[House Report 109-604]
[From the U.S. Government Publishing Office]



109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     109-604

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



 
               SAVING AMERICA'S RURAL HOUSING ACT OF 2006

                                _______
                                

 July 27, 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

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 5039]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 5039) to establish a program to revitalize rural 
multifamily housing assisted under the Housing Act of 1949, 
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..............................................     8
Background and Need for Legislation..............................     8
Hearings.........................................................    11
Committee Consideration..........................................    11
Committee Votes..................................................    11
Committee Oversight Findings.....................................    12
Performance Goals and Objectives.................................    12
New Budget Authority, Entitlement Authority, and Tax Expenditures    12
Committee Cost Estimate..........................................    12
Congressional Budget Office Estimate.............................    12
Federal Mandates Statement.......................................    15
Advisory Committee Statement.....................................    15
Constitutional Authority Statement...............................    15
Applicability to Legislative Branch..............................    16
Section-by-Section Analysis of the Legislation...................    16
Changes in Existing Law Made by the Bill, as Reported............    17
Additional Views.................................................    29

                               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 ``Saving America's Rural Housing Act of 
2006''.

SEC. 2. FINDINGS AND PURPOSES.

  (a) Findings.--The Congress finds that--
          (1) section 502(c) of the Housing Act of 1949 restricts the 
        rights of certain owners of projects for which loans were made 
        or insured under section 515 of such Act to prepay such loans;
          (2) expensive litigation against the Department of 
        Agriculture has cost the taxpayers of the United States 
        millions of dollars to date, funds that would be better spent 
        preserving affordable multifamily housing;
          (3) if such section 502(c) is partially repealed and the 
        prepayment restrictions are eliminated for multifamily housing 
        loans made before 1989 under section 515, it is expected, 
        according to a report, that approximately 10 percent of the 
        portfolio of such loans would be prepaid and those projects 
        would leave the program;
          (4) the average age of a multifamily housing project with a 
        section 515 loan is 28 years, and therefore much of the 
        portfolio of such projects is aging and in need of 
        revitalization, while the need for affordable rural housing is 
        increasing;
          (5) section 515 projects house some of the poorest families 
        in rural America, with almost 60 percent of the units occupied 
        by senior citizens or persons with disabilities and an average 
        annual household income among all occupants of approximately 
        $10,000;
          (6) in many small towns and communities, rental housing 
        financed by direct loans under section 515 is the only decent, 
        affordable rental housing available; and
          (7) consequently, any revitalization or disposition of this 
        portfolio, which houses nearly 450,000 low-income families and 
        seniors, should be handled with great care.
  (b) Purposes.--The purposes of this Act are--
          (1) to authorize the Secretary of Agriculture to carry out a 
        program that encourages, to the extent practicable, the 
        retention of section 515 housing project developments for long-
        term use and the repair and preservation of such properties, 
        and ensures that the minimum number of residents are displaced;
          (2) to repeal a portion of section 502(c) of the Housing Act 
        of 1949 to avoid further costly litigation against the 
        Department of Agriculture;
          (3) to preserve the availability of affordable rural housing 
        by providing a voluntary mechanism for owners of multifamily 
        rural housing projects with loans under section 515 to enter 
        into loan restructuring agreements with the Secretary to 
        provide capital for revitalization activities; and
          (4) to provide for affordable rents for tenants who live in 
        such projects that are revitalized under this Act and to 
        protect tenants who live in such projects for which the loan is 
        prepaid.

SEC. 3. REVITALIZATION OF MULTIFAMILY HOUSING.

  (a) Revitalization Program.--Title V of the Housing Act of 1949 (42 
U.S.C. 1471 et seq.) is amended by adding at the end the following new 
section:

``SEC. 544. REVITALIZATION AND TENANT PROTECTION VOUCHERS.

  ``(a) Purpose.--The purposes of this section are--
          ``(1) to protect tenants who live in multifamily housing 
        projects that are subsidized under this title and, in the case 
        of prepayments of loans under section 515, to protect tenants 
        that are displaced when the projects cease being eligible 
        projects;
          ``(2) to strengthen the long-term viability of eligible 
        projects;
          ``(3) to promote the revitalization of rural multifamily 
        housing projects; and
          ``(4) to accomplish such several purposes--
                  ``(A) by providing a voluntary mechanism for project 
                owners to enter into loan restructuring agreements with 
                the Secretary to obtain new types of financial 
                assistance to rehabilitate and maintain the projects; 
                and
                  ``(B) by deregulating certain projects in a manner 
                that still provides measurable performance standards 
                and effective financing and rehabilitation of 
                multifamily housing.
  ``(b) Revitalization.--
          ``(1) In general.--The Secretary shall, subject to the 
        availability of amounts appropriated, carry out a 
        revitalization program in accordance with this subsection to 
        provide financial incentives and other assistance to owners of 
        eligible projects through voluntary long-term use agreements 
        entered into between the project owners and the Secretary.
          ``(2) Applications to participate.--The Secretary may accept 
        applications from owners of eligible projects to participate in 
        the revitalization program under this section.
          ``(3) Long-term viability plan.--
                  ``(A) Requirement.--The Secretary may prepare and 
                approve a long-term viability plan under this paragraph 
                with respect to each eligible project for which the 
                owner requests to participate.
                  ``(B) Contents.--Each long-term viability plan for an 
                eligible project shall include the following 
                information:
                          ``(i) Physical needs assessment.--A physical 
                        needs assessment of the project that identifies 
                        and projects, for the following 20 years--
                                  ``(I) all necessary repairs, 
                                improvements, maintenance, and 
                                management standards for the project, 
                                and when they will be made, in order to 
                                meet the requirements of this title; 
                                and
                                  ``(II) the costs associated with the 
                                items referred to in this subparagraph 
                                (A).
                          ``(ii) Financial plan.--A financial plan for 
                        the project that--
                                  ``(I) reviews the financial stability 
                                of the project;
                                  ``(II) includes the loan 
                                restructuring elements, rent 
                                adjustments, management and operational 
                                efficiencies, and other financial 
                                adjustments to the project that are 
                                necessary to cover operating expenses 
                                for the project and maintain an 
                                adequate financial reserve for the 
                                future maintenance and capital needs of 
                                the project;
                                  ``(III) provides the project owner 
                                with a long-term rate of return on new 
                                capital, as determined by the 
                                Secretary, commensurate to comparable 
                                commercial multifamily housing 
                                projects;
                                  ``(IV) meets the physical needs for 
                                the project determined under the 
                                physical needs assessment;
                                  ``(V) ensures that rents available 
                                under the plan are affordable to 
                                eligible households in accordance with 
                                paragraph (7); and
                                  ``(VI) addresses any costs associated 
                                with any temporary tenant displacement 
                                resulting from renovations or 
                                rehabilitation undertaken as a result 
                                of participation of the project in the 
                                revitalization program.
                  ``(C) Development through participating 
                administrative entities.--The Secretary may develop 
                long-term viability plans through the use of third-
                party participating administrative entities, who may be 
                a private contractor, a State housing finance agency, 
                or a nonprofit organization.
                  ``(D) Revitalization determination.--Based on the 
                long-term viability plan for an eligible project, the 
                Secretary shall determine whether to offer the project 
                owner a financial restructuring plan under paragraph 
                (4) and the financial incentives to be included in any 
                such plan offered.
                  ``(E) Final review and comment.--With respect to any 
                long-term viability plan prepared by the Secretary, the 
                Secretary shall provide the project owner an 
                opportunity to review the plan and discuss the plan 
                with the Secretary or its agent before a determination 
                is made under subparagraph (D).
                  ``(F) Fees.--The Secretary may charge the project 
                owner a fee for preparation of the long-term viability 
                plan.
                  ``(G) Payment of fees.--If a long-term viability for 
                a project is approved, the payment of such fee may be 
                incorporated into a project owner's financial 
                restructuring plan for the project provided by the 
                Secretary pursuant to paragraph (4).
          ``(4) Financial restructuring plan; revitalization 
        incentives.--Based on the long-term viability plan for an 
        eligible project, the Secretary may offer a project owner a 
        financial restructuring plan for the project. Such a plan may 
        include one or more of the following revitalization incentives:
                  ``(A) Reduction or elimination of interest on the 
                loan or loans for the project made under section 515.
                  ``(B) Partial or full deferral of payments due under 
                such loan or loans.
                  ``(C) Forgiveness of such loan or loans.
                  ``(D) Subordination of such loan or loans, subject to 
                such terms and conditions as the Secretary shall 
                determine.
                  ``(E) Reamortization of loan payments under such loan 
                or loans over extended terms.
                  ``(F) A grant from the Secretary for the project.
                  ``(G) Payment of project costs associated with 
                developing the long-term viability plan.
                  ``(H) Opportunity for project owners to obtain 
                further investment equity from third parties in the 
                project.
                  ``(I) A direct loan or guarantee of a loan for the 
                project, with a subsidized interest rate without regard 
                to the value of the project.
          ``(5) Long-term use agreement.--
                  ``(A) In general.--If the owner of an eligible 
                project agrees to the terms of a financial 
                restructuring plan for the project providing 
                revitalization benefits under paragraph (4), in 
                exchange for such benefits, the Secretary and the 
                project owner shall enter into a long-term use 
                agreement under this paragraph for the project.
                  ``(B) Agreement.--A long-term use agreement for an 
                eligible project shall include--
                          ``(i) the terms of the financial 
                        restructuring plan for the project, including 
                        any revitalization incentives to be provided;
                          ``(ii) an agreement by the project owner--
                                  ``(I) to continue the property use 
                                restrictions with respect to the 
                                project in accordance with this title 
                                for a period of (aa) 20 years, or (bb) 
                                the remaining term of any loans under 
                                this title for the project, whichever 
                                ends later;
                                  ``(II) to comply with the long-term 
                                viability plan for the project;
                                  ``(III) to comply with the rent terms 
                                under paragraph (7) for the project; 
                                and
                                  ``(IV) to make value payments under 
                                paragraph (6) to the Secretary, and the 
                                terms of such payments;
                          ``(iii) provisions terminating the agreement 
                        if any revitalization incentives for the 
                        project to be provided under the agreement are 
                        no longer available and the Secretary 
                        determines that such unavailability is not the 
                        fault of the owner;
                          ``(iv) any rent terms for the project 
                        pursuant to paragraph (7);
                          ``(v) a covenant which runs with the land; 
                        and
                          ``(vi) such other terms as the Secretary 
                        determines are necessary to implement the 
                        purposes of this section.
          ``(6) Shared value agreements.--Each long-term use agreement 
        shall include a shared value agreement secured by the property 
        of the eligible project that is the subject of the long-term 
        use agreement, which shall determine how proceeds are divided 
        at the end of the term of the loan or loans and shall require 
        the project owner, at the end of such loan term or terms, to 
        pay the lesser of--
                  ``(A) the sum of--
                          ``(i) the amounts of any loan writedowns, 
                        write-offs, and interest subsidies provided in 
                        connection with the loan restructuring under 
                        this subsection, at the closing of 
                        revitalization;
                          ``(ii) any outstanding principal and 
                        interest; and
                          ``(iii) any non-loan funds provided by the 
                        Secretary under this subsection; or
                  ``(B) 75 percent of the appraised value of the 
                eligible project.
          ``(7) Rents under long-term use agreement.--In any eligible 
        project that is subject to a long-term use agreement, rents for 
        eligible households shall comply with the following 
        requirements:
                  ``(A) Minimum rent.--The Secretary, acting through 
                the director of the applicable local agency or office 
                of the Department responsible for carrying out the 
                programs under this title in such area, may provide 
                that each eligible household is charged a minimum 
                monthly rent in an amount determined by such local 
                director that does not in any case exceed $25. The 
                Secretary may allow exceptions to such minimum rent for 
                an eligible household or groups of eligible households 
                for demonstrated hardship, as determined by the 
                Secretary, which hardship exceptions, if allowed by the 
                Secretary, shall include the hardship exceptions 
                provided or established by the Secretary of Housing and 
                Urban Development, as appropriate, under subclauses (I) 
                through (V) of section 3(a)(3)(B)(i) of the United 
                States Housing Act of 1937 (42 U.S.C. 
                1437a(a)(3)(B)(i)).
                  ``(B) Maximum household contribution to rent.--
                Notwithstanding any minimum monthly rent established 
                pursuant to subparagraph (A), the maximum household 
                contribution to monthly rent for any eligible household 
                may not exceed 30 percent of the adjusted income of the 
                eligible household. Such local director may take 
                actions as may be necessary to verify tenant incomes 
                for purposes of carrying out this subparagraph.
                  ``(C) Rent adjustments.--The rents for eligible 
                households may be increased or decreased only on an 
                annual basis and only in accordance with standards 
                incorporated in such agreement. The Secretary shall 
                issue regulations establishing such standards, which 
                shall include standards for rents that are considered 
                affordable for eligible households for the area in 
                which a project is located and for establishing rents 
                that conform to such standards.
          ``(8) Lowest cost requirement.--In determining the terms of a 
        restructuring plan, and the type and amount of revitalization 
        benefits under such plan to approve under this subsection for 
        an eligible project, the Secretary shall, to the extent 
        practicable, approve assistance that imposes the least cost to 
        the Secretary while meeting the requirements of the long-term 
        viability plan for the project.
          ``(9) Authorization of appropriations.--There are authorized 
        to be appropriated for each fiscal year such sums as may be 
        necessary to carry out the revitalization program under this 
        subsection.
  ``(c) Homeownership Opportunities.--The owner of an eligible project 
may, in conjunction with revitalization of the project pursuant to this 
section, propose a sale to a tenant-based condominium or cooperative. 
Any such proposal shall be subject to a notice to tenants under terms 
that the Secretary shall establish.
  ``(d) Determination of Ineligibility.--
          ``(1) Procedure.--The Secretary may determine that a project 
        owner is ineligible for participation in the revitalization 
        program under this section in accordance with the standards 
        under paragraph (2).
          ``(2) Standards.--The Secretary may determine that a project 
        owner is ineligible if--
                  ``(A) the project owner has a history of poor 
                management or maintenance of multifamily housing 
                properties;
                  ``(B) the project owner is in default on a loan made 
                available under the section 514 or 515 housing program;
                  ``(C) the Secretary is unable to enter into a long-
                term use agreement for the project that is the subject 
                of the application with the project owner within a 
                reasonable time;
                  ``(D) the project owner is suspended or debarred from 
                participating in Federal contracts or programs; or
                  ``(E) the Secretary has other good cause for 
                withholding from the project owner the benefits made 
                available under this section.
  ``(e) Definitions.--For purposes of this section, the following 
definitions shall apply:
          ``(1) Eligible household.--The term `eligible household' 
        means a household that, under section 515, is eligible to 
        reside in a project funded with a loan made by the Secretary 
        under such section.
          ``(2) Eligible project.--The term `eligible project' means a 
        housing project funded with a loan made at any time by the 
        Secretary under section 515, the principal obligation of which 
        has not been fully repaid.
          ``(3) Project owner; owner.--The terms `project owner' and 
        `owner' mean, with respect to an eligible project, an 
        individual or entity, or principals thereof that own, or plan 
        to purchase, the project.''.
  (b) Priority for Section 515 Financing.--Subsection (j) of section 
515 of the Housing Act of 1949 (42 U.S.C. 1485(j)) is amended--
          (1) by inserting ``(1)'' before ``For''; and
          (2) by adding at the end the following new paragraph:
  ``(2) The Secretary may give priority, in entering into contracts 
under this section involving financing for new construction of a 
project, for projects located in areas having a need for affordable 
low-income rental housing due to prepayment of loans made or insured 
under this section.''.
  (c) Partial Repeal of Prepayment Restrictions; Administration of 
Prepayment Requests.--Section 502 of the Housing Act of 1949 (42 U.S.C. 
1472) is amended--
          (1) in subsection (c)--
                  (A) by striking ``or 515'' each place such term 
                appears;
                  (B) in paragraph (4)(B)--
                          (i) by striking clause (iv);
                          (ii) by redesignating clauses (v) and (vi) as 
                        clauses (iv) and (v), respectively; and
                          (iii) by realigning clause (v) (as so 
                        redesignated by clause (ii) of this 
                        subparagraph) so as to be indented two ems from 
                        the left margin; and
                  (C) in paragraph (5)(G)(i)(I), by striking ``, as the 
                case may be,''; and
          (2) by adding at the end the following new subsection:
  ``(i) Prepayment of Section 515 Multifamily Housing Loans.--
          ``(1) Administration.--
                  ``(A) Plan.--The Secretary shall develop a plan to 
                administer requests to prepay (not made in connection 
                with any revitalization under section 544) any loan 
                made under section 515. The plan shall provide for 
                administration of voucher assistance in accordance with 
                paragraph (3). The plan shall encourage and facilitate 
                owners of projects to maintain the projects, or to 
                transfer projects to owners who will maintain projects, 
                as housing affordable to low-income residents, but 
                shall not prevent an owner from prepaying.
                  ``(B) Implementation.--The Secretary shall implement 
                this subsection not later than the expiration of the 
                90-day period beginning on the date of the enactment of 
                the Saving America's Rural Housing Act of 2006. 
                Notwithstanding that full implementation of this 
                subsection may not have been completed, the Secretary 
                may not delay the processing of any request to prepay a 
                loan made under section 515.
          ``(2) Notice of prepayment or sale.--In preparation for 
        prepayment of a loan made or insured under section 515, the 
        project owner shall, not less than 120 days before the date of 
        prepayment of the loan or sale of the project for which the 
        loan was made, provide the following notices:
                  ``(A) Notice to tenants.--To the tenants of the 
                project, notice of the prepayment, as follows:
                          ``(i) The notice shall include information 
                        sufficient to inform each tenant of the plan 
                        after prepayment for the project, in which they 
                        reside as a tenant, and whether such plan may 
                        result in, or is likely to result in, the 
                        tenant being required to move and the earliest 
                        date that the tenant's lease will expire or the 
                        tenant may have to move, and of the 
                        availability of vouchers pursuant to paragraph 
                        (3), actions tenants must take to receive 
                        voucher assistance, the date prepayment is 
                        expected to take place, a telephone number and 
                        electronic mail address at which to contact the 
                        owner of the project, and any limitations, use, 
                        and other terms the Secretary considers 
                        appropriate.
                          ``(ii) In the case of any prepayment 
                        involving transfer of the ownership of a 
                        project, the notice shall include the name of 
                        the transferee, the date that the transfer was 
                        agreed to, the date the transfer is to take 
                        place, and telephone numbers and electronic 
                        mail addresses at which to contact the 
                        transferor and transferee.
                  ``(B) Notice to secretary.--To the Secretary, notice 
                that the requirements under subparagraph (A) have been 
                met, which shall identify the date that notice under 
                such subparagraph was made and the names of each tenant 
                to which such notice was provided.
          ``(3) Rural tenant protection vouchers.--
                  ``(A) In general.--In the case of a housing project 
                subject to a loan made under section 515, if the loan 
                is prepaid or foreclosed upon, the Secretary shall, to 
                the extent that amounts for assistance under this 
                paragraph are provided in advance in appropriation 
                Acts, offer voucher assistance to each low-income 
                family who on the date that notice is provided in 
                accordance with paragraph (2)(A) is residing in a 
                dwelling unit in the project.
                  ``(B) Use.--A voucher under this paragraph for a 
                family may be used for rental of a dwelling unit in the 
                project that the family resides in on the date of the 
                notice in accordance with paragraph (2)(A) or for a 
                dwelling unit elsewhere.
                  ``(C) Renewal.--Vouchers under this paragraph shall 
                be renewed annually, subject to the availability of 
                appropriations for such renewal, during the period that 
                the family assisted remains eligible for such 
                assistance.
                  ``(D) Right to use.--In the case of a project for 
                which a loan made under section 515 is prepaid--
                          ``(i) a family residing in such project on 
                        the date of prepayment may elect to remain in 
                        the unit in which the family was residing on 
                        such date; and
                          ``(ii) the owner of the project may not 
                        refuse to lease, to a family for whom voucher 
                        assistance under this paragraph is made 
                        available, any available rental dwelling unit 
                        in the project.
                  ``(E) Amount of assistance.--The amount of rental 
                assistance provided under a voucher under this 
                paragraph on behalf of a tenant shall be the amount by 
                which--
                          ``(i) the lesser of (I) the rent for the 
                        dwelling unit rented using such voucher, or 
                        (II) the rent for a comparable unit in the same 
                        market area as the housing project for which 
                        the loan was prepaid; exceeds
                          ``(ii) the lesser of (I) the amount of rent 
                        paid by the tenant for the dwelling unit 
                        occupied by the tenant at the time of the 
                        prepayment referred to in paragraph (1), or 
                        (II) the amount equal to 30 percent of the 
                        tenant's adjusted income (as such term is 
                        defined in section 3(b) of the United States 
                        Housing Act of 1937 (42 U.S.C. 1437a(b)).
                  ``(F) Rural affordable voucher.--For communities with 
                insufficient affordable housing alternatives, and in 
                the case of any elderly or disabled tenant who is 
                eligible for a voucher under this paragraph and has a 
                need to move to another community to be near immediate 
                family or necessary medical services, as determined by 
                the Secretary, voucher assistance under this paragraph 
                may be provided in accordance with section 8(t)(1) of 
                the United States Housing Act of 1937 (42 U.S.C. 
                1437f(t)(1)).
                  ``(G) Administration.--To the maximum extent 
                practicable, the Secretary shall administer voucher 
                assistance under this paragraph in accordance with, but 
                not subject to, regulations and administrative guidance 
                for housing vouchers administered by the Secretary of 
                Housing and Urban Development under section 8 of such 
                Act.
                  ``(H) Homeownership opportunities.--A voucher under 
                this paragraph may be used by a tenant to make payments 
                towards the purchase of a single-family home anywhere 
                in the United States, subject to subsidy limits for 
                vouchers under this title and the same limitations 
                applicable under section 8(y) of the United States 
                Housing Act of 1937 (42 U.S.C. 1437f(y) to the use of 
                tenant-based assistance under such section 8 for 
                homeownership.
                  ``(I) Authorization of appropriations.--There is 
                authorized to be appropriated for tenant protection 
                vouchers under this paragraph--
                          ``(i) for fiscal year 2007, $74,000,000; and
                          ``(ii) for each of fiscal years 2008 through 
                        2011, the amount necessary to provide vouchers 
                        in each such fiscal year for all of the 
                        families identified in subparagraph (A).
          ``(4) Prepayment standards for pre-1989 loans.--In the case 
        of a loan made or insured under section 515 pursuant to a 
        contract entered into before December 15, 1989:
                  ``(A) In general.--Subject to subparagraph (B), the 
                Secretary shall approve any offer to prepay such a loan 
                that meets the following requirements:
                          ``(i) The borrower under the loan has not 
                        been provided any assistance to extend low-
                        income use pursuant to section 502(c)(4) of 
                        this Act, as such section was in effect before 
                        the date of the enactment of the Saving 
                        America's Rural Housing Act of 2006.
                          ``(ii) The loan was not at any time 
                        restricted by servicing actions, including 
                        transfers.
                          ``(iii) The 20-year period during which the 
                        project is subject to use restrictions under 
                        the loan has concluded.
                  ``(B) Prohibition.--The Secretary may not approve any 
                offer to prepay such a loan during the 20-year period 
                during which the project is subject to use restrictions 
                under the loan.
          ``(5) Sale restrictions and marketing assistance.--
                  ``(A) Sale restrictions.--During the period that 
                begins upon the owner providing notice to the Secretary 
                under paragraph (2)(B) and having a duration of 75 
                days, the owner may not sell the property except to a 
                purchaser who enters into such binding agreements for 
                purchase at market rates as the Secretary considers 
                necessary to continue the property use restrictions 
                with respect to the project in accordance with this 
                title for a period of 20 years. This paragraph may not 
                be construed to prohibit an owner, during such period, 
                from soliciting or receiving any offers of sale or 
                purchase.
                  ``(B) Marketing assistance.--
                          ``(i) Database of potential buyers.--The 
                        Secretary shall establish and maintain a 
                        database of potential buyers of projects with 
                        loans made under section 515. Such database 
                        shall include only persons who have expressed 
                        an interest to the Secretary in purchasing such 
                        projects at fair market value and maintaining 
                        the projects for use as affordable housing.
                          ``(ii) Public notification of prepayment.--
                        Upon notification to the Secretary under 
                        paragraph (2)(B) regarding prepayment of a loan 
                        for a project, the Secretary shall make 
                        publicly available, on the appropriate World 
                        Wide Web site of the Department or by other 
                        appropriate electronic method, including 
                        individual notification, a notice containing 
                        information sufficient, in the determination of 
                        the Secretary, to notify persons with an 
                        interest in purchasing the project of the 
                        prepayment.''.

SEC. 4. CONFORMING AMENDMENTS TO TITLE V OF THE HOUSING ACT OF 1949.

  Title V of the Housing Act of 1949 is amended--
          (1) in section 502(b)(2) (42 U.S.C. 1472(b)(2))--
                  (A) by striking ``or 515''; and
                  (B) by inserting before the semicolon at the end the 
                following: ``and any prepayment of a loan made or 
                insured under section 515 shall be subject to the 
                provisions of subsection (i)''; and
          (2) in section 537(b)(1) (42 U.S.C. 1490p-1(b)(1)), by 
        inserting before the semicolon the following: ``and to 
        administer the revitalization program under section 544''.

SEC. 5. EFFECTIVE DATE.

  This Act and the amendments made by this Act shall take effect on 
October 10, 2007.

                          Purpose and Summary

    H.R. 5039, the Saving America's Rural Housing Act of 2006, 
was introduced to serve three goals: (1) preserve affordable 
section 515 housing, (2) remove restrictions on prepayment of 
certain pre-1989 section 515 loans, and (3) protect tenants 
living in prepaid section 515 properties. To preserve the 
section 515 portfolio, this legislation will create a 
revitalization program to give owners a chance to restructure 
existing debt and make necessary renovations and repairs. H.R. 
5039 will also repeal statutory restrictions on the prepayment 
of eligible pre-1989 loans, thus allowing owners to prepay 
certain section 515 loans. Additionally, this bill provides a 
number of tenant protections both for tenants living in 
revitalized properties and for tenant displaced or affected by 
prepayment.

                  Background and Need for Legislation

    The section 515 rural multifamily housing program allows 
Rural Development to make direct loans to owners and developers 
of rural, affordable apartment housing. Section 515 apartment 
housing is the only affordable housing available for low-income 
families in many rural communities. While the need for 
affordable rural housing is increasing, construction of new 
section 515 properties has slowed and the average age of these 
properties is 28 years. To preserve this housing for the 
future, the Saving America's Rural Housing Act of 2006 will 
create a revitalization program to allow for new financing for 
ailing section 515 properties. Under H.R. 5039, section 515 
owners will be offered incentives, such as loan restructuring, 
to encourage the preservation of these properties and to 
decrease the likelihood that they will be converted to other 
uses. Without the injection of new capital that the 
revitalization program will provide, section 515 units may 
cease to be an option for many families seeking affordable, 
decent rural housing.
    USDA Rural Development has its origins in the Housing Act 
of 1949 legislation recognizing that shortages of quality 
housing exist in rural areas. For over 50 years, Rural 
Development--through various loan and grant programs--has aided 
in financing both single- and multi-family housing for rural 
families. The section 515 program helps nearly 500,000 of the 
very poorest rural residents, with an average annual income of 
about $9,000, by financing 50-year, 1 percent loans to limited-
profit and nonprofit developers to construct or renovate 
affordable rental complexes in rural areas. In exchange for the 
very-low interest loan, owners of these developments agree to 
adhere to use restrictions for the property, generally for a 
term of 20 years. For FY 2006, $99 million was appropriated for 
section 515 direct loans.
    Typically, residents of section 515 housing also receive 
section 521 rental assistance and pay a maximum of 30 percent 
of their income toward rent and utilities. However, of the 
nearly 500,000 residents in section 515 housing, almost 80,000 
do not receive rental assistance and thus pay more than 30 
percent of their income towards rent. The section 515 portfolio 
currently contains about 17,000 existing multi-family 
properties. According to the comprehensive needs assessment 
study conducted in 2004, if restrictions are lifted and 
prepayment is allowed for eligible, pre-1989 loans, around 10 
percent of the section 515 portfolio is expected to prepay and 
leave the program, mostly because these properties are located 
in areas that were rural at the time of construction but could 
now be considered suburban or even urban. Thus, these 
properties could likely generate a much higher market rent. In 
anticipation of both a section 515 revitalization program and 
prepayment reform, USDA Rural Development was appropriated $25 
million to administer demonstration revitalization and voucher 
programs for FY 2006.
    Additionally, this legislation will repeal restrictions on 
the prepayment of certain section 515 loans made before 1989 in 
order to alleviate costly litigation against the USDA over 
these provisions. According to industry experts, owners who 
entered the section 515 program in the 1980's viewed the direct 
loan as a first mortgage, to later be refinanced by private 
debt. Rural Development data made available to Committee staff 
reveals that many owners of section 515 properties tend to be 
either community leaders seeking to improve the availability of 
affordable housing for residents, nonprofit groups, or farmers. 
In 1985 and 1986, Congress received complaints that elderly and 
low-income tenants were being displaced as a result of section 
515 prepayment, as owners' contracts included the explicit 
right to prepayment. As a reaction, P.L. 100-424, the Emergency 
Low Income Housing Preservation Act of 1987 (ELIHPA), was 
signed into law on February 5, 1988. This legislation placed a 
number of restrictions on prepayment and required the USDA to 
encourage owners to stay in the program. Further, this act was 
also applied retroactively to contracts that specifically 
permitted prepayment. On October 28, 1992, P.L. 102-550 was 
signed into law, extending ELIHPA restrictions retroactively to 
section 515 projects funded before December 15, 1989. It should 
be noted that section 515 contracts after this date include a 
provision restricting prepayment.
    The Federal government has spent millions of dollars 
defending lawsuits brought by section 515 owners hoping to 
circumvent retroactive prepayment restrictions on certain 
loans. One set of owners has been allowed to bypass the 
prepayment process by suing for quiet title (e.g., removing 
encumbrances on the property such as rent restrictions). See 
Kimberly Associates v. United States, No. CV-98-0083-S-LMB (D. 
Idaho 2002) (on remand from the U.S. Court of Appeals for the 
Ninth Circuit).
    Other owners have not been successful in achieving the same 
results. The U.S. Court of Appeals for the Eighth Circuit has 
twice upheld the prepayment restrictions and declined to allow 
owners to bypass them through a quiet title action. See 
Parkridge v. Farmers Home Administration, 13 F.3d 1192 (8th 
Cir. 1994) and Charleston Housing Authority v. USDA, 419 F.3d 
729 (8th Cir. 2005).
    In 2004, however, the U.S. Court of Federal Claims held 
that the retroactive restrictions on prepayment created by 
ELIHPA amounted to a breach of contract by the federal 
government. See Franconia Associates v. United States, 61 Fed. 
C1. 718 (Fed. C1. 2004). As a remedy, the plaintiff-owners have 
successfully sought money damages, with the average damage 
award per property exceeding $400,000.
    In an effort to relieve the federal government of future 
damage awards, H.R. 5039 would repeal these restrictions so 
that owners who have fulfilled their contractual obligations to 
the Department of Agriculture may prepay section 515 loans 
without pursuing costly lawsuits that would likely be decided 
against the Federal government. The enactment of H.R. 5039 
could enable Federal funds that might otherwise be directed 
towards litigation expenses, to be used for housing 
preservation and rental assistance.
    Keeping in mind that repealing restrictions on prepayment 
of pre-1989 section 515 loans will lead some properties to 
leave the program, this legislation contains significant 
protections for tenants who will either be displaced by 
prepayment or face rising, unaffordable rents. The voucher 
program created by this bill is designed to ensure that tenants 
are not disadvantaged by prepayment. Tenants receiving a 
voucher will not be responsible for additional rent beyond what 
they paid at their old unit before prepayment and will have the 
opportunity to elect to remain in their current unit post-
prepayment. Additionally, H.R. 5039 requires owners to provide 
residents detailed notice of prepayment at least 120 days 
before the date of prepayment. When Rural Development is 
informed of an owner's plans to prepay, it will be required to 
post information related to the upcoming prepayment on the USDA 
website; it will also have the authority to send personal email 
notice to parties interested in purchasing section 515 
properties and maintaining them in the program. These measures 
will increase the likelihood that the development will remain 
in the section 515 program after prepayment without 
unnecessarily burdening owners. Many of the tenant protections 
included in this bill mirror provisions used by the U.S. 
Department of Housing and Urban Development's section 8 
program, creating conformity and easing implementation.
    In order to preserve the section 515 portfolio, H.R. 5039 
creates a revitalization program so that owners may restructure 
existing debt, thereby increasing the funding available to make 
necessary repairs and renovations. In 2004, the USDA completed 
a comprehensive property assessment study and published its 
findings. According to the released report, all surveyed 
section 515 properties were lacking adequate reserves and cash 
flow to cover repairs and maintenance over time, thus drawing 
attention to the need for increased financing and preservation 
of these properties. The restructuring program created by this 
legislation will allow for essential repairs and renovations, 
thus preserving the section 515 portfolio for years to come. 
Without this restructuring program, there will be a greater 
need for new construction, which is ultimately more expensive 
than preserving existing units. Rural Development launched a 
restructuring demonstration program in FY 2006 and has received 
thousands of applications from interested owners.
    Believing that preserving these properties now is much more 
efficient than commissioning new construction later, the 
Committee understands that tenants currently living in the 
development to be restructured could face higher rents, as 
owners may initially encounter increased costs at the time of 
restructuring. Thus, it is the Committee's intent that 
residents of section 515 properties at the time of 
restructuring be protected from such costs.
    Further, it is the Committee's intent that ``overburdened'' 
tenants living in developments at the time of restructuring-
those paying over 30 percent of income towards rent-find 
relief. To that end, H.R. 5039 provides that a tenant living in 
a restructured property must contribute no more than 30 percent 
of his or her income towards rent.

                                Hearings

    The Subcommittee on Housing and Community Opportunity held 
a legislative hearing on April 25, 2006, on H.R. 5039, the 
Saving America's Rural Housing Act of 2006. The following 
witnesses testified: Mr. Russell T. Davis, Administrator for 
Rural Development Housing and Community Facilities Programs, 
U.S. Department of Agriculture; Mr. Gideon Anders, Executive 
Director, National Housing Law Project; Mr. James N. Arbury, 
Senior Vice President of Government Affairs, National Multi 
Housing Council, and also on behalf of the National Apartment 
Association; Mr. Thomas Carew, Red River Director, Frontier 
Housing, Inc.; Mr. Moises Loza, Executive Director, Housing 
Assistance Council; Mr. Robert A. Rapoza, Executive Secretary, 
National Rural Housing Coalition; Mr. Robert L. Rice, Jr., 
President, Council for Affordable and Rural Housing; Mr. 
Charles Wehrwein, Senior Vice President, Mercy Housing, Inc.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
June 14, 2006, and ordered reported H.R. 5039, Saving America's 
Rural Housing Act of 2006, as amended, reported 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 amendments were 
considered:
    An amendment in the nature of a substitute recommended by 
the Subcommittee on House and Community Opportunity, making 
various technical and substantive changes, as amended, was 
AGREED TO by a voice vote.
    The following amendments to the Subcommittee amendment were 
considered:
    An amendment by Mr. Neugebauer, No. 1, providing maximum 
tenant rent subject to appropriations, was WITHDRAWN.
    An en bloc amendment by Mr. Davis (KY), No. 2, including 
the following amendments: Mr. Davis (KY) technical amendment; 
Mr. Davis (AL) enhanced voucher expiration; Mr. Cleaver extend 
prepayment notice period; and Mr. Sanders striking ``proximate 
cause'', 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. 5039, the Saving America's Rural Housing Act of 2006, 
will serve three goals: (1) preserve affordable section 515 
housing, (2) remove restrictions on prepayment of certain pre-
1989 section 515 loans, and (3) protect tenants living in 
prepaid section 515 properties. To preserve the section 515 
portfolio, this legislation will create a revitalization 
program to give owners a chance to restructure existing debt 
and make necessary renovations and repairs. H.R. 5039 will also 
repeal statutory restrictions on the prepayment of eligible 
pre-1989 loans, thus allowing owners to prepay certain section 
515 loans. Additionally, this bill provides a number of tenant 
protections both for tenants living in revitalized properties 
and for tenant displaced or affected by prepayment.

   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.

                        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:

                                                     July 10, 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. 5039, the Saving 
America's Rural Housing Act of 2006.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susanne S. 
Mehlman.
            Sincerely,
                                          Donald B. Marron,
                                                   Acting Director.
    Enclosure.

H.R. 5039--Saving America's Rural Housing Act of 2006

    Summary: H.R. 5039 would require the Rural Housing Service 
(RHS) within the Department of Agriculture to implement a 
program aimed at preserving rural rental housing supported by 
section 515 of the Housing Act of 1949 by restructuring loans 
on existing properties. Under the legislation, RHS would 
provide housing vouchers to certain families who would be 
displaced if property owners prepay the mortgages on properties 
where they now reside. The effective date of those provisions 
of the bill is October 10, 2007. CBO estimates that 
implementing this legislation would cost $585 million over the 
2008-2011 period and additional amounts after 2011, assuming 
appropriation of the necessary amounts. Enacting this bill 
would not affect direct spending or revenues.
    Section 515 of the Housing Act of 1949 provides RHS with 
the authority to make direct loans to developers to build 
affordable multifamily rental housing in rural areas for very 
low-income families, elderly people, and persons with 
disabilities. Owners of projects financed through section 515 
must maintain rents at affordable levels, usually for a minimum 
of 20 years. According to RHS and housing industry experts, 
construction of new section 515 properties has slowed in recent 
years, existing units are deteriorating, and an increasing 
number of project owners want to prepay their mortgages. Such 
prepayments would probably displace tenants who cannot afford 
housing in projects that are not subsidized.
    Under H.R. 5039, RHS would provide financial incentives, 
such as loan forgiveness and direct loans, to owners of section 
515 housing who agree not to prepay their mortgages. H.R. 5039 
would authorize the appropriation of such sums as may be 
necessary each year to implement those financial incentives.
    H.R. 5039 also would authorize RHS to provide vouchers to 
those families residing in projects where the owners choose not 
to participate in the new program and to prepay their mortgages 
on section 515 properties. Such vouchers could be used by the 
affected tenants to stay in the same project or to rent or 
purchase housing elsewhere. This legislation would authorize 
the appropriation of such amounts as necessary to provide 
vouchers over the 2008-2011 period.
    H.R. 5039 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: The estimated 
budgetary impact of H.R. 5039 is shown in the following table. 
The costs of this legislation fall within budget functions 370 
(mortgage and housing credit) and 600 (income security).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2006     2007     2008     2009     2010     2011
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

RHS Rental Assistance Spending Under Current Law:
    Estimated Authorization Level \1\.....................      647      659      670      683      695      707
    Estimated Outlays.....................................      849      871      904      880      803      766
Proposed Changes:
    Mortgage Restructuring:
        Estimated Authorization Level.....................        0        0       27       41       57       45
        Estimated Outlays.................................        0        0       27       41       57       45
    Rural Tenant Protection Vouchers:
        Estimated Authorization Level.....................        0        0       74      135      158      162
        Estimated Outlays.................................        0        0       22       92      142      159
        Total Changes:
            Estimated Authorization Level.................        0        0      101      176      215      207
            Estimated Outlays.............................        0        0       49      133      199      204
Total Spending Under H.R. 5039:
    Estimated Authorization Level.........................      647      659      771      859      910      914
    Estimated Outlays.....................................      849      871      953    1,013    1,002     970
----------------------------------------------------------------------------------------------------------------
\1\ The amount shown for 2006 is the amount appropriated for rental assistance in that year. The 2007-2011
  levels are CBO baseline projections, assuming adjustments for anticipated inflation.

Note.--RHS = Rural Housing Service.

    Basis of estimate: CBO estimates that implementing H.R. 
5039 would cost $585 million over the 2008-2011 period, 
assuming appropriation of the necessary amounts. Of that 
amount, CBO estimates that about $170 million would be spent by 
RHS to restructure mortgages and $415 million would be used by 
RHS to provide tenant protection vouchers. Details of these two 
provisions are provided below.

Mortgage restructuring

    Under this legislation, long-term viability plans would be 
developed for those owners of section 515 properties who choose 
to have their mortgages restructured. A long-term viability 
plan would include an assessment of a project's physical needs 
and a financial plan that addresses the restructuring tools 
needed to cover operating expenses and physical needs of the 
project. The restructuring tools that could be used include 
loan forgiveness and a reduction or elimination of interest. In 
return for such assistance, owners would agree to enter into 
long-term commitments with RHS to make low-income rental 
housing available for the greater of 20 years or the remaining 
loan term.
    According to RHS, the portfolio of section 515 loans 
encompasses almost 16,000 properties with nearly 450,000 units. 
Furthermore, of these roughly 16,000 properties, around 9,560 
will be eligible for prepayment over the 2008-2011 period 
because their 20-year rent restrictions will be expiring. The 
remaining balance of properties (around 6,440 properties) 
include about 4,000 properties that are eligible for prepayment 
after 2011, 1,480 properties that are not under consideration 
for prepayment despite being currently eligible, and about 960 
properties that will have their mortgages prepaid or will have 
their mortgages restructured under an ongoing demonstration 
program by the end of fiscal year 2007.
    The ongoing agency demonstration program that offers 
mortgage restructuring indicates that the vast majority of 
property owners eligible for prepayment would be interested in 
obtaining some form of financial assistance to prevent 
defaulting on their mortgages. Based on information from RHS, 
CBO estimates that 88 percent of the 9,560 properties eligible 
for prepayment over the 2008-2011 period would undergo a 
mortgage restructuring; the remaining 12 percent would prepay 
their mortgages. We estimate that the restructuring tools used 
would cost $20,000 for an average property with a $700,000 
outstanding loan balance. The cost to restructure mortgages for 
about 8,400 properties would be about $170 million over the 
2008-2011 period.

Rural tenant protection vouchers

    Under this legislation, RHS would provide tenant protection 
vouchers that would be annually renewable to families residing 
in properties whose owners prepay their section 515 loans. 
Based on information from RHS, CBO estimates that owners of 
about 1,150 properties (with about 34,500 units) in the section 
515 loan program would opt to prepay their mortgages over the 
2008-2011 period. CBO assumes that families in all of the 
affected 34,500 units would elect to receive a voucher. 
Assuming that the average cost of a voucher would be $4,400 in 
fiscal year 2008 (adjusted for inflation in subsequent years) 
and that those vouchers would be renewed annually, CBO 
estimates that this provision would cost $415 million over the 
2008-2011 period.
    Intergovernmental and private-sector impact: H.R. 4804 
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: Susanne S. Mehlman and 
Chad Chirico. Impact on State, Local, and Tribal Governments: 
Sarah Puro. Impact on the Private Sector: Craig Cammarata.
    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

    The short title of this bill is the ``Saving America's 
Rural Housing Act of 2006.''

Section 2. Findings and purposes

    This section sets forth certain findings, including the 
need for a revitalization program to rehabilitate ailing 
section 515 housing projects and to protect tenants. This 
section also lists the purposes of the Act.

Section 3. Revitalization of multifamily housing

    This section amends Title V of the Housing Act of 1949 by 
adding a new section 544 to allow Rural Development and section 
515 project owners to enter into voluntary Long-Term Use 
Agreements. The Long-Term Use Agreement will require section 
515 project owners, in exchange for receiving financial 
incentives for use in making repairs and renovations, to agree 
to continue property-use restrictions for at least 20 years. 
Before entering into the Use Agreement, Rural Development will 
prepare a Long-Term Viability Plan that will assess the needs 
of the project for the next 20 years. This Plan will help 
determine the specific financial incentives the owner will be 
offered as part of the restructuring program.
    This section also allows for the partial repeal of section 
515 prepayment restrictions, so that owners of pre-1989 
properties who have fulfilled their contractual duties to the 
USDA may prepay and leave the program. Owners who wish to 
prepay their section 515 loan will be required to provide 
detailed notice of prepayment to tenants at least 120 days 
before the owner sells or prepays the loan.
    To protect tenants who will either be displaced by 
prepayment or who will face rising, unaffordable rents post-
prepayment, this section creates a voucher program with two 
types of voucher assistance. Rural Tenant Protection vouchers 
will be available for families on the date they receive notice 
of the impending prepayment. This voucher will strive to make-
up the difference between the tenant's rent before prepayment 
and the rental amount after (for either that same unit or a 
comparable unit), so that families are not disadvantaged by 
prepayment. Rural Affordable vouchers will be available for 
tenants affected by section 515 prepayment living in 
communities that lack sufficient affordable housing 
alternatives and will be administered in accordance with 
section 8 of the HUD statute. These vouchers will also be 
available for elderly and disabled tenants who need to move to 
another community to access necessary medical services or to be 
near immediate family.
    Under this section, voucher-holding tenants living in 
section 515 units subject to prepayment may elect to remain in 
their unit and owners of these properties may not refuse to 
rent to a family holding such a voucher.
    This section also requires that, for 75 days after the 
section 515 owner notifies the USDA Secretary of his or her 
intention to prepay, the owner must entertain market-rate 
offers to purchase the project from non-profits or other groups 
or individuals who will keep the property affordable for 20 
years. Rural Development is also directed to establish maintain 
a database of potential buyers who have expressed an interest 
in purchasing section 515 properties. The agency will then use 
this database to post electronic notice of upcoming prepayments 
and, if appropriate, may also disseminate individual, 
electronic notice to interested parties.

Section 4. Conforming amendments to Title V of the Housing Act of 1949

    This section provides instructions to conform this 
legislation to existing law.

Section 5. Effective date

    If enacted, this legislation will take effect on October 1, 
2007.

         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):

                   TITLE V OF THE HOUSING ACT OF 1949


TITLE V--FARM HOUSING

           *       *       *       *       *       *       *



           loans for housing and buildings on adequate farms

    Sec. 502. (a)  * * *
    (b) The instruments under which the loan is made and the 
security given shall--
          (1)  * * *
          (2) provide for the repayment of principal and 
        interest in accordance with schedules and repayment 
        plans prescribed by the Secretary, except that any 
        prepayment of a loan made or insured under section 514 
        [or 515] shall be subject to the provisions of 
        subsection (c) and any prepayment of a loan made or 
        insured under section 515 shall be subject to the 
        provisions of subsection (i);

           *       *       *       *       *       *       *

    (c)(1)(A) The Secretary may not accept an offer to prepay, 
or request refinancing in accordance with subsection (b)(3) of, 
any loan made or insured under section 514 [or 515] of this 
title pursuant to a contract entered into after December 21, 
1979, but before the date of the enactment of the Department of 
Housing and Urban Development Reform Act of 1989, unless the 
Secretary takes appropriate action which will obligate the 
borrower (and successors in interest thereof) to utilize the 
assisted housing and related facilities for the purposes 
specified in section 514 [or 515], as the case may be, for a 
period of--
          (i)  * * *

           *       *       *       *       *       *       *

    (2) If any loan which was made or insured under section 514 
[or 515] pursuant to a contract entered into prior to the date 
of enactment of the Department of Housing and Urban Development 
Reform Act of 1989, is prepaid or refinanced on or after the 
date of enactment of the Housing and Community Development Act 
of 1980, and tenants of the housing and related facilities 
financed with such loan are displaced due to a change in the 
use of the housing, or to an increase in rental or other 
charges, as a result of such prepayment or refinancing, the 
Secretary shall provide such tenants a priority for relocation 
in alternative housing assisted pursuant to this title.
  (3) Notice of offer to prepay.--Not less than 30 days after 
receiving an offer to prepay any loan made or insured under 
section 514 [or 515], the Secretary shall provide written 
notice of the offer or request to the tenants of the housing 
and related facilities involved, to interested nonprofit 
organizations, and to any appropriate State and local agencies.
  (4)(A) Agreement by borrower to extend low income use.--
Before accepting any offer to prepay, or requesting refinancing 
in accordance with subsection (b)(3) of, any loan made or 
insured under section 514 [or 515] pursuant to a contract 
entered into prior to the date of enactment of the Department 
of Housing and Urban Development Reform Act of 1989, the 
Secretary shall make reasonable efforts to enter into an 
agreement with the borrower under which the borrower will make 
a binding commitment to extend the low income use of the 
assisted housing and related facilities involved for not less 
than the 20-year period beginning on the date on which the 
agreement is executed.
  (B) Assistance available to borrower to extend low income 
use.--To the extent of amounts provided in appropriation Acts, 
the agreement under subparagraph (A) may provide for 1 or more 
of the following forms of assistance that the Secretary, after 
taking into account local market conditions, determines to be 
necessary to extend the low income use of the housing and 
related facilities involved:
          (i)  * * *

           *       *       *       *       *       *       *

          [(iv) An equity loan to the borrower under paragraphs 
        (1) and (2) of section 515(c) or under paragraphs (1) 
        and (2) of section 514(j), except that an equity loan 
        referred to in this clause may not be made available 
        after the date of the enactment of the Act entitled 
        ``An Act making appropriations for Agriculture, Rural 
        Development, Food and Drug Administration, and Related 
        Agencies programs for the fiscal year ending September 
        30, 1997, and for other purposes'', unless the 
        Secretary determines that the other incentives 
        available under this subparagraph are not adequate to 
        provide a fair return on the investment of the 
        borrower, to prevent prepayment of the loan insured 
        under section 514 [or 515], or to prevent the 
        displacement of tenants of the housing for which the 
        loan was made.]
          [(v)] (iv) Incremental rental assistance in 
        connection with loans under clauses (ii) and (iv) to 
        the extent necessary to avoid increases in the rental 
        payments of current tenants not receiving rental 
        assistance under section 521(a)(2) or under section 8 
        of the United States Housing Act of 1937, or current 
        tenants of projects not assisted under section 
        521(a)(5).
          [(vi)] (v) In the case of a project that has received 
        rental assistance under section 8 of the United States 
        Housing Act of 1937, permitting the owner to receive 
        rent in excess of the amount determined necessary by 
        the Secretary to defray the cost of long-term repair or 
        maintenance of such a project.
  (C) Approval of assistance.--The Secretary may approve 
assistance under subparagraph (B) for assisted housing only if 
the restrictive period has expired for any loan for the housing 
made or insured under section 514 [or 515] pursuant to a 
contract entered into after December 21, 1979, but before the 
date of the enactment of the Department of Housing and Urban 
Development Reform Act of 1989, and the Secretary determines 
that the combination of assistance provided--
          (i)  * * *

           *       *       *       *       *       *       *

  (5)(A)  * * *

           *       *       *       *       *       *       *

  (C) Financing of sale.--To facilitate the sale described in 
subparagraph (A), the Secretary shall--
          (i)  * * *
          (ii) approve the assumption, by the nonprofit 
        organization or public agency involved, of the loan 
        made or insured under section 514 [or 515];

           *       *       *       *       *       *       *

  (F) General restriction on prepayments and refinancings.--
Following the transfer of the maximum number of dwelling units 
set forth in subparagraph (H)(i) in any fiscal year or the 
maximum number of dwelling units for which budget authority is 
available in any fiscal year, the Secretary may not accept in 
such fiscal year any offer to prepay, or request refinancing in 
accordance with subsection (b)(3) of, any loan made or insured 
under section 514 [or 515] pursuant to a contract entered into 
prior to the date of enactment of the Department of Housing and 
Urban Development Reform Act of 1989, except in accordance with 
subparagraph (G). The limitation established in this 
subparagraph shall not apply to an offer to prepay, or request 
to refinance, if, following the date on which such offer or 
request is made (or following the date of the enactment of the 
Housing and Community Development Act of 1987, whichever occurs 
later) a 15-month period expires during which no budget 
authority is available to carry out this paragraph. For 
purposes of this subparagraph, the Secretary shall allocate 
budget authority under this paragraph in the order in which 
offers to prepay, or request to refinance, are made.
  (G) Exception.--This paragraph shall not apply to any offer 
to prepay, or any request to refinance in accordance with 
subsection (b)(3), any loan made or insured under section 514 
[or 515] pursuant to a contract entered into prior to the date 
of enactment of the Department of Housing and Urban Development 
Reform Act of 1989, if--
          (i) the borrower enters into an agreement with the 
        Secretary that obligates the borrower (and successors 
        in interest thereof)--
                  (I) to utilize the assisted housing and 
                related facilities for the purposes specified 
                in section 514 [or 515, as the case may be,] 
                for a period determined by the Secretary (but 
                not less than the period described in paragraph 
                (1)(B) calculated from the date on which the 
                loan is made or insured); and

           *       *       *       *       *       *       *

  (i) Prepayment of Section 515 Multifamily Housing Loans.--
          (1) Administration.--
                  (A) Plan.--The Secretary shall develop a plan 
                to administer requests to prepay (not made in 
                connection with any revitalization under 
                section 544) any loan made under section 515. 
                The plan shall provide for administration of 
                voucher assistance in accordance with paragraph 
                (3). The plan shall encourage and facilitate 
                owners of projects to maintain the projects, or 
                to transfer projects to owners who will 
                maintain projects, as housing affordable to 
                low-income residents, but shall not prevent an 
                owner from prepaying.
                  (B) Implementation.--The Secretary shall 
                implement this subsection not later than the 
                expiration of the 90-day period beginning on 
                the date of the enactment of the Saving 
                America's Rural Housing Act of 2006. 
                Notwithstanding that full implementation of 
                this subsection may not have been completed, 
                the Secretary may not delay the processing of 
                any request to prepay a loan made under section 
                515.
          (2) Notice of prepayment or sale.--In preparation for 
        prepayment of a loan made or insured under section 515, 
        the project owner shall, not less than 120 days before 
        the date of prepayment of the loan or sale of the 
        project for which the loan was made, provide the 
        following notices:
                  (A) Notice to tenants.--To the tenants of the 
                project, notice of the prepayment, as follows:
                          (i) The notice shall include 
                        information sufficient to inform each 
                        tenant of the plan after prepayment for 
                        the project, in which they reside as a 
                        tenant, and whether such plan may 
                        result in, or is likely to result in, 
                        the tenant being required to move and 
                        the earliest date that the tenant's 
                        lease will expire or the tenant may 
                        have to move, and of the availability 
                        of vouchers pursuant to paragraph (3), 
                        actions tenants must take to receive 
                        voucher assistance, the date prepayment 
                        is expected to take place, a telephone 
                        number and electronic mail address at 
                        which to contact the owner of the 
                        project, and any limitations, use, and 
                        other terms the Secretary considers 
                        appropriate.
                          (ii) In the case of any prepayment 
                        involving transfer of the ownership of 
                        a project, the notice shall include the 
                        name of the transferee, the date that 
                        the transfer was agreed to, the date 
                        the transfer is to take place, and 
                        telephone numbers and electronic mail 
                        addresses at which to contact the 
                        transferor and transferee.
                  (B) Notice to secretary.--To the Secretary, 
                notice that the requirements under subparagraph 
                (A) have been met, which shall identify the 
                date that notice under such subparagraph was 
                made and the names of each tenant to which such 
                notice was provided.
          (3) Rural tenant protection vouchers.--
                  (A) In general.--In the case of a housing 
                project subject to a loan made under section 
                515, if the loan is prepaid or foreclosed upon, 
                the Secretary shall, to the extent that amounts 
                for assistance under this paragraph are 
                provided in advance in appropriation Acts, 
                offer voucher assistance to each low-income 
                family who on the date that notice is provided 
                in accordance with paragraph (2)(A) is residing 
                in a dwelling unit in the project.
                  (B) Use.--A voucher under this paragraph for 
                a family may be used for rental of a dwelling 
                unit in the project that the family resides in 
                on the date of the notice in accordance with 
                paragraph (2)(A) or for a dwelling unit 
                elsewhere.
                  (C) Renewal.--Vouchers under this paragraph 
                shall be renewed annually, subject to the 
                availability of appropriations for such 
                renewal, during the period that the family 
                assisted remains eligible for such assistance.
                  (D) Right to use.--In the case of a project 
                for which a loan made under section 515 is 
                prepaid--
                          (i) a family residing in such project 
                        on the date of prepayment may elect to 
                        remain in the unit in which the family 
                        was residing on such date; and
                          (ii) the owner of the project may not 
                        refuse to lease, to a family for whom 
                        voucher assistance under this paragraph 
                        is made available, any available rental 
                        dwelling unit in the project.
                  (E) Amount of assistance.--The amount of 
                rental assistance provided under a voucher 
                under this paragraph on behalf of a tenant 
                shall be the amount by which--
                          (i) the lesser of (I) the rent for 
                        the dwelling unit rented using such 
                        voucher, or(II) the rent for a 
                        comparable unit in the same market area 
                        as the housing project for which the 
                        loan was prepaid; exceeds
                          (ii) the lesser of (I) the amount of 
                        rent paid by the tenant for the 
                        dwelling unit occupied by the tenant at 
                        the time of the prepayment referred to 
                        in paragraph (1), or (II) the amount 
                        equal to 30 percent of the tenant's 
                        adjusted income (as such term is 
                        defined in section 3(b) of the United 
                        States Housing Act of 1937 (42 U.S.C. 
                        1437a(b)).
                  (F) Rural affordable voucher.--For 
                communities with insufficient affordable 
                housing alternatives, and in the case of any 
                elderly or disabled tenant who is eligible for 
                a voucher under this paragraph and has a need 
                to move to another community to be near 
                immediate family or necessary medical services, 
                as determined by the Secretary, voucher 
                assistance under this paragraph may be provided 
                in accordance with section 8(t)(1) of the 
                United States Housing Act of 1937 (42 U.S.C. 
                1437f(t)(1)).
                  (G) Administration.--To the maximum extent 
                practicable, the Secretary shall administer 
                voucher assistance under this paragraph in 
                accordance with, but not subject to, 
                regulations and administrative guidance for 
                housing vouchers administered by the Secretary 
                of Housing and Urban Development under section 
                8 of such Act.
                  (H) Homeownership opportunities.--A voucher 
                under this paragraph may be used by a tenant to 
                make payments towards the purchase of a single-
                family home anywhere in the United States, 
                subject to subsidy limits for vouchers under 
                this title and the same limitations applicable 
                under section 8(y) of the United States Housing 
                Act of 1937 (42 U.S.C. 1437f(y) to the use of 
                tenant-based assistance under such section 8 
                for homeownership.
                  (I) Authorization of appropriations.--There 
                is authorized to be appropriated for tenant 
                protection vouchers under this paragraph--
                          (i) for fiscal year 2007, 
                        $74,000,000; and
                          (ii) for each of fiscal years 2008 
                        through 2011, the amount necessary to 
                        provide vouchers in each such fiscal 
                        year for all of the families identified 
                        in subparagraph (A).
          (4) Prepayment standards for pre-1989 loans.--In the 
        case of a loan made or insured under section 515 
        pursuant to a contract entered into before December 15, 
        1989:
                  (A) In general.--Subject to subparagraph (B), 
                the Secretary shall approve any offer to prepay 
                such a loan that meets the following 
                requirements:
                          (i) The borrower under the loan has 
                        not been provided any assistance to 
                        extend low-income use pursuant to 
                        section 502(c)(4) of this Act, as such 
                        section was in effect before the date 
                        of the enactment of the Saving 
                        America's Rural Housing Act of 2006.
                          (ii) The loan was not at any time 
                        restricted by servicing actions, 
                        including transfers.
                          (iii) The 20-year period during which 
                        the project is subject to use 
                        restrictions under the loan has 
                        concluded.
                  (B) Prohibition.--The Secretary may not 
                approve any offer to prepay such a loan during 
                the 20-year period during which the project is 
                subject to use restrictions under the loan.
          (5) Sale restrictions and marketing assistance.--
                  (A) Sale restrictions.--During the period 
                that begins upon the owner providing notice to 
                the Secretary under paragraph (2)(B) and having 
                a duration of 75 days, the owner may not sell 
                the property except to a purchaser who enters 
                into such binding agreements for purchase at 
                market rates as the Secretary considers 
                necessary to continue the property use 
                restrictions with respect to the project in 
                accordance with this title for a period of 20 
                years. This paragraph may not be construed to 
                prohibit an owner, during such period, from 
                soliciting or receiving any offers of sale or 
                purchase.
                  (B) Marketing assistance.--
                          (i) Database of potential buyers.--
                        The Secretary shall establish and 
                        maintain a database of potential buyers 
                        of projects with loans made under 
                        section 515. Such database shall 
                        include only persons who have expressed 
                        an interest to the Secretary in 
                        purchasing such projects at fair market 
                        value and maintaining the projects for 
                        use as affordable housing.
                          (ii) Public notification of 
                        prepayment.--Upon notification to the 
                        Secretary under paragraph (2)(B) 
                        regarding prepayment of a loan for a 
                        project, the Secretary shall make 
                        publicly available, on the appropriate 
                        World Wide Web site of the Department 
                        or by other appropriate electronic 
                        method, including individual 
                        notification, a notice containing 
                        information sufficient, in the 
                        determination of the Secretary, to 
                        notify persons with an interest in 
                        purchasing the project of the 
                        prepayment.

           *       *       *       *       *       *       *


direct and insured loans to provide housing and related facilities for 
              elderly persons and families in rural areas

      Sec. 515. (a)  * * *

           *       *       *       *       *       *       *

    (j)(1) For the purpose of achieving the lowest cost in 
providing units in newly constructed projects assisted under 
this section, the Secretary shall give a preference in entering 
into contracts under this section for projects which are to be 
located on specific tracts of land provided by States, units of 
local government, or others if the Secretary determines that 
the tract of land is suitable for such housing, and that 
affording such preference will be cost effective.
  (2) The Secretary may give priority, in entering into 
contracts under this section involving financing for new 
construction of a project, for projects located in areas having 
a need for affordable low-income rental housing due to 
prepayment of loans made or insured under this section.

           *       *       *       *       *       *       *


SEC. 537. OFFICE OF RURAL HOUSING PRESERVATION.

  (a)  * * *
  (b) Purposes.--The purposes of the Office are:
          (1) to review and process applications under section 
        502(c) and section 515(t) related to the preservation 
        of rural rental housing and to administer the 
        revitalization program under section 544;

           *       *       *       *       *       *       *


SEC. 544. REVITALIZATION AND TENANT PROTECTION VOUCHERS.

  (a) Purpose.--The purposes of this section are--
          (1) to protect tenants who live in multifamily 
        housing projects that are subsidized under this title 
        and, in the case of prepayments of loans under section 
        515, to protect tenants that are displaced when the 
        projects cease being eligible projects;
          (2) to strengthen the long-term viability of eligible 
        projects;
          (3) to promote the revitalization of rural 
        multifamily housing projects; and
          (4) to accomplish such several purposes--
                  (A) by providing a voluntary mechanism for 
                project owners to enter into loan restructuring 
                agreements with the Secretary to obtain new 
                types of financial assistance to rehabilitate 
                and maintain the projects; and
                  (B) by deregulating certain projects in a 
                manner that still provides measurable 
                performance standards and effective financing 
                and rehabilitation of multifamily housing.
  (b) Revitalization.--
          (1) In general.--The Secretary shall, subject to the 
        availability of amounts appropriated, carry out a 
        revitalization program in accordance with this 
        subsection to provide financial incentives and other 
        assistance to owners of eligible projects through 
        voluntary long-term use agreements entered into between 
        the project owners and the Secretary.
          (2) Applications to participate.--The Secretary may 
        accept applications from owners of eligible projects to 
        participate in the revitalization program under this 
        section.
          (3) Long-term viability plan.--
                  (A) Requirement.--The Secretary may prepare 
                and approve a long-term viability plan under 
                this paragraph with respect to each eligible 
                project for which the owner requests to 
                participate.
                  (B) Contents.--Each long-term viability plan 
                for an eligible project shall include the 
                following information:
                          (i) Physical needs assessment.--A 
                        physical needs assessment of the 
                        project that identifies and projects, 
                        for the following 20 years--
                                  (I) all necessary repairs, 
                                improvements, maintenance, and 
                                management standards for the 
                                project, and when they will be 
                                made, in order to meet the 
                                requirements of this title; and
                                  (II) the costs associated 
                                with the items referred to in 
                                this subparagraph (A).
                          (ii) Financial plan.--A financial 
                        plan for the project that--
                                  (I) reviews the financial 
                                stability of the project;
                                  (II) includes the loan 
                                restructuring elements, rent 
                                adjustments, management and 
                                operational efficiencies, and 
                                other financial adjustments to 
                                the project that are necessary 
                                to cover operating expenses for 
                                the project and maintain an 
                                adequate financial reserve for 
                                the future maintenance and 
                                capital needs of the project;
                                  (III) provides the project 
                                owner with a long-term rate of 
                                return on new capital, as 
                                determined by the Secretary, 
                                commensurate to comparable 
                                commercial multifamily housing 
                                projects;
                                  (IV) meets the physical needs 
                                for the project determined 
                                under the physical needs 
                                assessment;
                                  (V) ensures that rents 
                                available under the plan are 
                                affordable to eligible 
                                households in accordance with 
                                paragraph (7); and
                                  (VI) addresses any costs 
                                associated with any temporary 
                                tenant displacement resulting 
                                from renovations or 
                                rehabilitation undertaken as a 
                                result of participation of the 
                                project in the revitalization 
                                program.
                  (C) Development through participating 
                administrative entities.--The Secretary may 
                develop long-term viability plans through the 
                use of third-party participating administrative 
                entities, who may be a private contractor, a 
                State housing finance agency, or a nonprofit 
                organization.
                  (D) Revitalization determination.--Based on 
                the long-term viability plan for an eligible 
                project, the Secretary shall determine whether 
                to offer the project owner a financial 
                restructuring plan under paragraph (4) and the 
                financial incentives to be included in any such 
                plan offered.
                  (E) Final review and comment.--With respect 
                to any long-term viability plan prepared by the 
                Secretary, the Secretary shall provide the 
                project owner an opportunity to review the plan 
                and discuss the plan with the Secretary or its 
                agent before a determination is made under 
                subparagraph (D).
                  (F) Fees.--The Secretary may charge the 
                project owner a fee for preparation of the 
                long-term viability plan.
                  (G) Payment of fees.--If a long-term 
                viability for a project is approved, the 
                payment of such fee may be incorporated into a 
                project owner's financial restructuring plan 
                for the project provided by the Secretary 
                pursuant to paragraph (4)
          (4) Financial restructuring plan; revitalization 
        incentives.--Based on the long-term viability plan for 
        an eligible project, the Secretary may offer a project 
        owner a financial restructuring plan for the project. 
        Such a plan may include one or more of the following 
        revitalization incentives:
                  (A) Reduction or elimination of interest on 
                the loan or loans for the project made under 
                section 515.
                  (B) Partial or full deferral of payments due 
                under such loan or loans.
                  (C) Forgiveness of such loan or loans.
                  (D) Subordination of such loan or loans, 
                subject to such terms and conditions as the 
                Secretary shall determine.
                  (E) Reamortization of loan payments under 
                such loan or loans over extended terms.
                  (F) A grant from the Secretary for the 
                project.
                  (G) Payment of project costs associated with 
                developing the long-term viability plan.
                  (H) Opportunity for project owners to obtain 
                further investment equity from third parties in 
                the project.
                  (I) A direct loan or guarantee of a loan for 
                the project, with a subsidized interest rate 
                without regard to the value of the project.
          (5) Long-term use agreement.--
                  (A) In general.--If the owner of an eligible 
                project agrees to the terms of a financial 
                restructuring plan for the project providing 
                revitalization benefits under paragraph (4), in 
                exchange for such benefits, the Secretary and 
                the project owner shall enter into a long-term 
                use agreement under this paragraph for the 
                project.
                  (B) Agreement.--A long-term use agreement for 
                an eligible project shall include--
                          (i) the terms of the financial 
                        restructuring plan for the project, 
                        including any revitalization incentives 
                        to be provided;
                          (ii) an agreement by the project 
                        owner--
                                  (I) to continue the property 
                                use restrictions with respect 
                                to the project in accordance 
                                with this title for a period of 
                                (aa) 20 years, or (bb) the 
                                remaining term of any loans 
                                under this title for the 
                                project, whichever ends later;
                                  (II) to comply with the long-
                                term viability plan for the 
                                project;
                                  (III) to comply with the rent 
                                terms under paragraph (7) for 
                                the project; and
                                  (IV) to make value payments 
                                under paragraph (6) to the 
                                Secretary, and the terms of 
                                such payments;
                          (iii) provisions terminating the 
                        agreement if any revitalization 
                        incentives for the project to be 
                        provided under the agreement are no 
                        longer available and the Secretary 
                        determines that such unavailability is 
                        not the fault of the owner;
                          (iv) any rent terms for the project 
                        pursuant to paragraph (7);
                          (v) a covenant which runs with the 
                        land; and
                          (vi) such other terms as the 
                        Secretary determines are necessary to 
                        implement the purposes of this section.
          (6) Shared value agreements.--Each long-term use 
        agreement shall include a shared value agreement 
        secured by the property of the eligible project that is 
        the subject of the long-term use agreement, which shall 
        determine how proceeds are divided at the end of the 
        term of the loan or loans and shall require the project 
        owner, at the end of such loan term or terms, to pay 
        the lesser of--
                  (A) the sum of--
                          (i) the amounts of any loan 
                        writedowns, write-offs, and interest 
                        subsidies provided in connection with 
                        the loan restructuring under this 
                        subsection, at the closing of 
                        revitalization;
                          (ii) any outstanding principal and 
                        interest; and
                          (iii) any non-loan funds provided by 
                        the Secretary under this subsection; or
                  (B) 75 percent of the appraised value of the 
                eligible project.
          (7) Rents under long-term use agreement.--In any 
        eligible project that is subject to a long-term use 
        agreement, rents for eligible households shall comply 
        with the following requirements:
                  (A) Minimum rent.--The Secretary, acting 
                through the director of the applicable local 
                agency or office of the Department responsible 
                for carrying out the programs under this title 
                in such area, may provide that each eligible 
                household is charged a minimum monthly rent in 
                an amount determined by such local director 
                that does not in any case exceed $25. The 
                Secretary may allow exceptions to such minimum 
                rent for an eligible household or groups of 
                eligible households for demonstrated hardship, 
                as determined by the Secretary, which hardship 
                exceptions, if allowed by the Secretary, shall 
                include the hardship exceptions provided or 
                established by the Secretary of Housing and 
                Urban Development, as appropriate, under 
                subclauses (I) through (V) of section 
                3(a)(3)(B)(i) of the United States Housing Act 
                of 1937 (42 U.S.C. 1437a(a)(3)(B)(i)).
                  (B) Maximum household contribution to rent.--
                Notwithstanding any minimum monthly rent 
                established pursuant to subparagraph (A), the 
                maximum household contribution to monthly rent 
                for any eligible household may not exceed 30 
                percent of the adjusted income of the eligible 
                household. Such local director may take actions 
                as may be necessary to verify tenant incomes 
                for purposes of carrying out this subparagraph.
                  (C) Rent adjustments.--The rents for eligible 
                households may be increased or decreased only 
                on an annual basis and only in accordance with 
                standards incorporated in such agreement. The 
                Secretary shall issue regulations establishing 
                such standards, which shall include standards 
                for rents that are considered affordable for 
                eligible households for the area in which a 
                project is located and for establishing rents 
                that conform to such standards.
          (8) Lowest cost requirement.--In determining the 
        terms of a restructuring plan, and the type and amount 
        of revitalization benefits under such plan to approve 
        under this subsection for an eligible project, the 
        Secretary shall, to the extent practicable, approve 
        assistance that imposes the least cost to the Secretary 
        while meeting the requirements of the long-term 
        viability plan for the project.
          (9) Authorization of appropriations.--There are 
        authorized to be appropriated for each fiscal year such 
        sums as may be necessary to carry out the 
        revitalization program under this subsection.
  (c) Homeownership Opportunities.--The owner of an eligible 
project may, in conjunction with revitalization of the project 
pursuant to this section, propose a sale to a tenant-based 
condominium or cooperative. Any such proposal shall be subject 
to a notice to tenants under terms that the Secretary shall 
establish.
  (d) Determination of Ineligibility.--
          (1) Procedure.--The Secretary may determine that a 
        project owner is ineligible for participation in the 
        revitalization program under this section in accordance 
        with the standards under paragraph (2).
          (2) Standards.-- The Secretary may determine that a 
        project owner is ineligible if--
                  (A) the project owner has a history of poor 
                management or maintenance of multifamily 
                housing properties;
                  (B) the project owner is in default on a loan 
                made available under the section 514 or 515 
                housing program;
                  (C) the Secretary is unable to enter into a 
                long-term use agreement for the project that is 
                the subject of the application with the project 
                owner within a reasonable time;
                  (D) the project owner is suspended or 
                debarred from participating in Federal 
                contracts or programs; or
                  (E) the Secretary has other good cause for 
                withholding from the project owner the benefits 
                made available under this section.
  (e) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Eligible household.--The term ``eligible 
        household'' means a household that, under section 515, 
        is eligible to reside in a project funded with a loan 
        made by the Secretary under such section.
          (2) Eligible project.--The term ``eligible project'' 
        means a housing project funded with a loan made at any 
        time by the Secretary under section 515, the principal 
        obligation of which has not been fully repaid.
          (3) Project owner; owner.--The terms ``project 
        owner'' and ``owner'' mean, with respect to an eligible 
        project, an individual or entity, or principals thereof 
        that own, or plan to purchase, the project.

           *       *       *       *       *       *       *


                            ADDITIONAL VIEWS

    H.R. 5039 is needed legislation, and I compliment 
Congressman Geoff Davis for his work on the bill. USDA Rural 
Development's review of rental properties built through the 
Section 515 program shows that many are in bad shape and that 
owners are short on funding for improvements. If Congress does 
not set up an effective means for RHS to help owners revitalize 
these properties, rural residents will lose affordable housing 
options.
    Before this legislation is considered in the House, I 
believe the Committee needs to give further consideration to 
the provision in the legislation that caps tenant contribution 
to rent in restructured properties at 30 percent of income. I 
understand that the Committee's intent is to protect currently 
overburdened tenants living in developments at the time of loan 
restructuring. However, this cap on rent contribution will 
likely also result in higher costs for USDA that will limit the 
number of properties than can undergo loan restructuring and 
revitalization.
    Like Rural Development, I am concerned that the cap on 
tenant rent contribution will force USDA to restructure only 
properties with few overburdened tenants or force property 
owners to rent to tenants who do not pay more than 30 percent 
of their income toward rent. In addition, investors and other 
industry participants may have difficulty in predicting cash 
flows and the incomes of future tenants. This provision in H.R. 
5039 results in a high liability on the federal government, 
property owners and possibly other tenants by increasing the 
cost of preserving these properties.
    Rural Development has proposed a solution that gives the 
agency flexibility when entering into restructuring agreements, 
helping to control costs while also protecting tenants 
overburdened at the time of restructuring. I ask that the 
Committee consider RHS' recommendations in order to refine H.R. 
5039 so that the goals of preserving units and protecting 
tenants will be realized in a reasonable, cost-effective way 
that will encourage preservation, rather than make it more 
difficult.

                  Low Income Housing Tax Credit Equity

    In addition to the use of other restructuring incentives, I 
believe that Rural Development should have the discretion to 
create a rule permitting the return of low-income housing tax 
credit equity to Section 515 owners for hard-construction costs 
where appropriate. While the introduced version of H.R. 5039 
contained a provision explicitly allowing the return of this 
equity, this provision was removed at subcommittee markup 
without any prejudice regarding Rural Development's existing 
tools and flexibility at the time of restructuring. 
Notwithstanding this removal, I encourage Rural Development to 
consider the return of low-income housing tax-credit equity for 
hard-construction costs as a restructuring tool. The low-income 
housing tax credit has been a very useful tool for affordable 
housing development, and credit equity will be useful to 
property owners in revitalization.
                                                  Randy Neugebauer.

                                  
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