[Congressional Record Volume 152, Number 123 (Wednesday, September 27, 2006)]
[House]
[Pages H7571-H7573]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1730
                  MARK-TO-MARKET EXTENSION ACT OF 2006

  Mr. OXLEY. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 6115) to extend the authority of the Secretary of Housing and 
Urban Development to restructure mortgages and rental assistance for 
certain assisted multifamily housing.
  The Clerk read as follows:

                               H.R. 6115

       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 ``Mark-to-Market Extension Act 
     of 2006''.

     SEC. 2. REAUTHORIZATION.

       Section 579 of the Multifamily Assisted Housing Reform and 
     Affordability Act of 1997 (42 U.S.C. 1437f note) is amended--
       (1) in subsection (a)(1), by striking ``October 1, 2006'' 
     and inserting ``October 1, 2011''; and
       (2) in subsection (b), by striking ``October 1, 2006'' and 
     inserting ``October 1, 2011''.

     SEC. 3. EXCEPTION RENTS.

       Section 514(g)(2)(A) of the Multifamily Assisted Housing 
     Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) 
     is amended by striking ``five percent'' and inserting ``nine 
     percent''.

     SEC. 4. PERIOD OF ELIGIBILITY FOR NONPROFIT DEBT RELIEF.

       Section 517(a)(5) of the Multifamily Assisted Housing 
     Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) 
     is amended by inserting before the period at the end the 
     following: ``: Provided, That if such purchaser acquires such 
     project subsequent to the date of recordation of the 
     affordability agreement described in section 514(e)(6), (A) 
     such purchaser must acquire such project on or before the 
     later of (i) five years after the date of recordation of the 
     affordability agreement and (ii) two years after the date of 
     enactment of this title; and (B) the Secretary must have 
     received, and determined acceptable, such purchaser's 
     application for modification, assignment or forgiveness prior 
     to such purchaser's acquisition of the project''.

     SEC. 5. DEFINITIONS.

       Section 512 of the Multifamily Assisted Housing Reform and 
     Affordability Act of 1997 (42 U.S.C. 1437f note) is amended 
     by adding at the end the following new paragraph:
       ``(20) Disaster-damaged eligible project.--The term 
     `disaster-damaged eligible project' means an eligible 
     multifamily housing project--
       ``(A) that is located in a county that was declared a major 
     disaster area on or after January 1, 2005, by the President 
     pursuant to the Robert T. Stafford Disaster Relief and 
     Emergency Assistance Act (42 U.S.C. 5121 et seq);
       ``(B) whose owner carried casualty and liability insurance 
     covering such project in amounts required by the Secretary;
       ``(C) that suffered damages not covered by such insurance 
     that the Secretary determines are likely to exceed $5,000 per 
     unit in connection with the natural disaster that was the 
     subject of such designation; and
       ``(D) whose owner requests restructuring within two years 
     following the date that such damages were incurred.

     Disaster-damaged eligible projects shall be eligible without 
     regard to the relationship between rent level for the 
     assisted units and comparable market rents.''.

     SEC. 6. DISASTER-DAMAGED ELIGIBLE PROJECTS.

       (a) Market Rent Determinations.--Subparagraph (B) of 
     section 514(g)(1) of the Multifamily Assisted Housing Reform 
     and Affordability Act of 1997 (42 U.S.C. 1437f note) is 
     amended to read as follows:
       ``(B) if those rents cannot be determined--
       ``(i) with respect to a disaster-damaged eligible project, 
     are equal to 100 percent of the fair market rents for the 
     relevant market area (in effect at the time of such 
     disaster); and
       ``(ii) with respect to other eligible multifamily housing 
     projects, are equal to 90 percent of the fair market rents 
     for the relevant market area.''.
       (b) Owner Investment.--Section 517(c) of the Multifamily 
     Assisted Housing Reform and Affordability Act of 1997 (42 
     U.S.C. 1437f note) is amended by adding at the end the 
     following new paragraph:
       ``(3) Properties damaged by natural disasters.--With 
     respect to a disaster-damaged eligible project, the owner 
     contribution toward rehabilitation needs shall be determined 
     in accordance with paragraph (2)(C).''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Ohio (Mr. Oxley) and the gentlewoman from California (Ms. Waters) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Ohio.


                             General Leave

  Mr. OXLEY. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
on this legislation and to insert extraneous material thereon.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Ohio?
  There was no objection.
  Mr. OXLEY. Mr. Speaker, I yield myself such time as I may consume.
  I rise in strong support of H.R. 6115, the Mark-to-Market Extension 
Act of 2006, legislation introduced by my friend and colleague from 
Ohio, Congresswoman Deborah Pryce. This legislation extends the 
Multifamily Assisted Housing Restructuring and Affordability Act of 
1997 for 5 years beyond its current expiration date of September 30, 
2006.
  Legislation creating the Mark-to-Market program was enacted in 1997 
to reduce the cost to the Federal Government of renewing section 8 
contracts. At that time, 4,000 multifamily projects with FHA-insured 
mortgages were receiving project-based rent subsidies under section 8 
of the U.S. Housing Act of 1937. The original Housing Assistance 
Payment contracts attached to these projects were written for periods 
ranging from 15 to 40 years. The majority of these projects had units 
with rents that exceeded those for comparable unassisted units; 
however, HUD did not have the authority

[[Page H7572]]

to renew the contract at above-market rents.
  Consequently, few of these projects would have remained financially 
viable when their rental income was reduced to market rates, as owners 
would not have been able to cover their costs. With the reduced rents, 
such projects would most likely have gone into default on their 
mortgages, generating losses to the FHA insurance fund and possibly 
displacing many tenants in those projects.
  Under the current law, if the Mark-to-Market program expires, HUD 
will be required to renew Housing Assistance Payment Contracts at 
market levels, but the authority to restructure mortgage debt will no 
longer be available for projects that have yet to enter the Mark-to-
Market program. Without that authority, many projects would not 
generate sufficient cash flow to support their mortgage after rents are 
reduced to market levels.
  CBO estimates that the cost of restructuring is less expensive than 
the cost of default by about $500,000 per project, on average. 
Consequently, CBO estimates that enacting H.R. 6115 will reduce direct 
spending by $188 million over 5 years principally by avoiding defaults 
on FHA-insured multifamily mortgages that otherwise would occur under 
current law.
  H.R. 6115 will ensure that HUD continues to have the tools necessary 
to restructure mortgages and lower rents, thereby reducing the Fed's 
cost of oversubsidized section 8 properties.
  I want to commend Congresswoman Pryce for her work on this important 
legislation. And I urge the adoption of H.R. 6115, the Mark-to-Market 
Extension Act of 2006.
  Mr. Speaker, I reserve the balance of my time.
  Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume.
  (Ms. WATERS asked and was given permission to revise and extend her 
remarks.)
  Ms. WATERS. Mr. Speaker, I rise in support of H.R. 6115, the Mark-to-
Market Extension Act of 2006.
  I want to thank the gentlewoman from Ohio, Deborah Pryce, for 
sponsoring this bill, along with other cosponsors of the bill, 
including Mr. Gerlach of Pennsylvania; Mr. Tiberi of Ohio; and, of 
course, Ranking Member Frank. The distinguished chairman of the 
Committee on Financial Services, Mr. Oxley, must also be commended for 
moving this important bill to the floor. As the ranking member of the 
Subcommittee on Housing and Community Affairs, I am pleased to be an 
original cosponsor of this bill, and I would like to thank all of the 
members of the subcommittee who supported it.
  H.R. 6115, the Mark-to-Market Extension Act of 2006, will reauthorize 
the Mark-to-Market program. The program is set to expire on September 
30, 2006. Of course, we can ill afford to have any housing program 
eliminated by our failure to act, particularly since the Mark-to-Market 
program ensures that our multifamily rental housing stock remains on 
the market.
  When Congress enacted the Multifamily Assisted Housing Reform and 
Affordability Act of 1997, it was designed to, number one, eliminate 
above-market rents at low- and moderate-income multifamily properties 
with FHA-insured mortgages and project-based section 8 assistance; and, 
number two, preserve affordable rental housing in markets where it is 
needed.
  The Mark-to-Market program was created to address these program 
goals, and it relies basically on several tools: debt restructuring, 
full or partial payment of claims, deferment of mortgage payments, 
credit enhancements, and increased FHA mortgage insurance.
  There is ample evidence that the Mark-to-Market program is critical 
to preserving multifamily housing and to cost savings. According to 
HUD, as of March 2006, the Mark-to-Market program has been used to 
preserve approximately 220,000 affordable rental apartments at savings 
of $1.9 billion. And, in fact, the Congressional Budget Office 
concluded 5 years ago that the cost of restructuring debt for many 
multifamily housing projects is less expensive that the cost of default 
by an estimated $1 million per project.
  Because more than 1,000 projects could be assisted under the Mark-to-
Market program, we will save many multifamily affordable housing units 
over the next 5 years. I am certainly not interested in seeing any of 
the multifamily rental units that are located in my district or in the 
State of California, projects that are in the pipeline in California, 
go into default because the Mark-to-Market program is allowed to 
expire. This tool is too valuable to preserving the affordable housing 
stock across the country to allow it to expire. When I think about it, 
we were very close to losing several major housing programs had our 
Subcommittee on Housing and the full committee not taken action on this 
and other programs.
  Again, this bill not only demonstrates just how serious many members 
of the Committee on Financial Services have been on reaching consensus 
on programs that are important to fighting the affordable housing 
crisis in this country, but the bill recognizes low- and moderate-
income housing needs in many of our communities.
  Yes, H.R. 6115 is being considered by this House at a critical 
juncture because the Mark-to-Market program takes into account the 
serious shortage of the affordable multifamily rental housing in 
America. The Mark-to-Market program applies to FHA-insured multifamily 
projects with project-based assistance under the section 8 program. 
Rents for these projects are in excess of the rents for comparable 
rental units in the area. While many of these projects had been 
developed with rents which were above market, when the 20-year section 
8 contracts began to expire back in the 1990s, the contracts were not 
renewed at above-market rents. This forced many projects into default 
because the owners of the projects could not operate or meet mortgage 
payments at market rents.
  Restructuring the FHA-insured mortgage, which lowers debt service to 
a level that is sustainable at market rent, as well as mechanisms to 
rehabilitate and to replenish reserves, are what makes the Mark-to-
Market program worthy of extension. Under the Mark-to-Market program, 
owners of multifamily projects that have been restructured are required 
to accept section 8 renewal offers and to keep rents affordable 
regardless of whether section 8 assistance is available. The critical 
requirement must be met for the next 30 years.
  In addition, the committee included new provisions to the Mark-to-
Market program that will enable Mark-to-Market mechanisms to be 
extended to damaged properties in disaster areas. The committee 
concluded that by including these properties, many of which are located 
in the gulf region where 170,000 units in New Orleans were lost, that 
the question of eligibility would be eliminated, making M-M tools 
quickly available to the rebuilding efforts. The bill also allows for 
continued debt relief upon the transfer of a Mark-to-Market project to 
any qualified nonprofit purchasers.
  With regard to the use of exception rent, the committee recognized 
that the existing 5 percent cap on rents greater than 100 percent of 
the median is projected to be reached this year, requiring the 
committee to raise the rent ceiling to 9 percent of the Mark-to-Market 
portfolio.
  For all of the above reasons, this is one of the most constructive 
housing bills reported by the Committee on Financial Services this 
year.
  Mr. Speaker, we cannot let the Mark-to-Market program expire, and I 
certainly urge my colleagues to support the bill.
  Mr. FRANK of Massachusetts. Mr. Speaker, will the gentlewoman yield?
  Ms. WATERS. I yield to the gentleman from Massachusetts.
  Mr. FRANK of Massachusetts. Mr. Speaker, I thank the gentlewoman for 
yielding.
  I just wanted to note the good work that we have been able to do in 
our Subcommittee on Housing. There are some differences between the 
parties, and I have to say that we on our side regret that we were not 
able to get into the increased production, but that disagreement, and 
it is an important one, being what it is, hasn't kept us from working 
together in a number of other areas, including some efforts to 
preserve.
  And the leadership that the gentlewoman has shown, and the chairman 
of the full committee has worked there, and I must say the former 
chairman, the gentleman from Ohio, who is not with us now but good work 
should be

[[Page H7573]]

recognized no matter what circumstance has followed, in working 
together, we have managed to do, I think, a good job in the housing 
area. And the gentlewoman from California has been an excellent ranking 
member. This is another good piece of it, and I am very glad that we 
were able to do this today.
  Ms. WATERS. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  Mr. OXLEY. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, just in closing, let me salute our good friend from 
California, who has had a passionate interest in housing ever since she 
got here and has worked extremely well as the ranking member of the 
subcommittee with the chairman and with both the full committee 
chairmen, myself and the gentleman from Ohio. We have surprised a lot 
of people with what we have been able to produce.
  They say politics is the art of the possible, and I think we have 
proven it time and time again. This is commonsense legislation that is 
good for all concerned, and I just want to salute her dedication to 
that effort.
  Ms. PRYCE of Ohio. Mr. Speaker, I would first like to thank Chairman 
Oxley, for this effort and for his great leadership of our Committee 
for the last 6 years. Six very challenging years in which fiscal policy 
really mattered. A time when security, reliability, transparency, made 
a difference. Ms. Waters, and Ranking Member Frank and their staffs for 
their hard work on this legislation. Clinton Jones, Cindy Chetti, and 
Tallman Johnson on the Majority staff have been invaluable.
  We are here today to extend a program that works: A program that 
saves taxpayers money, reduces rents on tenants, and ensures the long-
term viability of affordable housing properties.
  The numbers speak louder than words--In just 7 years, Mark-to-Market 
has resulted in nearly $2 billion in net savings to taxpayers, reduced 
rent costs at over 2,700 properties by an estimated $216 million per 
year, and completed debt-restructuring on over 1,400 properties.
  Central Ohio has been the beneficiary of many of these projects, 
including the Ohio Capital Corporation for Housing's purchase of 12 
HUD-insured properties in urban Columbus, and the continued development 
of a home for disabled individuals near the Ohio State University, the 
Center for Creative Living.
  This bill also includes an amendment I drafted in Committee, which 
provides relief for properties in rural and dense urban areas and non-
profit purchasers, and erases any question of the eligibility of 
properties damaged by Hurricanes Katrina, Rita, Wilma or other natural 
disasters.
  Our action today shows our commitment to acting before this program 
sunsets.
  Mr. OXLEY. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Ohio (Mr. Oxley) that the House suspend the rules and 
pass the bill, H.R. 6115.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of 
those present have voted in the affirmative.
  Mr. OXLEY. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this question will 
be postponed.

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