To amend the Solid Waste Disposal Act to assist homeowners with properties contaminated by leaking underground storage tanks in moving from such properties on a temporary or permanent basis by authorizing the Secretary of Housing and Urban Development to guarantee loans to such homeowners.

May 21, 2003

Mr. KANJORSKI introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To amend the Solid Waste Disposal Act to assist homeowners with properties contaminated by leaking underground storage tanks in moving from such properties on a temporary or permanent basis by authorizing the Secretary of Housing and Urban Development to guarantee loans to such homeowners.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Emergency Home Financing Assistance Act'.

SEC. 2. GUARANTEED LOAN PROGRAM.

(a) AMENDMENT- Subtitle I of the Solid Waste Disposal Act (42 U.S.C. 6991 et seq.) is amended by adding at the end the following new section:

`HUD LOAN GUARANTEES FOR OWNERS OF HOMES AFFECTED BY LEAKING UNDERGROUND STORAGE TANKS

`SEC. 9011. (a) PROGRAM AUTHORITY-

`(1) IN GENERAL- In accordance with the provisions of this section, the Secretary of Housing and Urban Development (in this section referred to as the `Secretary') may guarantee, and make commitments to guarantee, loans made to homeowners whose properties have been contaminated, and reduced in value, by leaking underground storage tanks to assist such homeowners to obtain other temporary or permanent residences or to obtain the equity in the property for any other purpose.

`(2) ADMINISTRATION BY SPECIAL MASTER- The Secretary shall administer the loan guarantee program under this section through a Special Master, who shall be appointed by the Secretary. The Special Master shall carry out all functions of the Secretary under this section, including the promulgation of any substantive and procedural rules for the administration of the program.

`(b) ELIGIBLE LOANS- To be eligible to be guaranteed under this section, a loan shall meet the following requirements:

`(1) USE- The proceeds of the loan may be used only for the purpose of--

`(A) acquiring, by purchase or lease, a property consisting of one to four dwelling units, which shall be occupied as the principal residence of the borrower; or

`(B) obtaining the equity in the property for any other purpose, to the extent provided under paragraph (5)(C).

`(2) BORROWER- The loan shall be made to a borrower who is the owner of a qualified property under subsection (c).

`(3) LENDER- The loan shall be made by a lender approved by and meeting qualifications established by the Secretary. The following lenders are deemed to be approved under this paragraph:

`(A) Any mortgagee approved by the Secretary of Housing and Urban Development for participation in the single family mortgage insurance program under title II of the National Housing Act.

`(B) Any lender whose housing loans under chapter 37 of title 38, United States Code, are automatically guaranteed pursuant to section 1802(d) of such title.

`(C) Any lender approved by the Secretary of Agriculture to make guaranteed loans for single family housing under the Housing Act of 1949.

`(D) Any other lender that is supervised, approved, regulated, or insured by any agency of the Federal Government.

`(4) SECURITY- The loan shall be secured by the qualified property of the borrower.

`(5) TERMS- The loan shall--

`(A) be made for a term not exceeding 30 years;

`(B) bear interest (exclusive of the guarantee fee under subsection (e)(3) and service charges, if any) at a rate agreed upon by the borrower and the lender and determined by the Secretary to be reasonable, which may not exceed the rate generally charged in the area (as determined by the Secretary) for home mortgage loans not guaranteed or insured by any agency or instrumentality of the Federal Government; and

`(C) involve a principal obligation not exceeding--

`(i) the dollar amount limitation determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for a single-family residence (as such limitation is adjusted annually);

`(ii) the amount approved by the Secretary under this section; or

`(iii) 100 percent of the pre-release fair market value of the qualified property owned by the borrower, as determined by the Secretary.

`(c) QUALIFIED PROPERTY- For purposes of this section, a qualified property is a one- to four-family residence that--

`(1) is located on real property on any part of which is within an area that is affected by a release

from an underground storage tank, as determined by the Secretary;

`(2) immediately before the making of the loan guaranteed under this section, is the principal residence of the borrower under the loan (unless the borrower has temporarily relocated to avoid the consequences of the release referred to in paragraph (1));

`(3) is determined by the Secretary to be covered by an agreement entered into under subsection (d); and

`(4) is determined by the Secretary to be eligible for a loan guaranteed under this section.

`(d) AGREEMENTS WITH LOCAL HOUSING AGENCIES TO MAINTAIN UNOCCUPIED PROPERTIES AND TAKE TITLE- An agreement under this subsection is a legally binding agreement entered into between the Secretary and a public housing agency (as such term is defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)) or other entity selected by the Secretary that provides that--

`(1) in the case of a loan guaranteed under this section under which the borrower maintains the borrower's interest in a qualified property located within the jurisdiction of the public housing agency or other such entity, the public housing agency or other entity shall take any actions necessary to physically maintain the qualified property during the period

that such property remains unoccupied by the borrower;

`(2) in the case of a loan guaranteed under this section under which the borrower does not retain the borrower's interest in a qualified property located within the jurisdiction of the public housing agency or other such entity, the public housing agency or other entity shall take title to the qualified property and shall take any actions necessary to physically maintain the qualified property during any period that the property remains unoccupied; and

`(3) in the event that the Secretary obtains title to a qualified property located within the jurisdiction of the public housing agency or other such entity, pursuant to a default on a loan guaranteed under this section, the public housing agency or other entity shall take title to the qualified property from the Secretary and shall take any actions necessary to physically maintain the qualified property during any period that the property remains unoccupied.

Nothing in this subsection may be construed to prevent a public housing agency or other entity selected by the Secretary, that enters into an agreement under this subsection, from entering into an agreement with another entity to carry out any portion of the responsibilities of the public housing agency or entity selected by the Secretary under the agreement under this subsection.

`(e) GUARANTEE-

`(1) LIMITATION- The Secretary may not guarantee, or make a commitment to guarantee, any loan under this section in an amount exceeding 90 percent of the principal amount of the loan.

`(2) PRIVATE GUARANTEE OR INSURANCE- To be eligible for a guarantee under this section, any portion of a loan that is not guaranteed by the Secretary shall be covered by a guarantee or mortgage insurance provided by a State or local agency or a private mortgage insurer.

`(3) FEE- The Secretary shall fix and collect a guarantee fee for the guarantee of loans under this section, which shall be a percentage of the principal amount of the loan guaranteed under this section that does not exceed the percentage allowable under section 438(c)(2) of the Higher Education Act of 1965 (20 U.S.C. 1087-1(c)(2)) to be charged as an origination fee under such section. The fee shall be paid by the lender at time of issuance of the guarantee and shall be adequate, in the determination of the Secretary, to cover expenses and probable losses. The Secretary shall deposit any fees collected under this subsection in the loan guarantee fund established under subsection (i) of this section.

`(4) LIABILITY- The liability under a guarantee provided under this section shall decrease or increase on a pro rata basis according to any decrease or increase in the amount of the unpaid obligation under the provisions of the loan agreement.

`(f) CERTIFICATE OF GUARANTEE-

`(1) APPROVAL PROCESS- Before the Secretary approves any loan for guarantee under this section, the lender shall submit the application for the loan to the Secretary for examination. If the Secretary approves the loan for guarantee, the Secretary shall issue a certificate under this paragraph as evidence of the guarantee.

`(2) STANDARD FOR APPROVAL- The Secretary may approve a loan for guarantee under this section and issue a certificate under this paragraph only if the Secretary determines there is a reasonable prospect of repayment of the loan.

`(3) EFFECT- A certificate of guarantee issued under this paragraph by the Secretary shall be conclusive evidence of the eligibility of the loan for guarantee under the provisions of this section and the amount of such guarantee. Such evidence shall be incontestable in the hands of the bearer and the full faith and credit of the United States is pledged to the payment of all amounts agreed to be paid by the Secretary as security for such obligations.

`(4) FRAUD AND MISREPRESENTATION- This subsection may not be construed to preclude the Secretary from establishing defenses against the original lender based on fraud or material misrepresentation or to bar the Secretary from establishing by regulations in effect on the date of issuance or disbursement, whichever is earlier, partial defenses to the amount payable on the guarantee.

`(g) TRANSFER AND ASSUMPTION- Notwithstanding any other provision of law, any loan guaranteed under this section, including the security given for the loan, may be sold or assigned by the lender to any financial institution subject to examination and supervision by an agency of the Federal Government or of any State or the District of Columbia.

`(h) PAYMENT UNDER GUARANTEE-

`(1) NOTIFICATION OF DEFAULT- In the event of default by the borrower on a loan guaranteed under this section, the holder of the guarantee certificate shall provide written notice of the default to the Secretary.

`(2) PAYMENT OPTIONS- Upon providing such notice, the holder of the guarantee certificate shall be entitled to payment under the guarantee (subject to the provisions of this section) and may proceed to obtain payment in one of the following manners:

`(A) FORECLOSURE- The holder of the certificate may initiate foreclosure proceedings (after providing written notice of such action to the Secretary) and upon a final order by the court authorizing foreclosure and submission to the Secretary of a claim for payment under the guarantee, the Secretary shall pay to the holder of the certificate the pro rata portion of the amount guaranteed (as determined pursuant to subsection (e)) plus reasonable fees and expenses as approved by the Secretary. The Secretary shall be subrogated to the rights of the holder of the guarantee and the lender holder shall assign the obligation and security to the Secretary.

`(B) NO FORECLOSURE- Without seeking foreclosure (or in any case in which a foreclosure proceeding initiated under subparagraph

(A) continues for a period in excess of 1 year), the holder of the guarantee may submit to the Secretary a request to assign the obligation and security interest to the Secretary in return for payment of the claim under the guarantee. The Secretary may accept assignment of the loan if the Secretary determines that the assignment is in the best interests of the United States. Upon assignment, the Secretary shall pay to the holder of the guarantee the pro rata portion of the amount guaranteed (as determined under subsection (e)). The Secretary shall be subrogated to the rights of the holder of the guarantee and the holder shall assign the obligation and security to the Secretary.

`(3) REQUIREMENTS FOR PAYMENT- Before any payment under a guarantee is made under paragraph (2), the holder of the guarantee shall exhaust all reasonable possibilities of collection. Upon payment, in whole or in part, to the holder, the note or judgment evidencing the debt shall be assigned to the United States and the holder shall have no further claim against the borrower or the United States. The Secretary shall then take such action to collect as the Secretary determines appropriate.

`(i) LOAN FORGIVENESS-

`(1) MANDATORY- With respect to any loan guaranteed under this section:

`(A) PROLONGED CLEANUP- If the period that began upon identification of the release from the underground storage tank that affected the qualified property and ended upon termination of environmental cleanup relating to such release was eight or more years, the Secretary shall take action under this subsection to forgive a portion of the borrower's obligation under the loan equal to the lesser of--

`(i) the difference between the pre-release fair market value of the qualified property and the fair market value of such property at the time of such forgiveness; and

`(ii) the outstanding amount of principal and interest owed under the loan by the borrower.

`(B) SUSTAINED DECREASE IN PROPERTY VALUE-

`(i) IN GENERAL- If, during any period described in clause (ii), the fair market value of the qualified property has decreased from the pre-release fair market value by at least the amount described in such clause, and such decrease is directly attributable to the release from the underground storage tank that affected the property, the Secretary shall take action under this subsection to forgive a portion of the borrower's obligation under the loan equal to the lesser of the amounts under clauses (i) and (ii) of subparagraph (A).

`(ii) REQUIRED AMOUNT OF DECREASE- The periods and decreases in value referred to in clause (i) are--

`(I) 50 percent during the 1-year period beginning upon identification of the release that affected the property;

`(II) 45 percent during the 2-year period beginning upon such identification;

`(III) 40 percent during the 3-year period beginning upon such identification;

`(IV) 35 percent during the 4-year period beginning upon such identification;

`(V) 30 percent during the 5-year period beginning upon such identification;

`(VI) 25 percent during the 6-year period beginning upon such identification; and

`(VII) 20 percent during the 7-year period beginning upon such identification.

`(C) HEALTH EFFECTS- If the Secretary determines that a State or Federal health study has indicated that there is a level of chronic or terminal illness that (i) is directly related to exposure to the petroleum or other chemicals released from an underground storage tank in a release that affected the qualified property, and (ii) is significantly higher than the level of such illness among the general population, the Secretary shall take action under this subsection to forgive a portion of the borrower's obligation under the loan equal to the lesser of--

`(i) the pre-release fair market value of the qualified property; and

`(ii) the outstanding amount of principal and interest owed by the borrower.

In issuing regulations defining `significantly higher' for purposes of this subparagraph, the Secretary shall consult with the Administrator and the Secretary of Health and Human Services.

`(2) DISCRETIONARY- If, upon written application to the Secretary, the Secretary determines that the borrower under a loan guaranteed under this section is unable to continue payments under the loan due to the nature and extent of the release affecting the qualified property, financial hardship, demonstrated adverse health effects, or any other factor that the Secretary determines indicates that loan forgiveness under this section is appropriate, the Secretary may take action under this subsection to forgive all or part of the borrower's obligation under the loan.

`(3) ASSIGNMENT- Upon a determination pursuant to paragraph (1) or (2), the Secretary shall require the holder of the guarantee to assign the obligation and security interest to the Secretary in return for payment of the claim under the guarantee equal to the pro rata portion of the amount guaranteed (as determined under subsection (e)). The Secretary shall be subrogated to the rights of the holder of the guarantee.

`(4) FORGIVENESS- Pursuant to assignment under paragraph (3), the Secretary shall cancel a portion of the borrower's obligation, which shall be--

`(A) in the case of assignment pursuant to a determination under paragraph (1), the portion required under paragraph (1); or

`(B) in the case of assignment pursuant to a determination under paragraph (2), such portion as the Secretary considers appropriate.

`(j) LOAN GUARANTEE FUND-

`(1) ESTABLISHMENT- There is established in the Treasury of the United States a loan guarantee fund for the purpose of providing loan guarantees under this section.

`(2) CREDITS- The guarantee fund shall be credited with--

`(A) any amounts, claims, notes, mortgages, and contracts acquired by the Secretary under this section, and any collections and proceeds therefrom;

`(B) any amounts appropriated under paragraph (7);

`(C) any guarantee fees collected under subsection (e)(3); and

`(D) any interest or earnings on amounts invested under paragraph (4).

`(3) USE- Amounts in the guarantee fund shall be available, to the extent provided in appropriation Acts, for--

`(A) fulfilling any obligations of the Secretary with respect to loans guaranteed under this section, including the costs (as such term is defined in section 502 of the Congressional Budget Act of 1974) of such loans;

`(B) paying taxes, insurance, prior liens, expenses necessary to make fiscal adjustment in connection with the application and transmittal of collections, and other expenses and advances to protect the Secretary for loans which are guaranteed under this section or held by the Secretary;

`(C) acquiring such security property at foreclosure sales or otherwise; and

`(D) paying administrative expenses in connection with this section.

`(4) INVESTMENT- Any amounts in the guarantee fund that the Secretary determines are in excess of amounts currently required to carry out this section may be invested in obligations of the United States.

`(5) LIMITATION ON COMMITMENTS TO GUARANTEE LOANS AND MORTGAGES-

`(A) REQUIREMENT OF APPROPRIATIONS- The authority of the Secretary to enter into commitments to guarantee loans under this section shall be effective for any fiscal year to the extent or in such amounts as are or have been provided in appropriation Acts, without regard to the fiscal year for which such amounts were appropriated.

`(B) LIMITATIONS ON COSTS OF GUARANTEES- The authority of the Secretary to enter into commitments to guarantee loans under this section shall be effective for any fiscal year only to the extent that amounts in the guarantee fund are or have been made available in appropriation Acts to cover the costs (as such term is defined in section 502 of the Congressional Budget Act of 1974) of such loan guarantees for such fiscal year. Any amounts appropriated pursuant to this subparagraph shall remain available until expended.

`(C) LIMITATION ON OUTSTANDING AGGREGATE PRINCIPAL AMOUNT- Subject to the limitations in subparagraphs (A) and (B), the Secretary may enter into commitments to guarantee loans under this section in each fiscal year with an aggregate outstanding principal amount not exceeding such amount as may be provided in appropriation Acts for such fiscal year.

`(6) LIABILITIES- All liabilities and obligations of the assets credited to the guarantee fund under paragraph (2)(A) shall be liabilities and obligations of the guarantee fund.

`(7) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to the guarantee fund such sums as may be necessary to carry out this section.'.

(b) TABLE OF CONTENTS AMENDMENT- The table of contents for subtitle I of the Solid Waste Disposal Act is amended by adding at the end the following new item:

`Sec. 9011. HUD loan guarantees for owners of homes affected by leaking underground storage tanks.'.

(c) REGULATIONS- Not later than one year after the date of the enactment of this Act, the Secretary of Housing and Urban Development shall issue any regulations necessary to carry out this Act, which shall include regulations setting forth guidelines for loan forgiveness pursuant to section 9011(i)(2) of the Solid Waste Disposal Act (as added by the amendment made by subsection (a) of this section).

END