[Congressional Record Volume 149, Number 39 (Tuesday, March 11, 2003)]
[Senate]
[Pages S3518-S3519]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH (for himself, Mr. Breaux, Mr. Allard, Ms. Collins, 
        Mr. Sununu, and Ms. Snowe):
  S. 595. A bill to amend the Internal Revenue Code of 1986 to repeal 
the required use of certain principal repayments on mortgage subsidy 
bond financings to redeem bonds, to modify the purchase price 
limitation under mortgage subsidy bond rules based on median family 
income, and for other purposes; to the Committee on Finance.
  Mr. HATCH. Mr. President, on behalf of myself and Senator Breaux, I 
rise today to introduce the Housing Bond and Credit Modernization and 
Fairness Act of 2003. We are joined in this legislation by Senators 
Allard, Collins, Sununu, and Snowe.
  This bill will bring about important modifications to two important 
and popular Federal affordable housing programs--Housing Bonds, or 
single family Mortgage Revenue Bonds, MRBs, as they are commonly known, 
and the Low Income Housing Tax Credit. My long-time partnership on 
these issues with Senator Breaux is one indication of the broad 
bipartisan support enjoyed by these programs. Another is the fact that 
our identical bill in the 107th Congress attracted 79 members of this 
body as cosponsors.
  These programs are popular because they are state-administered, 
federal tax incentives designed to encourage private investment in 
first-time homebuyer mortgages for low and moderate-income families and 
privately developed and owned apartments for low-income renters. 
Moreover, they have a proven track record of being effective in 
providing housing to families who need it.
  As with most things, however, these programs could use some 
improvements. Specifically, the current law governing these two housing 
programs includes some obsolete provisions that act as barriers and 
limit their effectiveness. The legislation we are introducing today 
would modernize these programs and remove these barriers.
  The Housing Bond and Credit Modernization and Fairness Act does three 
things.
  First, it repeals the so-called ``Ten-Year Rule,'' a provision added 
to the MRB program in 1988 that prevents States from using homeowner 
payments on such mortgages to make new mortgages to additional 
qualified purchasers. For each day the Ten-Year Rule is in effect, 
States lose millions of dollars in financing for first-time homebuyer 
mortgages, amounting to more than $14 billion in mortgage authority 
between 2001 and 2005. This barrier keeps tens of thousands of 
additional qualified lower income homebuyers from getting an affordable 
MRB-financed mortgage, including many in my home State of Utah. Our 
bill eliminates the Ten-Year Rule to allow States to use mortgage 
payments to finance additional lower income mortgages.
  Second, it replaces the present unworkable price limit for homes 
these mortgages can finance with a simple limit that works. Let me 
explain. Current law limits the price of homes purchased with MRB-
financed mortgages to 90 percent of the average area home price. States 
have the option of determining their own purchase price limits or 
relying on Treasury-published safe harbor limits.
  Most States have relied on the Treasury limits because it is costly 
and burdensome to collect accurate and comprehensive sales price data. 
The problem is that the Treasury Department has not been providing 
recent data. This has especially been a problem for states, such as 
Utah, with many rural areas. In fact, Treasury last issued safe harbor 
limits in 1994, based on 1993 data. Home prices have risen 
significantly in the past ten years. This means that the MRB program 
simply cannot work in many parts of many states because qualified 
buyers cannot find homes priced below the outdated limits. To have an 
outdated and unworkable requirement that holds back the families that 
this program is designed to help is poor public policy that cries out 
for remedy.
  The answer, which is included in our bill, is to replace the present 
limit, set in Washington, by a simple formula limiting the purchase 
price to three and a half times the qualifying income under the 
program.
  Finally, the bill makes Housing Credit apartment production viable in 
rural areas by allowing States to use statewide median incomes as the 
basis for the income limits in that program. This change would apply 
the same methodology for determining qualifying income levels used in 
the MRB Program. HUD data shows that current income limits inhibit 
Housing Credit development in more than 1,300 nonmetropolitan counties 
across the country.
  I am pleased to tell my colleagues that the changes proposed by the 
Housing Bond and Credit Modernization and Fairness Act have been 
endorsed by the bipartisan National Governors Association, the National 
Council of State Housing Agencies, and nearly every major national 
housing organization. These groups know how important the Housing Bond 
and Housing Credit programs are in giving States the ability to meet 
the housing needs of low and moderate-income families.
  The Housing Credit and the MRB programs work and they are important 
to each State. This bill gives the Congress a golden opportunity to 
create new housing opportunities for tens of thousands of low and 
moderate-income families every year, simply by improving these existing 
and proven programs. I encourage my colleagues to join this bipartisan 
effort.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 595

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Housing Bond and Credit 
     Modernization and Fairness Act of 2003''.

     SEC. 2. REPEAL OF REQUIRED USE OF CERTAIN PRINCIPAL 
                   REPAYMENTS ON MORTGAGE SUBSIDY BOND FINANCINGS 
                   TO REDEEM BONDS.

       (a) In General.--Subparagraph (A) of section 143(a)(2) of 
     the Internal Revenue Code of 1986 (defining qualified 
     mortgage issue) is amended by adding ``and'' at the end of 
     clause (ii), by striking ``, and'' at the end of clause (iii) 
     and inserting a period, and by striking clause (iv) and the 
     last sentence.
       (b) Conforming Amendment.--Clause (ii) of section 
     143(a)(2)(D) of such Code is amended by striking ``(and 
     clause (iv) of subparagraph (A))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to repayments received after the date of the 
     enactment of this Act.

     SEC. 3. MODIFICATION OF PURCHASE PRICE LIMITATION UNDER 
                   MORTGAGE SUBSIDY BOND RULES BASED ON MEDIAN 
                   FAMILY INCOME.

       (a) In General.--Paragraph (1) of section 143(e) of the 
     Internal Revenue Code of 1986

[[Page S3519]]

     (relating to purchase price requirement) is amended to read 
     as follows:
       ``(1) In general.--An issue meets the requirements of this 
     subsection only if the acquisition cost of each residence the 
     owner-financing of which is provided under the issue does not 
     exceed the greater of--
       ``(A) 90 percent of the average area purchase price 
     applicable to the residence, or
       ``(B) 3.5 times the applicable median family income (as 
     defined in subsection (f)).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to financing provided, and mortgage credit 
     certificates issued, after the date of the enactment of this 
     Act.

     SEC. 4. DETERMINATION OF AREA MEDIAN GROSS INCOME FOR LOW-
                   INCOME HOUSING CREDIT PROJECTS.

       (a) In General.--Paragraph (4) of section 42(g) of the 
     Internal Revenue Code of 1986 (relating to certain rules made 
     applicable) is amended by striking the period at the end and 
     inserting ``and the term `area median gross income' means the 
     amount equal to the greater of--
       ``(A) the area median gross income determined under section 
     142(d)(2)(B), or
       ``(B) the statewide median gross income for the State in 
     which the project is located.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to--
       (1) housing credit dollar amounts allocated after the date 
     of the enactment of this Act, and
       (2) buildings placed in service after such date to the 
     extent paragraph (1) of section 42(h) of the Internal Revenue 
     Code of 1986 does not apply to any building by reason of 
     paragraph (4) thereof.
                                 ______