PREVENTING MORTGAGE DEFAULTS ON MULTIFAMILY HOUSING PROJECTS.

SEC. 103. PREVENTING MORTGAGE DEFAULTS ON MULTIFAMILY HOUSING PROJECTS. (a) Multifamily Housing Planning and Investment Strategies.— (1) Preparation of assessments for independent entities.—Section 402(a) of the Housing and Community Development Act of 1992 (12 U.S.C. 1715–1a note) is amended by adding at the end the following new sentence: “The assessment shall be prepared by an entity that does not have an identity of interest with the owner.”. (2) Timing of submission of needs assessments.—Section 402(b) of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-1a note) is amended to read as follows: “(b) Timing.—To ensure that assessments for all covered multi-family housing properties will be submitted on or before the conclusion of fiscal year 1997, the Secretary shall require the owners of such properties, including covered multifamily housing properties for the elderly, to submit the assessments for the properties in accordance with the following schedule: “(1) For fiscal year 1994, 10 percent of the aggregate number of such properties. “(2) For each of fiscal years 1995, 1996, and 1997, an additional 30 percent of the aggregate number of such properties.”. (3) Review of comprehensive needs assessments.—Section 404(d) of the Housing and Community Development Act of 1992 (12 U.S.C. 1715-la note) is amended to read as follows: “(d) Review.— “(1) In general.—The Secretary shall review each comprehensive needs assessment for completeness and adequacy before the expiration of the 90-day period beginning on the receipt of the assessment and shall notify the owner of the property for which the assessment was submitted of the findings of such review. “(2) Incomplete or inadequate assessments.—If the Secretary determines that the assessment is substantially incomplete or inadequate, the Secretary shall— “(A) notify the owner of the portion or portions of the assessment requiring completion or other revision; and “(B) require the owner to submit an amended assessment to the Secretary not later than 30 days after such notification.” 108 STAT. 359 (4) Repeal of notice provision.—Section 404 of the Housing and Community Development Act of 1992 (12 U.S.C. 1715-1a note) is amended by striking subsection (f). (5) Publication.—Section 404 of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-la note), as amended by paragraph (4) of this subsection, is further amended by inserting after subsection (e) the following new subsection: “(f) Publication of Method for Receiving Capital Needs Assessment.—The Secretary shall cause to be published in the Federal Register the method by which the Secretary determines which capital needs assessments will be received each year in accordance with section 402(b) and subsection (d) of this section”. (6) Funding.—Title IV of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-la note) is amended by adding at the end the following new section: “SEC. 409. FUNDING. “(a) Allocation of Assistance.—Based upon needs identified in comprehensive needs assessments, and subject to otherwise applicable program requirements, including selection criteria, the Secretary may allocate the following assistance to owners of covered multifamily housing projects and may provide such assistance on a noncompetitive basis: “(1) Operating assistance and capital improvement assistance for troubled multifamily housing projects pursuant to section 201 of the Housing and Community Development Amendments of 1978, except for assistance set aside under section 201(n)(l). “(2) Loan management assistance available pursuant to section 8 of the United States Housing Act of 1937. “(b) Operating Assistance and Capital Improvement Assistance.—In providing assistance under subsection (a) the Secretary shall use the selection criteria set forth in section 201(n) of the Housing and Community Development Amendments of 1978. “(c) Amount of Assistance.—The Secretary may fund all or only a portion of the needs identified in the capital needs assessment of an owner selected to receive assistance under this section.”. (b) Flexible Subsidy Program.— (1) Deletion of utility cost requirements.—Section 201(i) of the Housing and Community Development Amendments of 1978 (12 U.S.C. 1715z-la(i)) is hereby repealed. (2) Repeal of mandatory contribution from owner.—Section 201(k)(2) of the Housing and Community Development Amendments of 1978 (12 U.S.C. 1715z-la(k)(2)) is amended by striking “, except that” and all that follows and inserting a period. (3) Funding.—Section 201(n) of the Housing and Community Development Amendments of 1978 (42 U.S.C. 1715z-1a(n)) is amended to read as follows: “(n) Allocation of Assistance.— “(1) Set-aside.—In providing, and contracting to provide, assistance for capital improvements under this section, in each fiscal year the Secretary shall set aside an amount, as deter-mined by the Secretary, for projects that are eligible for incentives under section 224(b) of the Emergency Low Income Housing Preservation Act of 1987, as such section existed before the date of enactment of the CranstonGonzalez National 108 STAT. 360Affordable Housing Act. The Secretary may make such assistance available on a noncompetitive basis. “(2) General rules for allocation.—Except as provided in paragraph (3), with respect to assistance under this section not set aside for projects under paragraph (1), the Secretary— “(A) may award assistance on a noncompetitive basis; and “(B) shall award assistance to eligible projects on the basis of— “(i) the extent to which the project is physically or financially troubled, as evidenced by the comprehensive needs assessment submitted in accordance with title IV of the Housing and Community Development Act of 1992; and “(ii) the extent to which such assistance is necessary and reasonable to prevent the default of federally insured mortgages. “(3) Exceptions.— The Secretary may make exceptions to selection criteria set forth in paragraph (2)(B) to permit the provision of assistance to eligible projects based upon— “(A) the extent to which such assistance is necessary to prevent the imminent foreclosure or default of a project whose owner has not submitted a comprehensive needs assessment pursuant to title IV of the Housing and Community Development Act of 1992; “(B) the extent to which the project presents an imminent threat to the life, health, and safety of project residents; or “(C) such other criteria as the Secretary may specify by regulation or by notice printed in the Federal Register. “(4) Considerations.—In providing assistance under this section, the Secretary shall take into consideration— “(A) the extent to which there is evidence that there will be significant opportunities for residents (including a resident council or resident management corporation, as appropriate) to be involved in the management of the project (except that this paragraph shall have no application to projects that are owned as cooperatives); and “(B) the extent to which there is evidence that the project owner has provided competent management and complied with all regulatory and administrative requirements.”. (4) Repeal.—Section 201 of the Housing and Community Development Amendments of 1978 (12 U.S.C. 1715z-1a) is amended— (A) by striking subsection (o); and (B) by redesignating subsection (p) as subsection (o). (c) Implementation and Effective Dates for Subsections (a) and (b).— (1) In general.—Except as provided in paragraph (2), the amendments made by subsections (a) and (b) shall apply with respect to amounts made available for fiscal year 1994 and fiscal years thereafter. (2) Exception.—Section 201(n)(l) of the Housing and Community Development Amendments of 1978 (as added by the amendment made by subsection (b)(3) of this section) shall take effect on the date of enactment of this Act. 108 STAT. 361 (3) Notice.—The Secretary shall, by notice published in the Federal Register, establish any requirements necessary to implement the amendments made by subsections (a) and (b). The notice shall invite public comments and, not later than 12 months after the date on which the notice is published, the Secretary shall issue final regulations based on the initial notice, taking into consideration any public comments received. (d) Streamlined Refinancing.—As soon as practicable, the Secretary shall implement a streamlined refinancing program under the authority provided in section 223 of the National Housing Act to prevent the default of mortgages insured by the FHA which cover multifamily housing projects, as defined in section 203(b) of the Housing and Community Development Amendments of 1978. (e) GAO Study on Prevention of Default.— (1) In general.—Not later than April 1, 1995, the Comptroller General of the United States shall submit to the Committee on Banking, Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a report that evaluates the adequacy of loan loss reserves in the General Insurance and Special Risk Insurance Funds and presents recommendations for the Secretary to prevent losses from occurring. (2) Contents.—The report submitted under paragraph (1) shall— (A) evaluate the factors considered in arriving at loss estimates and determine whether other factors should be considered; (B) determine the relative benefit of creating a new, actuarially sound insurance fund for all new multifamily housing insurance commitments; and (C) recommend alternatives to the Secretary’s current procedures for preventing the future default of multifamily housing project mortgages insured under title II of the National Housing Act. (f) GAO Study on Actuarial Soundness of Certain Insurance Programs.— (1) In general.—Not later than April 1, 1995, the Comptroller General of the United States shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Banking, Finance and Urban Affairs of the House of Representatives a report that evaluates, in connection with the General Insurance Fund, the role and performance of the nursing home, hospital, and retirement service center insurance programs. (2) Contents.—The reports submitted under paragraph (1) shall— (A) evaluate the strategic importance of these insurance programs to the mission of the FHA; (B) evaluate the impact of these insurance programs upon the financial performance of the General Insurance Fund; (C) assess the potential losses expected under these programs through fiscal year 1999; (D) evaluate the risk of these programs to the General Insurance Fund in connection with changes in national health care policy; 108 STAT. 362 (E) assess the ability of the FHA to manage these programs; and (F) make recommendations for any necessary changes. (g) Risk Assessment.— (1) Special risk insurance fund.—Section 238(c) of the National Housing Act (12 U.S.C. 1715z-3(c)) is amended by adding at the end the following new paragraph: “(3) The Secretary shall undertake an annual assessment of the risks associated with each of the insurance programs comprising the Special Risk Insurance Fund, and shall present findings from such review to the Congress in the FHA Annual Management Report.”. (2) General insurance fund.—Section 519 of the National Housing Act (12 U.S.C. 1735c) is amended by adding at the end the following new subsection: “(g) Risk Assessment.—The Secretary shall undertake an annual assessment of the risks associated with each of the insurance programs comprising the General Insurance Fund, and shall present findings from such review to the Congress in the FHA Annual Management Report.”. (h) Alternative Uses for Prevention of Default.— (1) In general.—Subject to notice to and comment by existing tenants, to prevent the imminent default of a multifamily housing project subject to a mortgage insured under title II of the National Housing Act, the Secretary may authorize the mortgagor to use the project for purposes not contemplated by or permitted under the regulatory agreement, if— (A) such other uses are acceptable to the Secretary; (B) such other uses would be otherwise insurable under title II of the National Housing Act; (C) the outstanding principal balance on the mortgage covering such project is not increased; (D) any financial benefit accruing to the mortgagor shall, subject to the discretion of the Secretary, be applied to project reserves or project rehabilitation; and (E) such other use serves a public purpose. (2) Displacement protection.— The Secretary may take actions under paragraph (1) only if— (A) tenant-based rental assistance under section 8 of the United States Housing Act of 1937 is made available to each eligible family residing in the project that is dis-placed as a result of such actions; and (B) the Secretary determines that sufficient habitable, affordable (as such term is defined in section 203(b) of the Housing and Community Development Amendments of 1978) rental housing is available in the market area in which the project is located to ensure use of such assistance. (3) Implementation.—The Secretary shall, by notice published in the Federal Register, which shall take effect upon publication, establish such requirements as may be necessary to implement the amendments made by this subsection. The notice shall invite public comments and, not later than 12 months after the date on which the notice is published, the Secretary shall issue final regulations based on the initial notice, taking into account any public comments received.