MULTIFAMILY MORTGAGE CREDIT DEMONSTRATIONS.

SEC. 542. MULTIFAMILY MORTGAGE CREDIT DEMONSTRATIONS. (a) In General.—The Secretary of Housing and Urban Development (hereinafter referred to as the “Secretary”) shall carry out programs through the Federal Housing Administration to demonstrate the effectiveness of providing new forms of Federal credit enhancement for multifamily loans. In carrying out demonstration programs, the Secretary shall include an evaluation of the effectiveness of entering into partnerships or other contractual arrangements including reinsurance and risk-sharing agreements with State or local housing finance agencies, the Federal Housing Finance Board, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, qualified financial institutions, and other State or local mortgage insurance companies or bank lending consortia. (b) Risk-Sharing Pilot Program.— (1) In general.—The Secretary shall carry out a pilot program through the Federal Housing Administration to provide for risk sharing related to mortgagee on multifamily housing. (2) Authority for reinsurance agreements.—The Secretary may enter into reinsurance agreements (as such term is defined in section 544) with the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, qualified financial institutions, qualified housing finance agencies, and the Federal Housing Finance Board. The agreements may provide for risk-sharing and other forms of credit enhancement with respect to mortgage lending on multifamily housing, including reinsurance with respect to pools of loans on multi-family housing properties, that the Secretary determines to be appropriate to carry out the purposes of this subsection. The agreements shall be in a form and have such terms and conditions as the Secretary determines to be appropriate to carry out the purposes of this subsection. (3) Development of alternatives.— The Secretary shall develop and assess a variety of risk-sharing alternatives, including arrangements under which the Secretary assumes an appropriate share of the risk related to long-term mortgage loans on newly constructed or acquired multifamily rental housing, mortgage refinancings, bridge financing for construction, and other forms of multifamily housing mortgage lending that the Secretary deems appropriate to carry out the purposes of this subsection. Such alternatives shall be designed— (A) to ensure that other parties bear a share of the risk, in percentage amount and in position of exposure, that is sufficient to create strong, market-oriented incentives for other participating parties to maintain sound underwriting and loan management practices; (B) to develop credit mechanisms, including sound underwriting criteria, processing methods, and credit 106 STAT. 3795 enhancements, through which resources of the Federal Housing Administration can assist in increasing multifamily housing lending as needed to meet the expected need in the United States; (C) to provide a more adequate supply of mortgage credit for sound multifamily rental housing projects in underaerved urban and rural markets; (D) to encourage major financial institutions to expand their participation in mortgage lending for sound multifamily housing, through means such as mitigating uncertain-ties regarding actions of the Federal Government (including the possible failure to renew short-term subsidy contracts); (E) to increase the efficiency, and lower the costs to the Federal Government, of processing and servicing multi-family housing mortgage loans insured by the Federal Housing Administration; and (F) to improve the quality and expertise of Federal Housing Administration staff and other resources, as required for sound management of reinsurance and other market-oriented forms of credit enhancement. (4) Eligibility standards.—The Secretary shall establish and enforce standards for financial institutions and entities to be eligible to enter into reinsurance agreements under this subsection, as the Secretary determines to be appropriate. (5) Funding.—Using any authority provided in appropriation Acts to insure loans under the National Housing Act, the Secretary may enter into commitments under this sub-section for risk sharing with respect to mortgages on not more than 15,000 units over fiscal years 1993 and 1994. The demonstration authorized under this subsection shall not be expanded until the reports required under subsection (d) are submitted to Congress. (6) Fees.—Hie Secretary shall establish and collect premiums and fees under this subsection as the Secretary deter-mines appropriate to (A) achieve the purpose of this subsection, and (B) compensate the Federal Housing Administration for the risks assumed and related administrative costs. (7) Non-federal participation.—The Secretary shall carry out this subsection, to the maximum extent practicable, with the participation of well-established residential mortgage originators, financial institutions that invest in multifamily housing mortgages, multifamily housing sponsors, and such other private sector experts in multifamily housing finance as the Secretary determines to be appropriate. (8) Timing.—The Secretary shall take any administrative actions necessary to initiate the pilot program under this sub-section not later than the expiration of the 8-month period beginning on the date of the enactment of this Act. (c) Housing Finance Agency Pilot Program.— (1) In general.—The Secretary shall carry out a specific pilot program in conjunction with qualified housing finance agencies to test the effectiveness of Federal credit enhancement for loans for affordable multifamily housing through a system of risk-sharing agreements with such agencies. (2) Pilot program requirements.— (A) In general.—In carrying out the pilot program authorized under this subsection, the Secretary shall enter 106 STAT. 3796into risk-sharing agreements with qualified housing finance agencies. (B) Mortgage insurance.—Agreements under subparagraph (A) shall provide for full mortgage insurance through the Federal Housing Administration of the loans for affordable multifamily housing originated by or through qualified housing finance agencies and for reimbursement to the Secretary by such agencies for either all or a portion of the losses incurred on the loans insured. (C) Risk apportionment.—Agreements entered into under this subsection between the Secretary and a qualified housing finance agency shall specify the percentage of loss that each of the parties to the agreement will assume in the event of default of the insured multifamily mortgage. Such agreements shall specify that the qualified housing finance agency and the Secretary shall snare equally the full amount of any loss on the insured mortgage. (D) Reimbursement capacity.— Agreements entered into under this subsection between the Secretary and a qualified housing finance agency shall provide evidence of the capacity of such agency to fulfill any reimbursement obligations made pursuant to this subsection. Evidence of such capacity may include— (i) a pledge of the full faith and credit of a qualified State or local agency to fulfill any obligations entered into by the qualified housing finance agency ; (ii) reserves pledged or otherwise restricted by the qualified housing finance agency in an amount equal to an agreed upon percentage of the loss assumed by the housing finance agency under subparagraph (C); (iii) funds pledged through a State or local guarantee fund; or (iv) any other form of evidence mutually agreed upon by the Secretary and the qualified housing finance agency. (E) Underwriting standards.—The Secretary shall allow any qualified housing finance agency to use its own underwriting standards and loan terms and conditions for purposes of underwriting loans to be insured under this subsection without further review by the Secretary, except that the Secretary may impose additional underwriting criteria and loan terms and conditions for contractual agreements where the Secretary retains more than 50 per-cent of the risk of loss. (3) Mortgage insurance premiums.—The Secretary shall establish a schedule of insurance premium payments for mortgages insured under this subsection based on the percentage of loss the Secretary may assume. Such schedule shall reflect lower or nominal premiums for qualified housing finance agencies that assume a greater share of the risk apportioned according to paragraph (2)(C). (4) Limitation on insurance authority.—Using any authority provided by appropriations Acts to insure mortgages under the National Housing Act, the Secretary may enter into commitments under this subsection with respect to mortgages on not to exceed 30,000 units over fiscal years 1993, 1994, 106 STAT. 3797and 1995. The demonstration authorized under this subsection shall not be expanded until the reports required under sub-section (d) are submitted to the Congress. (5) Identity of interest.—Notwithstanding any other provision of law, the Secretary shall not apply identity of. interest provisions to agreements entered into with qualified State housing finance agencies under this subsection. (6) Prohibition on ginnie mae securitization.—The Government National Mortgage Association shall not securitize any multifamily loans insured under this subsection. (7) Qualification as affordable housing.—Multifamily housing securing loans insured under this subsection shall qualify as affordable only if the housing is occupied by very low- income families and bears rents not greater than the gross rent for rent-restricted residential units as determined under section 42(g)(2) of the Internal Revenue Code of 1986. (8) Regulations.—Not later than 90 days after the date of enactment of this Act, the Secretary shall issue such regulations as may be necessary to carry out this subsection. (d) Independent Studies and Reports.— (1) Federal national mortgage association.—The Federal National Mortgage Association, in consultation with representatives of its seller-servicers and State housing finance agencies, shall carry out an independent assessment of alter-native methods for achieving the purposes of this section and shall submit a report containing any findings and recommendations, including any recommendations for legislative or administrative action, simultaneously to the Secretary and the Congress not later than 12 months after the date of the enactment of this Act. (2) Federal home loan mortgage corporation.—The Federal Home Loan Mortgage Corporation, in consultation with representatives of its seller-servicers and State housing finance agencies, shall carry out an independent assessment of alter-native methods for achieving the purposes of this section and shall submit a report containing any findings and recommendations, including any recommendations for legislative or administrative action, simultaneously to the Secretary and the Congress not later than 12 months after the date of the enactment of this Act. (3) Secretary.—The Secretary shall submit to the Congress, and publish, reports under this paragraph assessing the activities carried out under each of the pilot programs. The Secretary shall submit and publish a preliminary report under this paragraph not later than 9 months after the date of the implementation of each of the pilot programs, and a final report not later than 24 months after the date of implementation on which the pilot program is initiated, which shall include any recommendations by the Secretary for legislative changes to achieve the purposes of this section, (4) Comptroller general.—The Comptroller General of the United States shall carry out an evaluation of each of the pilot programs under this section and shall submit to the Congress, not later than 30 months after the date of implementation for each of the pilot programs, a report regarding the evaluation, together with any recommendations for legislative changes to achieve the purposes of this section. 106 STAT. 3798 The Comptroller General shall also submit to the Congress a report containing a preliminary assessment of the pilot pro-gram not later than 18 months after the date of enactment of this Act. (5) Federal housing finance board.—The Federal Housing Finance Board shall monitor and assess the activities carried out under the pilot programs under this section. The Federal Housing Finance Board shall submit a preliminary report containing any findings regarding such activities not later than 9 months after the date of the enactment of this Act, and a final report containing such findings not later than 24 months after the date on which the pilot program is initiated, which shall include any recommendations by the Board for legislative changes to achieve the purposes of this section.