[House Report 108-164]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    108-164

======================================================================



 
                     AMERICAN DREAM DOWNPAYMENT ACT

                                _______
                                

 June 19, 2003.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Oxley, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1276]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Financial Services, to whom was referred the 
bill (H.R. 1276) to provide downpayment assistance under the 
HOME Investment Partnerships Act, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     3
Hearings.........................................................     7
Committee Consideration..........................................     7
Committee Votes..................................................     7
Committee Oversight Findings.....................................     9
Performance Goals and Objectives.................................     9
New Budget Authority, Entitlement Authority, and Tax Expenditures     9
Committee Cost Estimate..........................................     9
Congressional Budget Office Cost Estimate........................     9
Federal Mandates Statement.......................................    11
Advisory Committee Statement.....................................    11
Constitutional Authority Statement...............................    11
Applicability to Legislative Branch..............................    11
Section-by-Section Analysis......................................    11
Changes in Existing Law Made by the Bill, as Reported............    12
Dissenting Views.................................................    16

                               Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``American Dream Downpayment Act''.

SEC. 2. DOWNPAYMENT ASSISTANCE INITIATIVE UNDER HOME PROGRAM.

  (a) Downpayment Assistance Initiative.--Subtitle E of title II of the 
Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12821) is 
amended to read as follows:

                     ``Subtitle E--Other Assistance

``SEC. 271. DOWNPAYMENT ASSISTANCE INITIATIVE.

  ``(a) Grant Authority.--The Secretary may make grants to 
participating jurisdictions to assist low-income families to achieve 
homeownership, in accordance with this section.
  ``(b) Eligible Activities.--
          ``(1) In general.--Amounts made available under this section 
        may be used only for downpayment assistance toward the purchase 
        of single family housing by eligible families. For purposes of 
        this title, the term `downpayment assistance' means assistance 
        to help a family acquire a principal residence.
          ``(2) Eligible families.--For purposes of this section, the 
        term `eligible family' means a family who--
                  ``(A) is a low-income family and a first-time 
                homebuyer; or
                  ``(B) notwithstanding the income limitation under 
                section 215(b)(2)--
                          ``(i) includes a uniformed employee (which 
                        shall include policemen, firemen, and 
                        sanitation and other maintenance workers) or a 
                        teacher who is an employee, of the 
                        participating jurisdiction (or an agency or 
                        school district serving such jurisdiction) that 
                        is providing the downpayment assistance under 
                        this section for the family; and
                          ``(ii) has an income, at the time referred to 
                        in subparagraph (A), (B), or (C) of section 
                        215(b)(2), as appropriate, and as determined by 
                        the Secretary with adjustments for smaller and 
                        larger families, that does not exceed 115 
                        percent of the median income of the area, 
                        except that, with respect only to such areas 
                        that the Secretary determines have high housing 
                        costs, taking into consideration median house 
                        prices and median family incomes for the area, 
                        such income limitation shall be 150 percent of 
                        the median income of the area, as determined by 
                        the Secretary with adjustments for smaller and 
                        larger families.
  ``(c) Housing Strategy.--To be eligible to receive a grant under this 
section for a fiscal year, a participating jurisdiction shall include 
in its comprehensive housing affordability strategy under section 105 
for such year--
          ``(1) a description of the use of the grant amounts;
          ``(2) a plan for conducting targeted outreach to residents 
        and tenants of public housing, trailer parks, and manufactured 
        housing, and to other families assisted by public housing 
        agencies, for the purpose of ensuring that grant amounts 
        provided under this section to a participating jurisdiction are 
        used for downpayment assistance for such residents, tenants, 
        and families; and
          ``(3) a description of the actions to be taken to ensure the 
        suitability of families provided downpayment assistance under 
        this section to undertake and maintain homeownership.
  ``(d) Formula Allocation.--For each fiscal year, the Secretary shall 
allocate any amounts made available for assistance under this section 
for the fiscal year in accordance with a formula, which shall be 
established by the Secretary, that considers a participating 
jurisdiction's need for and prior commitment to assistance to 
homebuyers. The formula may include minimum and maximum allocation 
amounts. In considering a participating jurisdiction's prior year's 
commitment to assistance to homebuyers, the formula shall consider 
amounts committed to such purpose under the HOME investment 
partnerships program, the community development block grant program, 
mortgage revenue bonds, and prior year's funding from State and local 
governments, provided that the data underlying such funding is uniform, 
verifiable, and accurate by the State and local government, and shall 
consider other factors that the Secretary determines to be appropriate.
  ``(e) Reallocation.--If any amounts allocated to a participating 
jurisdiction under this section become available for reallocation, the 
amounts shall be reallocated to other participating jurisdictions in 
accordance with the formula established pursuant to subsection (d), 
except that if a local participating jurisdiction failed to receive 
amounts allocated under this section and is located in a State that is 
a participating jurisdiction, the funds shall be reallocated to the 
State.
  ``(f) Applicability of Other Provisions.--
          ``(1) In general.--Except as otherwise provided in this 
        section, grants under this section shall not be subject to the 
        provisions of this title.
          ``(2) Applicable provisions.--In addition to the requirements 
        of this section, grants under this section shall be subject to 
        the provisions of title I, sections 215(b) (except as provided 
        in subsection (b)(2)(B) of this section), 218, 219, 221, 223, 
        224, and 226(a) of subtitle A of this title, and subtitle F of 
        this title.
          ``(3) References.--In applying the requirements of subtitle A 
        referred to in paragraph (2)--
                  ``(A) any references to funds under subtitle A shall 
                be considered to refer to amounts made available for 
                assistance under this section; and
                  ``(B) any references to funds allocated or 
                reallocated under section 217 or 217(d) shall be 
                considered to refer to amounts allocated or reallocated 
                under subsection (d) or (e) of this section, 
                respectively.
  ``(g) Administrative Costs.--Notwithstanding section 212(c), a 
participating jurisdiction may use funds under subtitle A for 
administrative and planning costs of the jurisdiction in carrying out 
this section, and the limitation in section 212(c) shall be based on 
the total amount of funds available under subtitle A and this section.
  ``(h) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section $200,000,000 for each of fiscal 
years 2004 and 2005.''.
  (b) Relocation Assistance and Downpayment Assistance.--Subtitle F of 
title II of the Cranston-Gonzalez National Affordable Housing Act is 
amended by inserting after section 290 (42 U.S.C. 12840) the following 
new section:

``SEC. 291. RELOCATION ASSISTANCE AND DOWNPAYMENT ASSISTANCE.

  ``The Uniform Relocation Assistance and Real Property Acquisition 
Policies Act of 1970 shall not apply to downpayment assistance under 
this title.''.

                          Purpose and Summary

    H.R. 1276, the American Dream Downpayment Act, amends the 
Cranston-Gonzalez National Affordable Housing Act to authorize 
the Secretary of HUD to make grants to participating 
jurisdictions for downpayment assistance to low-income, first-
time home buyers using the HOME program as a distribution 
mechanism.

                  Background and Need for Legislation

    In June, 2002, President Bush announced the national goal 
of increasing the number of minority homeowners by at least 5.5 
million by the end of this decade and in part to eliminate the 
homeownership opportunity gap. To further that goal, the 
Administration proposed the American Dream Downpayment 
Initiative (Initiative)--a new initiative designed to set 
first-time, low-income homebuyers on the path to homeownership 
by helping with downpayment and closing costs. These costs are 
traditionally the most significant obstacles that would-be 
homebuyers face. The Initiative will provide communities 
throughout America with $200 million in grants in each year for 
FY 2004 and FY 2005. This $200 million is included in the 
President's FY 2004 budget proposal and is estimated to assist 
40,000 low-income families each year to share in the American 
dream of owning their first home. The Initiative requires a 
special appropriation so that funding for the downpayment 
program does not affect existing HOME program funding. Each 
low-income family will be given an average of $5,000 to be used 
toward downpayment and closing costs. Moreover, this new group 
of homeowners is expected to boost the American economy with an 
infusion of roughly $256 billion.
    The initiative is considered a wealth-building program and 
will be administered under the Department of Housing and Urban 
Development's (HUD) Home Investment Partnerships Program 
(HOME). HOME is an existing grant program that helps 
communities nationwide expand the supply of standard, 
affordable housing for low- and very low-income families. 
Therefore, rather than creating a new program infrastructure, 
the existing HOME program provides the Initiative the same 
local administrators, distribution networks and personnel to 
begin making an immediate impact for low-income families. 
Moreover, the Initiative will preserve the flexibility of the 
HOME program, so that States can design a package of 
downpayment assistance that best meets the needs of local 
citizens. More than 500 States and local jurisdictions will be 
eligible to receive the $200 million in grant funding, which 
will immediately assist these low income families in their 
first homebuying experience.
    The need for this program was highlighted in a recent HUD 
study entitled Barriers to Minority Homeownership, available on 
HUD's website at www.hud.gov. The study showed that the 
Nation's overall homeownership rate is 68 percent. More than 
two-thirds of all Americans own their own home; however, the 
homeownership rate for African-American, Hispanics and other 
non-Hispanic minorities is approximately 49 percent. Between 
1994 and 2001, the gap between these two homeownership rates 
had only narrowed by 1\1/2\ percentage points.
    The HUD report concluded that if the persistent gap in 
minority homeownership is to be substantially narrowed, the 
structural barriers to home ownership, particularly lack of 
capital for downpayment and closing costs, must be eliminated. 
This legislation eliminates that barrier for families 
struggling to save for a downpayment, but otherwise qualify for 
homeownership. Many low income Americans, particularly in 
minority communities, can meet a monthly mortgage payment, but 
they cannot afford the downpayment and closing costs associated 
with a standard residential loan.
    In addition to helping more families purchase their own 
homes, this proposal is also expected to strengthen communities 
by enlarging the number of stakeholders, thereby stabilizing 
and revitalizing our neighborhoods. The Millennial Housing 
Commission, in its May 30, 2002, report to Congress, noted that 
lagging minority homeownership rates are a serious concern 
because minority households are expected to account for two-
thirds of household growth over the coming decade.
    Improving the ability of Americans to make the transition 
to homeownership will be an especially important test of the 
Nation's capacity to create economic opportunity for minorities 
and immigrants and to build strong, stable communities. In most 
cases, the purchase of a home will be the largest and most 
significant investment an individual will make. Therefore, the 
home equity, created by that home purchase, is the most 
significant and perhaps only asset held by most American 
families and represents a significant share of household net 
worth.
    The creation of homeownership opportunities is also a 
catalyst for creating wealth-building capacity enabling 
families to prosper, through personal as well as professional 
and educational opportunities. Home equity can provide capital 
for small business startups or funds for higher education 
pursuits, both of which enhance community and individual 
economic viabilities. Studies also show that the average net 
worth of low-income renters is about $900, yet it rises to over 
$70,000 when they become home owners.
    A substantial body of research suggests that homeowners are 
more attached and active in their communities. With a little 
extra help in the form of downpayment assistance, Congress can 
help these families achieve the American dream of homeownership 
and strengthen the Nation's economy and communities at the same 
time.
    During the Committee's review of the need for this 
legislation, studies were presented showing that homeownership 
leads to a higher quality home environment enabling children to 
function better at school. For example, a 2001 study entitled 
``The Impact of Homeownership on Child Outcomes,'' by Donald 
Haurin, Toby Parcel, and Jean Haurin of Ohio State University 
demonstrated that residential stability leads homeowners to 
establish stronger community and social ties. A homeowner 
child's mathematics achievement level is seven percent higher 
than a renter child's. Further, children of homeowners complete 
almost a half a year more of education and have a high-school 
graduation rate that is 13 percentage points higher than their 
counterparts.
    From a community's perspective, owning a home provides a 
sense of security and contributes to safer, stronger 
neighborhoods. A financial and personal stake in a residence 
ensures that citizens assist and provide for a better 
neighborhood where all families, children, elderly and others 
can thrive and enjoy a better quality of life.
    Paradoxically, in order to build wealth through 
homeownership, borrowers must first accumulate some amount of 
wealth for a down payment. This contribution of borrower funds 
is a significant factor in virtually every lending decision. 
Until the mid-1990s, down payments on low-cost conventional 
mortgages averaged around 20 percent of the loan balance. Many 
families had to postpone homeownership for years while they 
worked to accumulate such a sizeable downpayment. Under the 
current mortgage finance environment, modern technology has 
assisted financial underwriters with the ability to assess 
credit risk, thereby decreasing the necessity for the types of 
substantial downpayments required ten or twenty years ago. 
However, most lenders continue to require some form of 
downpayment or homeowner equity at purchase to increase the 
likelihood that the borrower will not default. These 
downpayments will provide that assurance and close that 
homeownership opportunity gap.
    The Subcommittee on Housing and Community Opportunity 
adopted two amendments during its consideration of the bill. 
The first amendment clarified the funding formula to ensure 
that participating jurisdictions (local and State jurisdiction 
receiving grants from HOME or this legislation) are given 
credit and provided funds based on need and for downpayment 
assistance provided through existing CDBG and HOME programs, 
mortgage revenue bonds, and other State and local funds and 
programs. The second amendment adopted by the Subcommittee 
targets program outreach to public housing residents, Section 8 
residents, and mobile home communities. Public housing 
recipients are traditionally a sector of the population 
excluded from the home buying experience. This outreach will 
help to ensure that eligible public housing recipients have an 
opportunity to share in the American dream of homeownership and 
to break the cycle of dependence on public housing assistance.
    During the full Committee's consideration of the bill, a 
member raised a concern regarding section 271 of the bill 
pertaining to the formula allocations and the inclusion of a 
maximum amount, or ``cap'' on the funding for this program. The 
concern was that such a cap could adversely affect large urban 
areas. Recognizing this issue, the Committee intends to correct 
this problem when the bill is considered by the House by 
striking the language ``and maximum'' at the end of section 271 
thereby making it consistent with the existing HOME program.
    The full Committee also adopted two amendments during 
consideration. The first would require States and localities to 
ensure that families receiving the housing assistance are 
financially prepared to maintain ownership of their homes after 
the purchase. Under the provisions of the amendment, States and 
localities are required to incorporate a plan outlining how 
they intend to implement this initiative through the existing 
and required annual comprehensive housing affordability 
strategy plan as well as to provide the public an opportunity 
to review and comment on the local government's plans to 
address affordable housing issues.
    The second amendment adopted by the Committee would allow 
localities to use the new grant funds to help municipal 
employees making between 80 percent and 115 percent of local 
median income, and up to 150 percent in high cost areas, in 
order to help them live in the communities they serve. During 
the deliberations, many concerns were raised about the local 
residency requirements for police, fireman, teachers or other 
municipal workers imposed by local jurisdictions. In most 
cases, the public service salaries are not sufficient to afford 
housing in some of the most expensive housing markets in the 
country. As a result, the amendment would contribute to the 
viability and diversity of working families in these 
communities.
    The Committee deliberated on a third amendment to expand 
the eligible activities under the initiative to include 
foreclosure prevention counseling and foreclosure prevention 
assistance. While the Committee recognizes the benefits of 
counseling to the long-term homeownership status of low-income 
families, allowing American Dream Downpayment grants to be used 
for foreclosure counseling and prevention would dilute the 
specific purpose of the bill, which is to provide downpayment 
assistance for first-time low-income homebuyers.
    The Committee believes that the private sector currently 
provides a variety of loss-mitigation programs to prevent 
foreclosure. In fact, in most cases, it is disadvantageous for 
mortgage lenders to allow a mortgage to go to foreclosure. 
Conventional lenders not only practice loss mitigation but 
advise their mortgagors about the availability of counseling.
    The Committee believes, however, that counseling is 
essential to successful homeownership. Counseling helps renters 
and homebuyers become better-educated consumers and can result 
in reduced defaults and foreclosures. That is why President 
Bush has made housing counseling a priority in HUD's budget 
this year. In fact, the proposed FY 04 HUD budget increases 
housing counseling by $10 million, providing a total of $45 
million overall for that initiative. A multitude of counseling 
programs already exist at HUD to assist and provide individuals 
with counseling. The Committee believes a review of the current 
counseling practices and standards in the existing programs 
will help to determine what types of additional assistance is 
necessary. In addition, the Committee intends to work on a 
comprehensive homeownership counseling bill that will include 
foreclosure prevention and foreclosure counseling.
    Overall, the goal of the American Dream Downpayment Act is 
to increase the overall homeownership rate, and to close the 
current homeownership opportunity gap for minorities. There are 
many hard working, low-income families who would greatly 
benefit from the wealth-building opportunity that homeownership 
can afford. When citizens own their own home, they become 
stakeholders in their communities. By increasing the number of 
stakeholders through homeownership, empowered individuals and 
families will be less reliant on long-term government 
assistance.
    The American Dream Downpayment will help jumpstart the 
Administration's goal to bridge the minority homeownership 
opportunity gap and to increase the number of Americans owning 
their own home by 5.5 million.

                                Hearings

    The Subcommittee on Housing and Community Opportunity held 
a hearing on April 8, 2003 entitled ``Promoting the American 
Dream of Homeownership through Downpayment Assistance.'' The 
following witnesses testified: the Honorable Mel Martinez, 
Secretary of Housing and Urban Development; Robert M. Couch, 
President and CEO, New South Federal Savings Bank, Birmingham, 
Alabama, on behalf of the Mortgage Bankers Association of 
America; Ms. Lori R. Gay, Executive Director, Los Angeles 
Neighborhood Housing Services, Los Angeles, California; Ms. 
Barbara Thompson, Executive Director, National Council of State 
Housing Agencies; Mr. Paul Hilgers, Director, Neighborhood 
Housing and Community Development Department, City of Austin, 
Texas; Mr. Craig S. Nickerson, Vice President, Community 
Development and Lending, Freddie Mac, Washington DC; and Mr. 
Darrell V. Griffin, Sr., Division Chief, Housing Services 
Division, City of Jacksonville, Florida.

                        Committee Consideration

    The Subcommittee on Housing and Community Opportunity met 
in open session on May 7, 2003, and approved H.R. 1276 for full 
Committee consideration, as amended, by a voice vote.
    The Committee on Financial Services met in open session on 
May 21, 2003, and ordered H.R. 1276 reported to the House with 
a favorable recommendation, with an amendment.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Mr. Oxley to report the bill to the House with a 
favorable recommendation was agreed to by a voice vote.
    The following amendment was considered by a record vote:

          An amendment by Ms. Lee, no. 5, providing foreclosure 
        prevention counseling, was not agreed to by a record 
        vote of 25 yeas and 35 nays (Record vote no. FC-7).

                                              RECORD VOTE NO. FC-7
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Oxley......................  ........        X   .........   Mr. Frank (MA)..        X   ........  .........
Mr. Leach......................  ........        X   .........   Mr. Kanjorski...        X   ........  .........
Mr. Bereuter...................  ........        X   .........   Ms. Waters......        X   ........  .........
Mr. Baker......................  ........        X   .........   Mr. Sanders*....        X   ........  .........
Mr. Bachus.....................  ........        X   .........   Mrs. Maloney....  ........  ........  .........
Mr. Castle.....................  ........        X   .........   Mr. Gutierrez...  ........  ........  .........
Mr. King.......................  ........  ........  .........   Ms. Velazquez...        X   ........  .........
Mr. Royce......................  ........        X   .........   Mr. Watt........        X   ........  .........
Mr. Lucas (OK).................  ........        X   .........   Mr. Ackerman....  ........  ........  .........
Mr. Ney........................  ........        X   .........   Ms. Hooley (OR).        X   ........  .........
Mrs. Kelly.....................  ........        X   .........   Ms. Carson (IN).        X   ........  .........
Mr. Paul.......................  ........  ........  .........   Mr. Sherman.....        X   ........  .........
Mr. Gillmor....................  ........        X   .........   Mr. Meeks (NY)..        X   ........  .........
Mr. Ryun (KS)..................  ........        X   .........   Ms. Lee.........        X   ........  .........
Mr. LaTourette.................  ........  ........  .........   Mr. Inslee......        X   ........  .........
Mr. Manzullo...................  ........        X   .........  Mr. Moore........        X   ........  .........
Mr. Jones (NC).................  ........        X   .........   Mr. Gonzalez....        X   ........  .........
Mr. Ose........................  ........        X   .........   Mr. Capuano.....        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Ford.........  ........  ........  .........
Mr. Green (WI).................  ........        X   .........   Mr. Hinojosa....        X   ........  .........
Mr. Toomey.....................  ........        X   .........   Mr. Lucas (KY)..  ........        X   .........
Mr. Shays......................  ........        X   .........   Mr. Crowley.....  ........  ........  .........
Mr. Shadegg....................  ........        X   .........   Mr. Clay........  ........  ........  .........
Mr. Fossella...................  ........        X   .........   Mr. Israel......  ........  ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........   Mr. Ross........        X   ........  .........
Ms. Hart.......................  ........        X   .........   Mrs. McCarthy           X   ........  .........
                                                                 (NY).
Mrs. Capito....................  ........        X   .........   Mr. Baca........        X   ........  .........
Mr. Tiberi.....................  ........        X   .........   Mr. Matheson....        X   ........  .........
Mr. Kennedy (MN)...............  ........        X   .........   Mr. Lynch.......        X   ........  .........
Mr. Feeney.....................  ........        X   .........   Mr. Miller (NC).        X   ........  .........
Mr. Hensarling.................  ........        X   .........   Mr. Emanuel.....        X   ........  .........
Mr. Garrett (NJ)...............  ........        X   .........   Mr. Scott (GA)..        X   ........  .........
Mr. Murphy.....................  ........        X   .........   Mr. Davis (AL)..        X   ........  .........
Ms. Ginny Brown-Waite (FL).....  ........        X   .........  .................  ........  ........  .........
Mr. Barrett (SC)...............  ........        X   .........  .................  ........  ........  .........
Ms. Harris.....................  ........        X   .........  .................  ........  ........  .........
Mr. Renzi......................  ........        X   .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------
*Mr. Sanders is an independent, but caucuses with the Democratic Caucus.

    The following amendments were also considered:

          An amendment by Mr. Crowley, No. 1, eliminating 
        maximum allocation amounts from the formula, was 
        withdrawn.
          An amendment by Ms. Velazquez, No. 2, ensuring the 
        suitability of recipients of downpayment assistance, 
        was agreed to by a voice vote.
          An amendment by Mr. Capuano, No. 3, making municipal 
        employees eligible for downpayment assistance through 
        the Home Program, was ruled non germane by the Chair.
          An amendment by Mr. Capuano, No. 4, making municipal 
        employees eligible for downpayment assistance through 
        the American Dream Downpayment Program, was agreed to 
        by a voice vote.
          An amendment by Mr. Meeks of New York, No. 6, 
        defining ``single family'' as 1 to 4 family residences, 
        was withdrawn.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee made findings that are 
reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    Utilizing the authority granted by this legislation, the 
Secretary of Housing and Urban Development will provide 
resources to States and localities to increase the 
opportunities for homeownership among low-income, first-time 
homebuyers, particularly minorities, in accordance with their 
comprehensive housing affordability strategies.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of budget authority, entitlement authority, or 
tax expenditures or revenues contained in the cost estimate 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                          Washington, DC, May 2003.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1276, the American 
Dream Downpayment Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Chad Chirico.
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.
    Enclosure.

H.R. 1276--American Dream Downpayment Act

    Summary: H.R. 1276 would authorize the appropriation of 
$200 million for each of fiscal years 2004 and 2005 to be used 
for down-payment assistance toward the purchase of single-
family housing by low-income, first-time homebuyers. Uniformed 
employees of participating local jurisdictions, such as police 
and firefighters, whose income does not exceed 115 percent of 
the median income of the area would also be eligible for down-
payment assistance.
    CBO estimates that appropriation of the authorized amounts 
would cost $400 million over the 2004-2008 period. Enacting 
H.R. 1276 would not affect direct spending or revenues.
    H.R. 1276 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: CBO estimates 
that implementing H.R. 1276 would cost $400 million over the 
2004-2008 period, assuming appropriation of the amounts 
authorized for each year. For this estimate, we assume the bill 
will be enacted by the beginning of fiscal year 2004. The 
estimated outlays are based on historical patterns for similar 
activities in the HOME Investment Partnership Program. The 
estimated budgetary impact of H.R. 1276 is shown in the 
following table. The costs of this legislation fall within 
budget function 600 (income security).

----------------------------------------------------------------------------------------------------------------
                                                                   By fiscal year, in millions of dollars
                                                           -----------------------------------------------------
                                                              2003     2004     2005     2006     2007     2008
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law:
    Budget Authority/Authorization Level \1\..............    1,987    2,021    2,061    2,104    2,148    2,196
    Estimated Outlays.....................................    1,644    1,704    1,809    1,901    1,993    2,074
Proposed Changes:
    Estimated Authorization Level.........................        0      200      200        0        0        0
    Estimated Outlays.....................................        0       20      120      180       80        0
Spending Under H.R. 1276:
    Estimated Authorization Level.........................    1,987    2,221    2,261    2,104    2,148    2,196
    Estimated Outlays.....................................    1,644    1,724    1,929    2,081    2,073    2,074
----------------------------------------------------------------------------------------------------------------
\1\ The 2003 level is the amount appropriated for that year for the Home Investment Partnership Program. The
  2004-2008 levels are baseline projections for the Home Investment Partnership Program, assuming annual
  adjustments for anticipated inflation.

    Intergovernmental and private-sector impact: H.R. 1276 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal costs: Chad Chirico; impact 
on State, local, and tribal governments: Tori Heid Hall; impact 
on the private sector: Samuel Kina.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
defense and general welfare of the United States), and clause 3 
(relating to the power to regulate foreign and interstate 
commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section provides the short title of the bill, the 
``American Dream Downpayment Act.''

Section 2. Downpayment assistance initiative under HOME program

    This section amends subtitle E of title II of the Cranston-
Gonzalez National Affordable Housing Act (42 U.S.C. 12821) to 
grant the Secretary of Housing and Urban Development the 
authority to make grants to participating jurisdictions 
(defined as a local community or a State that receives funds 
under the HOME program) to assist (1) low-income families and 
(2) municipal uniformed employees and teachers to buy their 
first home. The participating jurisdictions receiving funds 
through this program must include a description of how these 
funds will be used in its comprehensive housing affordability 
strategy. This strategy includes a plan for (1) conducting 
targeted outreach to, and (2) ensuring the suitability of, 
families receiving public housing assistance.
    This section also directs the Secretary to develop a 
formula for the allocation of assistance funds taking into 
consideration a participating jurisdiction's need for, and 
verifiable prior provision of, assistance to homebuyers. The 
formula may include a minimum and/or a maximum amount to be 
provided to a participating jurisdiction.
    The final provision of the bill gives the Secretary 
authority to reallocate funds to other participating 
jurisdictions if they cannot use all of the money in accordance 
with the allocation formula. However, if the participating 
jurisdiction is a local community in a State that is a 
participating jurisdiction, the funds will be reallocated to 
the State instead of according to the formula. This section 
also authorizes the appropriation of $200 million for each of 
fiscal years 2004 and 2005.
    Finally, during its deliberations, the Committee discussed 
the definition of a ``single-family'' home and agreed to 
clarify the definition of ``single-family''. For the purpose of 
this Initiative, the Committee intends that the term ``single 
family housing'' mean a one- to four-unit dwelling or 
condominium unit, and will include both real and personal 
property manufactured homes. Downpayment assistance may include 
the purchase of a manufactured housing lot on which a 
qualifying single family home shall be located. The 
participating jurisdiction may determine whether or not 
ownership or membership in a cooperative or mutual housing 
project constitutes homeownership under State law.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

CRANSTON-GONZALEZ NATIONAL AFFORDABLE HOUSING ACT

           *       *       *       *       *       *       *



TITLE II--INVESTMENT IN AFFORDABLE HOUSING

           *       *       *       *       *       *       *


                [Subtitle E--Mortgage Credit Enhancement

[SEC. 271. REPORT ON CREDIT ENHANCEMENT.

  [(a) In General.--The Comptroller General of the United 
States shall carry out a study of ways in which financing for 
affordable housing may be made available to assist in the most 
efficient implementation of comprehensive housing affordability 
strategies of participating jurisdictions. In conducting the 
study, the Comptroller General shall draw upon the expertise of 
such representatives of State and local government, State and 
local housing finance agencies, agencies of the United States, 
government-sponsored mortgage finance corporations, for-profit 
and nonprofit housing developers, private  financial  
institutions,  and  sources  of  long-term  mortgage 
investment, as the Comptroller General determines to be 
appropriate.
  [(b) Report.--Not later than one year after the enactment of 
this Act, the Comptroller General shall submit to the Congress 
and the Secretary a report containing any recommendations for 
legislative or administrative actions needed to improve the 
availability of mortgage finance for affordable housing. The 
report shall include, but need not be limited to, an assessment 
of--
          [(1) the need for the Department of Housing and Urban 
        Development or other agencies of the United States to 
        provide partial credit enhancement to make financing 
        for affordable housing available efficiently and at the 
        lowest possible cost; and
          [(2) alternative ways in which--
                  [(A) the Department could provide any needed 
                credit enhancement on a one-stop basis for 
                participating jurisdictions, in coordination 
                with other forms of assistance under this 
                subtitle;
                  [(B) the Department or other agencies of the 
                Federal Government could assist government-
                sponsored mortgage finance corporations in the 
                financing of mortgages on affordable housing 
                through the development of mortgage-backed 
                securities that are more standardized and 
                readily traded in the capital markets;
                  [(C) the capacities of existing agencies of 
                the United States could be used to provide 
                mortgage finance more efficiently for 
                affordable housing through government-sponsored 
                mortgage finance corporations; and
                  [(D) the interests of the Federal Government 
                could be protected and any risks of loss could 
                be minimized through requirements for fees, 
                mortgage insurance, risk-sharing, secure 
                collateral, and guarantees by other parties, 
                and through standards relating to minimum 
                capital and prior experience with underwriting, 
                origination and servicing.]

                      Subtitle E--Other Assistance

SEC. 271. DOWNPAYMENT ASSISTANCE INITIATIVE.

  (a) Grant Authority.--The Secretary may make grants to 
participating jurisdictions to assist low-income families to 
achieve homeownership, in accordance with this section.
  (b) Eligible Activities.--
          (1) In general.--Amounts made available under this 
        section may be used only for downpayment assistance 
        toward the purchase of single family housing by 
        eligible families. For purposes of this title, the term 
        ``downpayment assistance'' means assistance to help a 
        family acquire a principal residence.
          (2) Eligible families.--For purposes of this section, 
        the term ``eligible family'' means a family who--
                  (A) is a low-income family and a first-time 
                homebuyer; or
                  (B) notwithstanding the income limitation 
                under section 215(b)(2)--
                          (i) includes a uniformed employee 
                        (which shall include policemen, 
                        firemen, and sanitation and other 
                        maintenance workers) or a teacher who 
                        is an employee, of the participating 
                        jurisdiction (or an agency or school 
                        district serving such jurisdiction) 
                        that is providing the downpayment 
                        assistance under this section for the 
                        family; and
                          (ii) has an income, at the time 
                        referred to in subparagraph (A), (B), 
                        or (C) of section 215(b)(2), as 
                        appropriate, and as determined by the 
                        Secretary with adjustments for smaller 
                        and larger families, that does not 
                        exceed 115 percent of the median income 
                        of the area, except that, with respect 
                        only to such areas that the Secretary 
                        determines have high housing costs, 
                        taking into consideration median house 
                        prices and median family incomes for 
                        the area, such income limitation shall 
                        be 150 percent of the median income of 
                        the area, as determined by the 
                        Secretary with adjustments for smaller 
                        and larger families.
  (c) Housing Strategy.--To be eligible to receive a grant 
under this section for a fiscal year, a participating 
jurisdiction shall include in its comprehensive housing 
affordability strategy under section 105 for such year--
          (1) a description of the use of the grant amounts;
          (2) a plan for conducting targeted outreach to 
        residents and tenants of public housing, trailer parks, 
        and manufactured housing, and to other families 
        assisted by public housing agencies, for the purpose of 
        ensuring that grant amounts provided under this section 
        to a participating jurisdiction are used for 
        downpayment assistance for such residents, tenants, and 
        families; and
          (3) a description of the actions to be taken to 
        ensure the suitability of families provided downpayment 
        assistance under this section to undertake and maintain 
        homeownership.
  (d) Formula Allocation.--For each fiscal year, the Secretary 
shall allocate any amounts made available for assistance under 
this section for the fiscal year in accordance with a formula, 
which shall be established by the Secretary, that considers a 
participating jurisdiction's need for and prior commitment to 
assistance to homebuyers. The formula may include minimum and 
maximum allocation amounts. In considering a participating 
jurisdiction's prior year's commitment to assistance to 
homebuyers, the formula shall consider amounts committed to 
such purpose under the HOME investment partnerships program, 
the community development block grant program, mortgage revenue 
bonds, and prior year's funding from State and local 
governments, provided that the data underlying such funding is 
uniform, verifiable, and accurate by the State and local 
government, and shall consider other factors that the Secretary 
determines to be appropriate.
  (e) Reallocation.--If any amounts allocated to a 
participating jurisdiction under this section become available 
for reallocation, the amounts shall be reallocated to other 
participating jurisdictions in accordance with the formula 
established pursuant to subsection (d), except that if a local 
participating jurisdiction failed to receive amounts allocated 
under this section and is located in a State that is a 
participating jurisdiction, the funds shall be reallocated to 
the State.
  (f) Applicability of Other Provisions.--
          (1) In general.--Except as otherwise provided in this 
        section, grants under this section shall not be subject 
        to the provisions of this title.
          (2) Applicable provisions.--In addition to the 
        requirements of this section, grants under this section 
        shall be subject to the provisions of title I, sections 
        215(b) (except as provided in subsection (b)(2)(B) of 
        this section), 218, 219, 221, 223, 224, and 226(a) of 
        subtitle A of this title, and subtitle F of this title.
          (3) References.--In applying the requirements of 
        subtitle A referred to in paragraph (2)--
                  (A) any references to funds under subtitle A 
                shall be considered to refer to amounts made 
                available for assistance under this section; 
                and
                  (B) any references to funds allocated or 
                reallocated under section 217 or 217(d) shall 
                be considered to refer to amounts allocated or 
                reallocated under subsection (d) or (e) of this 
                section, respectively.
  (g) Administrative Costs.--Notwithstanding section 212(c), a 
participating jurisdiction may use funds under subtitle A for 
administrative and planning costs of the jurisdiction in 
carrying out this section, and the limitation in section 212(c) 
shall be based on the total amount of funds available under 
subtitle A and this section.
  (h) Authorization of Appropriations.--There is authorized to 
be appropriated to carry out this section $200,000,000 for each 
of fiscal years 2004 and 2005.

Subtitle F--General Provisions

           *       *       *       *       *       *       *


SEC. 291. RELOCATION ASSISTANCE AND DOWNPAYMENT ASSISTANCE.

  The Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970 shall not apply to downpayment 
assistance under this title.

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    The American dream, as conceived by the Nation's founders, 
has little in common with H.R. 1276, the so-called American 
Dream Downpayment Act. In the original version of the American 
dream, individuals earned the money to purchase a house through 
their own efforts, oftentimes sacrificing other goods to save 
for their first downpayment. According to the sponsors of H.R. 
1276, that old American dream has been replaced by a new dream 
of having the federal government force your fellow citizens to 
hand you the money for a downpayment.
    H.R. 1276 not only warps the true meaning of the American 
dream, but also exceeds Congress' constitutional boundaries and 
interferes with and distorts the operation of the free market. 
Instead of expanding unconstitutional federal power, Congress 
should focus its energies on dismantling the federal housing 
bureaucracy so the America people can control housing resources 
and use the free market to meet their demands for affordable 
housing.
    As the great economist Ludwig Von Mises pointed out, 
questions of the proper allocation of resources for housing and 
other goods should be determined by consumer preference in the 
free market. Resources removed from the market and distributed 
according to the preferences of government politicians and 
bureaucrats are not devoted to their highest-valued use. Thus, 
government interference in the economy results in a loss of 
economic efficiency and, more importantly, a lower standard of 
living for all citizens.
    H.R. 1276 takes resources away from private citizens, 
through confiscatory taxation, and uses them for the 
politically favored cause of expanding home ownership. 
Government subsidization of housing leads to an excessive 
allocation of resources to the housing market. Thus, thanks to 
government policy, resources that would have been devoted to 
education, transportation, or some other good desired by 
consumers, will instead be devoted to housing. Proponents of 
this bill ignore the socially beneficial uses the monies 
devoted to housing might have been put to had those resources 
been left in the hands of private citizens.
    Finally, while I know this argument is unlikely to have 
much effect on my colleagues, I must point out that Congress 
has no constitutional authority to take money from one American 
and redistribute it to another. Legislation such as H.R. 1276, 
which takes tax money from some Americans to give to others 
whom Congress has determined are worthy, is thus blatantly 
unconstitutional.
    I hope no one confuses my opposition to this bill as 
opposition to any congressional actions to ensure more 
Americans have access to affordable housing. After all, one 
reason many Americans lack affordable housing is because taxes 
and regulations have made it impossible for builders to provide 
housing at a price that could be afforded by many lower-income 
Americans. Therefore, Congress should cut taxes and 
regulations. A good start would be generous housing tax 
credits. Congress should also consider tax credits and 
regulatory relief for developers who provide housing for those 
with low incomes. For example, I am cosponsoring H.R. 839, the 
Renewing the Dream Tax Credit Act, which provides a tax credit 
to developers who construct or rehabilitate low-income housing.
    H.R. 1276 distorts the economy and violates constitutional 
prohibitions on income redistribution. A better way of 
guaranteeing an efficient housing market where everyone could 
meet their own needs for housing would be for Congress to 
repeal taxes and programs that burden the housing industry and 
allow housing needs to be met by the free market. Therefore, I 
urge my colleagues to reject this bill and instead develop 
housing policies consistent with constitutional principles, the 
laws of economics, and respect for individual rights.

                                                  Ron Paul.

                                
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