     appropriation, provided the State receives such grants in 
     fiscal year 1997''.
                                 ______
                                 

                  BOND (AND OTHERS) AMENDMENT NO. 5167

  Mr. BOND (for himself, Mr. D'Amato, and Mr. Bennett) proposed an 
amendment to the bill, H.R. 3666, supra; as follows:

       On page 57, strike line 3 and all that follows through page 
     58, line 20, and insert the following:

     SEC. 211. SECTION 8 CONTRACT RENEWAL AUTHORITY.

       (a) Definitions.--For purposes of this section--
       (1) the term ``expiring contract'' means a contract for 
     project-based assistance under section 8 of the United States 
     Housing Act of 1937 that expires during fiscal year 1997;
       (2) the term ``family'' has the same meaning as in section 
     3(b) of the United States Housing Act of 1937;
       (3) the term ``multifamily housing project'' means a 
     property consisting of more than 4 dwelling units that is 
     covered in whole or in part by a contract for project-based 
     assistance under section 8 of the United States Housing Act 
     of 1937;
       (4) the term ``owner'' has the same meaning as in section 
     8(f) of the United States Housing Act of 1937;
       (5) the term ``project-based assistance'' means rental 
     assistance under section 8 of the United States Housing Act 
     of 1937 that is attached to a multifamily housing project;
       (6) the term ``public agency'' means a State housing 
     finance agency, a local housing agency, or other agency with 
     a public purpose and status;
       (7) the term ``Secretary'' means the Secretary of Housing 
     and Urban Development; and
       (8) the term ``tenant-based assistance'' has the same 
     meaning as in section 8(f) of the United States Housing Act 
     of 1937.
       (b) Section 8 Contract Renewal Authority.--
       (1) In general.--Notwithstanding section 405(a) of the 
     Balanced Budget Downpayment Act, I, upon the request of the 
     owner of a multifamily housing project that is covered by an 
     expiring contract, the Secretary shall use amounts made 
     available for the renewal of assistance under section 8 of 
     the United States Housing Act of 1937 to renew the expiring 
     contract as project-based assistance for a period of not more 
     than 1 year, at rent levels that are equal to those under the 
     expiring contract as of the date on which the contract 
     expires, only if those rent levels do not exceed 120 percent 
     of fair market rent for the market area in which the project 
     is located.
       (2) Exemption for state and local housing agency 
     projects.--Notwithstanding paragraph (1), upon the expiration 
     of an expiring contract with rent levels that exceed the 
     percentage described in that paragraph, if the Secretary 
     determines that the primary financing or mortgage insurance 
     for the multifamily housing project that is covered by that 
     expiring contract was provided by a public agency, the 
     Secretary shall, upon the request of the public agency, renew 
     the expiring contract--
       (A) for a period of not more than 1 year; and
       (B) at rent levels that are equal to those under the 
     expiring contract as of the date on which the contract 
     expires.
       (3) Ineligible contracts.--
       (A) Participation in demonstration.--For contracts covering 
     a multifamily housing project that expire during fiscal year 
     1997 with rent levels that exceed the percentage described in 
     paragraph (1), the Secretary shall, at the request of the 
     owner of the project, include that multifamily housing 
     project in the demonstration program under section 212 of 
     this Act. The Secretary shall ensure, to the maximum extent 
     practicable, that a project in the demonstration is 
     maintained as affordable for low-income families for the 
     maximum feasible period of time.
       (B) Effect of material adverse actions or omissions.--
     Notwithstanding paragraph (1) or any other provision of law, 
     the Secretary shall not renew an expiring contract if the 
     Secretary determines that the owner of the multifamily 
     housing project has engaged in material adverse financial or 
     managerial actions or omissions with regard to the project 
     (or with regard to other similar projects if the Secretary 
     determines that such actions or omissions constitute a 
     pattern of mismanagement that would warrant suspension or 
     debarment by the Secretary).
       (C) Transfer of property.--For properties disqualified from 
     the demonstration program because of actions by an owner or 
     purchaser in accordance with subparagraph (B), the Secretary 
     shall establish procedures to facilitate the voluntary sale 
     or transfer of the property, with a preference for tenant 
     organizations and tenant-endorsed community-based nonprofit 
     and public agency purchasers meeting such reasonable 
     qualifications as may be established by the Secretary.
       (4) Tenant protections.--To the extent provided in advance 
     in an appropriations Act, any family residing in an assisted 
     unit in a multifamily housing project that is covered by an 
     expiring contract that is not renewed, shall be offered 
     tenant-based assistance before the date on which the contract 
     expires or is not renewed.

     SEC. 212. FHA MULTIFAMILY DEMONSTRATION AUTHORITY.

       (a) In General.--
       (1) Repeal.--
       (A) In general.--Section 210 of the Departments of Veterans 
     Affairs and Housing and Urban Development and Independent 
     Agencies Appropriations Act, 1996 (110 Stat. 1321) is 
     repealed.
       (B) Exception.--Notwithstanding the repeal under 
     subparagraph (A), amounts made available under section 210(f) 
     the Departments of Veterans Affairs and Housing and Urban 
     Development and Independent Agencies Appropriations Act, 1996 
     shall remain available for the demonstration program under 
     this section through the end of fiscal year 1997.
       (2) Savings provisions.--Nothing in this section shall be 
     construed to affect any commitment entered into before the 
     date of enactment of this Act under the demonstration program 
     under section 210 of the Departments of Veterans Affairs and 
     Housing and Urban Development and Independent Agencies 
     Appropriations Act, 1996.
       (3) Definitions.--For purposes of this section--
       (A) the term ``affordable'' means, with respect to a 
     dwelling unit, a unit for which the rents are restricted to 
     the rent levels established under a mortgage restructuring;
       (B) the term ``demonstration program'' means the program 
     established under subsection (b);
       (C) the term ``designee'' means a third-party public agency 
     that enters into an arrangement with the Secretary under 
     subsection (b)(3);
       (D) the term ``expiring contract'' means a contract for 
     project-based assistance under section 8 of the United States 
     Housing Act of 1937 that expires during fiscal year 1997;
       (E) the term ``family'' has the same meaning as in section 
     3(b) of the United States Housing Act of 1937;
       (F) the term ``multifamily housing project'' means a 
     property consisting of more than 4 dwelling units that is 
     covered in whole or in part by a contract for project-based 
     assistance;
       (G) the term ``owner'' has the same meaning as in section 
     8(f) of the United States Housing Act of 1937;
       (H) the term ``project-based assistance'' means rental 
     assistance under section 8 of the United States Housing Act 
     of 1937 that is attached to a multifamily housing project;
       (I) the term ``Secretary'' means the Secretary of Housing 
     and Urban Development; and
       (J) the term ``tenant-based assistance'' has the same 
     meaning as in section 8(f) of the United States Housing Act 
     of 1937.
       (b) Demonstration Authority.--
       (1) In general.--The Secretary shall administer a 
     demonstration program with respect to multifamily projects--
       (A) whose owners agree to participate;
       (B) with rents on units assisted under section 8 of the 
     United States Housing Act of 1937 that are, in the aggregate, 
     in excess of 120 percent of the fair market rent of the 
     market area in which the project is located; and
       (C) the mortgages of which are insured under the National 
     Housing Act.
       (2) Purpose.--The demonstration program shall be designed 
     to test the feasibility and desirability of--
       (A) ensuring, to the maximum extent practicable, that the 
     debt service and operating expenses, including adequate 
     reserves, attributable to such multifamily projects can be 
     supported at the comparable market rent with or without 
     mortgage insurance under the National Housing Act and with or 
     without additional subsidies;
       (B) utilizing project-based assistance, while taking into 
     account the capital needs of the projects and the need for 
     assistance to low- and very low-income families in such 
     projects; and
       (C) preserving low-income rental housing affordability and 
     availability while reducing the long-term cost of project-
     based assistance.
       (3) Designees.--In carrying out the demonstration program, 
     the Secretary may enter into arrangements with one or more 
     third-party public entities, under which the Secretary may 
     provide for the assumption by the designee (by delegation, by 
     contract, or otherwise) of some or all of the functions, 
     obligations, and benefits of the Secretary.
       (c) Goals.--
       (1) In general.--The Secretary shall carry out the 
     demonstration program in a manner that will protect the 
     financial interests of the Federal Government through debt 
     restructuring and subsidy reduction and, in the least costly 
     fashion, address the goals of--
       (A) maintaining existing affordable housing stock in a 
     decent, safe, and sanitary condition;
       (B) minimizing the involuntary displacement of tenants;
       (C) taking into account housing market conditions;
       (D) encouraging responsible ownership and management of 
     property;
       (E) minimizing any adverse income tax impact on property 
     owners; and

[[Page S9749]]

       (F) minimizing any adverse impacts on residential 
     neighborhoods and local communities.
       (2) Balance of competing goals.--In determining the manner 
     in which a mortgage is to be restructured or a subsidy 
     reduced under this subsection, the Secretary may balance 
     competing goals relating to individual projects in a manner 
     that will further the purposes of this section.
       (d) Joint Venture Arrangements.--
       (1) In general.--In carrying out the demonstration program, 
     the Secretary may enter into joint venture arrangements with 
     designees, under which the Secretary may provide for the 
     assumption by the third parties (by delegation, by contract, 
     or otherwise) of some or all of the functions, obligations, 
     and benefits of the Secretary.
       (2) Preference.--In entering into any arrangement under 
     this subsection, the Secretary shall give preference to State 
     housing finance agencies and local housing agencies to act as 
     designees to the extent such agencies are determined to be 
     qualified by the Secretary.
       (3) Public agencies.--Each joint venture arrangement 
     entered into under this subsection shall include a public 
     agency as the primary partner.
       (4) Designee partnerships.--For purposes of any joint 
     venture arrangement under this subsection, designees are 
     encouraged to develop partnerships with each other, and to 
     contract or subcontract with other entities, including--
       (A) public housing agencies;
       (B) financial institutions;
       (C) mortgage servicers;
       (D) nonprofit and for-profit housing organizations;
       (E) the Federal National Mortgage Association;
       (F) the Federal Home Loan Mortgage Corporation;
       (G) Federal Home Loan Banks; and
       (H) other State or local mortgage insurance companies or 
     bank lending consortia.
       (e) Long-Term Affordability.--After the renewal of a 
     section 8 contract pursuant to a restructuring under this 
     section, the owner shall accept each offer to renew the 
     section 8 contract, for a period of 20 years from the date of 
     the renewal under the demonstration, if the offer to renew is 
     on terms and conditions, as agreed to by the Secretary or 
     designee and the owner under a restructuring.
       (f) Procedures.--
       (1) Notice of participation in demonstration.--Not later 
     than 45 days before the date of expiration of an expiring 
     contract (or such later date, as determined by the Secretary, 
     for good cause), the owner of the multifamily housing project 
     covered by that expiring contract shall notify the Secretary 
     or designee of the owner's intent to participate in the 
     demonstration program.
       (2) Demonstration contract.--Upon receipt of a notice under 
     paragraph (1), the owner and the Secretary or designee shall 
     enter into a demonstration contract, which shall provide for 
     initial section 8 project-based rents at the same rent levels 
     as those under the expiring contract or, if practical, the 
     budget-based rent to cover debt service, reasonable operating 
     expenses (including reasonable and appropriate services), and 
     a reasonable return on equity, as determined solely by the 
     Secretary. The demonstration contract shall be for the 
     minimum term necessary for the rents and mortgages of the 
     multifamily housing project to be restructured under the 
     demonstration program.
       (g) HUD-Owned and HUD-Held Mortgages.--For purposes of 
     carrying out the demonstration program--
       (1) the Secretary may manage and dispose of multifamily 
     properties owned by the Secretary and multifamily mortgages 
     held by the Secretary, on such terms and conditions as the 
     Secretary may determine, without regard to any other 
     provision of law; and
       (2) as provided under subsection (b)(3), the Secretary may 
     delegate to one or more designees the authority to carry out 
     some or all of the functions and responsibilities of the 
     Secretary in connection with mortgages held by the Secretary 
     under the National Housing Act.
       (h) Demonstration Actions.--For purposes of carrying out 
     the demonstration program, and in order to ensure that 
     contract rights are not abrogated, subject to such third 
     party consents as are necessary (if any), including consent 
     by the Government National Mortgage Association if it owns a 
     mortgage insured by the Secretary, consent by an issuer under 
     the mortgage-backed securities program of the Association, 
     subject to the responsibilities of the issuer to its security 
     holders and the Association under such program, and consent 
     by parties to any contractual agreement which the Secretary 
     proposes to modify or discontinue, the Secretary or, except 
     with respect to paragraph (2), designee, shall take not less 
     than 1 of the actions specified in paragraphs (6), (7), and 
     (8) and may take any of the following actions:
       (1) Removal of restrictions.--
       (A) In general.--Notwithstanding any other provision of 
     law, and subject to the agreement of the owner of the project 
     and after consultation with the tenants of the project, the 
     Secretary or designee may remove, relinquish, extinguish, 
     modify, or agree to the removal of any mortgage, regulatory 
     agreement, project-based assistance contract, use agreement, 
     or restriction that had been imposed or required by the 
     Secretary, including restrictions on distributions of income 
     which the Secretary or designee determines would interfere 
     with the ability of the project to operate without above-
     market rents.
       (B) Accumulated residual receipts.--The Secretary or 
     designee may require an owner of a property assisted under 
     the section 8 new construction/substantial rehabilitation 
     program under the United States Housing Act of 1937 to apply 
     any accumulated residual receipts toward effecting the 
     purposes of this section.
       (2) Reinsurance.--With respect to not more than 5,000 units 
     during fiscal year 1997, the Secretary may enter into 
     contracts to purchase reinsurance, or enter into 
     participations or otherwise transfer economic interest in 
     contracts of insurance or in the premiums paid, or due to be 
     paid, on such insurance to the designee, on such terms and 
     conditions as the Secretary may determine.
       (3) Induce participation of third parties.--Notwithstanding 
     any other provision of law, of amounts made available under 
     appropriations Acts, including amounts made available under 
     this section, the Secretary or designee may enter into such 
     agreements, provide such concessions, incur such costs, make 
     such grants (including grants to cover all or a portion of 
     the rehabilitation costs for a project) and other payments, 
     and provide other valuable consideration, as may reasonably 
     be necessary to induce participation of owners, lenders, 
     servicers, third parties, and other entities in the 
     demonstration program, including the use of fees for contract 
     administration under section 8 of the United States Housing 
     Act of 1937 for purposes of any contract restructured or 
     renewed under the demonstration program.
       (4) Full or partial payment of claim.--Notwithstanding any 
     other provision of law, the Secretary may make a full payment 
     of claim or partial payment of claim prior to default.
       (5) Credit enhancement.--
       (A) In general.--The Secretary or designee may provide FHA 
     multifamily mortgage insurance, reinsurance, or other credit 
     enhancement alternatives, including retaining the existing 
     FHA mortgage insurance on a restructured first mortgage at 
     market value or using the multifamily risk-sharing mortgage 
     programs, as provided under section 542 of the Housing and 
     Community Development Act of 1992.
       (B) Effect of limitations.--Any limitations on the number 
     of units available for mortgage insurance under section 542 
     shall not apply to insurance issued for purposes of the 
     demonstration program.
       (C) Maximum percentage.--During fiscal year 1997, not more 
     than 10 percent of multifamily housing projects with expiring 
     contracts may be restructured without FHA insurance, unless 
     otherwise agreed by the owner of a project.
       (D) Credit subsidy.--Subject to the funding restrictions 
     under subsection (l), any credit subsidy costs of providing 
     mortgage insurance shall be paid from the General Insurance 
     Fund and the Special Risk Insurance Fund.
       (6) Mortgage restructuring.--
       (A) In general.--The Secretary or designee may restructure 
     mortgages to provide a restructured first mortgage to cover 
     debt service and operating expenses at the market rent, and a 
     second mortgage equal to the difference between the 
     restructured first mortgage and the mortgage balance of the 
     eligible multifamily housing project at the time of 
     restructuring.
       (B) Interest rate on second mortgage.--The second mortgage 
     shall bear interest at a rate not to exceed the applicable 
     Federal rate for a term not to exceed 40 years.
       (C) Timing of payments.--If the first mortgage remains 
     outstanding, payments of interest and principal on the second 
     mortgage shall be made from all excess project income only 
     after the payment of all reasonable and necessary operating 
     expenses (including deposits in a reserve for replacement), 
     debt service on the first mortgage, and such other 
     expenditures as may be approved by the Secretary.
       (D) Assumption of second mortgage.--The second mortgage 
     shall be assumable by any subsequent purchaser of the 
     multifamily housing project.
       (E) Disposition of property.--The balance of the principal 
     and accrued interest due under the second mortgage shall be 
     fully payable upon disposition of the property, unless the 
     mortgage is assumed under subparagraph (D).
       (F) Second mortgage repayment.--The owner shall begin 
     repayment of the second mortgage upon full payment of the 
     first mortgage in equal monthly installments in an amount 
     equal to the monthly principal and interest payments formerly 
     paid under the first mortgage.
       (G) Failure to comply.--The principal and interest of a 
     second mortgage shall be immediately due and payable upon a 
     finding by the Secretary that an owner has failed to 
     materially comply with this section or any applicable 
     requirement of the United States Housing Act of 1937 in 
     relation to the project at issue.
       (H) Credit subsidy.--Subject to the funding restrictions 
     under subsection (l), any credit subsidy costs of providing a 
     second mortgage shall be paid from the General Insurance Fund 
     and the Special Risk Insurance Fund.
       (7) Debt forgiveness.--The Secretary or designee, for good 
     cause and at the request of the owner of a multifamily 
     housing project, may forgive at the time of the restructuring 
     of a mortgage any portion of a debt on the project that 
     exceeds the market value of the

[[Page S9750]]

     project. In exchange for debt forgiveness under this 
     paragraph, the project shall remain affordable to low-income 
     families for a period of 20 years, unless otherwise provided 
     by the Secretary.
       (8) Budget-based rents.--During fiscal year 1997, the 
     Secretary or designee may renew an expiring contract, for a 
     period of not more than 1 year, at a budget-based rent that 
     covers debt service, reasonable operating expenses (including 
     all reasonable and appropriate services), and a reasonable 
     return on equity, as determined solely by the Secretary, but 
     that does not exceed the rent levels under the expiring 
     contract. The Secretary may establish a preference under the 
     demonstration program for budget-based rents for unique 
     housing projects, such as projects designated for occupancy 
     by elderly families in rural areas.
       (i) Community and Tenant Input.--In carrying out this 
     section, the Secretary shall develop procedures to provide 
     appropriate and timely notice, including an opportunity for 
     comment, to officials of the unit of general local government 
     affected, the community in which the project is situated, and 
     the tenants of the project.
       (j) Limitation on Demonstration Authority.--The Secretary 
     shall carry out the demonstration program with respect to 
     mortgages not to exceed 50,000 units.
       (k) Priority for Participation.--The Secretary or designee 
     shall give priority for participation in the demonstration 
     program to any owner of an eligible multifamily housing 
     project with an expiring contract for project-based 
     assistance.
       (l) Funding.--In addition to the $30,000,000 made available 
     under section 210 of the Departments of Veterans Affairs and 
     Housing and Urban Development and Independent Agencies 
     Appropriations Act, 1996 (110 Stat. 1321), for the costs 
     (including any credit subsidy costs associated with providing 
     direct loans or mortgage insurance) of modifying and 
     restructuring loans held or guaranteed by the Federal Housing 
     Administration, as authorized under this section, 
     $10,000,000, are hereby appropriated, to remain available 
     until September 30, 1998.
       (m) Report to Congress.--
       (1) In general.--
       (A) Biannual reports.--Not less than biannually, the 
     Secretary shall submit to the Congress a report describing 
     and assessing the programs carried out under the 
     demonstration program.
       (B) Final report.--Not later than 6 months after the end of 
     the demonstration program, the Secretary shall submit to the 
     Congress a final report on the demonstration program.
       (2) Contents.--Each report submitted under paragraph (1) 
     shall include--
       (A) any findings and recommendations for legislative 
     action; and
       (B) a description of the status of each multifamily housing 
     project selected for the demonstration program.
       (3) Contents of final report.--The report submitted under 
     paragraph (1)(B) may include--
       (A) with respect to each multifamily housing project 
     participating in the demonstration program, information 
     relating to--
       (i) the size of the project;
       (ii) the geographic locations of the project, by State and 
     region;
       (iii) the physical and financial condition of the project;
       (iv) the occupancy profile of the project, including the 
     income, family size, race, and ethnic origin of the tenants, 
     and the rents paid by those tenants;
       (v) a description of actions undertaken pursuant to this 
     section, including a description of the effectiveness of such 
     actions and any impediments to the transfer or sale of the 
     projects;
       (vi) a description of the extent to which the demonstration 
     program has displaced tenants of the project;
       (vii) a description of the impact to which the 
     demonstration program has affected the localities and 
     communities in which the projects are located; and
       (viii) a description of the extent to which the 
     demonstration program has affected the owners of the 
     projects; and
       (B) a description of any of the functions performed in 
     connection with this section that are transferred or 
     contracted out to public or private entities or to State 
     entities.

                          ____________________