House Report 109-572 - MARK-TO-MARKET EXTENSION ACT OF 2006

[House Report 109-572]
[From the U.S. Government Publishing Office]

109th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 109-572

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

MARK-TO-MARKET EXTENSION ACT OF 2006

_______

July 17, 2006.--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

[To accompany H.R. 5527]

[Including cost estimate of the Congressional Budget Office]

The Committee on Financial Services, to whom was referred
the bill (H.R. 5527) to extend the authority of the Secretary
of Housing and Urban Development to restructure mortgages and
rental assistance for certain assisted multifamily housing,
having considered the same, report favorably thereon with an
amendment and recommend that the bill as amended do pass.

CONTENTS

Page
Amendment........................................................ 1
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 3
Hearings......................................................... 4
Committee Consideration.......................................... 4
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 4
Performance Goals and Objectives................................. 4
New Budget Authority, Entitlement Authority, and Tax Expenditures 4
Committee Cost Estimate.......................................... 5
Congressional Budget Office Estimate............................. 5
Federal Mandates Statement....................................... 10
Advisory Committee Statement..................................... 10
Constitutional Authority Statement............................... 10
Applicability to Legislative Branch.............................. 10
Section-by-Section Analysis of the Legislation................... 10
Changes in Existing Law Made by the Bill, as Reported............ 10

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 ``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).''.

Purpose and Summary

H.R. 5527, the Mark-to-Market Extension Act of 2006,
reauthorizes the Mark-to-Market program, which allows for
mortgage and rent restructuring for certain section 8 projects.
This legislation would reauthorize the Mark-to-Market program,
currently set to sunset at the end of FY 2006, through the end
of FY 2011.

Background and Need for Legislation

Legislation creating the Mark-to-Market program was enacted
in 1997 to reduce the cost to the Federal Government of
renewing section 8 contracts. By restructuring mortgages and
lowering rents, the program reduces the Federal costs of over-
subsidized section 8 properties. The section 8 assisted housing
program, administered by the Department of Housing and Urban
Development (HUD), provided project-based rental subsidies to
encourage developers to build affordable housing for low-income
residents. Under the program, tenants paid a fixed percentage
of their income towards rent, with the balance made up by the
Federal Government in the form of subsidies to the project
owner. The subsidy was attached to the unit, not to the tenant,
and many of the projects' rents were set higher than market
rents of comparable unassisted units in the area. When property
costs increased, so did rent, resulting in an increase of the
section 8 subsidy.
An examination of the Federal Housing Administration (FHA)
portfolio found that nearly 10,000 of these properties were
also receiving section 8 project-based rental assistance, and
that a substantial number of these had rents higher than the
rents of comparable, unassisted rental units in the same rental
housing market. Also, many section 8 projects were discovered
to be financially or physically distressed. In an effort to
address the economic, physical, and management problems of
these projects, while retaining the low-income affordability
and availability of the housing stock, Congress authorized the
Mark-to-Market restructuring program. Administered out of the
Office of Multifamily Housing Assistance Restructuring (OMHAR),
the program was designed to reduce Federal subsidies to owners
of FHA-insured section 8 properties, lower the above-market
rents payable to these owners, and restructure the mortgages of
these properties so that owners can operate effectively on less
income.
Under the Mark-to-Market program, interested section 8
owners are screened to see if their properties are economically
viable and in good physical condition. If selected, the owners
work with participating administrative entities to develop a
rental assistance plan for the development. Originally,
eligible owners were just those of section 8 project-based
properties with FHA-insured mortgages and rents exceeding
market levels. Now, also included, are owners of properties
other than section 8 project-based projects. All eligible
owners will have the opportunity to participate in the mortgage
restructuring plan. In exchange for debt restructuring, owners
must agree to maintain affordability and use restrictions in
order to keep the property affordable as housing for low-income
tenants for at least 30 years. This debt restructuring is
designed to reduce the outstanding mortgages of section 8
property owners so that they can charge lower rents with
reduced section 8 assistance.
Eligible owners may also engage in rent restructuring;
unlike the mortgage restructuring described above, the Mark-to-
Market rent restructuring programs contains no affordability or
use restriction requirements. In a rent restructuring,
participating administrative entities work with project owners
to bring rents to market or near market levels, so that rents
will be sufficient to cover budget-based cost increases and
owners will recover a reasonable rate of return after
accounting for operating costs. HUD is then required to renew
all budget-based contracts for 5 years, with adjustments after
that period if necessary.
The Committee believes that this authorization will
continue the efforts made by the Federal Housing Administration
(FHA) to restructure developments that, when completed, save
the Federal Government money while extending affordable housing
units for future generations.

Hearings

No hearings were held on H.R. 5527 in the 109th Congress.

Committee Consideration

The Committee on Financial Services met in open session on
June 14, 2006, and ordered reported H.R. 5527, the Mark-to-
Market Extension Act of 2006, as amended, to the House by a
voice vote.

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. No
record votes were taken with in conjunction with the
consideration of this legislation. A motion by Mr. Oxley to
report the bill, as amended, to the House with a favorable
recommendation was agreed to by a voice vote. During the
consideration of the bill, the following amendment was
considered:
An amendment by Mr. Ney, offered on behalf of Ms. Pryce,
increasing the exemption rent authority, was agreed to by a
voice vote.

Committee Oversight Findings

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
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:
H.R. 5527, the Mark-to-Market Extension Act of 2006,
reauthorizes the Mark-to-Market program, which allows for
mortgage and rent restructuring for certain section 8 projects.
This will reduce the cost to the Federal Government of renewing
section 8 contracts.

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 new 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, June 22, 2006.
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. 5527, the Mark-to-
Market Extension Act of 2006.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Chad Chirico.
Sincerely,
Donald B. Marron,
Acting Director.
Enclosure.

H.R. 5527--Mark-to-Market Extension Act of 2006

Summary: H.R. 5527 would extend the Multifamily Assisted
Housing Restructuring and Affordability Act of 1997 (MAHRA) for
five years beyond its current expiration date of September 30,
2006. That law authorizes the so-called mark-to-market approach
for renewing Section 8 Housing Assistance Payment (HAP)
contracts and for the restructuring of certain mortgages
insured by the Federal Housing Administration (FHA). Under the
mark-to-market approach, HAP contracts are renewed at market
rents for FHA-insured projects that currently receive above-
market results and, if necessary, the mortgages for those
projects are written down to levels that could be supported by
the lower rents. In addition, the bill would extend debt
restructuring eligibility to properties damaged by disasters
and expand the program's authority to set rents above 120
percent of the fair market rent.
CBO estimates that enacting H.R. 5527 would prevent some
projects from defaulting on FHA-insured mortgages and thus
reduce direct spending by $188 million over the 2006-2011
period. We also estimate that implementing H.R. 5527 would
allow for savings of $25 million in discretionary spending over
the 2007-2011 period, assuming that future appropriations are
reduced to reflect the lower costs of Section 8 contracts.
H.R. 5527 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA);
any costs to state, local, or tribal governments would be
incurred voluntarily.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 5527 is shown in the following table.
The costs of this legislation would fall within budget
functions 370 (mortgage and housing credit) and 600 (income
security).
Basis of estimate: CBO estimates that enacting H.R. 5527
would reduce direct spending by a total of $188 million over
the 2006-2011 period. Most of the estimated savings would be
recorded in the year of the bill's enactment. For this
estimate, CBO assumes that H.R. 5527 will be enacted by the end
of fiscal year 2006.
Savings would result principally from avoiding defaults on
FHA-insured mortgages that are anticipated under current law.
Those estimated FHA savings would be reflected in the budget on
a present value basis as ``loan modifications'' under the
provisions of the Federal Credit Reform Act.
Subject to the availability of appropriations, CBO
estimates that implementing H.R. 5527 would result in savings
of $33 million over the next five years from the reduction of
HAP contract rents, assuming that appropriations are reduced
accordingly. CBO also estimates that expanding exception rent
authority from 5 percent of the portfolio to 9 percent would
cost $8 million, assuming appropriation of the necessary
amounts. Thus, CBO estimates that implementing this bill would
yield net discretionary savings of $25 million over the 2007-
2011 period.

Background

In 1997, MAHRA was enacted to address financial problems in
the Section 8 program for affordable housing assistance. At
that time, over 4,000 multifamily projects with FHA-insured
mortgages were receiving project-based rent subsidies under
Section 8 of the United States Housing Act of 1937. The
original HAP contracts attached to these projects were written
for periods typically ranging from 15 to 40 years. The majority
of these projects had units with rents that exceeded those for
comparable unassisted units; however, the Department of Housing
and Urban Development (HUD) did not have the authority to renew
the contracts 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 have
been able to cover their costs. With reduced rents, such
projects would have been expected to default on their
mortgages, generating large losses to the FHA insurance fund
and possibly displacing many tenants in these projects.

ESTIMATED BUDGETARY EFFECTS OF H.R. 5527
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------
2006 2007 2008 2009 2010 2011
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

Extend Restructuring authority Through 2011:
Estimated Budget Authority............................ -173 0 0 0 0 0
Estimated Outlays..................................... -173 0 0 0 0 0
Expand Eligibility to properties damaged in Disasters:
Estimated Budget Authority............................ -11 -1 -1 -1 -1 -1
Estimated Outlays..................................... -11 -1 -1 -1 -1 -1

SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law for Project-based Rental
Assistance:
Estimated Authorization Level a....................... 5,037 5,404 5,605 5,935 6,321 6,657
Estimated Outlays..................................... 5,883 5,738 5,523 5,801 6,164 6,520
Proposed Changes:
Section 8 Rental Assistance:
Estimated Authorization Level..................... 0 -3 -4 -8 -11 -12
Estimated Outlays................................. 0 -2 -4 -6 -10 -12
Exception Rents:
Estimated Authorization Level..................... 0 1 1 2 3 3
Estimated Outlays................................. 0 * 1 2 2 3
Proposed Spending Under H.R. 5527 for Project-based Rental
Assistance:
Estimated Authorization Level..................... 5,037 5,402 5,602 5,929 6,313 6,648
Estimated Outlays..................................... 5,883 5,737 5,520 5,796 6,157 6,511
----------------------------------------------------------------------------------------------------------------
a The amount shown for 2006 is the amount appropriated for project-based rental assistance in that year. The
2007-2011 levels are CBO baseline projections, assuming adjustments for anticipated inflation and the renewal
of all units.

Notes: Components may not sum to totals because of rounding. * = Less than $500,000.

The mark-to-market process usually involves reducing a
project's rents to market levels and then either modifying or
refinancing the existing mortgage at an amount that could be
supported by the new market rents (this process is often
referred to as a ``full'' restructuring). Specifically, FHA
prepays all or a portion of the owner's existing mortgage debt
through a partial payment of claims (PPC) and then takes back a
second mortgage, and in some cases a third mortgage, to recover
some of the PPC. In some instances, though, only a property's
rent is reduced to market levels; this type of restructuring
(referred to as a ``lite'' restructuring) usually occurs when
the project is physically and financially sound enough to
operate at market-level rents with its existing mortgage.
Under current law, when MAHRA expires, HUD will still be
required to renew HAP 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.

Direct spending

CBO estimates that enacting H.R. 5527 will result in
savings principally by avoiding defaults on FHA-insured
multifamily mortgages that otherwise would occur under current
law.
Avoiding FHA Multifamily Defaults through Mark-to-Market.
Information provided by HUD demonstrate that at the end of
fiscal year 2005, about 1,400 projects have undergone full
restructuring since MAHRA was enacted in 1997. By extending the
mark-to-market authority through 2011, CBO estimates that an
additional 600 properties with FHA-insured mortgages would have
their mortgage debt restructured.
Based on a review of financial information on nearly 1,100
projects that were restructured since the program was
reauthorized in 2001, CBO estimates that the cost of
restructuring mortgages dedt is less expensive than the cost of
default by about $500,000 per project, on average. Our analysis
indicates that, on a present value basis, defaulted projects
would have cost the FHA insurance fund an average of $2.2
million per project, while restructured projects have cost the
FHA insurance fund an average of $1.6 million each since the
program was reauthorized in 2001. The costs of defaults
represent payments covering the remaining balance on the
mortgage. Based on information provided by HUD, CBO does not
expect any significant net recoveries on defaulted assisted
properties. HUD expects to sell assisted properties that
default to buyers interested in maintaining the property as
affordable housing for a nominal value.
The cost of restructuring mortgage debt includes the
payment covering the remaining balance on the mortgage plus
amounts used for rehabilitation (an estimated 81 percent of the
loan's unpaid balance or about $1.7 million per project, on
average), the fees paid to the public or private organization
that assists the Office of Affordable Housing Preservation with
mark-to-market activities (about $55,000 per project), and the
FHA subsidy cost associated with guaranteeing the new first
mortgage ($32,000 per project), less the present value of
expected receipts from repayments on the second mortgage
($129,000 per project). HUD expects to sell the second
mortgages after holding them for about five years.
The additional restructurings that could occur under H.R.
5527 would reduce the cost to the FHA insurance fund over the
remaining life of the affected loan guarantees. If the mark-to-
market program ends, CBO assumes, based on data provided by HUD
and discussions with industry experts, that about 90 percent of
the 600 projects whose mortgages have not yet been restructured
would default. The remaining 10 percent of projects are assumed
to either be sustainable at market rents or would not have
their rents reduced to levels that would result in a default
absent the debt restructuring tools authorized by the mark-to-
market program. For these projects that are not expected to
default, enacting this bill would result in restructuring costs
only.
Because enacting H.R. 5527 would change the expected cash
flows associated with the FHA multifamily loan guarantee
program, that loan restructuring is considered to be a
modification of existing federal loan guarantees. Under credit
reform procedures, the costs of a loan modification are
estimated on a net-present-value basis in the year in which the
legislation is enacted. Assuming that the bill is enacted late
in fiscal year 2006, CBO estimates savings of $173 million this
year. (Such estimated savings would be recorded in 2007 if the
bill is enacted after September 30, 2006.)
Expand Eligibility to Properties Damaged by Disasters.
Section 4 of the bill would extend restructuring authorities to
projects that suffered substantial damage in a county that was
declared a Major Disaster Area on or after January 1, 2005. To
be eligible, properties must have sustained damage that is
likely to exceed $5,000 per unit beyond what is covered by
casualty and liability insurance. Based on information provided
by HUD, CBO estimates that approximately 130 properties were
moderately to severely damaged by storms in 2005. The mortgages
on these properties have an estimated unpaid balance of about
$1.4 million per project. CBO assumes that full claims will be
paid on these properties as part of the restructuring process
to cover the cost of repair. Because the restructurings would
change the expected cash flows for these properties, such
restructurings would constitute modifications of existing
federal loan guarantees. CBO estimates that allowing these
properties to have their debts restructured would generate
savings that on a net-present-value basis would amount to $11
million this year.
In addition to the projects damaged last year, any projects
damaged by future disasters would also be eligible for
restructuring assistance. Based on an analysis of past
disasters, CBO estimates that an average of 10 projects will be
damaged each year. Assuming that restructuring the debt on
these properties saves about $70,000 compared to the cost of
default, CBO estimates that this provision would save an
additional $500,000 to $1 million a year over the 2007-2011
period. (The authority provided in section 4 would end in
2011.)

Spending subject to appropriation

Section 8 Rental Assistance. CBO estimates that by
extending MAHRA through 2011, the rents for properties that
have their debt restructuring would be reduced more than is
expected under current law. Based on discussions with industry
experts, CBO anticipates that the debt restructuring tools
authorized by MAHRA allow HUD to move more quickly in reducing
rents than would otherwise be the case, particularly in areas
where comparable rents are difficult to find. Since the program
was reauthorized in 2001, rents for projects that have had
their debt restructured have been reduced by 21 percent, on
average. Assuming that rent reduction for the 64,000 units in
the 600 restructured properties would be about 10 percent less
(or about 19 percent) absent the debt-restructuring tools, CBO
estimates that implementing the bill would result in
discretionary savings of $2 million in 2007 and $33 million
over the 2007-2011 period, assuming the appropriations are
reduced to reflect the lower cost of the HAP contracts.
Exception Rents. Section 3 of the bill would increase HUD's
authority to set exceptions rents above 120 percent of the fair
market rent (FMR) from 5 percent to 9 percent of all units
subject to restructuring. Based on data provided by HUD, CBO
estimates that such exception rents are, on average, about 14
percent higher (or $850 per year) than they would be if limited
to 120 percent of the FMR. The expansion of the exception
authority would allow an additional 3,200 units to establish
exception rents, CBO estimates. Expanding the exception rent
authority would require the appropriation of $9 million over
the 2007-2011 period, which would result in estimated outlays
of $8 million over that period.
Intergovernmental and private-sector impact: H.R. 5527
contains no intergovernmental or private-sector mandates as
defined in UMRA. Reauthorization of the mark-to-market program
would extend cooperative agreements between HUD and
participating state and local agencies. Any costs incurred by
those agencies as part of the agreements would be incurred
voluntarily.
Estimate prepared by: Federal Costs, Chad Chirico and
Susanne S. Mehlman. Impact on State, Local, and Tribal
Governments: Sarah Puro. Impact on the Private Sector: Peter
Richmond.
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
general welfare of the United States) and clause 3 (relating to
the power to regulate 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 establishes the short title of the bill, the
``Mark-to-Market Extension Act of 2006.''

Section 2. Reauthorization

This section will reauthorize the Mark-to-Market program
through FY 2011. Without this reauthorization, termination
would be at the conclusion of FY 2006.

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):

MULTIFAMILY ASSISTED HOUSING REFORM AND AFFORDABILITY ACT OF 1997

TITLE V--HUD MULTIFAMILY HOUSING REFORM

* * * * * * *

SEC. 510. SHORT TITLE.

This title may be cited as the ``Multifamily Assisted Housing
Reform and Affordability Act of 1997''.

Subtitle A--FHA-Insured Multifamily Housing Mortgage and Housing
Assistance Restructuring

* * * * * * *

SEC. 512. DEFINITIONS.

In this subtitle:
(1) * * *

* * * * * * *

(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. 514. MORTGAGE RESTRUCTURING AND RENTAL ASSISTANCE SUFFICIENCY
PLAN.

(a) * * *

* * * * * * *

(g) Rent Levels.--
(1) In general.--Except as provided in paragraph (2),
each mortgage restructuring and rental assistance
sufficiency plan pursuant to the terms, conditions, and
requirements of this subtitle shall establish for units
assisted with project-based assistance in eligible
multifamily housing projects adjusted rent levels
that--
(A) * * *
[(B) if those rents cannot be determined, are
equal to 90 percent of the fair market rents
for the relevant market area.]
(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.
(2) Exceptions.--
(A) In general.--A contract under this
section may include rent levels that exceed the
rent level described in paragraph (1) at rent
levels that do not exceed 120 percent of the
fair market rent for the market area (except
that the Secretary may waive this limit for not
more than [five] nine percent of all units
subject to portfolio restructuring agreements,
based on a finding of special need), if the
participating administrative entity--
(i) * * *

* * * * * * *

SEC. 517. RESTRUCTURING TOOLS.

(a) Mortgage Restructuring.--
(1) * * *

* * * * * * *

(5) The Secretary may modify the terms of the second
mortgage, assign the second mortgage to the acquiring
organization or agency, or forgive all or part of the
second mortgage if the Secretary holds the second
mortgage and if the project is acquired by a tenant
organization or tenant-endorsed community-based
nonprofit or public agency, pursuant to guidelines
established by the Secretary: 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.

* * * * * * *

(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).

* * * * * * *

SEC. 579. TERMINATION.

(a) Repeals.--
(1) Mark-to-market program.--Subtitle A (except for
section 524) is repealed effective October 1, [2006]
2011.

* * * * * * *

(b) Exception.--Notwithstanding the repeal under subsection
(a), the provisions of subtitle A (as in effect immediately
before such repeal) shall apply with respect to projects and
programs for which binding commitments have been entered into
under this Act before October 1, [2006] 2011.

* * * * * * *