[House Report 110-579]
[From the U.S. Government Publishing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-579

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



 
          MARK-TO-MARKET EXTENSION AND ENHANCEMENT ACT OF 2007

                                _______
                                

 April 10, 2008.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Frank of Massachusetts, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 3965]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 3965) to extend the Mark-to-Market program of 
the Department of Housing and Urban Development, and for other 
purposes, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     1
Purpose and Summary..............................................     6
Background and Need for Legislation..............................     6
Hearings.........................................................     8
Committee Consideration..........................................     8
Committee Votes..................................................     9
Committee Oversight Findings.....................................     9
Performance Goals and Objectives.................................     9
New Budget Authority, Entitlement Authority, and Tax Expenditures    10
Committee Cost Estimate..........................................    10
Congressional Budget Office Estimate.............................    10
Federal Mandates Statement.......................................    15
Advisory Committee Statement.....................................    15
Constitutional Authority Statement...............................    15
Applicability to Legislative Branch..............................    15
Earmark Identification...........................................    15
Section-by-Section Analysis of the Legislation...................    15
Changes in Existing Law Made by the Bill, as Reported............    18

                               Amendment

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Mark-to-Market 
Extension and Enhancement Act of 2007''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
Sec. 3. Definitions.
Sec. 4. Extension of Mark-to-Market program.
Sec. 5. Funding for tenant and other participation and capacity 
building.
Sec. 6. Exception rents.
Sec. 7. Otherwise eligible projects.
Sec. 8. Disaster-damaged eligible projects.
Sec. 9. Period of eligibility for nonprofit debt relief.
Sec. 10. Acquisition of restructured projects by nonprofit 
organizations.
Sec. 11. Mark-to-market for moderate rehabilitation projects.
Sec. 12. Enhanced voucher assistance upon contract termination.
Sec. 13. Correcting harm caused by late subsidy payments.
Sec. 14. Effective date.

SEC. 2. PURPOSES.

  The purpose of this Act is to--
          (1) continue the progress of the Multifamily Assisted Housing 
        Reform and Affordability Act of 1997, as amended by the Mark-
        To-Market Extension Act of 2001;
          (2) expand eligibility for Mark-to-Market restructuring so as 
        to further the preservation of affordable housing in a cost-
        effective manner; and
          (3) provide for the preservation and rehabilitation of 
        projects damaged by Hurricanes Katrina, Rita, and Wilma, or by 
        other natural disasters.

SEC. 3. DEFINITIONS.

  Section 512 of the Multifamily Assisted Housing Reform and 
Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by adding 
at the end the following:
          ``(20) Disaster-damaged eligible project.--
                  ``(A) In general.--The term `disaster-damaged 
                eligible project' means an otherwise eligible 
                multifamily housing project--
                          ``(i) that is located in a county that was 
                        designated a major disaster area on or after 
                        January 1, 2005, by the President pursuant to 
                        title IV of the Robert T. Stafford Disaster 
                        Relief and Emergency Assistance Act (42 U.S.C. 
                        5121 et seq.);
                          ``(ii) whose owner carried casualty and 
                        liability insurance covering such project in an 
                        amount required by the Secretary;
                          ``(iii) that suffered damages not covered by 
                        such insurance that the Secretary determines is 
                        likely to exceed $5,000 per unit in connection 
                        with the natural disaster that was the subject 
                        of the designation described in subparagraph 
                        (A); and
                          ``(iv) whose owner requests restructuring of 
                        the project not later than 2 years after the 
                        date that such damage occurred.
                  ``(B) Rule of construction.--A disaster-damaged 
                eligible project shall be eligible for amounts under 
                this Act without regard to the relationship between 
                rent levels for the assisted units in such project and 
                comparable rents for the relevant market area.''.

SEC. 4. EXTENSION OF MARK-TO-MARKET PROGRAM.

  Section 579 of the Multifamily Assisted Housing Reform and 
Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by striking 
``October 1, 2011'' each place such term appears and inserting 
``October 1, 2012''.

SEC. 5. FUNDING FOR TENANT AND OTHER PARTICIPATION AND CAPACITY 
                    BUILDING.

  Paragraph (3) of section 514(f) of the Multifamily Assisted Housing 
Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) is 
amended--
          (1) in subparagraph (A)--
                  (A) in the first sentence--
                          (i) by striking ``not more than'' and 
                        inserting ``not less than'';
                          (ii) by striking ``of low-income housing for 
                        which project-based rental assistance is 
                        provided at below market rent levels and may 
                        not be renewed'' and inserting the following: 
                        ``and improvement of low-income housing for 
                        which project-based rental assistance, 
                        subsidized loans, or enhanced vouchers under 
                        section 8(t) are provided''; and
                          (iii) in the second parenthetical clause, by 
                        inserting before the closing parenthesis the 
                        following: ``, and predevelopment assistance to 
                        enable such transfers''; and
                  (B) by inserting after the period at the end the 
                following: ``For outreach and training of tenants and 
                technical assistance, the Secretary shall implement a 
                grant program utilizing performance-based outcome 
                measures for eligible costs incurred. Recipients 
                providing capacity building or technical assistance 
                services to tenant groups shall be qualified nonprofit 
                Statewide, countywide, areawide or citywide 
                organizations with demonstrated experience including at 
                least a two-year recent track record of organizing and 
                providing assistance to tenants, and independence from 
                the owner, a prospective purchaser, or their managing 
                agents. The Secretary may provide assistance and 
                training to grantees in administrative and fiscal 
                management to ensure compliance with applicable Federal 
                requirements. The Secretary shall expedite the 
                provision of funding for fiscal year 2008 by entering 
                into new multi-year contracts with any prior grantee 
                without adverse audit findings or whose adverse audit 
                findings have been cleared, and by entering into an 
                interagency agreement for not less than $1,000,000 with 
                the Corporation for National and Community Service or 
                any other agency of the Federal Government, that is 
                selected by the Secretary and the Secretary determines 
                is qualified to conduct such program, to conduct a 
                tenant outreach and training program under the same or 
                similar terms and conditions as was most recently 
                conducted by the Corporation. The Secretary shall also 
                make available flexible grants to qualified nonprofit 
                organizations that do not own eligible multifamily 
                properties, for tenant outreach in underserved areas, 
                and to experienced national or regional nonprofit 
                organizations to provide specialized training or 
                support to grantees assisted under this section. 
                Notwithstanding any other provision of law, funds 
                authorized under this section for any fiscal year shall 
                be available for obligation in subsequent fiscal years. 
                The Secretary shall require each recipient of amounts 
                made available pursuant to this subparagraph to submit 
                to the Secretary reports, on a quarterly basis, 
                detailing the use of such funds and including such 
                information as the Secretary shall require.''; and
          (2) by adding at the end the following new subparagraphs:
                  ``(D) Prohibitions.--None of the funds made available 
                under subparagraph (A) may be used for any political 
                activities, political advocacy, or lobbying (as such 
                terms are defined by Circular A-122 of the Office of 
                Management and Budget, entitled `Cost Principles for 
                Non-Profit Organizations'), or for expenses for travel 
                to engage in political activities or preparation of or 
                provision of advice on tax returns.
                  ``(E) Program compliance systems.--Each recipient of 
                amounts made available under subparagraph (A) shall 
                develop systems to ensure compliance with the program 
                and the requirements of this paragraph.
                  ``(F) Penalties.--The Secretary may impose penalties 
                on any recipient of amounts made available under 
                subparagraph (A) that fails to comply with any 
                requirement under this paragraph or of the program 
                established pursuant to this paragraph, which penalties 
                may include--
                          ``(i) ineligibility for further assistance 
                        from amounts made available under subparagraph 
                        (A); and
                          ``(ii) requiring the recipient to reimburse 
                        the Secretary for any amounts that were so 
                        misused.''.

SEC. 6. EXCEPTION RENTS.

  In the matter preceding clause (i) of section 514(g)(2)(A) of the 
Multifamily Assisted Housing Reform and Affordability Act of 1997 (42 
U.S.C. 1437f note) is amended--
          (1) by inserting ``disaster-damaged eligible projects and'' 
        after ``waive this limit for''; and
          (2) by striking ``five percent'' and inserting ``9 percent''.

SEC. 7. OTHERWISE ELIGIBLE PROJECTS.

  Section 514 of the Multifamily Assisted Housing Reform and 
Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by adding 
at the end the following:
  ``(i) Other Eligible Projects.--
          ``(1) In general.--Notwithstanding any other provision of 
        this subtitle, a project that meets the requirements of 
        subparagraphs (B) and (C) of section 512(2) but does not meet 
        the requirements of subparagraph (A) of section 512(2), may be 
        treated as an eligible multifamily housing project on an 
        exception basis if the Secretary determines, subject to 
        paragraph (2), that such treatment is necessary to preserve the 
        project in the most cost-effective manner in relation to other 
        alternative preservation options.
          ``(2) Owner request.--
                  ``(A) Request required.--The Secretary shall not 
                treat an otherwise eligible project described under 
                paragraph (1) as an eligible multifamily housing 
                project unless the owner of the project requests such 
                treatment.
                  ``(B) No adverse treatment if no request made.--If 
                the owner of a project does not make a request under 
                subparagraph (A), the Secretary shall not withhold from 
                such project any other available preservation option.
          ``(3) Cancellation.--
                  ``(A) Timing.--At any time prior to the completion of 
                a mortgage restructuring under this subtitle, the owner 
                of a project may--
                          ``(i) withdraw any request made under 
                        paragraph (2)(A); and
                          ``(ii) pursue any other option with respect 
                        to the renewal of such owner's section 8 
                        contract pursuant to any applicable statute or 
                        regulation.
                  ``(B) Documentation.--If an owner of a project 
                withdraws such owner's request and pursues other 
                renewal options under this paragraph, such owner shall 
                be entitled to submit documentation or other 
                information to replace the documentation or other 
                information used during processing for mortgage 
                restructuring under this subtitle.
          ``(4) Limitation.--The Secretary may exercise the authority 
        to treat projects as eligible multifamily housing projects 
        pursuant to this subsection only to the extent that the number 
        of units in such projects do not exceed 10 percent of all units 
        for which mortgage restructuring pursuant to section 517 is 
        completed.''.

SEC. 8. DISASTER-DAMAGED ELIGIBLE PROJECTS.

  (a) Market Rent Determinations.--Section 514(g)(1)(B) of the 
Multifamily Assisted Housing Reform and Affordability Act of 1997 (42 
U.S.C. 1437f note) is amended by striking ``determined, are equal'' and 
inserting the following: ``determined--
                          ``(i) with respect to a disaster-damaged 
                        eligible property, are equal to 100 percent of 
                        the fair market rents for the relevant market 
                        area (as such rents were in effect at the time 
                        of such disaster); and
                          ``(ii) with respect to other eligible 
                        multifamily housing projects, are equal''.
  (b) Owner Investment.--Section 517(c) of the Multifamily Assisted 
Housing Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) is 
amended by adding at the end the following:
          ``(3) Properties damaged by natural disasters.--With respect 
        to a disaster-damaged eligible property, the owner contribution 
        toward rehabilitation needs shall be determined in accordance 
        with paragraph (2)(C).''.

SEC. 9. PERIOD OF ELIGIBILITY FOR NONPROFIT DEBT RELIEF.

  Section 517(a)(5) of the Multifamily Assisted Housing Reform and 
Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by adding 
at the end the following: ``If such purchaser acquires such project 
subsequent to the date of recordation of the affordability agreement 
described in section 514(e)(6)--
                  ``(A) such purchaser shall acquire such project on or 
                before the later of--
                          ``(i) 5 years after the date of recordation 
                        of the affordability agreement; or
                          ``(ii) 2 years after the date of enactment of 
                        the Mark-to-Market Extension and Enhancement 
                        Act of 2007; and
                  ``(B) the Secretary shall have received, and 
                determined acceptable, such purchaser's application for 
                modification, assignment, or forgiveness prior to the 
                acquisition of the project by such purchaser.''.

SEC. 10. ACQUISITION OF RESTRUCTURED PROJECTS BY NONPROFIT 
                    ORGANIZATIONS.

  Paragraph (5) of section 517(a) of the Multifamily Assisted Housing 
Reform and Affordability Act of 1997 (42 U.S.C. 1437 note) is amended 
by inserting ``, or the sole general partner of the limited partnership 
owning the project,'' after ``if the project''.

SEC. 11. MARK-TO-MARKET FOR MODERATE REHABILITATION PROJECTS.

  (a) Renewal of Expiring Project-Based Section 8 Moderate 
Rehabilitation Contracts.--Section 524 of the Multifamily Assisted 
Housing Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) is 
amended--
          (1) in subsection (a)(4)(A)(iv)--
                  (A) in subclause (I), by inserting ``or'' after the 
                semicolon;
                  (B) by striking subclause (II); and
                  (C) by redesignating subclause (III) as subclause 
                (II); and
          (2) in subsection (b), by striking paragraph (3).
  (b) Rent Adjustments for Covered Projects.--
          (1) Rent determination at initial renewal after enactment.--
        Upon the first request by an owner of a covered housing project 
        for renewal of project-based assistance pursuant to section 524 
        of the Multifamily Assisted Housing Reform and Affordability 
        Act of 1997 made after the date of the enactment of this Act--
                  (A) the rent levels at which assistance will be 
                provided pursuant to such renewal shall be determined 
                as if such renewal were the initial renewal of a 
                contract for assistance under section 524, as amended 
                by subsection (a) of this section; and
                  (B) solely for purposes of determining the rent 
                levels at which assistance will be provided pursuant to 
                such first renewal after the date of the enactment of 
                this Act, in the case of a project for which contract 
                rents were reduced upon a prior renewal of an expiring 
                contract pursuant to subsection (b)(3) of section 524, 
                as in effect on the day before the date of the 
                enactment of this Act, the contract rent levels in 
                effect immediately prior to such first renewal after 
                the date of the enactment of this Act shall be the 
                considered to be the deemed rent levels described in 
                paragraph (3)(C).
          (2) Rent adjustments after initial renewal after enactment.--
        After the first renewal of a contract for assistance of a 
        covered housing project after the date of the enactment of this 
        Act in accordance with paragraph (1) of this subsection, the 
        Secretary of Housing and Urban Development shall adjust rents 
        in accordance with subsection (c) of section 524.
          (3) Definitions.--For purposes of this subsection, the 
        following definitions shall apply:
                  (A) The term ``section 524'' means section 524 of the 
                Multifamily Assisted Housing Reform and Affordability 
                Act of 1997 (42 U.S.C. 1437f note).
                  (B) The term ``covered housing project'' means a 
                project that receives project-based assistance under 
                section 8 of the United States Housing Act of 1937 (42 
                U.S.C. 1437f) which was renewed prior to the date of 
                the enactment of this Act pursuant to subsection (b)(3) 
                of section 524, as in effect on the day before the date 
                of the enactment of this Act.
                  (C) The term ``deemed rent levels'' means the 
                contract rent levels in effect immediately prior to the 
                first renewal of assistance pursuant to subsection 
                (b)(3) of section 524, as in effect on the day before 
                the date of the enactment of this Act, upon which 
                contract rent levels were reduced, as adjusted by the 
                applicable operating cost adjustment factor established 
                by the Secretary at the date of such renewal and at the 
                date of any subsequent renewal pursuant to such 
                subsection (b)(3).
                  (D) The term ``Secretary'' means the Secretary of 
                Housing and Urban Development or any public housing 
                agency approved by the Secretary to serve as the 
                contracting party in lieu of the Secretary.

SEC. 12. ENHANCED VOUCHER ASSISTANCE UPON CONTRACT TERMINATION.

  Subsection (d) of section 524 of the Multifamily Assisted Housing 
Reform and Affordability Act of 1997 (42 U.S.C. 1437 note) is amended--
          (1) in the subsection heading, by inserting ``or 
        Termination'' after ``Contract Expiration''; and
          (2) in paragraph (1)--
                  (A) by inserting ``or termination'' after ``the date 
                of the expiration'';
                  (B) by striking ``shall make'' and inserting ``shall 
                provide'';
                  (C) by striking ``available on behalf of'' and 
                inserting ``for''; and
                  (D) by inserting ``or termination'' after ``the date 
                of such expiration''.

SEC. 13. CORRECTING HARM CAUSED BY LATE SUBSIDY PAYMENTS.

  Section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) 
is amended by adding at the end the following new subsection:
  ``(ff) Late Payments.--
          ``(1) General.--The Secretary shall make payments of project-
        based rental assistance provided under this section for each 
        month on or before the due date under paragraph (2) for the 
        payment.
          ``(2) Due date.--The due date under this paragraph for a 
        monthly payment is the first business day of the month.
          ``(3) Notification of late payment.--The Secretary shall 
        notify a project owner at least 10 days before the due date for 
        a housing assistance payment if such payment will be late and 
        shall inform the project owner of the approximate date the 
        payment will be made.
          ``(4) Use of reserves.--If a housing assistance payment for a 
        project has not been received before the expiration of the 10-
        day period beginning upon the due date for such payment, the 
        project owner shall, after the expiration of such period, be 
        entitled to obtain funds from a project replacement reserve, 
        residual receipts reserve, or other project reserve in order to 
        pay operating and debt service costs for the project. Upon 
        receipt of the monthly housing assistance payment from the 
        Secretary, the project owner shall promptly replace or 
        replenish any such funds advanced pursuant to the preceding 
        sentence.
          ``(5) Interest payment.--If a monthly housing assistance 
        payment is not made before the expiration of the 30-day period 
        beginning upon the due date for such payment, the Secretary 
        shall pay to the owner simple interest on the amount of such 
        monthly payment, from the due date until the date of payment, 
        at a rate determined by the Secretary of Treasury in accordance 
        with section 12 of the Contract Disputes Act of 1978 (41 U.S.C. 
        611). Interest payments under this paragraph shall be made from 
        amounts made available for management and administration of the 
        Department of Housing and Urban Development.''.

SEC. 14. EFFECTIVE DATE.

  This Act, and the amendments made by this Act, shall take effect on 
the earlier of--
          (1) the date of enactment of this Act; or
          (2) September 30, 2008.

                          Purpose and Summary

    H.R. 3965, the ``Mark-to-Market Extension and Enhancement 
Act of 2007,'' reauthorizes the Mark-to-Market program, which 
allows for mortgage and rent restructuring for certain section 
8 projects. This legislation, which was introduced on October 
25, 2007 by Representatives Waters, Frank (MA), and Pryce (OH), 
would extend the Mark to Market program of the Multifamily 
Assisted Housing Restructuring and Affordability Act of 1997 
through the end of Fiscal Year 2012.
    H.R. 3965 includes all the provisions from H.R. 647, the 
``Mark to Market Extension Act,'' which was the subject of a 
hearing by the Subcommittee on Housing and Community 
Opportunity on October 23, 2007. In addition, H.R. 3965 as 
introduced includes the following provisions: (1) extending the 
program for one additional year, until October 1, 2012; (2) 
changing the effective date of the bill to the earlier of the 
date of enactment of the legislation or September 30, 2008; and 
(3) adding a provision to address the problem of late housing 
assistance payments by the Department of Housing and Urban 
Development to owners of project-based Section 8 properties, 
which was the subject of a separate hearing held by the 
Subcommittee on October 17, 2007.
    The Committee also notes that this bill is similar to 
legislation introduced in the 109th Congress by Reps. Pryce 
(OH), Frank (MA), Tiberi, and Waters (H.R. 6115), which passed 
the House under suspension of the rules by a vote of 416 to 1 
on September 27, 2006, but was not acted upon by the Senate 
prior to adjournment.
    During the markup of H.R. 3965, several amendments were 
agreed to that improved the bill. These amendments are 
described in Sections 5 and 9 through 12 of the Section-by-
Section analysis below.

                  Background and Need for Legislation

    At the inception of the project-based Section 8 program, 
the Department of Housing and Urban Development (HUD) allowed 
owners to set rents higher than market rents in order to 
encourage owner participation. Owners entered into 20 year 
contracts, over the course of which, many of the rents were 
adjusted to compensate for increased property costs.
    A review of the portfolio of Federal Housing Administration 
insured-properties receiving project-based assistance found 
that by 1997, many of the properties had rents higher than 
those charged for comparable units in the private market. In 
addition, many of these properties were financially or 
physically distressed, including a number that were mismanaged.
    In 1997, Congress created the Mark-to-Market program 
through the Multifamily Assisted Housing Reform and 
Affordability Act (MAHRA), which was passed as Title V of the 
VA-HUD Appropriations Act for Fiscal Year 1998 (Public Law 105-
65) and authorized the program through Fiscal Year 2001. The 
program was amended and reauthorized through Fiscal Year 2006 
in Title VI of the Labor, Health, and Human Services, 
Education, and Related Appropriation Act for Fiscal Year 2002 
(Public Law 107-116). The most recent reauthorization was in 
H.J. Res. 20 (Public Law 110-5), which extended the program 
through Fiscal Year 2011.
    The Mark-to-Market program reduces Section 8 subsidies to 
FHA-insured properties with above-market rents and restructures 
the mortgages of these properties so that owners can operate 
more effectively on less income and by charging more 
competitive rents. The purpose of the program is to provide 
cost savings for the government, encourage continued 
participation by owners, and to protect tenants by maintaining 
the low-income affordability of the properties.
    Properties with expiring contracts are eligible for the 
program if they are insured by an FHA mortgage or have a HUD-
held mortgage (excluding Section 202 properties or properties 
financed by a state or local government), receive project-based 
Section 8 assistance, have rents in excess of market rents, and 
have an owner in good standing.
    Through February 2008, 3,303 properties representing 
248,696 units were restructured through the Mark-to-Market 
program. Of those, 1,640 properties with 130,421 units received 
full debt restructuring. An additional 126 properties 
representing 10,990 units were in the restructuring pipeline as 
of this date. Based on eligibility requirements, HUD estimated 
that there were 772 properties with 83,253 units that could 
potentially be restructured through the Mark-to-Market program.
    In addition to these properties, HUD reported that it has 
effectively reached the five percent portfolio cap limit on 
exception rents. The portfolio cap limit applies to properties 
that have rents that are above market (e.g. above market rents 
can go up to 120 percent of the fair market rent). While the 
exception rent authority is utilized when the restructured 
transaction closes, HUD considers the authority utilized when 
the transaction has received Department approval and a binding 
restructuring commitment has been executed by both the 
Department and the property owner. As of mid-March, all but 43 
units have been utilized. Approximately 385 of the nearly 9,000 
units in the current pipeline will require an increase in the 
exception rent authority to be eligible for restructuring. As 
such, HUD requested the Committee to act on this legislation, 
which would increase the portfolio cap from five to nine 
percent.
    As noted above, the bill is similar to H.R. 647, the ``Mark 
to Market Extension Act of 2007,'' which was the subject of a 
hearing by the Subcommittee on Housing and Community 
Opportunity on October 23, 2007.

                                Hearings

    The Subcommittee on Housing and Community Opportunity held 
a hearing on October 23, 2007, on H.R. 647, the ``Mark-to-
Market Extension Act of 2007.'' The following witnesses 
testified:

                               PANEL ONE

     Mr. Theodore K. Toon, Deputy Assistant Secretary, 
Office of Affordable Housing Preservation, U.S. Department of 
Housing and Urban Development

                               PANEL TWO

     Ms. Amy Anthony, President and Executive Director, 
Preservation of Affordable Housing, Inc.
     Ms. Sheila Malynowski, President, National Leased 
Housing Association, and President of Preservation Management, 
Inc.
     Mr. Bill Faith, Executive Director, Coalition on 
Homelessness and Housing in Ohio
     Ms. Paula Foster, Vice President Western Region, 
National Alliance of HUD Tenants
    The Subcommittee also held a hearing on October 17, 2007, 
entitled ``The Impacts of Late Housing Assistance Payments on 
Tenants and Owners in the Project-Based Rental Assistance 
Program.'' The following witnesses testified:

                               PANEL ONE

     Mr. John W. Cox, Chief Financial Officer, U.S. 
Department of Housing and Urban Development
     Mr. David Wood, Director, Financial Markets and 
Community Investment, U.S. Government Accountability Office

                               PANEL TWO

     Mr. Michael Bodaken, President, National Housing 
Trust
     Mr. Lawrence J. Lipton, Chief Financial Officer, 
Related Companies, Inc. on behalf of the National Leased 
Housing Association
     Mr. J. Kenneth Pagano, President and Chief 
Executive Officer, Essex Plaza Management on behalf of the 
National Affordable Housing Management Association
     Mr. Donald L. Beebout, Vice President, Showe 
Management Corporation
     Ms. Carolann Livingstone, President of 1890 House 
Tenants Association and Vice President of the Eastern Region of 
the National Alliance of HUD Tenants
     Dr. William L. Minnix, Jr., President and Chief 
Executive Officer, American Association of Homes and Services 
for the Aging

                        Committee Consideration

    The Committee on Financial Services met in open session on 
October 31, 2007, and ordered H.R. 3965, the ``Mark-to-Market 
Extension and Enhancement Act of 2007'', as amended, favorably 
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 in conjunction with the consideration 
of this legislation. A motion by Mr. Frank (MA) 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 by Mr. Frank (MA), No. 1, regarding 
acquisition of restructured projects by nonprofit 
organizations, was agreed to by a voice vote.
    An amendment by Mr. Frank (MA), No. 2, applying mark-to-
market for moderate rehabilitation projects, was agreed to by a 
voice vote.
    An amendment by Mr. Frank (MA), No. 3, making technical 
corrections, was agreed to by a voice vote.
    An amendment by Ms. Waters, No. 4, providing enhanced 
voucher assistance upon contract termination, was agreed to by 
a voice vote.
    An amendment by Mr. Al Green (TX), No. 5, regarding funding 
for tenant and other participation and capacity building, was 
offered and withdrawn.
    An amendment by Mr. Al Green (TX), No. 6, regarding funding 
for tenant and other participation and capacity building 
(revised), 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. 3965, the Mark-to-Market Extension and Enhancement Act 
of 2007, reauthorizes the Mark-to-Market program, which allows 
for mortgage and rent restructuring for certain section 8 
projects. The Mark-to-Market program reduces Section 8 
subsidies to FHA-insured properties with above-market rents and 
restructures the mortgages of these properties so that owners 
can operate more effectively on less income and by charging 
more competitive rents. The purpose of the program is to 
provide cost savings for the government, encourage continued 
participation by owners, and to protect tenants by maintaining 
the low-income affordability of the properties.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

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

                        Committee Cost Estimate

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

                  Congressional Budget Office Estimate

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

                                                 November 30, 2007.
Hon. Barney Frank,
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. 3965, the Mark-to-
Market Extension and Enhancement Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Chad Chirico.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 3965--Mark-to-Market Extension and Enhancement Act of 2007

    Summary: H.R. 3965 would extend the Multifamily Assisted 
Housing Restructuring and Affordability Act of 1997 (MAHRA) for 
one year to September 30, 2012. The bill contains several 
provisions that would affect loans and loan guarantees made by 
the Department of Housing and Urban Development (HUD). The bill 
also would change how rents are set and how HUD makes payments 
to property owners.
    CBO estimates that enacting H.R. 3965 would increase direct 
spending by $137 million in 2008 because the bill would modify 
the terms of existing federal loans and loan guarantees--
reducing the present value of expected cash flows for such 
loans. We also estimate that implementing the bill would have a 
discretionary cost of $227 million over the 2008-2012 period, 
assuming appropriation of the necessary amounts.
    H.R. 3965 contains an intergovernmental mandate as defined 
in the Unfunded Mandates Reform Act (UMRA) because it would 
extend an existing preemption of state and local law. CBO 
estimates, however, that the mandate would impose no costs on 
state, local, or tribal governments. The bill contains no new 
private-sector mandates as defined by UMRA.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 3965 is shown in the following table. 
The costs of this legislation fall within budget functions 370 
(commerce and housing credit) and 600 (income security).

                ESTIMATED BUDGETARY EFFECTS OF H.R. 3965
------------------------------------------------------------------------
                                      By fiscal year, in millions of
                                                 dollars--
                                 ---------------------------------------
                                   2008    2009    2010    2011    2012
------------------------------------------------------------------------
                       CHANGES IN DIRECT SPENDING

Expand Debt Restructuring
 Eligibility:
    Estimated Budget Authority..      77       0       0       0       0
    Estimated Outlays...........      77       0       0       0       0
Nonprofit Debt Relief:
    Estimated Budget Authority..      60       0       0       0       0
    Estimated Outlays...........      60       0       0       0       0
        Total Changes in Direct
         Spending:
            Estimated Budget         137       0       0       0       0
             Authority..........
            Estimated Outlays...     137       0       0       0       0

              CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Moderate Rehabilitation Rents:
    Estimated Authorization           50      46      43      39      35
     Level......................
    Estimated Outlays...........      30      48      44      41      37
Late Subsidy Payments:
    Estimated Authorization            4       4       4       4       4
     Level......................
    Estimated Outlays...........       4       4       4       4       4
Exception Rents:
    Estimated Authorization            *       1       2       2       2
     Level......................
    Estimated Outlays...........       *       1       2       2       2
        Total Changes in
         Spending Subject to
         Appropriation:
            Estimated                 54      51      49      45      41
             Authorization Level
            Estimated Outlays...      34      53      50      47      43
------------------------------------------------------------------------
Note: * = less than $500,000.

    Basis of estimate: For this estimate, CBO assumes that H.R. 
3965 will be enacted near the beginning of calendar year 2008, 
that the full amounts authorized will be appropriated for each 
year and that outlays will follow historical patterns. 
Components of the estimated costs are described below.

Background

    In 1997, MAHRA was enacted to address financial problems in 
the Section 8 program that provides affordable housing 
assistance. At that time, over 4,000 multifamily properties 
with mortgages insured by the Federal Housing Administration 
were receiving project-based rent subsidies under Section 8 of 
the United States Housing Act of 1937. The original rental 
contracts for those properties typically ranged from 15 to 40 
years and most properties had units with rents that exceeded 
the rents for comparable units that did not receive rent 
subsidies.
    The mark-to-market process usually involves reducing a 
property's rental rates to market levels and then either 
modifying or refinancing the existing mortgage for an amount 
that could be supported by the new lower rates. Specifically, 
HUD prepays all or a portion of the owner's existing mortgage 
debt through a partial payment of claim (PPC) and then issues a 
secondary mortgage to recover some of the PPC. Property owners 
can defer payments on the junior debt while the first mortgage 
remains outstanding unless some excess project income remains 
after the owner pays all other expenses. At least 75 percent of 
any excess income must be applied to the second mortgage and 
the full amount is due when the first mortgage is terminated or 
the property is sold.

Direct spending

    Because several provisions of the legislation would change 
the expected cash flows associated with existing federal loans 
and loan guarantees, those changes constitute a modification of 
the existing loans. Under credit reform procedures, the costs 
of loan modifications are estimated on a present value basis 
and recorded as changes in direct spending in the year in which 
the legislation is enacted. In total, CBO estimates that 
enacting H.R. 3965 would increase direct spending by $137 
million in 2008.
    Expand Debt Restructuring Eligibility. Under section 7 of 
the bill, properties that are otherwise eligible for debt 
restructuring, but have rents that are at or below those for 
comparable market units, would be eligible to have their 
insured mortgages restructured. The provision would allow HUD 
to exercise this authority for up to 10 percent of all units 
for which mortgage restructuring is completed. Based on 
information provided by HUD, CBO estimates that about 30 
properties per year (out of 1,400 properties that would be 
newly eligible) would have their debt restructured under this 
provision.
    Based on HUD data, CBO estimates that the average unpaid 
principal balance for properties eligible for the mark-to-
market process is about $2 million. The average PPC for 
properties that have had their debt restructured is about 80 
percent of the unpaid balance and the repayment rate on the new 
secondary mortgages averages about 2 percent per year. On 
average, CBO estimates that for those properties that would 
have defaulted on their loans, restructuring mortgage debt 
would save about $1 million per project on a present value 
basis. However, restructuring debt for properties that would 
not have otherwise defaulted, would cost about $1 million per 
project on a present value basis.
    Because the properties made eligible by this provision 
would either receive rent increases or maintain current rent 
levels upon expiration of their Section 8 contracts, CBO 
expects that they would have low default rates in the absence 
of debt restructuring. As a result, CBO estimates such 
restructurings would cost $77 million in 2008 on a present 
value basis.
    Nonprofit Debt Relief. Both section 9 and section 10 of the 
bill would increase the number of properties that receive debt 
relief. In total, CBO estimates that enacting those provisions 
would cost $60 million in 2008 on a present value basis.
    Section 9 would expand the period of eligibility for 
qualified nonprofits to receive debt relief when acquiring a 
property that has been through the mark-to-market debt 
restructuring process. Under current law, HUD can forgive or 
assign a property's secondary mortgage if the property is 
acquired by a qualified nonprofit entity and HUD's guidelines 
require that any transactions resulting in debt relief must 
occur within three years of debt restructuring. The provision 
would extend that period to the later of five years or two 
years after the date of enactment.
    HUD has completed 57 such transactions to date, the 
majority of which were completed in the past few years. Based 
on HUD data, CBO estimates that the federal government loses 
about $700,000 of expected secondary mortgage payments (on a 
present value basis) per property as a result of such debt 
forgiveness. This loss is partially offset by HUD's requirement 
that the seller of a restructured property pay at least half of 
any cash-out proceeds at the time of sale as a partial 
repayment of the second mortgage (such payments have averaged 
about $290,000).
    About 1,000 properties that are beyond the current three-
year window would be eligible for debt relief if acquired by a 
qualified nonprofit. Based on the program's recent experience, 
CBO estimates that about 5 percent of those properties would be 
transferred to a qualified nonprofit and have their debt 
forgiven or assigned. Thus, CBO estimates that expanding the 
period of eligibility for nonprofit debt relief would cost $25 
million in 2008 on a present value basis.
    Similarly, section 10 would allow debt relief if a 
qualified nonprofit becomes the general partner of a limited 
partnership that owns a property (general partners may hold as 
little as one-half of one percent interest in the limited 
partnership). In some instances, CBO expects that becoming the 
general partner would be a more attractive transaction for a 
qualified nonprofit than acquiring title to the property. Based 
on information from HUD and industry groups, CBO estimates that 
this provision would roughly double the number of transactions 
resulting in debt relief. CBO estimates that allowing debt 
relief for such transactions would cost $35 million in 2008 on 
a present value basis.

Spending subject to appropriation

    CBO estimates that implementing provisions of H.R. 3965 
would have a discretionary cost of $227 million over the 2008-
2012 period, assuming appropriation of the necessary amounts.
    Moderate Rehabilitation Rents. Section 11 would change the 
manner in which rents are determined upon contract renewal for 
properties assisted through the Moderate Rehabilitation (Mod 
Rehab) program which provides a rental subsidy to properties 
that have been previously rehabilitated. Currently, rents for 
such properties are renewed at the lesser of existing rents 
(adjusted by an operating cost factor), 120 percent of the fair 
market rent (as determined by HUD), or comparable market rents, 
which are generally higher than the other options. The 
provision would allow rents for those properties to be renewed 
at comparable market rents.
    About 29,000 units are currently assisted through the Mod 
Rehab program and owners may choose to leave the program when 
their contract expires and instead receive enhanced tenant-
based vouchers. A common reason for opting out of the Mod Rehab 
program is that the rents under that program are often below 
market rates and tenants with enhanced vouchers would pay 
market rent. Based on data provided by the Government 
Accountability Office (GAO) and HUD, CBO estimates that 
approximately 5,000 units have left the program each year since 
1998.
    Allowing rents under the Mod Rehab program to be set at 
market levels would increase the estimated cost of rental 
assistance if the owner of that property would not have 
otherwise opted to leave the program to take tenants with 
enhanced vouchers. Based on HUD data, CBO estimates that about 
70 percent of Mod Rehab units have rents that are about 25 
percent below market rates. Increasing the rents to match 
market rates would have an annual cost of about $2,500 per unit 
for each year that the property would have stayed in the 
program.
    Assuming an attrition rate similar to the past few years 
and appropriation of the necessary amounts, CBO estimates that 
this provision would cost $200 million over the 2008-2012 
period.
    Late Subsidy Payments. Section 13 would require HUD to make 
Housing Assistance Payments (HAP) for project-based rental 
assistance by the first business day of each month. If a HAP 
payment is not made within 30 days of the due date, HUD would 
be required to pay the property owner simple interest on the 
amount of such payment at a rate determined by the Secretary of 
Treasury. Interest payments would be made from amounts made 
available for the management and administration of HUD. Based 
on data from GAO, CBO estimates that approximately 6 percent of 
HAP payments are more than 30 days late with an average delay 
of about 60 days. Assuming an average interest rate of 5.7 
percent, CBO estimates that the payment of interest for late 
HAP payments would cost about $20 million over the 2008-2012 
period, assuming availability of the necessary amounts.
    Exception Rents. Under current law, HUD can set rents above 
120 percent of the fair market rent (FMR) for up to 5 percent 
of all units subject to debt restructuring. Section 6 would 
increase this authority for up to 9 percent of all such units. 
Based on HUD data, CBO estimates that such exception rents are, 
on average, about 14 percent higher (or $870 per year) than 
they would be if limited to 120 percent of the FMR, and that 
the expansion of this authority would affect about 500 units 
per year, on average. CBO estimates that expanding the 
exception rent authority would cost $7 million over the 2008-
2012 period, assuming availability of the necessary amounts.
    Intergovernmental and private-sector impact: H.R. 3965 
would extend an existing preemption of state and local law. 
Under current law, state and local governments may not have 
laws that conflict with federal regulations governing how 
surplus funds are distributed from housing projects that 
receive assistance under the mark-to-market program. Extending 
that preemption would be an intergovernmental mandate as 
defined by UMRA. However, because the preemption would simply 
limit the application of state and local law, the mandate would 
not impose costs on state, local, or tribal governments.
    In general, state, local, and tribal governments that 
participate in affordable housing projects and programs would 
benefit from activities authorized in the bill. Any costs those 
governments incur to comply with program conditions would be 
incurred voluntarily. The bill contains no new private-sector 
mandates as defined in UMRA.
    Estimate prepared by: Federal Costs: Chad Chirico and 
Susanne S. Mehlman; Impact on State, Local, and Tribal 
Governments: Lisa Ramirez-Branum; Impact on the Private Sector: 
Keisuke Nakagawa.
    Estimate approved by: Keith Fontenot, Deputy Assistant 
Director for Health and Human Resources, Budget Analysis 
Division.

                       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.

                         Earmark Identification

    H.R. 3965 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-By-Section Analysis of the Legislation


Section 1. Short title

    Short title identifying the bill as the ``Mark-to-Market 
Extension and Enhancement Act of 2007.''

Section 2. Purposes

    Sets forth purposes of the legislation: (1) continue the 
progress of the Multifamily Assisted Housing Reform and 
Affordability Act of 1997; (2) expand eligibility for Mark-to-
Market restructuring to further preservation in a cost-
effective manner; and (3) provide for the preservation and 
rehabilitation of projects damaged by natural disasters, 
including those damaged by Hurricanes Katrina, Rita, and Wilma.

Section 3. Definitions

    Sets forth a definition for disaster-eligible projects.

Section 4. Extension of the Mark-to-Market Program

    Amends the Multifamily Assisted Housing Reform and 
Affordability Act of 1997 to reauthorize the following programs 
until October 1, 2012: (1) the Mark-to-Market program; and (2) 
provisions of the FHA-insured Multifamily Housing Mortgage and 
Housing Assistance Restructuring program regarding projects and 
programs for which binding commitments have been entered into 
under such Act.

Section 5. Funding for tenant and other participation and capacity 
        building

    Authorizes not less than $10 million in grant funds for 
training and technical assistance. While current law provides 
that HUD may make available up to $10 million, no funds have 
been made available since 2002.
    Requires HUD to: (1) make modifications to a new technical 
assistance program called TRIO (Tenant Resources Information 
and Outreach Program); (2) resume an inter-agency agreement 
with the Corporation for National and Community Service (CNCS) 
to restart the VISTA program, which helps to train volunteers 
who provide technical assistance to residents; and (3) use $1 
million of the $10 million in authorized funds for the VISTA 
program. CNCS would match HUD's funding dollar-for-dollar 
resulting in $2 million for technical assistance.
    Establishes reporting requirements and other measures to 
ensure that funds are used solely for authorized activities. 
Specifically, this section requires each grant recipient to 
submit to the HUD Secretary on a quarterly basis reports 
detailing the use of such funds and including such information 
as the Secretary requires. Also requires recipients to develop 
systems to ensure compliance with the new TRIO program and 
requirements. In addition, this section ensures that no funds 
may be used for political activities, political advocacy or 
lobbying, or for expenses to travel to engage in political 
activities or preparation of or provision of advice on tax 
returns.
    Finally, this section authorizes the HUD Secretary to 
impose penalties on any recipient of grant funds for failure to 
comply with any requirement.

Section 6. Exception rents

    Permits the Secretary of Housing and Urban Development to 
waive rent level limits for up to 9 percent (currently 5 
percent) of all units subject to restructured mortgages in any 
fiscal year, based on certain findings of special need.

Section 7. Otherwise eligible projects

    Revises requirements for an approved mortgage restructuring 
and rental assistance sufficiency plan with respect to 
modification or forgiveness of all or part of a second mortgage 
held by the Secretary (debt relief) if the project concerned is 
acquired by a tenant organization or tenant-endorsed community-
based nonprofit or public agency. Sets forth requirements for 
alternative periods of eligibility for such nonprofit debt 
relief if the purchaser acquires the project subsequent to the 
date of recordation of the related affordability agreement, and 
two years after the date of enactment of this Act.

Section 8. Disaster-damaged eligible properties

    Declares disaster-damaged eligible projects eligible 
without regard to the relationship between rent level for the 
assisted units and comparable market rents.
    Requires each mortgage restructuring and rental assistance 
sufficiency plan to determine for units assisted with project-
based assistance in eligible multifamily housing projects, if 
rents cannot be determined, adjusted rent levels: (1) for 
disaster-damaged eligible projects equal to 100 percent of the 
fair market rents for the relevant market area; and (2) for 
other eligible multifamily housing projects equal to 90 percent 
of the fair market rents for the relevant market area.
    States that, with respect to a disaster-damaged eligible 
project, the owner contribution toward rehabilitation needs 
shall be determined in accordance with specified requirements.

Section 9. Period of eligibility for non-profit debt relief

    Facilitates the transfer of properties from exiting owners 
to qualified not-for-profit preservation owners by extending 
the time for which the Secretary is authorized to exercise not-
for-profit purchase incentives from the later of five years 
after the date of recordation of the affordability agreement 
(currently it is three years) or two years after the date of 
enactment of this title.

Section 10. Acquisition of restructured projects by nonprofit 
        organizations

    Allows debt relief if a qualified nonprofit becomes the 
general partner of a limited partnership that owns a multi-
family property. While HUD recognized that either acquisition 
of title, or acquisition of control, of a property constitutes 
a transfer of physical assets, HUD has expressed uncertainty as 
to whether the term ``acquired'', as used in Section 517(a)(5) 
of MAHRA, applies to the acquisition of control over the 
ownership of a project. This provision would clarify that in 
addition to acquiring title to restructured projects, a 
qualified nonprofit organization may qualify for forgiveness or 
modification of secondary debt held by HUD if it acquires 
control over the limited partnership owning the project by 
becoming the sole general partner of the partnership.

Section 11. Mark-to-market for moderate rehabilitation projects

    Subjects properties assisted under HUD's Moderate 
Rehabilitation program to the same standards that apply to 
project-based Section 8 contracts by making such properties 
eligible for the mark- to market process. This section also 
would require that public agencies renew Section 8 moderate 
rehabilitation contracts when requested by owners. This section 
does not provide retroactive rent hikes for moderate 
rehabilitation properties that have already been renewed.

Section 12. Enhanced voucher assistance upon contract termination

    Clarifies that enhanced vouchers shall be made available to 
residents if the project-based Section 8 housing assistance 
contract is terminated by the owner. Thus, the provision 
clarifies Congressional intent by ensuring that residents are 
protected against being subject to rent increases in the event 
a contract is terminated. Such protections already exist for 
cases where a contract expires.

Section 13. Correcting harm caused by late subsidy payments

    Requires HUD to make monthly project-based rental 
assistance housing assistance payments to owners upon the first 
day of each month. Also requires HUD to notify owners at least 
10-days prior to the due date if the payment will be late and 
when such payment will be made. Authorizes owners who have not 
received the monthly housing assistance payment within 10-days 
of the due date to use project replacement reserves, residual 
receipt reserves or other project reserves for the purpose of 
paying operating and debt service. Requires HUD to pay simple 
interest on the amount of such monthly payment, from the due 
date until the date of payment. Interest is determined by the 
Secretary of Treasury in accordance with the Contract Disputes 
Act of 1978 (currently, the interest rate is 5.750 percent).

Section 14. Effective date

    Makes the bill effective upon the earlier of the date of 
enactment of the legislation or September 30, 2008.

         Changes in Existing Law Made by the Bill, as Reported

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

   MULTIFAMILY ASSISTED HOUSING REFORM AND AFFORDABILITY ACT OF 1997


TITLE V--HUD MULTIFAMILY HOUSING REFORM

           *       *       *       *       *       *       *



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

           *       *       *       *       *       *       *


SEC. 512. DEFINITIONS.

  In this subtitle:
          (1) * * *

           *       *       *       *       *       *       *

          (20) Disaster-damaged eligible project.--
                  (A) In general.--The term ``disaster-damaged 
                eligible project'' means an otherwise eligible 
                multifamily housing project--
                          (i) that is located in a county that 
                        was designated a major disaster area on 
                        or after January 1, 2005, by the 
                        President pursuant to title IV of the 
                        Robert T. Stafford Disaster Relief and 
                        Emergency Assistance Act (42 U.S.C. 
                        5121 et seq.);
                          (ii) whose owner carried casualty and 
                        liability insurance covering such 
                        project in an amount required by the 
                        Secretary;
                          (iii) that suffered damages not 
                        covered by such insurance that the 
                        Secretary determines is likely to 
                        exceed $5,000 per unit in connection 
                        with the natural disaster that was the 
                        subject of the designation described in 
                        subparagraph (A); and
                          (iv) whose owner requests 
                        restructuring of the project not later 
                        than 2 years after the date that such 
                        damage occurred.
                  (B) Rule of construction.--A disaster-damaged 
                eligible project shall be eligible for amounts 
                under this Act without regard to the 
                relationship between rent levels for the 
                assisted units in such project and comparable 
                rents for the relevant market area.

           *       *       *       *       *       *       *


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

  (a) * * *

           *       *       *       *       *       *       *

  (f) Tenant and Other Participation and Capacity Building.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Funding.--
                  (A) In general.--The Secretary shall make 
                available [not more than] not less than 
                $10,000,000 annually in funding, which amount 
                shall be in addition to any amounts made 
                available under this subparagraph and carried 
                over from previous years, from which the 
                Secretary may make obligations to tenant 
                groups, nonprofit organizations, and public 
                entities for building the capacity of tenant 
                organizations, for technical assistance in 
                furthering any of the purposes of this subtitle 
                (including transfer of developments to new 
                owners), for technical assistance for 
                preservation [of low-income housing for which 
                project-based rental assistance is provided at 
                below market rent levels and may not be 
                renewed] and improvement of low-income housing 
                for which project-based rental assistance, 
                subsidized loans, or enhanced vouchers under 
                section 8(t) are provided (including transfer 
                of developments to tenant groups, nonprofit 
                organizations, and public entities, and 
                predevelopment assistance to enable such 
                transfers), for tenant services, and for tenant 
                groups, nonprofit organizations, and public 
                entities described in section 517(a)(5), from 
                those amounts made available under 
                appropriations Acts for implementing this 
                subtitle or previously made available for 
                technical assistance in connection with the 
                preservation of affordable rental housing for 
                low-income persons. For outreach and training 
                of tenants and technical assistance, the 
                Secretary shall implement a grant program 
                utilizing performance-based outcome measures 
                for eligible costs incurred. Recipients 
                providing capacity building or technical 
                assistance services to tenant groups shall be 
                qualified nonprofit Statewide, countywide, 
                areawide or citywide organizations with 
                demonstrated experience including at least a 
                two-year recent track record of organizing and 
                providing assistance to tenants, and 
                independence from the owner, a prospective 
                purchaser, or their managing agents. The 
                Secretary may provide assistance and training 
                to grantees in administrative and fiscal 
                management to ensure compliance with applicable 
                Federal requirements. The Secretary shall 
                expedite the provision of funding for fiscal 
                year 2008 by entering into new multi-year 
                contracts with any prior grantee without 
                adverse audit findings or whose adverse audit 
                findings have been cleared, and by entering 
                into an interagency agreement for not less than 
                $1,000,000 with the Corporation for National 
                and Community Service or any other agency of 
                the Federal Government, that is selected by the 
                Secretary and the Secretary determines is 
                qualified to conduct such program, to conduct a 
                tenant outreach and training program under the 
                same or similar terms and conditions as was 
                most recently conducted by the Corporation. The 
                Secretary shall also make available flexible 
                grants to qualified nonprofit organizations 
                that do not own eligible multifamily 
                properties, for tenant outreach in underserved 
                areas, and to experienced national or regional 
                nonprofit organizations to provide specialized 
                training or support to grantees assisted under 
                this section. Notwithstanding any other 
                provision of law, funds authorized under this 
                section for any fiscal year shall be available 
                for obligation in subsequent fiscal years. The 
                Secretary shall require each recipient of 
                amounts made available pursuant to this 
                subparagraph to submit to the Secretary 
                reports, on a quarterly basis, detailing the 
                use of such funds and including such 
                information as the Secretary shall require.

           *       *       *       *       *       *       *

                  (D) Prohibitions.--None of the funds made 
                available under subparagraph (A) may be used 
                for any political activities, political 
                advocacy, or lobbying (as such terms are 
                defined by Circular A-122 of the Office of 
                Management and Budget, entitled ``Cost 
                Principles for Non-Profit Organizations''), or 
                for expenses for travel to engage in political 
                activities or preparation of or provision of 
                advice on tax returns.
                  (E) Program compliance systems.--Each 
                recipient of amounts made available under 
                subparagraph (A) shall develop systems to 
                ensure compliance with the program and the 
                requirements of this paragraph.
                  (F) Penalties.--The Secretary may impose 
                penalties on any recipient of amounts made 
                available under subparagraph (A) that fails to 
                comply with any requirement under this 
                paragraph or of the program established 
                pursuant to this paragraph, which penalties may 
                include--
                          (i) ineligibility for further 
                        assistance from amounts made available 
                        under subparagraph (A); and
                          (ii) requiring the recipient to 
                        reimburse the Secretary for any amounts 
                        that were so misused.
  (g) Rent Levels.--
          (1) In general.--Except as provided in paragraph (2), 
        each mortgage restructuring and rental assistance 
        sufficiency plan pursuant to the terms, conditions, and 
        requirements of this subtitle shall establish for units 
        assisted with project-based assistance in eligible 
        multifamily housing projects adjusted rent levels 
        that--
                  (A) * * *
                  (B) if those rents cannot be [determined, are 
                equal] determined--
                          (i) with respect to a disaster-
                        damaged eligible property, are equal to 
                        100 percent of the fair market rents 
                        for the relevant market area (as such 
                        rents were in effect at the time of 
                        such disaster); and
                          (ii) with respect to other eligible 
                        multifamily housing projects, are equal 
                        to 90 percent of the fair market rents 
                        for the relevant market area.
          (2) Exceptions.--
                  (A) In general.--A contract under this 
                section may include rent levels that exceed the 
                rent level described in paragraph (1) at rent 
                levels that do not exceed 120 percent of the 
                fair market rent for the market area (except 
                that the Secretary may waive this limit for 
                disaster-damaged eligible projects and not more 
                than [five percent] 9 percent of all units 
                subject to portfolio restructuring agreements, 
                based on a finding of special need), if the 
                participating administrative entity--
                          (i)  * * *

           *       *       *       *       *       *       *

  (i) Other Eligible Projects.--
          (1) In general.--Notwithstanding any other provision 
        of this subtitle, a project that meets the requirements 
        of subparagraphs (B) and (C) of section 512(2) but does 
        not meet the requirements of subparagraph (A) of 
        section 512(2), may be treated as an eligible 
        multifamily housing project on an exception basis if 
        the Secretary determines, subject to paragraph (2), 
        that such treatment is necessary to preserve the 
        project in the most cost-effective manner in relation 
        to other alternative preservation options.
          (2) Owner request.--
                  (A) Request required.--The Secretary shall 
                not treat an otherwise eligible project 
                described under paragraph (1) as an eligible 
                multifamily housing project unless the owner of 
                the project requests such treatment.
                  (B) No adverse treatment if no request 
                made.--If the owner of a project does not make 
                a request under subparagraph (A), the Secretary 
                shall not withhold from such project any other 
                available preservation option.
          (3) Cancellation.--
                  (A) Timing.--At any time prior to the 
                completion of a mortgage restructuring under 
                this subtitle, the owner of a project may--
                          (i) withdraw any request made under 
                        paragraph (2)(A); and
                          (ii) pursue any other option with 
                        respect to the renewal of such owner's 
                        section 8 contract pursuant to any 
                        applicable statute or regulation.
                  (B) Documentation.--If an owner of a project 
                withdraws such owner's request and pursues 
                other renewal options under this paragraph, 
                such owner shall be entitled to submit 
                documentation or other information to replace 
                the documentation or other information used 
                during processing for mortgage restructuring 
                under this subtitle.
          (4) Limitation.--The Secretary may exercise the 
        authority to treat projects as eligible multifamily 
        housing projects pursuant to this subsection only to 
        the extent that the number of units in such projects do 
        not exceed 10 percent of all units for which mortgage 
        restructuring pursuant to section 517 is completed.

           *       *       *       *       *       *       *


SEC. 517. RESTRUCTURING TOOLS.

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

           *       *       *       *       *       *       *

          (5) The Secretary may modify the terms of the second 
        mortgage, assign the second mortgage to the acquiring 
        organization or agency, or forgive all or part of the 
        second mortgage if the Secretary holds the second 
        mortgage and if the project, or the sole general 
        partner of the limited partnership owning the project, 
        is acquired by a tenant organization or tenant-endorsed 
        community-based nonprofit or public agency, pursuant to 
        guidelines established by the Secretary. If such 
        purchaser acquires such project subsequent to the date 
        of recordation of the affordability agreement described 
        in section 514(e)(6)--
                  (A) such purchaser shall acquire such project 
                on or before the later of--
                          (i) 5 years after the date of 
                        recordation of the affordability 
                        agreement; or
                          (ii) 2 years after the date of 
                        enactment of the Mark-to-Market 
                        Extension and Enhancement Act of 2007; 
                        and
                  (B) the Secretary shall have received, and 
                determined acceptable, such purchaser's 
                application for modification, assignment, or 
                forgiveness prior to the acquisition of the 
                project by such purchaser.

           *       *       *       *       *       *       *

  (c) Rehabilitation Needs and Addition of Significant 
Features.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Properties damaged by natural disasters.--With 
        respect to a disaster-damaged eligible property, the 
        owner contribution toward rehabilitation needs shall be 
        determined in accordance with paragraph (2)(C).

           *       *       *       *       *       *       *


SEC. 524. RENEWAL OF EXPIRING PROJECT-BASED SECTION 8 CONTRACTS.

  (a) In General.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Renewal rents.--Except as provided in subsection 
        (b), the contract for assistance shall provide 
        assistance at the following rent levels:
                  (A) Market rents.--At the request of the 
                owner of the project, at rent levels equal to 
                the lesser of comparable market rents for the 
                market area or 150 percent of the fair market 
                rents, in the case only of a project that--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iv) is not--
                                  (I) owned by a nonprofit 
                                entity; or
                                  [(II) subject to a contract 
                                for moderate rehabilitation 
                                assistance under section 
                                8(e)(2) of the United States 
                                Housing Act of 1937, as in 
                                effect before October 1, 1991; 
                                or]
                                  [(III)] (II) a project for 
                                which the public housing agency 
                                provided voucher assistance to 
                                one or more of the tenants 
                                after the owner has provided 
                                notice of termination of the 
                                contract covering the tenant's 
                                unit; and

           *       *       *       *       *       *       *

  (b) Exception Rents.--
          (1) * * *

           *       *       *       *       *       *       *

          [(3) Moderate rehabilitation projects.--In the case 
        of a project with a contract under the moderate 
        rehabilitation program, other than a moderate 
        rehabilitation contract under section 441 of the 
        Stewart B. McKinney Homeless Assistance Act, pursuant 
        to the request of the owner of the project, the 
        contract for assistance for the project pursuant to 
        subsection (a) shall provide assistance at the lesser 
        of the following rent levels:
                  [(A) Adjusted existing rents.--The existing 
                rents under the expiring contract, as adjusted 
                by an operating cost adjustment factor 
                established by the Secretary (which shall not 
                result in a negative adjustment).
                  [(B) Fair market rents.--Fair market rents 
                (less any amounts allowed for tenant-purchased 
                utilities).
                  [(C) Market rents.--Comparable market rents 
                for the market area.]

           *       *       *       *       *       *       *

  (d) Enhanced Vouchers Upon Contract Expiration or 
Termination.--
          (1) In general.--In the case of a contract for 
        project-based assistance under section 8 for a covered 
        project that is not renewed under subsection (a) or (b) 
        of this section (or any other authority), to the extent 
        that amounts for assistance under this subsection are 
        provided in advance in appropriation Acts, upon the 
        date of the expiration or termination of such contract 
        the Secretary [shall make] shall provide enhanced 
        voucher assistance under section 8(t) of the United 
        States Housing Act of 1937 (42 U.S.C. 1437f(t)) 
        [available on behalf of] for each low-income family 
        who, upon the date of such expiration or termination, 
        is residing in an assisted dwelling unit in the covered 
        project.

           *       *       *       *       *       *       *


Subtitle C--Enforcement Provisions

           *       *       *       *       *       *       *


PART 2--FHA Multifamily Provisions

           *       *       *       *       *       *       *


SEC. 579. TERMINATION.

  (a) Repeals.--
          (1) Mark-to-market program.--Subtitle A (except for 
        section 524) is repealed effective October 1, [2011] 
        2012.

           *       *       *       *       *       *       *

  (b) Exception.--Notwithstanding the repeal under subsection 
(a), the provisions of subtitle A (as in effect immediately 
before such repeal) shall apply with respect to projects and 
programs for which binding commitments have been entered into 
under this Act before October 1, [2011] 2012.

           *       *       *       *       *       *       *

                              ----------                              


           SECTION 8 OF THE UNITED STATES HOUSING ACT OF 1937

                    LOWER INCOME HOUSING ASSISTANCE

  Sec. 8. (a) * * *

           *       *       *       *       *       *       *

  (ff) Late Payments.--
          (1) General.--The Secretary shall make payments of 
        project-based rental assistance provided under this 
        section for each month on or before the due date under 
        paragraph (2) for the payment.
          (2) Due date.--The due date under this paragraph for 
        a monthly payment is the first business day of the 
        month.
          (3) Notification of late payment.--The Secretary 
        shall notify a project owner at least 10 days before 
        the due date for a housing assistance payment if such 
        payment will be late and shall inform the project owner 
        of the approximate date the payment will be made.
          (4) Use of reserves.--If a housing assistance payment 
        for a project has not been received before the 
        expiration of the 10-day period beginning upon the due 
        date for such payment, the project owner shall, after 
        the expiration of such period, be entitled to obtain 
        funds from a project replacement reserve, residual 
        receipts reserve, or other project reserve in order to 
        pay operating and debt service costs for the project. 
        Upon receipt of the monthly housing assistance payment 
        from the Secretary, the project owner shall promptly 
        replace or replenish any such funds advanced pursuant 
        to the preceding sentence.
          (5) Interest payment.--If a monthly housing 
        assistance payment is not made before the expiration of 
        the 30-day period beginning upon the due date for such 
        payment, the Secretary shall pay to the owner simple 
        interest on the amount of such monthly payment, from 
        the due date until the date of payment, at a rate 
        determined by the Secretary of Treasury in accordance 
        with section 12 of the Contract Disputes Act of 1978 
        (41 U.S.C. 611). Interest payments under this paragraph 
        shall be made from amounts made available for 
        management and administration of the Department of 
        Housing and Urban Development.

                                  
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