Servicing HECM

PUBLIC LAW 100-242—FEB. 5, 1988
Public Law 100-242
100th Congress

101 STAT. 1815

An Act

To amend and extend certain laws relating to housing, community and neighborhood
development and preservation, and related programs, and for other purposes.

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

Feb. 5, 1988
[S. 825]

Housing and

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

Community
Development

(a) SHORT TITLE.—This Act may be cited as the "Housing and
Community Development Act of 1987".

^lu^lJslo'i
note.

(b) TABLE OF CONTENTS.—
Sec. 1. Short title and table of contents.
Sec. 2. Findings and purpose.
Sec. 3. Budget compliance.
Sec. 4. Credit limitation.
Sec. 5. Limitation on spending authority.
TITLE I—HOUSING ASSISTANCE
Subtitle A—Programs Under United States Housing Act of 1937
PART 1—GENERAL PROVISIONS

Sec. 101. Lower income housing authorization.
Sec. 102. Tenant rental contributions.
Sec. 103. Income eligibility for assisted housing.
PART 2—PUBUC HOUSING

Sec. 111. Discretionary preference for near elderly families in public housing
projects designed for the elderly.
Sec. 112. Grants for public housing development.
Sec. 113. Limitation on public housing development and assurance of public housing quality standards.
Sec. 114, Limitation on recapture of funding reservations.
Sec. 115, Indian public housing.
Sec. 116. Location of acquired housing.
Sec. 117. Public housing child care grants.
Sec. 118. Payments for operation of lower income housing projects.
Sec. 119. Comprehensive improvement assistance program.
Sec. 120. Comprehensive improvement assistance special purpose needs.
Sec. 121. Public housing demolition and disposition.
Sec. 122. Public housing resident maneigement.
Sec. 123. Public housing homeownership and management opportunities.
Sec. 124. Treatment of certain public housing development funds.
Sec. 125. Energy efficient public housing demonstration.
Sec. 126. Public housing comprehensive transition demonstration.
PART 3—SECTION 8 ASSISTANCE AND OTHER PROGRAMS

Sec.
Sec.
Sec.
Sec.

141.
142.
143.
144.

Sec. 145.
Sec. 146.
Sec. 147.
Sec. 148.
Sec. 149.

Section 8 contracts for existing dwelling units.
Section 8 fair market rentals and contract rents.
Housing voucher program.
Administrative fees for section 8 certificate and housing voucher
programs.
Portability of section 8 certificates and vouchers.
Prohibition of denial of section 8 certificates and vouchers to residents of
public housing.
Nondiscrimination agfdnst section 8 certificate holders and voucher
holders.
Project-based section 8 assistance.
Section 8 assistance for residents of rental rehabilitation projects.

101 STAT. 1816

PUBLIC LAW 100-242—FEB. 5, 1988

Sec. 150. Rental rehabilitation grants.
Sec. 151. Rental development grants.
Sec. 152. Termination of rental development grant program.
Sec.
Sec.
Sec.
Sec.
Sec.

161.
162.
163.
164.
165.

Sec.
Sec.
Sec.
Sec.
Sec.

166.
167.
168.
169.
170.

Subtitle B—Other Housing Assistance Programs
Housing for the elderly and handicapped.
Housing for the handicapped.
- . -/
Congregate services.
Modification of restriction on use of assisted housing by aliens.
Preventing fraud and abuse in Department of Housing and Urban Development programs.
Annual report on characteristics of families in assisted housing.
Section 236 rental housing program.
Tenant eligibility determinations in rent supplement projects.
Counseling to tenants and homeowners.
Housing assistance technical amendments.

Subtitle C—Multifamily Housing Management and Preservation
Sec. 181. Management and preservation of HUD-owned multifamily housing
projects.
Sec. 182. Acquisition of insured multifamily housing projects.
Sec. 183. Tenfmt participation in multifamily housing projects.
,. e, -..,
j; ..
Sec. 184. Multifamily housing disposition partnership.
Sec. 185. Multifamily housing capital improvements assistance.
Sec. 186. Flexible subsidy program.
TITLE n—PRESERVATION OF LOW INCOME HOUSING
Subtitle A—General Provisions
Sec. 201. Short title.
Sec. 202. Findings and purpose.
Sec. 203. Termination of certain provisions.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

Subtitle B—Prepayment of Mortgages Insured Under National Housing Act
221. General prepayment limitation.
222. Notice of intent.
223. Plan of action.
224. Incentives to extend low income use.
225. Criteria for approval of plan of action.
226. Alternative State strategy.
227. Timetable for approval of plan of action.
228. Modification of existing regulatory agreements.
229. Consultations with other interested parties.
230. Right of conversion to alternative prepayment system.
231. Insurance for second mortgage financing.
232. Report to Congress.
233. Definitions.
234. Regulations.
235. Effective date.

' "^
'

Subtitle C—Rural Rental Housing Displacement Prevention
Sec. 241. Prepajmient and refinancing procedures.
Sec. 242. Equity recapture loans and loans to nonprofit organizations and public
agencies.
Sec. 243. Use of Rural Housing Insurance Fund.
Subtitle D—Other Measures to Preserve Low Income Housing
Sec. 261. Early prepayment.
u
Sec. 262. Section 8 assistance.
Sec. 263. Section 515 operating reserve and equity contribution requirements.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

301.
302.
303.
304.
305.
306.
307.

i-

TITLE III—RURAL HOUSING
Program authorizations.
;'
"
Eligibility requirements.
'••'•••> *-Escrowing taxes and insurance.
Rural housing guaranteed loan demonstration.
Definition of domestic farm labor.
Conformance with low-income housing tax credit eligibility requirements.
Limitation of fees on rural rental housing loans.

PUBLIC LAW 100-242—FEB. 5, 1988
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

308.
309.
810.
311.
312.
313.
314.
315.
316.

101 STAT. 1817

Rural area classification.
Procedures for reduction of interest credits.
Rural housing preservation grant program.
Rural rental rehabilitation demonstration.
Study of mortgage credit in rural areas.
Debt settlement authority of Secretary.
Manufactured housing.
Loan packaging by nonprofit organizations.
Rural housing technical amendments.

TITLE IV—MORTGAGE INSURANCE AND SECONDARY MORTGAGE MARKET
PROGRAMS
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

Subtitle A—FHA Mortgage Insurance Programs
Insurance authority for FHA.
Amount to be insured under National Housing Act.
Limitation on Federal Housing Administration insurance premiums.
Increase in maximum mortgage amount under single family insurance
program.
405. Change in definition of veteran.
406. Limitation on use of single family mortgage insurance by investors.
407. Actions to reduce losses under single family mortgage insurance program.
408. Insurance of graduated payment mortgeiges.
409. Refinancing mortgage insurance for hospitals, nursing homes, intermediate care facilities, and board and care homes.
410. Mortgage insurance for nursing homes, intermediate care facilities, and
board and care homes.
411. Requirement of State approval for mortgage insurance for hospitals.
412. Mortgage insurance for public hospitals.
413. Mortgage insurance on Hawaiian home lands and Indian reservations.
414. Co-insurance program.
415. Increase in authority to insure adjustable rate single family mortgages.
416. Penalties for equity skimming.
417. Home equity conversion mortgage insurance demonstration.
418. Assurance of adequate processing of applications for loan and mortgage
insurance.
419. Prohibition of lender requirements discouraging loans with lower principal amounts.
420. Repeal of requirement to publish prototype housing costs for 1- to 4-family
dwelling units.
421. Double damages remedy for unauthorized use of multifamily housing
project assets and income.
422. Miscellaneous mortgage insurance provisions.
423. Calculation of maximum mortgage amount under single family insurance
program.
424. Approval of individual residential water purification or treatment units.
425. Regulation of rents in insured projects.
426. Mortgage limits for multifamily projects.
427. Operating loss loan insurance.
428. Interest charges on temporary mortgage assistance pajmients and assignment or other assistance.
429. Mortgage insurance technical amendments.
430. Release of pool funds.

401.
402.
403.
404.

Subtitle B—Secondary Mortgage Market Programs
Sec. 441. Limitations on certain secondary mortgage market fees.
Sec. 442. FNMA cumulative voting.
Sec. 443. Permanent authority to purchase second mortgages on single-family
properties.
Sec. 444. Period for approval of actions of FNMA.
Sec. 445. Prohibition of limitation on FHLMC mortgage operations.
Sec. 446. Limitation on GNMA guarantees of mortgage-backed securities.
TITLE V—COMMUNITY DEVELOPMENT AND MISCELLANEOUS PROGRAMS
Sec.
Sec.
Sec.
Sec.

Subtitle A—Community and Neighborhood Development and Preservation
501. Community development authorizations.
502. Targeting of benefits to persons of low and moderate income.
503. City and county classifications.
504. Eligible activities.

101 STAT. 1818
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

PUBLIC LAW 100-242—FEB. 5, 1988
505.
506.
507.
508.
509.
510.

Sec. 511.
Sec. 512.
Sec. 513.
Sec. 514.
Sec. 515.
Sec. 516.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

517.
518.
519.
520.
521.
522.
523.
524.
525.

Statement of activities and review.
?'
Alleviation of lakefront flooding and erosion.
Housing assistance plans.
Citizen participation plan.
Conserving neighborhoods and housing by prohibiting displacement.
Limited new construction of housing under community development block
grant program.
Availability of community development block grants for uniform emergency telephone number systems.
State certiflcations for receiving community development block grants for
nonentitlement areas.
Administrative expenses of States distributing funds to nonentitlement
areas.
Community development block grant loan guarantees.
Urban development action grant selection criteria.
Prohibition on use of urban development action grants for business
relocations.
Urban homesteading.
,
;.
.
,
Rehabilitation loans.
Loan cancellation.
Neighborhood reinvestment corporation.
Neighborhood development demonstration program.
Park Central New Community Project.
Community development projects labor standards.
Urban planning.
Community development technical amendments.

Subtitle B—Flood and Crime Insurance Programs
Extension of flood insurance program.
Extension of crime insurance program.
Studies under national flood insurance program.
Schedule for payment of flood insurance for structures on land subject to
imminent collapse or subsidence.
Sec. 545. Flood and crime insurance technical amendments.

Sec.
Sec.
Sec.
Sec.

541.
542.
543.
544.

Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

561.
562.
563.
564.
565.
566.
567.
568.
569.
570.
571.
572.

Subtitle C—Miscellaneous Programa
Fair housing initiatives pr(^am.
»
Collection of certain data.
Regulatory authority.
.,
R ^ a r c h and development.
Home mortgage disclosure.
Lead-based paint poisoning prevention.
Median area income.
Manufactured housing construction and safety standards.
Nullification of right of redemption of single-family mortgagors.
Miscellaneous programs technical amendments.
Use of American materials and products.
Study of voluntary standards for modular homes.

Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

601.
602.
603.
604.
605.
606.
607.
608.
609.
610.
611.
612.
613.

TITLE VI—NEHEMIAH HOUSING OPPORTUNITY GRANTS
Statement of purpose.
Definitions.
Assistance to nonprofit organizations.
Use of assistance.
Program requirements.
Terms and conditions of assistance.
Program selection criteria.
Distribution of assistance to nonprofit organizations.
Nehemiah Housing Opportunity Fund.
Report.
Regulations.
Authorization of appropriations.
Sunset.

Sec.
Sec.
Sec.
Sec.

701.
702.
703.
704.

-H

.,,;••

;•
; ^j?:

TITLE VII—ENTERPRISE ZONE DEVELOPMENT
Designation of enterprise zones.
Evaluation and reporting requirements.
Interaction with other Federal programs.
Waiver or modification of housing and community development rules in
enterprise zones.
. ,
^ ,
* , .

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1819

Sec. 705. Coordination of housing and urban development programs in enterprise
zones.
Sec. 706. Coordination with CDBG and UDAG programs.
SEC. 2. FINDINGS AND PURPOSE.

42 USC 5301

(a) FINDINGS.—The Congress finds that—
(1) for the past 50 years, the Federal Government has taken
the leading role in enabling the people of the Nation to be the
best housed in the world, and recent reductions in Federal
assistance have contributed to a deepening housing crisis for
low- and moderate-income families;
(2) the efforts of the Federal Government have included a
system of specialized lending institutions, favorable tax policies,
construction Eissistance, mortgage insurance, loan guarantees,
secondary markets, and interest and rental subsidies, that have
enabled people to rent or buy affordable, decent, safe, and
sanitary housing; £ind
(3) the tragedy of homelessness in urban and suburban
communities across the Nation, involving a record number of
people, dramatically demonstrates the lack of affordable residential shelter, and people living on the economic margins of
our society (lower income families, the elderly, the working
poor, and the deinstitutiongilized) have few available alternatives for shelter.
Oa) PURPOSE.—The purpose of this Act, therefore, is—
(1) to reaffirm the principle that decent and affordable shelter
is a basic necessity, and the general welfare of the Nation and
the hegilth and living standards of its people require the addition of new housing units to remedy a serious shortage of
housing units for all Americans, particularly for persons of low
and moderate income;
(2) to make the distribution of direct and indirect housing
assistance more equitable by providing Federal assistance for
the less affluent people of the Nation;
(3) to provide needed housing assistance for homeless people
and for persons of low and moderate income who lack affordable, decent, safe, and sanitary housing; and
(4) to reform existing programs to ensure that such assistance
is delivered in the most efficient msinner possible.
SEC. 3. BUDGET COMPLIANCE.

42 USC 5301

(a) IN GENERAL.—This Act and the amendments made by this Act
may not be construed to provide for new budget authority, budget
outlays, or new entitlement authority, for fiscal year 1988 in excess
of the appropriate aggregate levels established by the concurrent
resolution on the budget for such fiscal year for the programs
authorized by this Act and the amendments made by this Act.
OJ) DEFINITIONS.—For purposes of this section, the terms "budget
authority", "budget outlays", "concurrent resolution on the
budget", and "entitlement authority" have the meanings given such
terms in section 3 of the Congressional Budget Act of 1974 (2 U.S.C.
622).
SEC. 4. CREDIT LIMITATION.

Any new credit authority (as defined in section 3 of the Congressional Budget Act of 1974) which is provided by this Act, or by an
amendment made by this Act, shall be effective only to such extent
or in such amounts as are provided in appropriation Acts.

42 USC 5301

101 STAT. 1820
42 u s e 5301

PUBLIC LAW 100-242—FEB. 5, 1988

SEC. 5. LIMITATION ON SPENDING AUTHORITY.

Any new spending authority (as defined in section 401(c) of the
Congressional Budget Act of 1974) which is provided by this Act, or
by an amendment made by this Act, shall be effective only to such
extent or in such amounts as are provided in appropriation Acts.

TITLE I—HOUSING ASSISTANCE
Subtitle A—Programs Under United States
Housing Act of 1937
PART 1—GENERAL PROVISIONS
SEC. 101. LOWER INCOME HOUSING AUTHORIZATION.

42 use 1437c.

(a) AGGREGATE BUDGET AUTHORITY.—Section 5(cX6) of the United
States Housing Act of 1937 is amended by adding at the end the
following new sentence: "The aggregate amount of budget authority
that may be obligated for contracts for annual contributions for
assistance under section 8, for contracts referred to in paragraphs
(TXAXiv) and (7XBXiv), for grants for public housing, for comprehensive improvement assistance, and for amendments to existing contracts, is increased (to the extent approved in appropriation Acts) by
$7,167,000,000 on October 1, 1987, and by $7,300,945,000 on October 1, 1988.".
(b) UTIUZATION OF BUDGET AUTHORITY.—Section 5(cX7) of

^' •• ••';•'
^'

.^,,,
• *'

;

the

United States Housing Act of 1937 is amended to read as follows:
"(7XA) Using the additional budget authority provided under
paragraph (6) and the balances of budget authority that become
available during fiscal year 1988, the Secretary shall, to the extent
approved in appropriations Acts, reserve authority to enter into
obligations aggregating—
"(i) for public housing grants under subsection (aX2), not more
than $481,320,000, of which amount not more than $144,696,000
shall be available for Indian housing;
"(ii) for assistance under subsections (bXD and (o) of section 8,
not more than $2,415,000,000;
"(iii) for assistance under section 8(eX2), not more than
$400,000,000;
"(iv) for assistance under section 8 in connection with projects
developed under section" 202 of the Housing Act of 1959, not
more than $1,681,830,000;
"(v) for comprehensive improvement assistance grants under
section 14, not more than $1,700,000,000;
"(vi) for assistance under section 8 for property disposition,
not more than $301,700,000; and
"(vii) for assistance under section 8 for loan management, not
more than $187,150,000.
"(B) Using the additional budget authority provided under paragraph (6) and the balances of budget authority that become avsdlable
during fiscal year 1989, the Secretary shall, to the extent approved
in appropriations Acts, reserve authority to enter into obligations
aggregating—
"(i) for public housing grants under subsection (aX2), not more
than $490,465,000, of which amount not more than $147,445,000
shall be available for Indian housing;
c,u tc ^wi; * ^i p? i» . ^

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1821

z,.

"(ii) for assistance under subsections (b)(1) and (o) of section 8,
not more than $2,458,660,000;
"(iii) for assistance under section 8(e)(2), not more than
$407,600,000;
"(iv) for assistance under section 8 in connection with projects
developed under section 202 of the Housing Act of 1959, not
more than $1,713,785,000;
"(v) for comprehensive improvement gissistance grants under
section 14, not more than $1,732,300,000;
"(vi) for assistance under section 8 for property disposition,
not more than $307,430,000; and
"(vii) for assistance under section 8 for loan management, not
more than $190,705,000.
"(C)(i) Any amount available for the conversion of a project to
assistance under section 8(b)(1), if not required for such purpose,
shall be used for assistance under section 8(b)(1).
"(ii) Any amount available for assistance under section 8 for
property disposition, if not required for such purpose, shall be used
for assistance under section 8(b)(1).".
SEC. 102. TENANT RENTAL CONTRIBUTIONS.

(a) ECONOMIC RENT.—Section 3(a) of the United States Housing
Act of 1937 is amended—
(1) by inserting "(1)" after "(a)";
(2) in the last sentence, by striking "A" and inserting the
following: "Except as provided in paragraph (2), a";
(3) by redesignating paragraphs (1) through (3) as subparagraphs (A) through (C), respectively; and
(4) by adding at the end the following new paragraph:
"(2)(A) Any public housing agency may provide that each family
residing in a public housing project owned and operated by such
agency (or in lower income housing assisted under section 8 that
contains more than 2,000 dwelling units) shall pay as monthly rent
for not more than a 3-year period an amount determined by such
agency to be appropriate that does not exceed a maximum amount
that—
"(i) is established by such agency and approved by the
Secretary;
"(ii) is not more than the amount payable as rent by such
family under paragraph (1); and
"(iii) is not less than the average monthly amount of debt
service and operating expenses attributable to dwelling units of
similar size in public housing projects owned and operated by
such agency.
"(B) The 3-year limitation established in subparagraph (A) shall
not apply to any family residing in a public housing project administered by an Indian public housing agency.".
(b) UTILITY ALLOWANCE.—

(1) The Comptroller General of the United States shall submit
to the Congress not later than October 30,1988, a report regarding the utility allowances provided to the residents of public
housing and housing assisted under section 8 of the United
States Housing Act of 1937.
(2) The report shall include the following:
(A) A description of the manner in which public housing
agencies are currently calculating utility allowances.

42 u s e 1437a.

Indians.

Reports.

101 STAT. 1822

Energy.

PUBLIC LAW 100-242—FEB. 5, 1988

,h' liG 5 including a national survey of the calculation methods
used.
'!!;'
(B) An estimate of the number of residents of public
housing and housing £issisted under section 8 of the United
States Housing Act of 1937 paying more than 30 percent of
monthly adjusted income for rent and utilities, including a
separate estimate for each meter category.
(C) Recommendations for revisions that may be made in
current law to ensure that—
(i) utility allowances will not differ solely because of
the metering system of the dwelling unit;
(ii) residents of public housing and housing assisted
under section 8 of the United States Housing Act of
1937 will not pay more than 30 percent of monthly
adjusted income for rent and utilities; and
(iii) such residents will have a strong incentive to
conserve energy and reduce utility costs, and resi•
dents who waste substantial amounts of energy will be
penalized.
(D) A description of administratively feasible methods of
ensuring that utility allowances will reflect differences in
- -'^
the size, location, and energy-conserving condition of different types of dwelling units and appliances.
(E) An estimate of the costs that will be associated with
any recommendation made under subparagraph (C).
(3) In preparing the report under this subsection, the
Comptroller General shall consult with the Secretary of Housing and Urban Development, other appropriate Federal officials, other knowledgeable individuals, and national and other
organizations representing public housing agencies, local
governments, tenants, and energy conservation interests.
SEC. 103. INCOME ELIGIBILITY FOR ASSISTED HOUSING.
(a) IMPLEMENTATION OF PERCENTAGE LIMITATIONS.—Section 16 of

42 u s e 1437n.

Regulations.

the United States Housing Act of 1937 is amended by adding at the
end the following:
"(c) In developing admission procedures implementing subsection
Ot>), the Secretary may not totally prohibit admission of lower income
families other than very low-income families, and shall establish, as
appropriate, differing percentage limitations on admission of lower
income families in separate assisted housing programs that, when
aggregated, will achieve the overall percentage limitation contained
in subsection (b). The Secretary shall issue regulations to carry out
this subsection not later than 60 days after the date of the enactment of the Housing and Community Development Act of 1987.".
Ot)) EXEMPTIONS FROM PERCENTAGE LIMITATIONS.—Section 16 of the

Contracts.
Grants.

United States Housing Act of 1937 (as amended by subsection (a) of
this section) is further amended by adding at the end the following
new subsection:
"(d)(1) The limitations established in subsection (b) shall not apply
to dwelling units made available under section 8 housing assistance
contracts for the purpose of preventing displacement, or ameliorating the effects of displacement, including displacement caused by
rents exceeding 30 percent of monthly adjusted family income, of
lower income families from projects being rehabilitated with assistance from rehabilitation grants under section 17 and the Secretary

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1823

shall not otherwise unduly restrict the use of payments under
section 8 housing assistance contracts for this purpose.
"(2) The limitations established in subsections (a) and (b) shall not
apply to dwelling units assisted by Indian public housing agencies.".

Indians,

PART 2—PUBLIC HOUSING
SEC. 111. DISCRETIONARY PREFERENCE FOR NEAR ELDERLY FAMILIES
IN PUBLIC HOUSING PROJECTS DESIGNED FOR THE ELDERLY.

Section 3G))(3) of the United States Housing Act of 1937 is amended by adding at the end the following new sentence: "In determining
priority for admission to public housing projects designed for elderly
families, the public housing agency shall give preference to such
families. When the public housing agency determines (in accordance
with regulations of the Secretary) that there are insufficient numbers of elderly families to fill all the units in such a project, the
agency may give preference to families in which the head of household (or spouse) is at least 50 years of age but below the age of 62
before those in which the head of household and spouse, if any, are
below the age of 50.".

42 USC 1437a.

SEC. 112. GRANTS FOR PUBLIC HOUSING DEVELOPMENT.

(a) AUTHORITY TO PROVIDE GRANTS.—Section 5(a) of the United
States Housing Act of 1937 is amended to read as follows:
"(a)(1) The Secretary may make annual contributions to public
housing agencies to assist in achieving and maintaining the lower
income character of their projects. The Secretary shall embody the
provisions for such annual contributions in a contract guaranteeing
their payment. The contribution payable annually under this section shall in no case exceed a sum equal to the annual amount of
principal and interest payable on obligations issued by the public
housing agency to finance the development or acquisition cost of the
lower income project involved. Annual contributions payable under
this section shall be pledged, if the Secretary so requires, as security
for obligations issued by a public housing agency to assist the
development or acquisition of the project to which annual contributions relate and shall be paid over a period not to exceed 40 years.
"(2) The Secretary may make contributions (in the form of grants)
to public housing agencies to cover the development cost of public
housing projects. The contract under which such contributions shall
be made shall specify the amount of capital contributions required
for each project to which the contract pertains, and that the terms
and conditions of such contract shall remain in effect for a 40-year
period.
"(3) The amount of contributions that would be established for a
newly constructed project by a public housing agency designed to
accommodate a number of families of a given size and kind may be
established under this section for a project by such public housing
agency that would provide housing for the comparable number,
sizes, and kinds of families through the acquisition and rehabilitation, or use under lease, of structures that are suitable for lower
income housing use and obtained in the local market.".
(b) CONFORMING AMENDMENTS.—

(1) Section 5 of the United States Housing Act of 1937 is
amended—
(A) by striking "ANNUAL" in the section heading; and
(B) by striking "annual" in subsection (e)(2).

42 USC 1437c.
Contracts,

^

Grants.
Contracts,

101 STAT. 1824
42 use I437d.

42 use 1437e.
42 use 1437g.

42 use 1437J.
42 use 1437/.

PUBLIC LAW 100-242—FEB. 5, 1988
(2) Section 6 of the United States Housing Act of 1937 is
amended by striking "annual" the first place it appears in the
first sentence of subsection (g), and each place it appears in
subsection (d) and the first sentence of each of subsections (a)
and (c).
(3) Section 7 of the United States Housing Act of 1937 is
amended by striking "annual" in the proviso in the first
sentence.
(4) Section 9(a)(2) of the United States Housing Act of 1937 is
amended—
(A) by striking "being assisted by an annual contributions
contract authorized by section 5(c)" and inserting the following: "one developed pursuant to a contributions contract
authorized by section 5 ' ; and
(B) by striking "any such annual" and inserting "any
such".
(5) Section 12 of the United States Housing Act of 1937 is
amended by striking "annual".
(6) Section 14 of the United States Housing Act of 1937 is
amended—
(A) by striking "receive assistance under section 5(c)" in
subsection (cX2) and inserting "assisted under section 5";

y:^;:i; : ]

42 use 1437m.
42 use I437n.
42 use I437p.

and

(B) by striking "annual" in each of paragraphs (2) and
(4XC) of subsection (d).
(7) Section 15 of the United States Housing Act of 1937 is
amended by striking "with loans or debt service annual contributions" in clause (2).
(8) Section 16(b) of the United States Housing Act of 1937 is
amended by striking "annual".
(9) Section 18(c) of the United States Housing Act of 1937 is
amended by striking "annual contributions authorized under
section 5(c)' and inserting "contributions authorized under section 5".
SEC. 113. LIMITATION ON PUBLIC HOUSING DEVELOPMENT AND ASSURANCE OF PUBLIC HOUSING QUALITY STANDARDS.

42 use 1437c.

Section 5 of the United States Housing Act of 1937 is amended by
adding at the end the following new subsection:
"(JXD After September 30, 1987, in providing assistance under this
Act to a public housing agency for public housing (other than for
Indian families), the Secretary shall reserve funds for the development of public housing only if—
"(A) the Secretary determines that additional amounts are
required to complete the development of dwelling units for
which amounts are obligated on or before such date;
"(B) the public housing agency certifies to the Secretary that
85 percent of the public housing dwelling units of the public
housing agency—
"(i) are maintained in substantial compliance with the
housing quality standards established by the Secretary
under section 8(oX6);
"(ii) will be so maintained upon completion of modernizag.
tion for which funding has been awarded; or
"(iii) will be so maintained upon completion of moderniza, tion for which applications are pending that have been
submitted in good faith under section 14 (or a comparable

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1825

State or local government program) and that there is a
reasonable expectation, as determined by the Secretary in
writing, that the applications would be approved;
"(C) the public housing agency certifies that such
development—
8"(i) will replace dwelling units that are disposed of or
demolished by the public housing agency, including dwelling units disposed of or lost through sale to tenants or
through units redesign; or
"(ii) is required to comply with court orders or directions
of the Secretary;
"(D) the public housing agency certifies that it has demands
for family housing not satisfied by the rental assistance programs established in subsection (b) or (o) of section 8 for which it
plans to construct or acquire projects of not more than 100
units; or
"(E) the Secretary makes such reservation under paragraph
(2).
"(2) Notwithstanding any other provision of law, not more than 20
percent of the funds appropriated for development of public housing
also may be committed by the Secretary for the substantial redesign,
reconstruction, or redevelopment of existing public housing projects
or units, which work shall be carried out pursuant to the rules and
regulations applicable to the development of public housing.".

-y. :, ^i,

- > ,
- ..t

SEC. 114. LIMITATION ON RECAPTURE OF FUNDING RESERVATIONS.

Section 5 of the United States Housing Act of 1937 (as amended by
section 113 of this Act) is further amended by adding at the end the
following new subsection:
"(k) After the reservation of public housing development funds to
a public housing agency, the Secretary may not recapture any of the
amounts included in such reservation due to the failure of a public
housing agency to begin construction or rehabilitation, or to complete acquisition, during the 30-month period following the date of
such reservation. During such 30-month period, the public housing
agency shall be permitted to change the site of the public housing
project or reformulate the project, if not less than the original
number of dwelling units are to be constructed, rehabilitated, or
acquired. There shall be excluded from the computation of such 30month period any delay in the beginning of construction or rehabilitation of such project caused by (1) the failure of the Secretary
to process such project within a reasonable period of time; (2) any
environmental review requirement; (3) any legal action affecting
such project; or (4) any other factor beyond the control of the public
housing agency.".
SEC. 115. INDIAN PUBLIC HOUSING.

Section 5 of the United States Housing Act of 1937 (as amended by
section 114 of this Act) is further amended by adding at the end the
following new subsection:
"(1) The Secretary may not use £is a criterion for distributing
assistance under this section the progress made by an Indian public
housing agency in collecting rents owed by tenants unless—
"(1) such criterion is used as 1 of several criteria that are Regulations.
weighted proportionally and is established by regulations issued
after public notice and opportunity to comment in accordance
with section 553 of title 5, United States Code; or

101 STAT. 1826

PUBLIC LAW 100-242—FEB. 5, 1988

"(2) the Secretary determines that the Indian public housing
agency has demonstrated a pattern of substantial noncompliance with requirements governing the collection of rents.".
SEC. 116. LOCATION OF ACQUIRED HOUSING.
42USC1437d.
Section 6(h) of the United States Housing Act of 1937 is
amended—
(1) by inserting before "is" the following: "in the neighborhood where the public housing agency determines the housing is
needed"; and
(2) by inserting "in such neighborhood" after "rehabilitation".
SEC. 117. PUBLIC HOUSING CHILD CARE GRANTS.
Section 222 of the Housing and Urban-Rural Recovery Act of 1983
12 use 1701Z-6 is amended to read as follows:
note.
"PUBUC HOUSING CHILD CARE DEMONSTRATION PROGRAM
"SEC. 222. (a) PROGRAM AUTHORITY.—

Aged persons.

•'^'

"(1) The Secretary of Housing and Urban Development shall,
to the extent approved in appropriation Acts, carry out a demonstration program of making grants to nonprofit organizations
to assist such organizations in providing child care services in
lower income housing projects for lower income families who
reside in public housing.
"(2) The Secretary shall design the program described in
paragraph (1) to determine the extent to which the availability
of child care services in lower income housing projects facilitates the employability of the parents or guardians of children
residing in public housing.
"(b) EuGiBiLiTY FOR ASSISTANCE.—The Secretary may make a
grant to a nonprofit organization for child care services in a lower
income housing project only if—
"(1) prior to receipt of assistance under this section, a child
care services program is not in operation in the project;
"(2) the public housing agency agrees to provide suitable
facilities for the provision of child care services;
"(3) the child care services program in the project will serve
preschool children during the day, school children after school,
or both, in order to permit the parents or guardians of such
children to obtain, retain, or train for employment;
"(4) the child care services program in the project is designed,
to the extent practicable, to involve the participation of the
parents of children benefiting from such program;
"(5) the child care services program in the project is designed,
to the extent practicable, to employ in part-time positions
elderly individuals who reside in the lower income housing
project involved; and
"(6) the child care services program in the project complies
with all applicable State and local laws, regulations, and
ordinances.
"(c) ALLOCATION OF ASSISTANCE.—In providing grants under this
section, the Secretary shall—
"(1) give priority to nonprofit organizations providing child
care services in lower income housing projects in which reside
the largest number of preschool and school children of lower
income families;

PUBLIC LAW 100-242—FEB. 5, 1988

C
j^

101 STAT. 1827

"(2) seek to ensure a reasonable distribution of such grants
between urban and rural areas and among nonprofit organizations providing child care services in lower income housing
projects of varying sizes; and
"(3) seek to provide such grants to the largest number of
nonprofit organizations practicable, considering the amount of
funds available under this section and the financied requirements of the particular child care services programs to be
established in the lower income housing projects for which
applications are submitted under this section.

^^

'

"(d) ADMINISTRATIVE PROVISIONS.—

"(1) Applications for grants under this section shall be made
by nonprofit organizations (in consultation with public housing
agencies) in such form, and according to such procedures, as the
Secretary may prescribe.
"(2) Any nonprofit organization receiving a grant under this
section may use such grant only for operating expenses and
minor renovations of facilities necessary to the provision of
child care services under this section.
"(3) The Secretary shall conduct periodic evaluations of each
child care services program assisted under this section for
purposes of—
"(A) determining the effectiveness of such program in
providing child care services and permitting the parents or
guardians of children residing in public housing to obtain,
retain, or train for employment; and
"(B) ensuring compliance with the provisions of this
section.
"(4) No provision of this section may be construed to authorize
the Secretary to establish any health, safety, educational, or
other standards with respect to child care services or facilities
assisted with grants received under this section. Such services
and facilities shall comply with all applicable State and local
?
laws, regulations, and ordinances, and all requirements estab,
lished by the Secretary of Health and Human Services for child
care services and facilities.
"(e) REPORT TO CONGRESS.—Not later than the expiration of the 3year period following the date of the enactment of the Housing and
Community Development Act of 1987, the Secretary shall prepare
and submit to the Congress a detailed report setting forth the
findings and conclusions of the Secretary as a result of cariying out
the demonstration program established in this section. Sucn report
shall include any recommendations of the Secretary with respect to
the establishment of a permanent program of assisting child care
services in lower income housing projects.
"(f) DEFINITIONS.—For purposes of this section:
"(1) The term 'lower income families' has the meaning given
such term in section 3(bX2) of the United States Housing Act of
1937.
"(2) The terms 'lower income housing project' and 'public
housing'have the meanings given such terms in section 3(bXl)
of the United States Housing Act of 1937.
"(3) The term 'public housing agency' has the meaning given
such term in section 3(bX6) of the United States Housing Act of
1937.
"(4) The term 'Secretary' means the Secretary of Housing and
Urban Development.

?«-...;

101 STAT. 1828

PUBLIC LAW 100-242—FEB. 5, 1988

"(g) AUTHORIZATION OF APPROPRIATIONS.—Of the total amount
approved in appropriation Acts under section 103 of the Housing
and Community Development Act of 1974, there shall be set aside to
carry out this section $5,000,000 for fiscal year 1988 and $5,210,000
for fiscal year 1989.".
SEC. 118. PAYMENTS FOR OPERATION OF LOWER INCOME HOUSING
PROJECTS.
(a) PERFORMANCE FUNDING SYSTEM.—Section 9(a) of the United
42 u s e 1437g.

Insurance.

Contracts.
Energy.
Utilities.

States Housing Act of 1937 is amended—
(1) by striking the last sentence of paragraph (1); and
(2) by adding at the end the following new paragraph:
"(3XA) For purposes of making payments under this section, the
Secretary shall utilize a performance funding system that is
substantially based on the system defined in regulations and in
effect on the date of the enactment of the Housing and Community
Development Act of 1987 (as modified by this paragraph), and that
establishes standards for costs of operation and reasonable projections of income, taking into account the character and location of
the project and the characteristics of the families served, in accordance with a formula representing the operations of a prototype wellmanaged project. Such performance funding system shall be established in consultation with public housing agencies and their
associations, be contained in a regulation promulgated by the Secretary prior to the start of any fiscal year to which it applies, and
remain in effect for the duration of such fiscal year without change.
Notwithstanding the preceding sentences, the Secretary shall revise
the performance funding system by June 15, 1988, to accurately
reflect the increase in insurance costs incurred by public housing
agencies.
"(B) Under the performance funding system established under
this paragraph—
"(i) in the first year that the reductions occur, any public
housing agency shall share equally with the Secretary any cost
reductions due to the differences between projected and actual
utility rates attributable to actions taken by the agency which
lead to such reductions;
"(ii) in the case of any public housing agency that receives
financing (from a person other than the Secretary) or enters
into a performance contract to undertake energy conservation
improvements in a public housing project, under which payment does not exceed the cost of the energy saved as a result of
the improvements during a negotiated contract period of not
more than 12 years that is approved by the Secretary—
"(I) the public housing agency shall retain 100 percent of
any cost avoidance due to differences between projected and
actual utility consumption (adjusted for heating degree
days) attributable to tne improvements, until the term of
the financing agreement is completed, at which time the
annual utility expense level 3-year rolling beise procedures
shcdl be applied using—
"(a) in the first year following the end of the contract
period, the energy use during the 2 years prior to
installation of the energy conservation improvements
and the last contract year;
%,f^
._,
"(b) in the second year following the end of the
^'' "* ' '
contract period, the energy use during the 1 year prior

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1829

to installation of the energy conservation improvements and the 2 years following the end of the contract
period; and
"(c) in the third year following the end of the contract period, the energy use in the 3 years following the
end of the contract period; or
"(II) the Secretary shall provide an additional operating
subsidy above the current allowable utility expense level
ijjjt.
equivalent to the cost of the energy saved as a result of the
* f Si
improvements and sufficient to cover payments for the
'*
improvements through the term of the contract or agreement;
"(iii) there shall be a formal review process for the purpose of
providing such revisions (either increases or reductions) to the
allowable expense level of a public housing agency as
necessary—
"(I) to correct inequities and abnormalities that exist in
the base year expense level of such public housing agency;
"(II) to accurately reflect changes in operating circumstances since the initial determination of such base
year expense level; and
"(III) to ensure that the allowable expense limit accurately reflects the higher cost of operating the project in
an economically distressed unit of local government and the
i;^^:
lower cost of operating the project in an economically prosperous unit of local government; and
"(iv) if a public housing agency redesigns or substantially
rehabilitates a public housing project so that 2 or more dwelling
units are combined to create a single larger dwelling unit, the
payments received under this section shall not be reduced solely
because of the resulting reduction in the number of dwelling
units if not less than the same number of individuals will reside
in the new larger dwelling unit £is resided in the dwelling units
'•^* ^ ^^
that were combined to form such larger dwelling unit.".
(b) AUTHORIZATION OF APPROPRIATIONS.—Section 9(c) of the United
States Housing Act of 1937 is amended to read as follows:
42 USC 1437g. 0
"(c) There are authorized to be appropriated for purposes of
^
providing annual contributions under this section $1,500,000,000 for
fiscal year 1988 and $1,530,000,000 for fiscal year 1989.".
(c) TIME OF PAYMENT.—Section 9 of the United States Housing Act
of 1937 is amended by adding at the end the following new
subsection:
"(e) In the case of any public housing agency that submits its
budget for any fiscal year of such agency to the Secretary in a timely
manner in accordance with the regulations issued by the Secretary
under this section, assistance to be provided to such agency under
this section for such fiscal year shall commence not later than the
1st month of such fiscal year, and shall be paid in accordance with
such payment schedule as may be agreed upon by the Secretary and
such agency.".
(d) USE OF OPERATING SUBSIDIES TO REMEDY P H A NONCOMPLIANCE
WITH AUDIT RESPONSIBILITIES.—Section 9(a)(1) of the United States

Housing Act of 1937 is amended by adding at the end the following
new sentences: "If the Secretary determines that a public housing
agency has failed to take the actions required to submit an acceptable audit on a timely basis in accordance with chapter 75 of title 31,
United States Code, the Secretary may arrange for, and pay the

101 STAT. 1830

PUBLIC LAW 100-242—FEB. 5, 1988

costs of, the audit. In such circumstances, the Secretary may withhold, from assistance otherwise payable to the agency under this
section, amounts sufficient to pay for the reasonable costs of
conducting an acceptable audit, including, when appropriate, the
reasonable costs of accounting services necessary to place the
agency's books and records in auditable condition.".
42 use 1437Z
iiote.

SEC. 119. COMPREHENSIVE IMPROVEMENT ASSISTANCE PROGRAM.
(a) PURPOSE OF AMENDMENTS.—It is the purpose of the amendments made by this section—
(1) to provide assistance on a reliable and more predictable
basis to public housing agencies in furtherance of their plans to
enable them to operate, upgrade, modernize, and rehabilitate
public housing projects financed under the United States Housing Act of 1937 to ensure their continued availability for the
benefit of lower income families as decent, safe, and sanitary
rental housing at affordable rents;
(2) to provide considerable discretion to public housing agencies to decide the specific improvements, the manner of their
execution, and the timing of the expenditure of funds in the
modernization of projects under section 14 of the United States
Housing Act of 1937;
(3) to significantly simplify the program of Federal assistance
for capital improvements in public housing projects;
(4) to provide increased opportunities and incentives for more
efficient management of public housing projects; and
(5) to afford public housing agencies greater control in planning and expending funds under the United States Housing Act
of 1937 for the modernization, rehabilitation, maintenance, and
improvement of public housing projects to benefit lower income
families.
(b) AUTHORITY TO PROVIDE FINANCIAL ASSISTANCE.—Section 140b)

42 use 1437Z.
Grants.
Contracts.

of the United States Housing Act of 1937 is amended—
(A) by inserting "(1)" after the subsection designation; and
(B) by adding at the end the following new paragraph:
"(2) The Secretary may make contributions (in the form of grants)
to public housing agencies under this section. The contract under
which the contributions shall be made shall specify that the terms
and conditions of the contract shall remain in effect for a 20-year
period for any project receiving the benefit of a grant under the
contract.".
(c) APPUCATIONS BY P H A ' S MANAGING LESS THAN 500 UNITS.—

Section 14(d) of the United States Housing Act of 1937 is amended in
the matter preceding paragraph (1) by inserting after "subsection
(b)" the following: "to a public housing agency that owns or operates
less than 500 public housing dwelling units".
(d) COMPREHENSIVE PLANS.—Section 14 of the United States Housing Act of 1937 is amended—
(1) by redesignating subsection (e) as subsection (f); and
(2) by inserting after subsection (d) the following new subsection:
"(eXD No financial assistance may be made available under this
section to a public housing agency that owns or operates 500 or more
public housing dwelling units unless the Secretary approves (or has
approved before the effective date of this subsection) a 5-year comprehensive plan submitted by the public housing agency, except that

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1831

the Secretary may provide such assistance if it is necessary to
correct conditions that constitute an immediate threat to the health
or safety of tenants. The comprehensive plan shall contain—
"(A) a comprehensive assessment of—
"(i) the current physical condition of each public housing
,j.C;
project owned or operated by the public housing agency;
"(ii) the physical improvements necessary for each such
project to permit the project—
"(I) to be rehabilitated to a level at least equal to the
modernization standards specified in the Modernization Handbook of the Department of Housing and
Urban Development in effect on the date of the enact.j.; * :
ment of the Housing and Community Development Act
of 1987, as well as the modernization standards established by the Secretary and in effect at the time of the
preparation of the comprehensive plan; and
,
"(II) to comply with life-cycle cost-effective energy Energy.
[''
conservation performance standards established by the
Secretary to reduce operating costs over the estimated
life of the building; and
"(iii) the replacement needs of equipment systems and
structural elements that will be required to be met (assuming routine and timely maintenance is performed) during
the 5-year period covered by the comprehensive plan;
"(B) a comprehensive assessment of the improvements needed
to upgrade the management and operation of the public housing
agency and of each such project so that decent, safe, and
sanitary living conditions will be provided such projects, which
assessment shall include at least an identification of needs
related to—
"(i) the management, financial, and accounting control
systems of the public housing agency that are related to
such projects;
"(ii) the adequacy and qualifications of personnel appropriate to be employed by the public housing agency (in the
mauEigement and operation of such projects) for each
significant category of employment; and
"(iii) the improvement of the efficacy of—
"(I) tenant programs and services in such projects;
"(II) the security of each such project and its tenants;
"(III) policies and procedures of the public housing
Eigency for the selection and eviction of tenants in such
projects; and
"(IV) other policies and procedures of the public
housing agency relating to such projects, as specified by
the Secretary;
"(C) an analysis, made on a project-by-project basis in accordance with standards and criteria prescribed by the Secretary,
demonstrating that completion of the improvements and
replacements identified under subpargigraphs (A) and (B) will
reasonably ensure the long-term physical and social viability of
each such project at a reasonable cost;
"(D) an action plan for making the improvements and
replacements identified under subparagraphs (A) and (B) that
are determined under the analysis described in subparagraph
(C) to reasonably ensure long-term viability of each such project
at a regisonable cost, which action plan shall include at least a

„ >.;

101 STAT. 1832

State and local
governments.
Indians.

PUBLIC LAW 100-242—FEB. 5, 1988

schedule, in order of priority established by the public housing
agency, of the actions that are to be completed over a period of 5
years from the date of approval of the comprehensive plan by
the Secretary (or any longer period reasonably needed to make
the improvements and replacements, considering the scope of
the improvements and replacements and the amount of funding
provided) and that are necessary—
"(i) to make the improvements and replacements identified under subparagraph (A) for each project expected to
receive capital improvements or replacements (with priority to improvements and replacements required to correct
any life threatening condition); and
"(ii) to upgrade the management and operation of the
public housing agency and its public housing projects as
described in subparagraph (B);
"(E) a statement, to be signed by the chief local government
official (or Indian tribal official, if appropriate), certifying
that'll) the comprehensive plan was developed by the public
housing agency in consultation with appropriate local
government officials (or Indian tribal officials) and with
tenants of the housing projects (or tenants of the Indian
housing projects) eligible for assistance under this section,
which shall include at least one public hearing that shall be
held prior to the initial adoption of any plan by the public
housing agency for use of such assistance, and afford tenants and interested parties an opportunity to summarize
their priorities and concerns, to ensure their due consideration in the planning process of the public housing agency;
and
"(ii) the comprehensive plan is consistent with the assessment of the community of its lower income housing needs
and that the unit of general local government (or Indian
tribe) will cooperate in the provision of tenant programs
and services (as defined in section 3(cX2));
"(F) a statement, to be signed by the chief public housing
official, certifying that the public housing agency will carry out
the comprehensive plan in conformity with title VI of the Civil
Rights Act of 1964, title VIII of the Act of April 11, 1968
(commonly known £is the Civil Rights Act of 1968), and section
504 of the Rehabilitation Act of 1973;
"(G) a preliminary estimate of the total cost of the items
identified in subparagraphs (A) and (B), including a preliminary
estimate of the funds that will be required during each year
covered by the comprehensive plan to accomplish the work
pursuant to the action plan; and
"(H) such other information £is the Secretary may require.
"(2XA) The Secretary shall approve a comprehensive plan
unless—
"(i) the comprehensive plan is incomplete in significant
matters;
"(ii) on the bsisis of available significant facts and data
pertaining to the physical and operational condition of the
public housing projects of the public housing agency or the
management and operations of the public housing agency, the
Secretary determines that the identification by the public

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1833

?'

housing agency of needs is plainly inconsistent with such facts
and data;
"(iii) on the basis of the comprehensive plan, the Secretary
determines that the action plan described in paragraph (IXD) is
plainly inappropriate to meeting the needs identified in the
comprehensive plan, or that the public housing agency has
failed to denionstrate that completion of improvements and
* replacements identified under subparagraphs (A) and (B) of
paragraph (1) will reasonably ensure long-term viability of one
or more public housing projects to which they relate at a
"* reasonable cost; or
*
"(iv) there is evidence available to the Secretary that tends to
' challenge in a substantial manner any certification contained in
the comprehensive plan.
"(B) The comprehensive plan shall be considered to be approved,
unless the Secretary notifies the public housing agency in writing
within 75 calendar days of submission that the Secretary has disapproved the comprehensive plan as submitted, indicating the reasons for disapproval and modifications required to make the comprehensive plan approvable.
"(3)(A) Each public housing agency that owns or operates 500 or
more public housing dwelling units shall, after being advised by the
Secretary of the estimated assistance it will receive under this
section in any fiscal year, submit to the Secretary, at a date determined by the Secretary, an annual statement of the activities and
expenditures projected to be undertaken, in whole or in part, by
such assistance during the 12-month period immediately following
the execution of the contract for such assistance. The Secretary, in
establishing the funding for a public housing agency for any fiscal
year, shall review the relative needs for restoring public housing
shown by the approved comprehensive plans in the regional or area
office of the Department of Housing and Urban Development for
such agency. As long as the activities and expenditures are consistent with the approved plan, the public housing agency shall have
total discretion in expending assistance for any activity or work set
forth in the plan. The annual statement shall include a certification
by the public housing agency that the proposed activities and
expenditures are consistent with the approved comprehensive plan
of the public housing agency. The annual statement also shall
include a certification that the public housing agency has provided
the tenants of the public housing affected by the planned activities
the opportunity to review the annual statement and comment on it,
and that such comments have been taken into account in formulating the annual statement as submitted to the Secretary.
"(B) A public housing agency may propose an amendment to its
comprehensive plan under paragraph (1) in any annual statement.
Any such proposed amendment shall be reviewed in accordance
with paragraph (2), and shall include a certification that (i) the
proposed amendment has been made publicly available for comment
prior to its submission; (ii) affected tenants have been given sufficient time to review and comment on it; and (iii) such comments
have been taken into consideration in the preparation and submission of the amendment. A public housing agency shall have a right
to amend its comprehensive plan and related statements to extend
the time for performance whenever the Secretary has not provided
the amount of assistance set forth in the plan or heis not provided
the assistance in a timely manner.

sh i<*

- ' ' "^*

101 STAT. 1834

Reports.

42 use 1437/.

PUBLIC LAW 100-242—FEB. 5, 1988

"(C) The Secretary shall approve the annual statement and any
amendment to it or the comprehensive plan unless the Secretary
determines that the statement or amendment is plainly inconsistent
with the activities specified in the comprehensive plan. The statement or amendment shall be considered to be approved, unless
the Secretary notifies the public housing agency in writing before
the expiration of the 75-day period following its submission that
the Secretary has disapproved it as submitted, indicating the reasons for disapproval and the modifications required to make it
approvable.
'(4XA) Each public housing agency that owns or operates 500 or
more public housing dwelling units shall submit to the Secretary, on
a date determined by the Secretary, a performance and evaluation
report concerning the use of funds made available under this section. The report of the public housing agency shall include an
assessment by the public housing agency of the relationship of such
use of funds made available under this section, as well as the use of
other funds, to the needs identified in the comprehensive plan of the
public housing agency and to the purposes of this section. The public
housing agency shall certify that the report has been made available
for review and comment by affected tenants prior to its submission
to the Secretary.
"(B) The Secretary shall, at least on an annual basis, make such
reviews as may be necessary or appropriate to determine whether
each public housing agency receiving assistance under this section—
"(i) has carried out its activities under this section in a timely
manner and in accordance with its comprehensive plan;
"(ii) hgis a continuing capacity to carry out its comprehensive
plan in a timely manner;
"(iii) has satisfied, or has made reasonable progress towards
satisfying, such performance standards as shall be prescribed by
the Secretary, and has made reasonable progress in carrying
out modernization projects approved under this section.
"(C) Each public housing agency that owns or operates 500 or
more public housing dwelling units and receives assistance under
this section shall have an audit made in accordance with chapter 75
of title 31, United States Code. The Secretary, the Inspector General
of the Department of Housing and Urban Development, and the
Comptroller General of the United States shall have access to all
books, documents, papers, or other records that are pertinent to the
activities carried out under this section in order to make audit
examinations, excerpts, and transcripts.
"(D) The comprehensive plan, any amendments to the comprehensive plan, and the annual statement shall, once approved by the
Secretary, be binding upon the Secretary and the public housing
agency. The Secretary may order corrective action only if the public
housing agency does not comply with subparagraph (A) or (B) or if
an audit under subparagraph (C) reveals findings that the Secretary
reasonably believes require such corrective action. The Secretary
may withhold funds under this section only if the public housing
agency fails to take such corrective action after notice and a reasonable opportunity to do so. In administering this section, the Secretary shall, to the greatest extent possible, respect the professional
judgment of the administrators of the public housing agency.",
(e) EuGiBLE COSTS.—Section 14(f) of the United States Housing Act
of 1937 (as so redesignated by this section) is amended—
(1) by inserting "(1)" after the subsection designation;

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1835

(2) in the matter preceding paragraph (1), by inserting after
"public housing agency" the following: "that owns or operates
less than 500 public housing dwelling units";
(3) by redesignating paragraphs (1) through (4) as subparagraphs (A) through (D); and
(4) by adding at the end the following new paragraph:
"(2) A public housing agency that owns or operates 500 or more
public housing dwelling units may use financial assistance received
under subsection (b) only—
"(A) to undertake activities described in its approved comprehensive plan under subsection (e)(1) or its annual statement
under subsection (e)(3);
"(B) to correct conditions that constitute an immediate threat
to the health or safety of tenants and to meet special purpose
needs described in section 14(iXl)(D), whether or not the need
for such correction is indicated in its comprehensive plan or
annual statement; and
"(C) to prepare a comprehensive plan under subsection (eXD,
including reasonable costs that may be necessary to assist
tenants in participating in the planning process in a meaningful
way, an annual statement under subsection (e)(3), an annual
performance and evaluation report under subsection (e)(4)(A),
and an audit under subsection (e)(4)(C).".

Health and
medical care.
Safety.

Reports.

(f) ALLOCATION OF ASSISTANCE.—Section 14 of the United States

Housing Act is amended by adding at the end the following new 42 u s e 1437/.
subsection:
"(k)(l) Until the Congress establishes by law a revised method for
allocating assistance under this section, assistance shall be allocated
under this section in substantial accordance with the allocation
method in effect on the date of the enactment of the Housing and
Community Development Act of 1987.
"(2) Not later than 1 year after the date of the enactment of the
Housing and Community Development Act of 1987, the Secretary
shall—
"(A) complete the study of the need for public housing modernization initiated pursuant to the Department of Housing and
Urban Development-Independent Agencies Appropriation Act,
1984 (Public Law 98-45) and any other studies that are necessary
to evaluate the current condition and capital requirements of
public housing as well as the future need for rehabilitation and
replacement of public housing facilities;
"(B) submit to the Congress proposed methods for determining the relative allocation of funds between activities to correct
existing deficiencies and the annual accrual of resources to
meet future needs;
"(C) submit to the Congress proposed alternatives for allocating funds among public housing agencies to correct existing
deficiencies, including formulas for distributing funds to public
housing agencies, to regional and field offices of the Department
of Housing and Urban Development, or to States, as well as
such other allocation methods as the Secretary may wish to
recommend;
"(D) provide the Congress with—
"(i) an analysis of data and other information used to
develop recommendations for measuring existing deficiencies, future needs, and anticipated emergencies;

101 STAT. 1836

PUBLIC LAW 100-242—FEB. 5, 1988

"(ii) an analysis of the bases underlying each of the
proposed allocation methods; and
"(iii) a comparison of proposed allocations to previous
-•'I
allocations under this section;
"(E) propose to the Congress criteria for distinguishing capital
replacement activities that are routine from those that are not
routine;
"(F) propose to the Congress alternative methods—
"(i) to allocate funds to public housing agencies to meet
predictable routine modernization and regular capital
replacement expenses; and
"(ii) provide for unpredictable, infrequent, or extraordinary future capital replacement needs through a fund
administered on a national, regional. State, or local level or
through such other methods as the Secretary may recommend;
"(G) consult at least on a quarterly basis with organizations
and individuals representing public housing agencies, local
government, and tenants regarding progress on the studies
referred to in subparagraph (A) and the development of alternatives for improving this section; and
"(H) estimate, for not less than the 200 largest public housing
agencies, the amount that will be received annually under each
such alternative allocation system and compare such amounts
to funds received in prior years under this section.".
(g) ANNUAL REPORT.—Section 14 of the United States Housing Act
(as amended by subsection (f) of this section) is further amended by
adding at the end the following new subsection:
"(1) The Secretary shall include in the annual report under section
8 of the Department of Housing and Urban Development Act—
"(1) a description of the allocation, distribution, and use of
assistance under this section on a regional basis and on the
basis of public housing agency size; and
"(2) a national compilation of the total funds requested in
comprehensive plans for all public housing agencies owning or
operating 500 or more public housing dwelling units.".
(h) REGULATIONS.—Section 14 of the United States Housing Act (as
amended by subsection (g) of this section) is further amended by
adding at the end the following new subsection:
"(m) Subject to subsection (k)(l), the Secretary may issue any
regulations that are necessary to carry out this section.",
(i) CONFORMING AMENDMENTS.—

(1) Section 14(d) of the United States Housing Act of 1937 is
amended in the matter preceding paragraph (1) by striking
"subsection (eX4)" and inserting "subsection (fK4)".
(2) Section 14(iXl) of the United States Housing Act of 1937 is
amended in the matter preceding subparagraph (A) by inserting
"(f) " after "(e) ".
(3) Section 14(f) of the United States Housing Act of 1937 (as
so redesignated by this section) is amended by striking
"annual".
(4) Section 14(g) of the United States Housing Act of 1937 is
amended by inserting "or (e)" after "subsection (d)(4)".
(5) Section 14(hX2) of the United States Housing Act of 1937 is
amended by inserting "or (e)" after "subsection (dX4)".

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1837

(6) Section 14(i) of the United States Housing Act of 1937 is 42 USC 1437/.
amended by striking "subsections (c), (d), (e), (g), and (h)" and
inserting "subsections (c) through (h)".
SEC. 120. COMPREHENSIVE IMPROVEMENT ASSISTANCE SPECIAL PURPOSE NEEDS.

Section 14(i)(l)(D) of the United States Housing Act of 1937 is
amended—
(1) by inserting "(i)" after "(D)";
(2) by redesignating clauses (i) and (ii) and clauses (I) and (II),
respectively;
(3) by striking the period at the end and inserting "; and"; and
(4) by adding at the end the following new clause:
"(ii) physical improvement needs eligible under this subparagraph shall include replacing or repairing major equipment
systems or structural elements, upgrading security, increasing
accessibility for elderly families and handicapped families (as
such terms are defined in section 3(b)(3)), reducing the number
of vacant substandard units, and increasing the energy efficiency of the units, except that the Secretary may make financial assistance available under this clause only if the Secretary
determines that the physical improvements are necessary and
sufficient to extend substantially the useful life of the project.".
SEC. 121. PUBLIC HOUSING DEMOLITION AND DISPOSITION.
(a) DETERMINATION OF INFEASIBILITY OF MODIFICATIONS.—Section

18(a)(1) of the United States Housing Act of 1937 is amended by 42 USC I437p.
striking "or" after "purposes," and inserting "and".
(b)

DEVELOPMENT AND APPROVAL OF REPLACEMENT HOUSING

PLAN.—Section 18(b) of the United States Housing Act of 1937 is
amended—
(1) by striking "and" at the end of paragraph (1);
(2) by striking the period at the end of paragraph (2) and
inserting "; and"; and
(3) by adding at the end the following new paragraph:
"(3) the public housing agency has developed a plan for the
provision of an additional decent, safe, sanitary, and affordable
dwelling unit for each public housing dwelling unit to be demolished or disposed under such application, which plan—
"(A) provides for the provision of such additional dwelling
i vi r < ;
y,,^
units through—
"(i) the acquisition or development of additional
public housing dwelling units;
"(ii) the use of 15-year project-based assistance under
section 8;
"(iii) the use of not less than 15-year project-based
:
-•
assistance under other Federal programs;
"(iv) the acquisition or development of dwelling units State and local
assisted under a State or local government program governments,
that provides for project-based assistance comparable Contracts,
in terms of eligibility, contribution to rent, and length
of assistance contract (not less than 15 years) to assistance under section 8(b)(1);
"(v) the use of 15-year tenant-based assistance under
section 8 (excluding vouchers under section 8(o)); or
"(vi) any combination of such methods;

101 STAT. 1838
Vi ''• '.

State and local
governments.
"

. ^^
^

PUBLIC LAW 100-242—FEB. 5, 1988

•-•

"(B) if it provides for the use of tenant-based assistance
under section 8, may be approved—
"(i) only after a finding by the Secretary that replacement with project-based assistance is not feasible, and
* ' the supply of private rental housing actually available
to those who would receive such assistance under the
AT
u plan is sufficient for the total number of certificates
and vouchers available in the community after implementation of the plan and that such supply is likely
tf. .
to remain available for the full 15-year term of the
assistance; and
,;r"(ii) only if such finding is based on objective
information, which shall include rates of participation
by landlords in the section 8 program, size, conditions
and rent levels of available rental housing as compared
to section 8 standards, the supply of vacant existing
housing meeting the section 8 quality standards with
rents at or below the fair market rent or the likelihood
of adjusting the fair market rent, the number of eligible families waiting for public housing or housing
assistance under section 8, and the extent of discrimination against the types of individuals or families to be
served by the assistance;
"(C) is approved by the unit of general local government
in which the project is located;
"(D) includes a schedule for completing the plan within a
period consistent with the size of the proposed demolition or
disposition, except that the schedule shall in no event
exceed 6 years;
'":
"(E) includes a method of ensuring that the same number
of individuals and families will be provided housing;
"(F) provides for the payment of the relocation expenses
f
, of each tenant to be displaced and ensures that the rent
'''"^^
paid by the tenant following relocation will not exceed the
amount permitted under this Act; and
"(G) prevents the taking of any action to demolish or
"-'
dispose of any unit until the tenant of the unit is relocated
to decent, safe, sanitary, and affordable housing that is, to
the extent practicable, of the tenant's choice.".
(c) FUNDING OF REPLACEMENT HOUSING PLAN.—Section 18(c) of the

42 use I437p.

United States Housing Act of 1937 is amended—
(1) by inserting "(1)" after the subsection designation; and
(2) by adding at the end the following new paragraphs:
"(2) The Secretary shall, upon approving a plan under subsection
(b)(3), agree to commit (subject to the availability of future appropriations) the funds necessary to carry out the plan over the
approved schedule of the plan.
"(3) The Secretary shall, in allocating assistance for the acquisition or development of public housing or for moderate rehabilitation
under section 8(eX2), give consideration to housing that replaces
demolished public housing units in accordance with a plan under
subsection (b)(3).".
(d) APPLICABIUTY.—Section 18 of the United States Housing Act of
1937 is amended by striking subsection (d) and inserting the following new subsection:
"(d) A public housing agency shall not take any action to demolish
or dispose of a public housing project or a portion of a public housing

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1839

project without obtaining the approval of the Secretary and satisfying the conditions specified in subsections (a) and (b).".
SEC. 122. PUBLIC HOUSING RESIDENT MANAGEMENT.

Corporations.

The United States Housing Act of 1937 is amended by adding at
the end the following new section:
"PUBUC HOUSING RESIDENT MANAGEMENT

"SEC. 20. (a) PURPOSE.—The purpose of this section is to encourage 42 u s e 1437r.
increased resident management of public housing projects, as a
means of improving existing living conditions in public housing
projects, by providing increased flexibility for public housing
projects that are managed by residents by—
"(1) permitting the retention, and use for certain purposes, of
any revenues exceeding operating and project costs; and
"(2) providing funding, from amounts otherwise available, for
technical assistance to promote formation and development of
resident management entities.
For purposes of this section, the term 'public housing project' includes one or more contiguous buildings or an area of contiguous
row houses the elected resident councils of which approve the
establishment of a resident management corporation and otherwise
meet the requirements of this section.
"Oo) PROGRAM REQUIREMENTS.—
"(1) RESIDENT COUNCIL.—As

a condition of entering into a
resident management program, the elected resident council of a
public housing project shall approve the establishment of a
resident management corporation. When such approval is made
by the elected resident council of a building or row house area,
the resident management program shall not interfere with the
rights of other families residing in the project or harm the
efficient operation of the project. The resident management
corporation and the resident council may be the same organization, if the organization complies with the requirements applicable to both the corporation and council. The corporation
shall be a nonprofit corporation organized under the laws of the
State in which the project is located, and the tenants of the
project shall be the sole voting members of the corporation. If
there is no elected resident council, a majority of the households
of the public housing project shall approve the establishment of
a resident council to determine the feasibility of establishing a
resident management corporation to manage the project.
"(2) PuBUC HOUSING MANAGEMENT SPECIAUST.—The resident
council of a public housing project, in cooperation with the
public housing agency, shall select a qualified public housing
management specialist to assist in determining the feasibility
of, and to help establish, a resident management corporation
and to provide training and other duties agreed to in the daily
operations of the project.
"(3) BONDING AND INSURANCE.—Before assuming any manage-

ment responsibility for a public housing project, the resident
management corporation shall provide fidelity bonding and
insurance, or equivalent protection, in accordance with regulations and requirements of the Secretary and the public housing
agency. Such bonding and insurance, or its equivalent, shall be
adequate to protect the Secretary and the public housing agency

101 STAT. 1840

PUBLIC LAW 100-242—FEB. 5, 1988

against loss, theft, embezzlement, or fraudulent acts on the part
of the resident management corporation or its employees.
Contracts.
"(4) MANAGEMENT RESPONSIBIUTIES.—A resident management
corporation that qualifies under this section, and that supplies
insurance and bonding or equivalent protection sufficient to the
Secretary and the public housing agency, shall enter into a
contract with the public housing agency establishing the respective management rights and responsibilities of the corporation
and the public housing agency. Such contract shall be consistent
^au Hi m with the requirements of this Act applicable to public housing
projects and may include specific terms governing management
i' personnel and compensation, access to public housing project
8* records, submission of and adherence to budgets, rent collection
procedures, tenant income verification, tenant eligibility deter'^^ minations, tenant eviction, the acquisition of supplies and
materials, and such other matters as may be appropriate. The
contract shall be treated £is a contracting out of services and shall
be subject to any provision of a collective bargaining agreement
regarding contracting out to which the public housing agency is
subject.
"(5) ANNUAL AUDIT.—The books and records of a resident
management corporation operating a public housing project
Reports.
shall be audited annually by a certified public accountant. A
written report of each audit shall be forwarded to the public
housing agency and the Secretary.
"(c) COMPREHENSIVE IMPROVEMENT ASSISTANCE.—Public housing

projects managed by resident management corporations may be
provided with comprehensive improvement assistance under section
14 for purposes of renovating such projects in accordance with such
section. If such renovation activities (including the planning and
architectural design of the rehabilitation) are administered by a
resident management corporation, the public housing agency involved may not retain, for any administrative or other reason, any
portion of the assistance provided pursuant to this subsection unless
otherwise provided by contract.
"(d) WAIVER OF FEDERAL REQUIREMENTS.—
"(1) WAIVER OF REGULATORY REQUIREMENTS.—Upon the re-

s

quest of any resident management corporation and public housing agency, and after notice and an opportunity to comment is
afforded to the affected tenants, the Secretary may waive (for
both the resident management corporation and the public housing agency) any requirement established by the Secretary (and
not specified in any statute) that the Secretary determines to
unnecessarily increase the costs or restrict the income of a
public housing project.
"(2) WAIVER TO PERMIT EMPLOYMENT.—Upon the request of

st

any resident management corporation, the Secretary may, subject to applicable collective bargaining agreements, permit residents of such project to volunteer a portion of their labor.
"(3) REPORT ON ADDITIONAL WAIVERS.—Not later than 6
months after the date of the enactment of the Housing and
Community Development Act of 1987, the Secretary shall
submit to the Congress a report setting forth any additional
waivers of Federal law that the Secretary determines are necessary or appropriate to carry out the provisions of this section.
In preparing the report, the Secretary shall consult with resident management corporations and public housing agencies.

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1841

"(4) EXCEPTIONS.—The Secretary may not waive under this
subsection any requirement with respect to income eligibility
for purposes of section 16, rental payments under section 3(a),
tenant or applicant protections, employee organizing rights, or
rights of employees under collective bargaining agreements.
"(e) OPERATING SUBSIDY AND PROJECT INCOME.—
"(1) CALCULATION OF OPERATING SUBSIDY.—Notwithstanding

any provision of section 9 or any regulation under such section,
and subject to the exception provided in paragraph (3), the
portion of the operating subsidy received by a public housing
agency under section 9 that is allocated to a public housing
project managed by a resident management corporation shall
not be less than the public housing agency per unit monthly
amount provided in the previous year as determined on an
individual project basis.
"(2) CONTRACT REQUIREMENTS.—Any contract for management
of a public housing project entered into by a public housing
agency and a resident management corporation shall specify
the amount of income expected to be derived from the project
itself (from sources such as rents and charges) and the amount
of income funds to be provided to the project from the other
sources of income of the public housing agency (such as operating subsidy under section 9, interest income, administrative
fees, and rents).
"(3) CALCULATION OF TOTAL INCOME.—

;

tmim

"

^^;

^*

"(A) Subject to subparagraph (B), the amount of funds
provided by a public housing agency to a public housing
project managed by a resident management corporation
may not be reduced during the 3-year period beginning on
the date of enactment of the Housing and Community
Development Act of 1987 or on any later date on which a
resident management corporation is first established for
the project.
"(B) If the total income of a public housing agency
(including the operating subsidy provided to the public
housing agency under section 9) is reduced or increased, the
income provided by the public housing agency to a public
housing project managed by a resident management corporation shall be reduced or increased in proportion to the
reduction or increase in the total income of the public
housing agency, except that any reduction in operating
subsidy that occurs as a result of fraud, waste, or
mismanagement by the public housing agency shall not
affect the funds provided to the resident management
corporation.

'• •-'*''*•' '''^^-

.;

"(4) RETENTION OF EXCESS REVENUES.—

"(A) Any income generated by a resident management
corporation of a public housing project that exceeds the
income estimated for purposes of this subsection shall be
excluded in subsequent years in calculating (i) the operating subsidies provided to the public housing agency under
section 9; and (ii) the funds provided by the public housing
agency to the resident management corporation.
"(B) Any revenues retained by a resident management
corporation under subparagraph (A) shall be used for purposes of improving the maintenance and operation of the
public housing project, for establishing business enterprises

'

, . "

101 STAT. 1842

PUBLIC LAW 100-242—FEB. 5, 1988
that employ residents of public housing, or for acquiring
additional dwelling units for lower income families.

"(f) RESIDENT
MANAGEMENT
TECHNICAL
ASSISTANCE
AND
TRAINING.—
"(1) FINANCIAL ASSISTANCE.—To the extent budget authority is

available for section 14, the Secretary shall provide financial
assistance to resident management corporations or resident
councils that obtain, by contract or otherwise, technical assistance for the development of resident management entities,
including the formation of such entities, the development of the
management capability of newly formed or existing entities, the
identification of the social support needs of residents of public
housing projects, and the securing of such support.
"(2) LIMITATION ON ASSISTANCE.—The financial assistance provided under this subsection with respect to any public housing
project may not exceed $100,000.
"(3) FUNDING.—Of the amounts available for financial assistance under section 14, the Secretary may use to carry out this
subsection not more than $2,500,000 for fiscal year 1988 and not
more than $2,500,000 for fiscal year 1989.
"(g) ASSESSMENT AND REPORT BY THE SECRETARY.—Not later than 3
years after the date of the enactment of the Housing and Community Development Act of 1987, the Secretary shall—
"(1) conduct an evaluation and assessment of resident
management, and particularly of the effect of resident management on living conditions in public housing; and
"(2) submit to the Congress a report setting forth the findings
of the Secretary as a result of the evaluation and assessment
and including any recommendations the Secretary determines
to be appropriate.".
Corporations.

SEC. 123. PUBLIC HOUSING
OPPORTUNITIES.

HOMEOWNERSHIP

AND

MANAGEMENT

The United States Housing Act of 1937 (as amended by section 122
of this Act) is further amended by adding at the end the following
new section:
PUBUC H O U S I N G HOMEOWNERSHIP AND MANAGEMENT OPPORTUNITIES
42 u s e 1437s.

" S E C . 2 1 . (a) HOMEOWNERSHIP OPPORTUNITIES IN GENERAL.—Lower

income families residing in a public housing project shall be provided with the opportunity to purchase the dwelling units in the
project through a qualifying resident management corporation as
follows:
"(1) FORMATION OF RESIDENT MANAGEMENT CORPORATION.—As

Contracts.

a condition for public housing homeownership—
"(A) the adult residents of a public housing project shall
have formed a resident management corporation in accordance with regulations and requirements of the Secretary
prescribed under this section and section 20;
"(B) the resident management corporation shall have
entered into a contract with the public housing agency
establishing the respective management rights and responsibilities of the resident management corporation and the
public housing agency; and

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1843

"(C) the resident management corporation shall have
demonstrated its ability to manage public housing effectively and efficiently for a period of not less than 3 years.
"(2) HOMEOWNERSHIP ASSISTANCE.—

"(A) The Secretary may provide comprehensive improvement assistance under section 14 to a public housing project
in which homeownership activities under this section are
conducted.
"(B) The Secretary, and the public housing agency
owning and operating a public housing project, shall provide such training, technical assistance, and educational
assistance as the Secretary determines to be necessary to
prepare the families residing in the project, and any resident management corporation established under paragraph
(1), for homeownership.
"(C) This paragraph shall not have effect after Septem- Termination
her 30, 1990.
date.
"(3) CONDITIONS OF PURCHASE BY A RESIDENT MANAGEMENT
CORPORATION.—

"(A) A resident management corporation may purchase
from a public housing agency one or more multifamily
buildings in a public housing project following a determination by the Secretary that—
"(i) the resident management corporation has met
the conditions of paragraph (1);
"(ii) the resident management corporation has applied for and is prepared to undertake the ownership,
management, and maintenance of the building or
buildings with continued assistance from the Secretary;
"(iii) the public housing agency has held one or more
public hearings to obtain the views of citizens regarding the proposed purchase and, in consultation with the
Secretary, has certified that the purchase will not
interfere with the rights of other families residing in
public housing, will not harm the efficient operation of
other public housing, and is in the interest of the
community;
"(iv) the public housing agency has certified that it
has and will implement a plan to replace public housing units sold under this section within 30 months of
the sale, which plan shall provide for replacement of
100 percent of the units sold under this section by—
"(I) production, acquisition, or rehabilitation of
vacant public housing units by the public housing
agency; and
"(II) acquisition by the resident management
corporation of nonpublicly owned, decent, and affordable housing units, which the resident management corporation shall operate as rental housing
subject to tenant income and rent limitations comparable to the limitations applicable to public
housing; and
"(v) the building or buildings meet the minimum
safety and livability standards applicable under section
14, and the physical condition, management, and operation of the building or buildings are sufficient to

91-194 O - 90 - 18 : QL.3 Part 3

101 STAT. 1844
?.v
s
V

;. Hs r

Termination
date.

PUBLIC LAW 100-242—FEB. 5, 1988
permit affordable homeownership by the families residing in the project.
"(B) The price of a building purchased under the preceding sentence shall be approved by the Secretary, in consultation with the public housing agency and resident
management corporation, taking into account the fair
market value of the property, the ability of resident families to afford and maintain the property, and such other
factors as the Secretary determines to be consistent with
increasing the supply of dwelling units affordable to very
low income families.
"(C) This paragraph shall not have effect after September 30, 1990.
"(4) CONDITIONS OF RESALE.—

.33?

"(A)(i) A resident management corporation may sell a
'fxm-cs dwelling unit or ownership rights in a dwelling unit only to
a lower income family residing in, or eligible to reside in,
I'iiaMs public housing and only if the Secretary determines that
the purchase will not interfere with the rights of other
families residing in the housing project or harm the efficient operation of the project, and the family will be able to
„. . ^ purchase and maintain the property.
"(ii) The sale of dwelling units or ownership rights in
j<^m fc dwelling units under clause (i) shall be made to families in
the following order of priority:
"(I) a lower income family residing in the public
.4
housing project in which the dwelling unit is located;
fi
"(ID a lower income family residing in any public
housing project within the jurisdiction of the public
housing agency having jurisdiction with respect to the
project in which the dwelling unit is located;
"(III) a lower income family receiving Federal housing assistance and residing in the jurisdiction of such
public housing agency; and
"(IV) a lower income family on the waiting list of
9 • >
such public housing agency for public housing or assistance under section 8, with priority given in the order in
r- t« '>
which the family appears on the waiting list.
"(iii) Each resident management corporation shall provide each family described in clause (ii) with a notice of the
eligibility of the family to purchase a dwelling unit under
this paragraph.
"(B) A purchase under subparagraph (A) may be made
under any of the following arrangements:
"(i) Limited dividend cooperative ownership.
f»
"(ii) Condominium ownership,
"(iii) Fee simple ownership.
"(iv) Shared appreciation with a public housing
agency providing financing under paragraph (6).
"(v) Any other arrangement determined by the Secn di I ii
retary to be appropriate.
"(C) Property purchased under this section shall be resold
only to the resident management corporation, a lower
income family residing in or eligible to reside in public
housing or housing assisted under section 8, or to the public
housing agency.

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1845

"(D) In no case may the owner receive consideration for Regulations,
nis or her interest in the property that exceeds the total
of—
"(i) the contribution to equity paid by the owner;
"(ii) the value, £is determined by such means as the
Secretary shall determine through regulation, of any
improvements installed at the expense of the owner
during the owner's tenure as owner; and
"(iii) the appreciated value determined by an inflation allowance at a rate which may be based on a cost
of living index, an income index, or market index as
determined by the Secretary through regulation and
agreed to by the purchaser and the resident management corporation or the public housing agency, whichever is appropriate, at the time of initial sale, and
applied against the contribution to equity; the resident
management corporation or the public housing agency
may, at the time of initial sale, enter into an agreement
with the owner to set a maximum amount which this
appreciation may not exceed.
"(E) Upon sale, the resident management corporation or
the public housing agency, whichever is appropriate, shall
ensure that subsequent owners are bound by the same
limitations on resale and further restrictions on equity
appreciation.
"(5) USE OF PROCEEDS.—Notwithstanding any other provision
of this Act or other law to the contrary, proceeds from the sale
of a building or buildings under paragraph (3) and amounts
recaptured under paragraph (4) shall be paid to the public
housing agency and shall be retained and used by the public
housing agency only to increase the number of public housing
units available for occupancy. The resident management corporation shall keep and make available to the public housing
agency and the Secretary all records necessary to calculate
accurately payments due the local housing agency under this
section. The Secretary shall not reduce or delay payments
under other provisions of law £is a result of amounts made
available to the local housing agency under this section.
"(6) FINANCING.—When financing for the purchase of the
property is not otherwise available for purposes of assisting any
purchase by a family or resident management corporation
under this section, the public housing agency involved may
make a loan on the security of the property involved to the
family or resident management corporation at a rate of interest
that shall not be lower than 70 percent of the market interest
rate for conventional mortgages on the date on which the loan
is made.
"(7) ANNUAL CONTRIBUTIONS.—Notwithstanding the purchase

of a building in a public housing project under this section, the
Secretary shall continue to pay annual contributions with respect to the project. Such contributions may not exceed the
maximum contributions authorized in section 5(a).
"(8) OPERATING SUBSIDIES.—Operating subsidies shall not be
available with respect to a building after the date of its sale by
the public housing agency.
'(b) PROTECTION OP NONPURCHASING FAMILIES.—

101 STAT. 1846

PUBLIC LAW 100-242—FEB. 5, 1988
"(1) EVICTION PROHIBITION.—No family residing in a dwelling
unit in a public housing project may be evicted by reason of the
sale of the project to a resident management corporation under
this section.
"(2) TENANTS RIGHTS.—Families renting a dwelling unit purchased by a resident management corporation shall have all
rights provided to tenants of public housing under this Act.
"(3) RENTAL ASSISTANCE.—If any family resides in a dwelling

unit in a building purchased by a resident management corporation, and the family decides not to purchase the dwelling unit,
the Secretary shall offer to provide to the family (at the option
of the family) a certificate under section 8(b)(1) or a housing
voucher under section 8(o) for as long as the family continues to
reside in the building. The Secretary may adjust the fair market
rent for such certificate to take into account conditions under
which the building was purchased.
"(4) RENTAL AND RELOCATION ASSISTANCE.—If any family re-

sides in a dwelling unit in a public housing project in which
other dwelling units are purchased under this section, and the
family decides not to purchase the dwelling unit, the Secretary
shall offer (to be selected by the family, at its option)—
"(A) to assist the family in relocating to a comparable
appropriate sized dwelling unit in another public housing
project, and to reimburse the family for their cost of relocation; and
"(B) to provide to the family the financial assistance
necessary to permit the family to stay in the dwelling unit
or to move to another comparable dwelling unit and to pay
no more for rent than required under subparagraph (A), (B),
or (Oof section 3(a)(1).
"(c) FINANCIAL ASSISTANCE FOR PUBLIC HOUSING AGENCIES.—The

Secretary shall provide to public housing agencies such financial
assistance as is necessary to permit such agencies to carry out the
provisions of this section.
"(d) ADDITIONAL HOMEOWNERSHIP AND MANAGEMENT OPPORTUNI-

TIES.—This section shall not apply to the turnkey III, the mutual
help, or any other homeownership program established under section 5(h) or section 6(c)(4)(D) and in existence before the date of the
enactment of the Housing and Community Development Act of 1987.
"(e) REGULATIONS.—The Secretary shall issue such regulations as
may be necessary to carry out the provisions of this section. Such
regulations may establish any additional terms and conditions for
homeownership or resident management under this section that are
determined by the Secretary to be appropriate.
"(f) ANNUAL REPORT.—The Secretary shall annually submit to the
Congress a report setting forth—
"(1) the number, type, and cost of units sold;
"(2) the income, race, gender, children, and other characteristics of families purchasing or moving and not purchasing;
"(3) the amount and type of financial assistance provided;
"(4) the need for subsidy to ensure continued affordability and
meet future maintenance and repair costs;
"(5) any need for the development of additional public housing dwelling units as a result of the sale of public housing
V dwelling units under this section;
"(6) recommendations of the Secretary for additional budget
authority to carry out such development;
_
.

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1847

"(7) recommendations of the Secretary to ensure decent
homes and decent neighborhoods for lower income families; and
"(8) the recommendations of the Secretary for statutory and
regulatory improvements to the program.
"(g) LIMITATION.—Any authority of the Secretary under this sec- Contracts.
tion to provide financial assistance, or to enter into contracts to
provide financial assistance, shall be effective only to such extent or
in such amounts as are or have been provided in advance in an
appropriation Act.".
SEC. 124. TREATMENT OF CERTAIN PUBLIC HOUSING DEVELOPMENT
FUNDS.
(a) FORGIVENESS OP CERTAIN INTEREST.—Notwithstanding any Pennsylvania.
other provision of law or other requirement, any interest accruing
on any excess funds advanced to the Housing Authority of the City
of Pittsburgh, in the State of Pennsylvania, for development of the
public housing project numbered PA-1-22 shall be forgiven, and any
such interest paid to the Secretary of Housing and Urban Development before the date of the enactment of this Act shall be returned
to such City.
(b) FORGIVENESS OP CERTAIN PAYMENTS.—Notwithstanding any

other provision of law or other requirement, the Secretary of Housing and Urban Development may not require the Bay City Housing
Commission in the State of Michigan to pay any amount relating to
ineligible costs incurred with respect to the public housing development grant numbered Michigan 24-7, awarded in 1974, under the
United States Housing Act of 1937.
(c) SUBJECT TO APPROPRIATIONS.—This section shall be effective
only to the extent approved in appropriation Acts.
SEC. 125. ENERGY EFFICIENT PUBLIC HOUSING DEMONSTRATION.
(a) EsTABUSHMENT.—The Secretary of Housing and Urban Development shall establish a demonstration program through the
assistance of an appropriate technology transfer organization that
specializes in producing detailed energy-efficient designs and in
conducting locad and statewide, public participation tests for energy
efficient, needs-oriented housing. The appropriate technology
organization shall carry out the demonstration working through
and with public housing agencies to build and test a variety of
energy-efficient housing designs in 100 separate housing units in 4
different States that meet local lower income housing needs (including single parent, disabled, and elderly concerns) through a composite ranging from single to 12-plex units in the cluster approach on
vacant lots and open areas.
Ob) REPORT.—As soon as practicable following September 30,1988,
the Secretary of Housing and Urban Development shall submit to
the Congress a report setting forth the findings and recommendations of the Secretary as a result of the demonstration under this
section.
(c) FUNDING.—Of the budget authority authorized to be provided
for the development of public housing, there is authorized to be
appropriated to carry out this section $4,700,000 for fiscal year 1988.
SEC. 126. PUBLIC HOUSING COMPREHENSIVE TRANSITION DEMONSTRATION.
(a) EsTABUSHMENT OP DEMONSTRATION PROGRAM.—The Secretary
of Housing and Urban Development (in this section referred to as

Michigan.

42 USC 1437k
note.

42 USC 1437f
note.

101 STAT. 1848

North Carolina.

PUBLIC LAW 100-242—FEB. 5, 1988

the "Secretary") shall carry out a program to demonstrate the
effectiveness of providing a comprehensive program of services to
participating public housing residents in order to ensure the successful transition of such residents to private housing. In carrying out
the demonstration program, the Secretary shall consult with the
heads of other appropriate Federal agencies to design and implement procedures to carry out the transition from public housing.
(b) SCOPE OF DEMONSTRATION PROGRAM.—The Secretary shall
carry out the demonstration program with respect to public housing
administered by the Housing Authority of the City of Charlotte, in
the State of North Carolina. The Secretary may also carry out the
demonstration program with respect to public housing administered
by not more than 10 additional public housing agencies.
(c) REQUIREMENTS OF DEMONSTRATION PROGRAM.—The demonstration program shall consist of the following requirements:
(1) CONTRACT OF PARTICIPATION.—Each participating public
housing agency may enter into a voluntary contract with any
family that is to commence residence in a public housing project
administered by the public housing agency. The contract shall
be made part of the lease, shall set forth the provisions of the
demonstration program, and shall specify the resources to be
made available to the participating family and the responsibilities of the participating family.
(2) REMEDIATION PHASE.—

Education.
Drugs and drug
abuse.

„ *,,;

(A) During not to exceed the first 2 years of residence of a
participating family in public housing, the public housing
agency shall ensure the provision of remediation services to
the family in accordance with the terms and conditions of
the contract of participation, which may include—
(i) remedial education;
. ,.
'
(ii) completion of high school;
(iii) job training and preparation;
(iv) substance abuse treatment and counseling;
(v) training in homemaking skills and parenting; and
(vi) training in money management.
(B) During the remediation phase, the amount of rent
charged the family may not be increased on the basis of any
increase in earned income of the family.
(3) TRANSITION PHASE.—

(A) During not to exceed a 5-year period following completion of the remediation stage—
(i) the head of the femily shall be required to have
full-time employment; and
(ii) the public housing agency shall ensure the proviJ
sion of counseling for the family with respect to
homeownership, money management, and problem
solving.
(B) During the transition phase, the amount of rent
charged the family—
]"
(i) may be increased on the basis of any increase in
-r
family income; and
(ii) may not be decreased on the basis of any decrease
,^,,
in earned income due to voluntary termination of
'*"*
employment.
(4) ENCOURAGEMENT OF SAVINGS.—The public housing agency
shall take appropriate actions (including the establishment of
an escrow savings account) to encourage each participating

PUBLIC LAW 100-242—FEB. 5, 1988
'

101 STAT. 1849

family to save funds during the remediation and transition
phases.
(5) EFFECT OF INCREASES IN FAMILY INCOME.—

(A) Any increase in the earned income of a family during
participation in the demonstration program under this section may not be considered as income or a resource for the
purpose of denying the eligibility of, or reducing the
amount of benefits payable to, the family under any other
Federal law, unless the income of the family increases at
any time to not less than 50 percent of the median income
of the area (as determined by the Secretary with adjustments for smaller and larger families).
(B) If at any time during the participation of a family in
the demonstration program the income of the family increases to not less than 80 percent of the median income of
the area (as determined by the Secretary with adjustments
for smaller and larger families), the participation of the
family in the demonstration program shall terminate.

' *' ^

w< /^

(6) COMPLETION OF TRANSITION.—Each family participating in

the demonstration program shall be required to complete the
transition out of public housing during a period of not more
than 7 years. The public housing agency shall extend the period
for any family that requests an extension for good cause.
(d) REPORTS TO CONGRESS.—
(1) INTERIM REPORT.—Not

later than 2 years after the date of
the enactment of this Act, the Secretary shall submit to the
Congress an interim report evaluating the effectiveness of the
demonstration program under this section.
(2) FINAL REPORT.—Not later than 60 days after the termination of the demonstration program under subsection (f), the
Secretary shall submit to the Congress a final report evaluating the effectiveness of the demonstration program under this
"" section.
(e) REGULATIONS.—The Secretary shall issue such regulations as
may be necessary to carry out this section.
(f) TERMINATION OF DEMONSTRATION PROGRAM.—The demonstration program under this section shall terminate upon the expiration
of the 7-year period beginning on the date of the enactment of this
Act.

PART 3—SECTION 8 ASSISTANCE AND OTHER
PROGRAMS
SEC. 141. SECTION 8 CONTRACTS FOR EXISTING DWELLING UNITS

Section 8(b)(1) of the United States Housing Act of 1937 is 42USCl437f.
amended by inserting after the first sentence the following new
sentence: "The Secretary shall enter into a separate annual contributions contract with each public housing agency to obligate the
authority approved each year, beginning with the authority approved in appropriations Acts for fiscal year 1988 (other than
amendment authority to increase assistance payments being made
using authority approved prior to the appropriations Acts for fiscal
year 1988), and such annual contributions contract (other than for
annual contributions under subsection (o)) shall bind the Secretary
to make such authority, and any amendments increasing such

101 STAT. 1850

PUBLIC LAW 100-242—FEB. 5, 1988

authority, available to the public housing agency for a specified
period.".
SEC. 142. SECTION 8 FAIR MARKET RENTALS AND CONTRACT RENTS.
(a) ANNUAL ADJUSTMENT.—Section 8(cXl) of the United States

42 use 1437f.

New York.

Housing Act of 1937 is amended by inserting before the last sentence
the following new sentence: "Each fair market rental in effect under
this subsection shall be adjusted to be effective on October 1 of each
year to reflect changes, based on the most recent available data
trended so the rentals will be current for the year to which they
apply, of rents for existing or newly constructed rental dwelling
units, as the case may be, of various sizes and types in the market
area suitable for occupancy by persons assisted under this section.".
(b) CALCULATION FOR CERTAIN CoUNTY.—Section 8(cXl) of t h e

United States Housing Act of 1937 is amended by adding at the end
the following new sentence: "The Secretary shall establish separate
fair market rentals under this paragraph for Westchester County in
the State of New York.".
(c) COMPARABILITY.—

(1) Section 8(c)(1) of the United States Housing Act of 1937 (as
amended by subsection (b) of this section) is further amended by
adding at the end the following new sentence: "If units assisted
under this section are exempt from local rent control while they
are so assisted or otherwise, the maximum monthly rent for
such units shall be reasonable in comparison with other units in
the market area that are exempt from local rent control.".
(2) Section 8(cX2XC) of the United States Housing Act of 1937
is amended—
(A) by striking "assisted and comparable unassisted
units" and inserting the following: "assisted units and unassisted units of similar quality and age in the same market
area"; and
(B) by adding at the end the following new sentence: "If
' '
the Secretary or appropriate State agency does not complete and submit to the project owner a comparability study
' '
not later than 60 days before the anniversary date of the
assistance contract under this section, the automatic
annual adjustment factor shall be applied.".
(d) PROHIBITION ON REDUCTION OF CERTAIN CONTRACT RENTS.—

Section 8(cX2XC) of the United States Housing Act of 1937 (as
amended by subsection (c) of this section) is further amended by
adding at the end the following new sentence: "The Secretary may
not reduce the contract rents in effect on or after April 15, 1987, for
newly constructed, substantially rehabilitated, or moderately rehabilitated projects assisted under this section (including projects
assisted under this section as in effect prior to November 30, 1983),
unless the project has been refinanced in a manner that reduces the
periodic payments of the owner.".
(e) REPEAL OF LIMIT ON (CONTRACT RENT INCREASES.—Section 8(cX2)
of the United States Housing Act of 1937 is amended by striking
subparagraph (D).
SEC. 143. HOUSING VOUCHER PROGRAM.

(a) OPERATION.—Section 8(o) of the United States Housing Act of
1937 is amended—

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1851

(1) in the first sentence of paragraph (1), by striking "In" and
all that follows through "demonstration program" and inserting
"The Secretary may provide assistance";
(2) by striking paragraph (4); and
(3) by redesignating paragraphs (5) through (8) as paragraphs
(4) through (7), respectively.
G>) FLEXIBILITY TO ADJUST ASSISTANCE PAYMENTS.—Section 8(o)(6)

of the United States Housing Act of 1937 (as so redesignated by
subsection (a) of this section) is amended—
(1) in subparagraph (A), by striking "as frequently as twice
during any five-year period" and inserting ' annually"; and
(2) by striking subparagraph (D).

42 USC I437f.

(c) USE OF VOUCHERS IN CONNECTION WITH COOPERATIVE AND

MUTUAL HOUSING.—Section 8(o)(7) of the United States Housing Act
of 1937 (as so redesignated by subsection (a) of this section) is
amended by striking "not to exceed 5 per centum of the amount of.
(d) ADJUSTMENT POOLS.—Section 8(o) of the United States Housing
Act of 1937 (as amended by subsection (a) of this section) is further
amended by adding at the end the following new paragraph:
"(8) The Secretary may set aside up to 5 percent of the budget
authority available under this subsection as an adjustment pool. The
Secretary shall use amounts in the adjustment pool for adjustments
pursuant to paragraph (6)(A) to ensure continued affordability
where the Secretary determines additional assistance for this purpose is necessarv, based on documentation submitted by a public
housing agency.'.
SEC. 144. ADMINISTRATIVE FEES FOR SECTION 8 CERTIFICATE AND
HOUSING VOUCHER PROGRAMS.

Section 8 of the United States Housing Act of 1937 is amended by
adding at the end the following new subsection:
"(q)(l) The Secretary shall establish a fee for the costs incurred in
administering the certificate and housing voucher programs under
subsections (b) and (o). The amount of the fee for each month for Contracts.
which a dwelling unit is covered by an assistance contract shall be
8.2 percent of the fair market rental established under subsection
(c)(1) for a 2-bedroom existing rental dwelling unit in the market
i
area of the public housing agency. The Secretary may increase the
fee if necessary to reflect the higher costs of administering small
programs and programs operating over large geographic areas.
"(2XA) The Secretary shall also establish reasonable fees (as determined by the Secretary) for—
"(i) the costs of preliminary expenses (not to exceed $275) that
the public housing agency documents it has incurred in connection with new allocations of assistance under the certificate and
housing voucher programs under subsections (b) and (o);
"(ii) the costs incurred in assisting families who experience
difficulty (as determined by the Secretary) in obtaining appropriate housing under the programs; and
"(iii) extraordinary costs approved by the Secretary.
"(B) The method used to calculate fees under subparagraph (A)
shall be the same for the certificate and housing voucher programs
under subsections (b) and (o) and shall take into account local cost
differences.
"(3) The Secretary may establish or increase a fee in accordance
with this subsection only to such extent or in such amounts as are
provided in appropriation Acts.".

101 STAT. 1852

PUBLIC LAW 100-242—FEB. 5, 1988

SEC. 145. PORTABILITY OF SECTION 8 CERTIFICATES AND VOUCHERS.

Section 8 of the United States Housing Act of 1937 (as amended by
section 144 of this Act) is further amended by adding at the end the
following new subsection:
"(rXD Any family assisted under subsection Ot>) or (o) may receive
such assistance to rent an eligible dwelling unit if the dwelling unit
to which the family moves is within the same, or a contiguous,
* *' metropolitan statistical area as the metropolitan statistical area
within which is located the area of jurisdiction of the public housing
agency approving such assistance.
"(2) The public housing agency having authority with respect to
the dwelling unit to which a family moves under this subsection
shall have the responsibility of carrying out the provisions of this
subsection with respect to the family. If no public housing agency
has authority with respect to the dwelling unit to which a family
moves under this subsection, the public housing agency approving
the assistance shall have such responsibility.
"(3) In providing assistance under subsection (b) or (o) for any
fiscal year, the Secretary shall give consideration to any reduction
in the number of resident families incurred by a public housing
agency in the preceding fiscal year as a result of the provisions of
this subsection.
"(4) The provisions of this subsection may not be construed to
restrict any authority of the Secretary under any other provision of
law to provide for the portability of assistance under this section.".

^iih

SEC. 146. PROHIBITION OF DENIAL OF SECTION 8 CERTIFICATES AND
VOUCHERS TO RESIDENTS OF PUBLIC HOUSING.

>
Contracts.

Section 8 of the United States Housing Act of 1937 (as amended by
section 145 of this Act) is further amended by adding at the end the
following new subsection:
"(s) In selecting families for the provision of assistance under this
section (including subsection (o)), a public housing agency may not
exclude or penalize a family solely because the family resides in a
public housing project.".
SEC. 147. NONDISCRIMINATION AGAINST SECTION 8 CERTIFICATE HOLDERS AND VOUCHER HOLDERS.

Section 8 of the United States Housing Act of 1937 (as amended by
section 146 of this Act) is further amended by adding at the end the
following new subsection:
"(tXD No owner who has entered into a contract for housing
assistance pajonents under this section on behalf of any tenant in a
multifamily housing project shall refuse—
"(A) to lease any available dwelling unit in any multifamily
housing project of such owner that rents for an amount not
greater than the fair market rent for a comparable unit, as
determined by the Secretary under this section, to a holder of a
certificate of eligibility under this section a proximate cause of
which is the status of such prospective tenant as a holder of
such certificate, and to enter into a housing assistance payments contract respecting such unit; or
"(B) to lease any available dwelling unit in any multifamily
housing project of such owner to a holder of a voucher under
subsection (o), and to enter into a voucher contract respecting
such unit, a proximate cause of which is the status of such
prospective tenant £is holder of such voucher.

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1853

"(2) For purposes of this subsection, the term 'multifamily housing
project' means a residential building containing more than 4 dwelling units.".
SEC. 148. PROJECT-BASED SECTION 8 ASSISTANCE.

Section 8(d)(2) of the United States Housing Act of 1937 is amended by inserting before the period at the end of the last sentence the
following: ", except that the Secretary shall permit the public
housing agency to approve such attachment with respect to not
more than 15 percent of the assistance provided by the public
housing agency if the requirements of clause (B) are met".

42 USC I437f.

SEC. 149. SECTION 8 ASSISTANCE FOR RESIDENTS OF RENTAL REHABILITATION PROJECTS.

Section 8 of the United States Housing Act of 1937 (as amended by
section 147 of this Act) is further amended by adding at the end the
following new subsection:
"(u) In the case of lower income families living in rental projects
rehabilitated under section 17 of this Act or section 533 of the
Housing Act of 1949 before rehabilitation—
"(1) certificates or vouchers under this section shall be made
for families who are required to move out of their units because
of the physical rehabilitation activities or because of overcrowding; and
'(2) at the discretion of each public housing agency or other
agency administering the allocation of assistance, certificates or
vouchers under this section may be made for families who
would have to pay more than 30 percent of their adjusted
income for rent after rehabilitation whether they choose to
remain in, or to move from, the project.".
SEC. 150. RENTAL REHABILITATION GRANTS.

(a) AUTHORIZATION OF APPROPRIATIONS.—Section 17(a)(3) of the

United States Housing Act of 1937 is amended to read as follows: 42 USC l437o.
"(3) AUTHORIZATION.—There are authorized to be appropriated for
rental rehabilitation under this section $125,000,000 for each of the
fiscal years 1988 and 1989, of which $1,500,000 shall be available
each fiscal year for technical assistance, including the collection,
processing, and dissemination of program information useful for
local and national program management.".
(b) EuGiBLE PROPERTY.—Section 17(a)(1)(A) of the United States
Housing Act of 1937 is amended by inserting after "property" the
following: ", or of real property that will be privately owned upon
the completion of rehabilitation,".
(c) MAXIMUM GRANT AMOUNT.—Section 17(c)(2)(E) of the United
States Housing Act of 1937 is amended by striking "$5,000 per unit"
and inserting the following: "$5,000 per unit for a unit with no
bedrooms, $6,500 per unit for a unit with 1 bedroom, $7,500 per unit
for a unit with 2 bedrooms, and $8,500 per unit for a unit with 3 or
more bedrooms,".
(d) USE OF FUNDS.—Section 17(c) of the United States Housing
Act of 1937 is amended by adding at the end the following new
paragraph:
"(4) USE OF FUNDS TO COMPLY WITH SEISMIC STANDARDS.—If a unit state and local
of general local government has a local ordinance that requires governments.
rehabilitation to meet seismic standards, the unit of local government may use all rehabilitation assistance received under this

101 STAT. 1854

42 use l437o.

PUBLIC LAW 100-242—FEB. 5, 1988

section to rehabilitate units with no bedroom or 1 bedroom, if the
occupants of the units will have incomes that do not exceed 50
percent of the median income of the area.".
(e) ADMINISTRATIVE EXPENSES.—Section 17(h) of the United States
Housing Act of 1937 is amended by inserting before the period at the
end the following: ", except that not more than 10 percent of any
rehabilitation grant received under subsection (c) may be retained to
cover administrative expenses incurred by any State administering
resources made available under subsection (b) (which State shall
share such amount with units of general local government administering the program with the State) and by any city or urban
county receiving resources under subsection (b)".
(f) ELIGIBILITY.—Section 17(k)(4) of the United States Housing Act
of 1937 is amended—
(1) by inserting "privately owned" before "real property";
(2) by inserting "(A)" after "includes"; and
(3) by inserting before the semicolon at the end the following:
T ", and (B) housing that is owned by a State or locally chartered,
neighborhood based, nonprofit organization the primary purpose of which is the provision and improvement of housing".
SEC. 151. RENTAL DEVELOPMENT GRANTS.
(a) AUTHORIZATION OF APPROPRIATIONS.—Section 17(a)(3) of

the

United States Housing Act of 1937 (as amended by section 150 of this
Act) is further amended by adding at the end the following new
sentence: "There are authorized to be appropriated for development
rants under this section $75,000,000 for fiscal year 1988 and
75,000,000 for fiscal year 1989.".
(b) AREA ELIGIBILITY.—Section 17(d)(2) of the United States Housing Act of 1937 is amended by adding at the end the following new
sentence: "Notwithstanding any other provision of law, the eligibility requirements for development grants under this section shall
be the requirements in effect under this subsection on October 17,
1986.".
(c) GRANT AMOUNT.—Section 17(d)(4)(B) of the United States Housing Act of 1937 is amended by striking "refinancing costs and".
(d) PROGRAM REQUIREMENTS.—Section 17(d)(4) of the United States
Housing Act of 1937 is amended—
(1) by inserting before the semicolon at the end of subparagraph (G) the following: ", except that the Secretary may extend
such period by not more than 6 months if the commencement of
such activities is delayed due to judicial or administrative
proceedings";
(2) by striking "and" at the end of subparagraph (G);
(3) by striking the period at the end of subparagraph (H) and
inserting "; and"; and
(4) by adding at the end the following new subparagraph:
"(I) the owner of each assisted structure agrees to comply
with the provisions of paragraph (8) until the 20-year period
specified in paragraph (7) has ended.".
(e) DEVELOPMENT COST.—Section 17(d) of the United States Housing Act of 1937 is amended by adding at the end the following new
paragraph:

f
0- vn.,,

"(10) DEVELOPMENT COST.—

"(A) The Secretary shall include in the development cost of a
project assisted under this subsection any developer's fee if such
fee—

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1855

"(i) is included in a mortgage secured by the project; and
"(ii) the lender is a State housing finance agency or the
project is financed by bonds issued by a State housing
finance agency or similar local entity.
"(B) The amount of any developer's fee shall not be counted in
calculating the maximum grant amount pursuant to paragraph
(4)(B).
"(C) This paragraph shall only be applicable to projects with
respect to which a notice of project selection is received before
the date of the enactment of the Housing and Community
Development Act of 1987.".
SEC. 152. TERMINATION OF RENTAL DEVELOPMENT GRANT PROGRAM.

42 USC 1437o.

(a) IN GENERAL.—Effective on October 1, 1989, the rental development grant program under section 17(d) of the United States Housing Act of 1937 shall terminate.
(b) SAVINGS PROVISION.—The provisions of subsection (a) shall not
apply with respect to any housing development grant under section
17(d) of the United States Housing Act of 1937 made pursuant to a
reservation of funds made by the Secretary of Housing and Urban
Development before October 1,1989.

Subtitle B—Other Housing Assistance
Programs
SEC. 161. HOUSING FOR THE ELDERLY AND HANDICAPPED.

(a) BORROWING AUTHORITY.—The first sentence of section
202(aX4)(B)(i) of the Housing Act of 1959 is amended—
12 USC I70lq.
(1) by striking "and" the first place it appears; and
(2) by inserting after "1984," the following: "and to such sums
as may approved in appropriation Acts for fiscal years 1988 and
1989,'\
(b) LOAN AUTHORITY.—Section 202(a)(4)(C) of the Housing Act of

1959 is amended by adding at the end the following new sentence:
"For fiscal years 1988 and 1989, not more than $621,701,000 and
$630,000,000, respectively, may be approved in appropriation Acts
for such loans.".
(c) INTEREST RATE ON LOANS.—

(1) CALCULATION OF RATE.—Section 202(aX3) of the Housing
Act of 1959 is amended—
(A) by inserting "(A)" after the paragraph designation;
(B) by striking all that follows Secretary" the second
place it appears through "loan is made" and inserting the
following: "taking into consideration the average yield,
during the 3-month period immediately preceding the fiscal
year in which the loan is made, on the most recently issued
30-year marketable obligations of the United States"; and
(C) by adding at the end the following new subparagraph:
"(B) At the option of the borrower, a loan under this section may
be made and may be processed for a conditional or firm commitment
either (i) at an interest rate not to exceed a rate and allowance
determined by the Secretary in accordance with subparagraph (A)
using the 1-month period immediately prior to the month in which
the request for a commitment is submitted; or (ii) at an interest rate
not to exceed a rate and allowance determined by the Secretary in

101 STAT. 1856

12 use I70lq
note,
12 use I70lq.

o" Ai»• .4

PUBLIC LAW 100-242—FEB. 5, 1988

accordance with subparagraph (A) using the 3-month period immediately preceding the fiscal year in which the request for a commitment is submitted.".
(2) MAXIMUM RATE.—Section 223(a) of the Housing and
Urban-Rural Recovery Act of 1983 is amended by striking paragraph (2).
(d) INTEREST RATE ON NOTES.—The second sentence of section
202(aX4XB)(i) of the Housing Act of 1959 is amended to read as
follows: "Such notes or other obligations shall bear interest at a rate
determined by the Secretary of the Treasury taking into consideration the average yield, during the 3-month period immediately
preceding the fiscal year in which the loan is made, on the most
recently issued 30-year marketable obligations of the United
States.".
(e) APPEAL OF CANCELLATION OF LOAN AUTHORITY.—Section 202 of

the Housing Act of 1959 is amended by adding at the end the
following new subsection:
"(n) The Secretary shall notify the project sponsor not less than 30
days prior to canceling any loan authority provided under this
section. During the 30-day period following the receipt of a notice
under paragraph (1), a sponsor may appeal the proposed cancellation of loan authority. Such appeal, including review by the Secretary, shall be completed not later than 45 days after the appeal is
filed.'^.
(f) PRIORITY.—Section 202(a) of the Housing Act of 1959 is amended by adding at the end the following new paragraph:
"(8) In reviewing applications for loans under this section, the
Secretary shall give a priority to any project that will provide
housing designed to replace a structure that is owned by a public
housing agency, contains not less than 100 dwelling units, is used for
Termination
housing only elderly families, and is to be demolished. The requiredate.
^ ments of this paragraph shall not apply after September 30, 1988.".
SEC. 162. HOUSING FOR THE HANDICAPPED.
12 use I70iq
(a) FINDINGS AND PURPOSE.—
note.
(1) The Congress finds that—.
(A) housing for nonelderly handicapped families is assisted under section 202 of the Housing Act of 1959 and
section 8 of the United States Housing Act of 1937;
(B) the housing programs under such sections are den^,:..,v*} signed and implemented primarily to assist rental housing
'"^ *
for elderly and nonelderly families and are often inappropriate for dealing with the specialized needs of the physically impaired, the developmentally disabled, and the
chronically mentally ill;
(C) the development of housing for nonelderly handicapped families under such programs is often more expensive than necessary, thereby reducing the number of such
families that can be £issisted with available funds;
(D) the program under section 202 of the Housing Act of
1959 can continue to provide direct loans to finance group
residences and independent apartments for nonelderly
handicapped families, but can be made more efficient and
less costly by the adoption of standards and procedures
applicable only to housing for such families;
(E) the cost containment policies currently being imple.i .,, f. mented in the development of small group homes (i) do not

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1857

adequately reflect the necessity for building designs to meet
the needs of the designated residents; and (ii) do not recognize necessary State and local standards for the operation
of such homes;
(F) the use of the program under section 8 of the United
States Housing Act of 1937 to assist rentals for housing for
nonelderly handicapped families is time consuming and
unnecessarily costly and, in some areas of the Nation,
prevents the development of such housing;
(G) the use of the program under section 8 of the United
States Housing Act of 1937 to assist rentals for housing for
nonelderly handicapped families should be replaced by a
more appropriate subsidy mechanism;
(H) both elderly and handicapped housing projects assisted under section 202 of the Housing Act of 1959 will
benefit from an increased emphasis on supportive services
and a greater use of State and local funds; and
(I) an improved program for nonelderly handicapped
families will assist in providing shelter and supportive
services for mentally ill persons who might otherwise be
homeless.
(2) The purpose of this section is to improve the direct loan
program under section 202 of the Housing Act of 1959 to ensure
that such program meets the special housing and related needs
of nonelderly handicapped families,
(b) HOUSING FOR HANDICAPPED FAMILIES.—

(1) Section 202(h) of the Housing Act of 1959 is amended to 12 USC I70lq.
read as follows:
"(h)(1) Of the amounts made available in appropriation Acts for Loans.
loans under subsection (a)(4XC) for any flscal year commencing after
September 30, 1987, not less than 15 percent shall be available for
loans for the development costs of housing for handicapped families.
If the amount required for any such fiscal year for approvable
applications for loan under this subsection is less than the amount
available under this paragraph, the balance shall be made available
for loans under other provisions of this section.
"(2) The Secretary shall take such actions as may be necessary to
ensure that—
"(A) funds made available under this subsection will be used
to support a variety of methods of meeting the needs primarily
of nonelderly handicapped families by providing a variety of
housing options, ranging from small group homes to independent living complexes; and
"(B) housing for handicapped families assisted under this
subsection will provide families occupying units in such housing
with an assured range of services specified in subsection (f), will
provide such families with opportunities for optimal independent living and participation in normal daily activities, and will
facilitate access by such families to the community at large and
to suitable employment opportunities within such community.
"(3)(A) In allocating funds under this subsection, and in processing
applications for loans under this section and assistance payments
under paragraph (4), the Secretary shall adopt such distinct standards and procedures as the Secretary determines appropriate due to
differences between housing for handicapped families and other
housing assisted under this section. In adopting such standards, the
Secretary shall ensure adequate participation by representatives of

101 STAT. 1858

Reports.

Contracts.
Loans.

12 use 170lq.

PUBLIC LAW 100-242—FEB. 5, 1988

the disability community through the provisions available under the
Federal Advisory Committee Act.
"(B) The Secretary may, on a demonstration basis, determine the
feasibility and desirability of reducing processing time and costs for
housing for handicapped families by limiting project design to a
small number of prototype designs. Any such demonstration shall be
limited to the 3-year period following the date of the enactment of
the Housing and Community Development Act of 1987, may only
involve projects whose sponsors consent to participation in such
demonstration, and shall be described in a report submitted by the
Secretary to the Congress following completion of such demonstration.
"(4)(A) The Secretary shall, to the extent approved in appropriation Acts, enter into contracts with owners of housing for handicapped families receiving loans under, or meeting the requirements
of, this section to make monthly payments to cover any part of the
costs attributed to units occupied (or, as approved by the Secretary,
held for occupancy) by lower income families that is not met from
project income. The annual contract amount for any project shall
not exceed the sum of the initial annual project rentals for all units
and any initial utility allowances for such units, as approved by the
Secretary. Any contract amounts not used by a project in any year
shall remain available to the project until the expiration of the
contract. The term of a contract entered into under this subparagraph shall be 240 months. The annual contract amount may be
adjusted by the Secretary if the sum of the project income and the
amount of assistance payments available under this subparagraph
are inadequate to provide for reasonable project costs. In the case of
an intermediate care facility in which there reside families assisted
under title XIX of the Social Security Act, project income under this
subparagraph shall include the same amount as if such families
were being assisted under title XVI of the Social Security Act.
"(B) The Secretary shall approve initial project rentals for any
project assisted under this subsection based on the determination of
the Secretary of the total actual necessary and reasonable costs of
developing and operating the project, excluding the costs of the
assured range of services under subsection (f), taking into consideration the need to contain costs to the extent practicable and consistent with the purposes of the project and this section.
"(C) The Secretary shall require that, during the term of each
contract entered into under subparagraph (A), all units in a project
assisted under this subsection shall be made available for occupancy
by lower income families, as such term is defined in section 3(bX2) of
the United States Housing Act of 1937. The rent payment required
of a lower income family shall be determined in accordance with
section 3(a) of such Act, except that the gross income of a family
occupying an intermediate care facility assisted under title XIX of
the Social Security Act shall be the same amount as if the family
were being assisted under title XVI of the Social Security Act.
"(D) The Secretary shall coordinate the processing of an application for a loan for housing for handicapped families under this
section and the processing of an application for assistance payments
under this paragraph for such housing.".
(2) Section 202(d) of the Housing Act of 1959 is amended by
adding at the end the following new paragraphs:

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1859

"(9) The term 'housing for handicapped families' means housing
and related facilities to be occupied by handicapped families who are
primarily nonelderly handicapped families.
"(10) The term 'nonelderly handicapped families' means elderly or
handicapped families, the head of which (and spouse, if any) is less
than 62 years of age at the time of initial occupancy of a project
assisted under this section.".
(3) Section 202(cX3) of the Housing Act of 1959 is amended by 12 u s e 1701q.
inserting after "section" the following: "and designed for dwelling use by 12 or more elderly or handicapped families",
(c) SUPPORTIVE SERVICES FOR ELDERLY AND HANDICAPPED FAMI-

UES.—Section 202(f) of the Housing Act of 1959 is amended—
(1) by inserting "(1)" after the subsection designation; and
(2) by adding at the end the following new paragraph:
"(2) Each applicant for a loan under this section for housing and
related facilities shall submit with the application a supportive
services plan describing—
"(A) the category or categories of families such housing £uid
facilities are intended to serve;
"(B) the range of necessary services to be provided to the
families occupying such housing;
"(C) the manner in which such services will be provided to
such families; and
"(D) the extent of State and local funds available to assist in
the provision of such services.".
(d) TERMINATION OF SECTION 8 ASSISTANCE.—On and after the first
date that amounts approved in an appropriation Act for any fiscal
year become available for contracts under section 202(hX4XA) of the
Housing Act of 1959, as amended by subsection (b) of this section, no
project for handicapped (primarily nonelderly) families approved for
such fiscal year pursuant to section 202 of such Act shall be provided
assistance payments under section 8 of the United States Housing
Act of 1937, except pursuant to a reservation for a contract to make
such assistance pajrments that was made before the first date that
amounts for contracts under such section 202(hX4XA) became
avEiilable.
(e) IMPLEMENTATION.—Not later than the expiration of the 120-day
period following the date of the enactment of this Act, the Secretary
of Housing and Urban Development shall, to the extent amounts are
approved in an appropriation Act for use under section 202(hX4XA)
of the Housing Act of 1959 for fiscal year 1988, publish in the
Federal Register a notice of fund availability to implement the
provisions of, and amendments made by, this section. The Secretary
shall issue such rules as may be necessary to carry out such provisions and amendments for fiscal year 1989 and thereafter.
(f) EFFECTIVE DATE AND APPUCABIUTY.—

Loans.

State and local
governments.
Contracts.
12 u s e 1701q
note.

Federal
Register,
publication.
12 u s e 1701q
note.

12 u s e ITOlq

(1) Except as otherwise provided in this section, the provisions note.
of, and amendments made by, this section shall not apply with
respect to projects with loans or loan reservations made under
section 202 of the Housing Act of 1959 before the implementation date under subsection (e).
(2) Notwithstanding paragraph (1), the Secretary shall apply
the provisions of, and amendments made by, this section to any
project if needed to facilitate the development of such project in
a timely manner.

101 STAT. 1860

PUBLIC LAW 100-242—FEB. 5, 1988

SEC. 163. CONGREGATE SERVICES.
42 u s e 8010.

(a) AUTHORIZATION OF APPROPRIATIONS.—Section 411(a) of the Congregate Housing Services Act of 1978 is amended to read as follows:
"(a) There are authorized to be appropriated to carry out this title
$10,000,000 for each of the fiscal years 1988 and 1989.".
0)) DELETION OF REFERENCE TO PROGRAM AS NONPERMANENT.—

42 u s e 8007.

eontracts.
State and local
governments.

Grants.

Section 408 of the Congregate Housing Services Act of 1978 is
amended by striking subsection (c).
(c) REPORT.—Section 408 of the Congregate Housing Services Act
of 1978 (as amended by subsection (b) of this section) is further
amended by adding at the end the following new subsection:
"(c)(1) The Secretary shall contract with a university or qualified
research institution to produce a report—
"(A) documenting the number of elderly living in federally
f i. assisted housing at risk of institutionalization;
j: _j
"(B) studying and comparing alternative delivery systems in
the States, including the congregate housing services pro: , gram, to provide services to older persons in assisted congregate housing;
. .
"(C) assessing existing and potential financial resources at the
" • Federal, State, and local levels for the support of congregate
housing services; and
o:r i
"(D) making legislative recommendations as to the feasibility
of permitting State housing agencies and other appropriate
State agencies to participate and operate the program on a
matching grant basis.
"(2) The Secretary shall submit the report to the Congress not
later than September 30,1988.".
SEC. 164. MODIFICATION OF RESTRICTION ON USE OF ASSISTED HOUSING
BY ALIENS.

42 u s e 1436a.

(a) AuENS ADMITTED FOR LAWFUL RESIDENCE.—Section 214(a) of
the Housing and Community Development Act of 1980 is amended—
(1) by striking "or" at the end of paragraph (4);
(2) by striking the period at the end of paragraph (5) and
inserting "; or"; and
(3) by adding at the end the following new paragraph:
"(6) an alien lawfully admitted for temporary or permanent
residence under section 245A of the Immigration and Nationality Act.".
(b) PRESERVATION OF FAMILIES.—Section 214 of the Housing and

Community Development Act of 1980 is amended by inserting after
subsection (b) the following new subsection:
"(c)(1) If, following completion of the applicable hearing process,
financial assistance for any individual receiving such assistance on
the date of the enactment of the Housing and Community Development Act of 1987 is to be terminated, the public housing agency or
other local governmental entity involved (in the case of public
housing or assistance under section 8 of the United States Housing
Act of 1937) or the Secretary of Housing and Urban Development (in
the case of any other financial assistance) may, in its discretion,
take one of the following actions:
"(A) Permit the continued provision of financial assistance, if
necessary to avoid the division of a family in which the head of
household or spouse is a citizen of the United States, a national
of the United States, or an alien resident of the United States
described in any of paragraphs (1) through (6) of subsection (a).

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1861

For purposes of this paragraph, the term 'family' means a head
of household, any spouse, any parents of the head of household,
any parents of the spouse, and any children of the head of
household or spouse.
"(B) Defer the termination of financial assistance, if necessary
to permit the orderly transition of the individual and any
family members involved to other affordable housing. Any
deferral under this subparagraph shall be for a 6-month period
and may be renewed by the public housing agency or other
entity involved for an aggregate period of 3 years. At the
beginning of each deferral period, the public housing agency or
other entity involved shall inform the individual and family
members of their ineligibility for financial assistance and offer
them other assistance in finding other affordable housing.
"(2) Notwithstanding any other provision of law, the Secretary of
Housing and Urban Development may not make financial assistance available for the benefit of—
"(A) any alien who—
"(i) has a residence in a foreign country that such alien
has no intention of abandoning;
"(ii) is a bona fide student qualified to pursue a full
course of study; and
"(iii) is admitted to the United States temporarily and
solely for purposes of pursuing such a course of study at an
established institution of learning or other recognized place
of study in the United States, particularly designated by
such alien and approved by the Attorney General after
consultation with the Department of Education of the
United States, which institution or place of study shall have
agreed to report to the Attorney General the termination of
attendance of each nonimmigrant student (and if any such
institution of learning or place of study fails to make such
}. ,
reports promptly the approval shall be withdrawn); and
"(B) the alien spouse and minor children of any alien
described in subparagraph (A), if accompanying such alien or
following to join such alien.".
(c) VERIFICATION PROCEDURES.—Section 214(d) of the Housing and

Immigration.

Community Development Act of 1980 (as added by section 121(aX2)
of the Immigration Reform and Control Act of 1986 (Public Law 99603)) is amended—
42 u s e 1436a.
(1) in paragraph (2), by inserting after "States" the following:
", is not 62 years of age or older, and is receiving financial
assistance on the date of the enactment of the Housing and
Community Development Act of 1987";
(2) in paragraph (4), in the matter before subparagraph (A)—
(A) by inserting after "States" the following: ", is not 62
years of age or older, and is receiving financial assistance
on the date of the enactment of the Housing and Community Development Act of 1987"; and
(B) by inserting "or recertification" after "application";
(3) in paragraph (4)(A)(i), by inserting after the comma the
following: "or to appeal to the Immigration and Naturalization
Service the verification determination of the Immigration and
Naturalization Service under paragraph (3),";
(4) in paragraph (4)(B), by striking the matter before clause (i)
and inserting the following:

101 STAT. 1862

PUBLIC LAW 100-242—FEB. 5, 1988

"(B) if any documents or additional information are
submitted as evidence under subparagraph (A), or if appeal
to i?
is made to the Immigration and Naturalization Service
with respect to the verification determination of the Service
under paragraph (3)—";
(5) in paragraph (4XB)(i), by inserting "or additional information" after "documents";
(6) in paragraph (4XBXii), by inserting "or appeal" after
"verification";
(7) by inserting after paragraph (5) the following new
paragraph:
"(6) For purposes of paragraph (5XB), the applicable fair
hearing process made available with respect to any individual
shall include not less than the following procedural protections:
"(A) The Secretary shall provide the individual with
„ ^.
written notice of the determination described in paragraph
(5) and of the opportunity for a hearing with respect to the
determination.
g,^ji,
"(B) Upon timely request by the individual, the Secretary
shall provide a hearing before an impartial hearing officer
if/tj
designated by the Secretary, at which hearing the individual may produce evidence of a satisfactory immigration
K
status.
"(C) The Secretary shall notify the individual in writing
'
of the decision of the hearing officer on the appeal of the
determination in a timely manner.
"(D) Financial assistance may not be denied or terminated until the completion of the hearing process."; and
(8) by striking the last sentence and inserting the following:
"For purposes of this subsection, the term 'Secretary' means the
Secretary of Housing and Urban Development, a public housing
agency, or another entity that determines the eligibility of an
individual for financial assistance.".
Immigration.
(d) ENFORCEMENT PROCEDURES.—Section 214(e) of the Housing and
Community Development Act of 1980 (as added by section 121(a)(2)
of the Immigration Reform and Control Act of 1986 (Public Law 9942 use 1436a.
603)) is amended—
(1) in the matter before paragraph (1), by inserting "of Housing and Urban Development" after "Secretary";
,./
,j,, _
(2) in paragraph (2), by inserting after "(dX4XAXii)" the foUow,c^M «b ,"
jjjg. w^Qj. under any alternative system for verifying immigration status with the Immigration and Naturalization Service
'
authorized in the Immigration Reform and Control Act of 1986
^
(Public Law 99-603))";
(3) in paragraph (3), by inserting after "(d)(4XBXii)" the follow,
ing: "(or under any alternative system for verifying immigration status with the Immigration and Naturalization Service
authorized in the Immigration Reform and Control Act of 1986
(Public Law 99-603))"; and
(4) in paragraph (4), by inserting after "(dX5XB)" the following: "(or provided for under any alternative system for verifying
immigration status with the Immigration and Naturalization
Service authorized in the Immigration Reform and Control Act
^
of 1986 (Public Law 99-603))".
(e) VERIFICATION

SYSTEM.—Section 214

of the

Housing

and

Community Development Act of 1980 (as amended by section
121(aX2) of the Immigration Reform and Control Act of 1986 (Public

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1863

Law 99-603)) is amended by adding at the end the following new 42 u s e 1436a.
subsection:
"(f)(1) Notwithstanding any other provision of law, no agency or State and local
official of a State or local government shall have any liability for the governments.
design or implementation of the Federal verification system described in subsection (d) if the implementation by the State or local
agency or official is in accordance with Federal rules and regulations.
"(2) The verification system of the Department of Housing and
Urban Development shall not supersede or affect any consent agreement entered into or court decree or court order entered prior to the
date of the enactment of the Housing and (Community Development
Act of 1987.".
(f) REIMBURSEMENT FOR COSTS OF IMPLEMENTATION.—

(1) Section 214 of the Housing and Community Development
Act of 1980 (as amended by subsection (e) of this section)
is further amended by adding at the end the following new
subsection:
"(g) The Secretary of Housing and Urban Development is au- Immigration.
thorized to pay to each public housing agency or other entity an
amount equal to 100 percent of thQ costs incurred by the public
housing agency or other entity in implementing and operating an
immigration status verification system under subsection (d) (or
under any alternative system for verifying immigration status with
the Immigration and Naturalization Service authorized in the
Immigration Reform and Control Act of 1986 (Public Law 99-603)).".
(2) The United States Housing Act of 1937 (as amended by
section 1210t))(6) of the Immigration Reform and Control Act of
1986 (Public Law 99-603)) is amended by striking section 20. 42 u s e 1437r.
(g)

TRANSITIONAL CERTIFICATION AND DOCUMENTATION PROVI-

42 u s e 1436a
note.

SIONS.—In carrying out section 214 of the Housing and Community
Development Act of 1980 during fiscal year 1988, the Secretary of
Housing and Urban Development shall require, as a condition of
providing financial assistance for the benefit of any individual, that
such individual—
(1) declare in writing, under penalty of perjury, whether or
not such individual is a citizen or national of the United States;
and
(2) if not a citizen or national—
. j^
(A) declare in writing, under penalty of perjury, the
..^'",.
immigration status of such individual, if such individual is
"" '
not less than 62 years of age "and is receiving financial
assistance on the date of the enactment of the Housing and
Community Development Act of 1987"; or
(B) provide such documentation regarding the immigra- Immigration.
tion status of such individual as the Secretary may require
by regulation,
(h) EFFECTIVE DATES.—

42 u s e 1436a

(1) The provisions of, and amendments made by, subsections note.
(a), (b), (e), (f), and (g) shall take effect on the date of the
enactment of this Act.
(2) The amendments made by subsections (c) £ind (d) shall take
effect on October 1,1988.

101 STAT. 1864
42 u s e 3543.
Loans.
Grants.

PUBLIC LAW 100-242—FEB. 5, 1988

SEC. 165. PREVENTING FRAUD AND ABUSE IN DEPARTMENT OF HOUSING
AND URBAN DEVELOPMENT PROGRAMS.
(a) DISCLOSURE OF SOCIAL SECURITY ACCOUNT NUMBER.—As a

condition of initial or continuing eligibility for participation in any
program of the Department of Housing and Urban Development
involving loans, grants, interest or rental assistance of any kind, or
mortgage or loan insurance, and to ensure that the level of benefits
provided under such programs is proper, the Secretary of Housing
and Urban Development may require that an applicant or participant (including members of tne household of an applicant or participant) disclose his or her social security account number or employer
identification number to the Secretaiy.
(b) DEFINITIONS.—For purposes of this section, the terms "applicant" and "participant" shall have such meanings as the Secretary of Housing and Urban Development by regulation shall
prescribe. Such terms shall not include persons whose involvement
is only in their official capacity, such as State or local government
officials or officers of lending institutions.
SEC. 166. ANNUAL REPORT ON CHARACTERISTICS OF FAMILIES IN
ASSISTED HOUSING.

42 u s e 3536
note.

(a) I N GENERAL.—The Secretary of Housing and Urban Development shall include in the annual report under section 8 of the
Housing and Urban Development Act descriptions of the characteristics of families assisted under each of the following programs of
assistance: public housing, section 8 of the United States Housing
Act of 1937 (other than subsection (o) of such section), section 8(o) of
the United States Housing Act of 1937, and section 202 of the
Housing Act of 1959.
(b) SPECIFIC REQUIREMENTS.—The descriptions required in subsection (a) shall include information with respect to—
(1) family size, including the number of children;
(2) amount and sources of family income;
i
(3) the age, race, and sex of family members; and
(4) whether the head of the family (or the spouse of such
person) is a member of the armed forces.
SEC. 167. SECTION 236 RENTAL HOUSING PROGRAM.
(a) STATE-AIDED PROJECTS.—

12 u s e 1715Z-1.

12 u s e 1701s.
12 u s e 1715Z-1.

(1) Section 236(f)(4) of the National Housing Act is amended
by striking "90 per centum" and inserting "100 percent".
(2) Section 101(g) of the Housing and Urban Development Act
of 1965 is amended by striking "90 per centum" and inserting
"100 percent".
Ot)) INSURING AUTHORITY.—Section 236(n) of the National Housing
Act is amended by adding at the end the following new sentence: "A
mortgage may be insured under this section after the date in the
preceding sentence in order to refinance a mortgage insured under
this section or to finance pursuant to subsection (jX3) the purchase,
by a cooperative or nonprofit corporation or association, of a project
assisted under this section.".
SEC. 168. TENANT ELIGIBILITY DETERMINATIONS IN RENT SUPPLEMENT
PROJECTS.

Section 101 of the Housing and Urban Development Act of 1965 is
amended—
(1) by striking the second sentence of subsection (eXD; and

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1865

'•

(2) by striking subsection (k) and inserting the following:
"(k) In selecting individuals or families to be assisted under this
section in accordance with the eligibility criteria and procedures
established under subsection (eXD, the project owner shall give
preference to individuals or families who are occupying substandard
housing, are paying more than 50 percent of family income for rent,
or are involuntarily displaced at the time they are seeking housing
assistance under this section.".

>-. • J

SEC. 169. COUNSELING TO TENANTS AND HOMEOWNERS.
(a) COUNSELING SERVICES.—Section 106(a)(3) of the Housing and

Urban Development Act of 1968 is amended in the first sentence by 12 USC I70lx.
striking all that follows the semicolon and inserting the following:
"except that for each of the fiscal years 1988 and 1989 there are
authorized to be appropriated $3,500,000 for such purposes.".
(b) EMERGENCY HOMEOWNERSHIP COUNSELING.—Section 106 of the

Housing and Urban Development Act of 1968 is amended by inserting at the'end the following new subsection:
"(c) GRANTS FOR HOMEOWNERSHIP COUNSELING ORGANIZATIONS.—

"(1) I N GENERAL.—The Secretary of Housing and Urban
Development may make grants—
"(A) to nonprofit organizations experienced in the provision of homeownership counseling to enable the organizations to provide homeownership counseling to eligible
homeowners; and
"(B) to assist in the establishment of nonprofit
homeownership counseling organizations.
"(2) PROGRAM REQUIREMENTS.—

"(A) Applications for grants under this subsection shall
be submitted in the form, and in accordance with the
procedures, that the Secretary requires.
"(B) The homeownership counseling organizations
receiving assistance under this subsection shall use the
assistance only to provide homeownership counseling to
eligible homeowners.
"(C) The homeownership counseling provided by
homeownership counseling organizations receiving assistance under this subsection shall include counseling with
,^t
respect to—
"(i) financial management;
"(ii) available community resources, including public
:"
;
assistance programs, mortgage assistance programs,
home repair assistance programs, utility assistance pro' V
grams, food programs, and social services; and
"(iii) employment training and placement.
"(3) AVAILABILITY OF HOMEOWNERSHIP COUNSELING.—The Secretary shall take any action that is necessary—
"(A) to ensure the availability throughout the United
States of homeownership counseling from homeownership
counseling organizations receiving assistance under this
'
subsection, with priority to areas that—
"(i) are experiencing high rates of home foreclosure
-' i
and any other indicators of homeowner distress determined by the Secretary to be appropriate; and
"(ii) are not already adequately served by
homeownership counseling organizations; and

,

101 STAT. 1866

Loans.

r

Loans.

PUBLIC LAW 100-242—FEB. 5, 1988

"(B) to inform the public of the availability of the
homeownership counseling.
"(4) ELIGIBILITY FOR COUNSELING.—A homeowner shall be eligible for homeownership counseling under this subsection if—
"(A) the home loan is secured by property that is the
principal residence (as defined by the Secretary) of the
^^ ..
homeowner;
"(B) the home loan is not assisted under title V of the
Housing Act of 1949; and
"(C) the homeowner is, or is expected to be, unable to
make payments, correct a home loan delinquency within a
reasonable time, or resume full home loan payments due to
a reduction in the income of the homeowner because of^
"(i) an involuntary loss of, or reduction in, the
employment of the homeowner, the self-employment of
,
the homeowner, or income from the pursuit of the
occupation of the homeowner; or
"(ii) any similar loss or reduction experienced by
y
any person who contributes to the income of the
homeowner.
"(5) NOTIFICATION OF AVAILABILITY OF HOMEOWNERSHIP COUN-

SEUNG REQUIREMENT.—The Creditor of a delinquent home loan
shall notify an eligible homeowner of the availability of any
homeownership counseling offered by the creditor. As a supplement to the counseling provided by the creditor, the creditor
shall notify the homeowner of the availability of 1 of the
following:
"(A) Homeownership counseling provided by nonprofit
organizations approved by the Secretary and experienced in
the provision of homeownership counseling.
"(B) A list of the nonprofit organizations, approved by the
Secretary and experienced in the provision of homeownership counseling, that can be obtained by calling a toll-free
"
telephone number at the Department of Housing and
'
Urban Development.
"(C) Homeownership counseling provided by the Adminis''
trator of Veterans' Affairs for loans insured or guaranteed
under chapter 37 of title 38, United States Code.
"(6) DEFINITIONS.—For purposes of this subsection:
"(A) The term 'creditor' means a person or entity that is
servicing a home loan on behalf of itself or another person
or entity.
"(B) The term 'eligible homeowner' means a homeowner
:
eligible for counseling under paragraph (4).
"(C) The term 'home loan' means a loan secured by a
mortgage or lien on residential property.
"(D) The term 'homeowner' means a person who is obligated under a home loan.
"(E) The term 'residential property' means a 1-family
residence, including a 1-family unit in a condominium
project, a membership interest and occupancy agreement in
a cooperative housing project, and a manufactured home
and the lot on which the home is situated.
"(7) REGULATIONS.—The Secretary shall issue any regulations
that are necessary to carry out this subsection.
"(8)

AUTHORIZATION OF APPROPRIATIONS.—There

are

au-

thorized to be appropriated to carry out this subsection

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1867

$3,500,000 for each of the fiscal years 1988 and 1989. Any
amount appropriated under this subsection shall remain available until expended.
"(9) TERMINATION.—The provisions of this subsection shall not
be effective after September 30,1989.".
SEC. 170. HOUSING ASSISTANCE TECHNICAL AMENDMENTS.

(a) SECTION 235 HOMEOWNERSHIP ASSISTANCE.—Section 235(i)(3)(C)
of the National Housing Act is amended by inserting an opening 12 USC I7l5z.
parenthesis before "including".
(b) RENTAL HOUSING FOR LOWER INCOME FAMILIES.—The last sentence of section 236(iXl) of the National Housing Act is amended by 12 USC I7i5z-l.
striking "(h)" and inserting "(fK4)".
(c) DEFINITION OF DISABIUTY.—Section 303)(3XA) of the United

States Housing Act of 1937 is amended—
42 USC 1437a.
(1) by striking "or" the first place it appears and inserting a
comma; and
(2) by striking "or in section 102 of the Developmental Disabilities Services and Facilities Construction Amendments of 1970"
and inserting the following: ", has a developmental disability as
defined in section 102(7) of the Developmental Disabilities
Assistance and Bill of Rights Act (42 U.S.C. 6001(7))".
(d) LOWER INCOME HOUSING.—

(1) The first sentence of section 6(a) of the United States
Housing Act of 1937 is amended by inserting "The" before 42USC1437d.
"Secretary".
(2) Section 6(cX4)(A) of the United States Housing Act of 1937
is amended—
(A) by striking "or are paying more than 50 per centum of
family income for rent"; and
(B) by inserting ", are paying more than 50 percent of
family income for rent," after "substandard housing".
(3) Paragraphs (4) and (5) of section 6(k) of the United States
Housing Act of 1937 are amended by striking "his" each place it
appears and inserting "their".
(e) HOUSING DEVELOPMENT GRANTS.—Section 17(dX7XA) of the

United States Housing Act of 1937 is amended by striking "title" 42 USC 1437o.
and inserting "subsection".
(f) PUBLIC HOUSING DEMOUTION AND DISPOSITION.—Section 18(b) of

the United States Housing Act of 1937 is amended in the matter
preceding paragraph (1) by inserting "or" after "section".

42 USC I437p.

(g) HOUSING FOR THE ELDERLY AND HANDICAPPED.—

(1) The third sentence of section 202(dX4) of the Housing Act
of 1959 is amended by striking "is a developmentally disabled 12USC I70lq.
individual as defined in section 102(5) of the Developmental
Disabilities Services and Facilities Construction Amendments of
1950" and inserting the following: "has a developmental disability as defined in section 102(7) of the Developmental Disabilities
Assistance and Bill of Rights Act (42 U.S.C. 6001(7))".
(2) Section 202(f) of the Housing Act of 1959 is amended by
striking "section 134" and inserting "section 133".
(3) Section 202(1) of the Housing Act of 1959 is amended by
striking "difference" and inserting "different".
(h) RENT SUPPLEMENTS.—Section 101(jXlXD) of the Housing and

Urban Development Act of 1965 is amended by striking "divided"
and inserting "dividend".

12 USC I70ls.

101 STAT. 1868

PUBLIC LAW 100-242—FEB. 5, 1988

Subtitle C—Multifamily Housing Management
and Preservation
SEC. 181. MANAGEMENT AND PRESERVATION OF HUD-OWNED MULTIFAMILY HOUSING PROJECTS.

(a) GOALS.—Section 203(a) of the Housing and Community Development Amendments of 1978 is amended by striking "(a)" and all
that follows through the semicolon at the end of paragraph (1) and
inserting the following:
„,-^. j ,
"(a) The Secretary of Housing and Urban Development (in this
section referred to as the 'Secretary') shall manage or dispose of
multifamily housing projects that are owned by the Secretary, or
that are subject to a mortgage held by the Secretary that is either
delinquent, under a workout agreement, or being foreclosed upon by
the Secretary, in a manner that is consistent with the National
Housing Act and this section and that will, in the least costly
fashion among the reasonable alternatives available, further the
goals of—
"(1) preserving so that they are available to and affordable by
low- and moderate-income persons—
"(A) all units in multifamily housing projects that are
subsidized projects or formerly subsidized projects;
. , ^ , ,.
"(B) in other multifamily housing projects owned by the
M. i'
»•
Secretary, at least the units that are occupied by low- and
,,„
moderate-income persons or vacant; and
>tTj.
,(^Q^ ^^ ^2j other multifamily housing projects, at least the
units that are, on the date of assignment, occupied by lowand moderate-income persons;".

12USC1701Z-11.

(b) MANAGEMENT SERVICES.—Section 203(b)(2) of the Housing and

-^

K;

Community Development Amendments of 1978 is amended—
(1) by inserting "(A)" after the paragraph designation;
(2) by redesignating clauses (A) through (D) as clauses (i)
through (iv), respectively;
(3) by striking ", owned by the Secretary" and inserting the
following: "subject to subsection (a) that is owned by the Secfij . ^
retary (or for which the Secretary is mortgagee in possession)";
(4) by striking the period at the end and inserting "; and"; and
(5) by adding at the end the following new subparagraph:
' «•
"(B) to require the owner of a multifamily housing project
subject to subsection (a) that is not owned by the Secretary (and
for which the Secretary is not mortgagee in possession), to
contract for management services for the project in the manner
'
described in subparagraph (A).".
(c) MAINTAINING OF PROJECTS.—Section 203(c) of the Housing and

, itTi

ii \:

Community Development Amendments of 1978 is amended to read
as follows:
"(cXD In the case of multifamily housing projects subject to
subsection (a) that are owned by the Secretary (or for which the
Secretary is mortgagee in possession), the Secretary shall—
"(A) to the greatest extent possible, maintain all such occupied projects in a decent, safe, and sanitary condition;
"(B) to the greatest extent possible, maintain full occupancy
in all such projects; and
"(C) maintain all such projects for purposes of providing
rental or cooperative housing for the longest feasible period.

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1869

"(2) In the case of any multifamily housing project subject to
subsection (a) that is not owned by the Secretary (and for which the
Secretary is not mortgagee in possession), the Secretary shall require the owner of the project to carry out the requirements of
paragraph (1).".
(d) FINANCIAL ASSISTANCE.—Section 203 of the Housing and
Community Development Amendments of 1978 is amended—
(1) by redesignating subsections (d) through (g) as subsections
(e) through (h), respectively; and
(2) by inserting after subsection (c) the following new subsection:
"(d) In carrying out the goals specified in subsection (a)(1) the
Secretary shall take not less than one of the following actions:
"(1) Enter into contracts under section 8 of the United States
Housing Act of 1937, to the extent budget authority is available
for such section 8, with owners of multifamily housing projects
that are acquired by a purchaser other than the Secretary at
foreclosure or after sale by the Secretary. Such contracts shall
provide assistance to the project involved for a period of not less
than 15 years. Such contracts shall be sufficient to assist all
units in subsidized or formerly subsidized projects, and all units
in other projects that are occupied by lower income families
eligible for assistance under such section 8 at the time of
foreclosure or sale, as the case may be, and all units that are
vacant at such time (which units shall be made available for
such families as soon as possible). In order to make available to
families any units in subsidized or formerly subsidized projects
that are occupied by persons not eligible for assistance under
such section 8, but that subsequently become vacant, the contract shall also provide that when any such vacancy occurs the
owner involved shall lease the available unit to a family eligible
for assistance under such section 8. The Secretary shall provide
such contracts at contract rents that, consistent with subsection
(a), provide for the rehabilitation of such project and do not
exceed the most recently adjusted fair market rents for substantially rehabilitated units published by the Secretary in the
Federal Register.
"(2) In accordance with the authority provided under the
National Housing Act, provide purchase-money mortgages,
reduce the selling price, or provide other financial assistance to
the owners of multifamily housing projects that are acquired by
a purchaser other than the Secretary at foreclosure, or after
sale by the Secretary, on terms that will ensure that, for a
period of not less than 15 years (A) the project will remain
available to and affordable by low- and moderate-income persons; and (B) such persons shall pay not more than the amount
payable as rent under section 3(a) of the United States Housing
Act of 1937.".

12 USC I70lz-ll.

Contracts.
i '<

Federal
Register,
publication.

(e) RIGHT OF FIRST REFUSAL.—Section 203 of the Housing and

Community Development Amendments of 1978 is amended—
(1) by redesignating subsections (e) through (h) (as so redesignated by this section) as subsections (f) through (i); and
(2) by inserting before such subsection (f) the following new
subsection:
"(e) Upon receipt of a bona fide offer to purchase a project subject State and local
to subsection (a), the Secretary shall notify the local government governments.
and the State housing finance agency (or other agency or agencies

101 STAT. 1870

PUBLIC LAW 100-242—FEB. 5, 1988

designated by the Governor) of the proposed terms and conditions of
the offer, including the assistance that the Secretary plans to make
available to the prospective purchaser. The local government and
the designated State agency shall have 90 days to match the offer
and purchase the project. In administering the right of first refusal
provided in this subsection, the Secretary shall offer assistance to
the local government or designated State agency on terms and
conditions at least as favorable as made available to the prospective
purchaser. Notwithstanding any other provision of law to the contrary, a local government (including a public housing agency) or
designated State agency may purchase a subsidized project or formerly subsidized project in accordance with this subsection.".
(f) DISPLACEMENT PROTECTION.—Section 203(fKl) of the Housing

12use iTOlz-ll.

and Community Development Amendments of 1978 (as so redesignated by this section) is amended—
(1) by striking "ovnied by the Secretary" and inserting the
following: "subject to subsection (a) that is owned by the Secretary (or for which the Secretary is mortgagee in possession)";
and
(2) by adding at the end the following new sentence: "In the
case of a multifamily housing project subject to subsection (a)
that is not owned by the Secretary (and for which the Secretary
is not mortgagee in possession), the Secretary shall require the
owner of the project to carry out the requirements of this
paragraph.".
(g) LIMITATIONS ON CERTAIN PROJECT, LOAN, AND MORTGAGE

State and local
governments.

SALES.—Section 203 of the Housing and Community Development
Amendments of 1978 is amended—
(1) by redesignating subsections (h) and (i) (as so redesignated
by this section) as subsections (i) and (j)j and
(2) by inserting before such subsection (i) the following new
subsection:
"(hXD The Secretary may not approve the sale of any loan or
mortgage held by the Secretary (including any loan or mortgage
owned by the Government National Mortgage Association) on any
subsidized project or formerly subsidized project unless such sale is
made as part of a transaction that will ensure that such project will
continue to operate at least until the maturity date of such loan or
mortgage in a manner that will provide rental housing on terms at
least as advantageous to existing and future tenants as the terms
required by the program under which the loan or mortgage was
made or insured prior to the assignment of the loan or mortgage on
such project to the Secretary.
"(2) The Secretary may not approve the sale of any subsidized
project (A) that is subject to a mortgage held by the Secretary; or (B)
if the sale transaction involves the provision of any additional
subsidy funds by the Secretary or a recasting of the mortgage,
unless such sale is made £is part of a transaction that will ensure
that such project will continue to operate at least until the maturity
date of the loan or mortgage in a manner that will provide rental
housing on terms at least as advantageous to existing and future
tenants as the terms required by the program under which the loan
or mortgage was made or insured prior to the proposed sale of the
project.
"(3) Notwithstanding any provision of law that may require
Competitive sales or bidding, the Secretary may carry out negotiated
sales of subsidized or formerly subsidized mortgages held by the

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1871

Secretary, without the competitive selection of purchasers or
intermediaries, to agencies of State or local government, or groups
of investors that include at least 1 such agency of State or local
government, if the negotiations are conducted with such agencies,
except that—
"(A) the terms of any such sale shall include the agreement of
the purchasing agency or agencies of State or local government
?
to act as mortgagee or owner of a beneficial interest in such
mortgages in a manner consistent with maintaining the projects
that are subject to such mortgages for occupancy by the general
tenant group intended to be served by the applicable mortgage
insurance program, including, to the extent the Secretary determines appropriate, authorizing such agency of State or local
government to enforce the provisions of any regulatory agreement or other program requirements applicable to the related
projects; and
"(B) the sales prices for such mortgages shall be, in the
determination of the Secretary, the best price that may be
obtained for such mortgages from an agency of State or local
government, consistent with the expectation and intention that
the projects financed will be retained for use under the applicable mortgage insurance program for the life of the initial
mortgage insurance contract. .
(h) DEFINITIONS.—Section 203(i) of the Housing and Community
Development Amendments of 1978 (as so redesignated by this section) is amended—
12 USC I70lz-ll.
(1) by inserting "(1)" after the subsection designation; and
(2) by adding at the end the following new paragraphs:
"(2) For the purpose of this section, the term 'subsidized project'
means a multifamily housing project receiving any of the following
assistance immediately prior to tne assignment of the mortgage on
such project to, or the acquisition of such mortgage by, the
Secretary:
^
"(A) below market interest rate mortgage insurance under
the proviso of section 221(dX5) of the National Housing Act;
"(B) interest reduction pajonents made in connection with
mortgages insured under section 236 of the National Housing
Act;
"(C) rent supplement payments under section 101 of the
Housing and Urban Development Act of 1965;
"(D) direct loans at below market interest rates, made under
section 202 of the Housing Act of 1959 or to a multifamily
housing project under section 312 of the Housing Act of 1964; or
"(E) housing assistance payments made under section 23 of
the United States Housing Act of 1937 (as in effect before
January 1, 1975) or section 8 of the United States Housing Act
of 1937 (other than subsection (b)(1) of such section), without
regard to whether such payments are made to all or a portion of
the units in the project.
"(3) For the purpose of this section, the term 'formerly subsidized
project' means a multifamily housing project owned by the Secretary that was a subsidized project immediately prior to its acquisition by the Secretary.".
SEC. 182. ACQUISITION OF INSURED MULTIFAMILY HOUSING PROJECTS.
Section 207(k) of the National Housing Act is amended by insert- 12 USC 1713.
ing after the second sentence the following new sentence: "In deter-

101 STAT. 1872

PUBLIC LAW 100-242—FEB. 5, 1988

mining the amount to be bid, the Secretary shall act consistently
with the goal established in section 203(a)(1) of the Housing and
Community Development Amendments of 1978.".
SEC. 183. TENANT PARTICIPATION IN MULTIFAMILY HOUSING PROJECTS.
12 u s e 1715z-lb.

(a) APPLICABILITY.—Section 202(a) of the Housing and Community
Development Amendments of 1978 is amended by inserting before
the period at the end the following: "or section 202 of the Housing
Act of 1959".
(b) NOTICE AND COMMENT.—Section 202(b)(1) of the Housing and

Community Development Amendments of 1978 is amended by striking "and the Secretary deems it appropriate" and inserting the
following: "or where the Secretary proposes to sell a mortgage
secured by a multifamily housing project".
Contracts.
42 u s e 1437f
note.

State and local
governments.
12 u s e ITOlz-ll
note.

(c) NONDISCRIMINATION AGAINST SECTION 8 CERTIFICATE HOLDERS

AND VOUCHER HOLDERS.—No owner of a subsidized project (as defined in section 203(i)(2) of the Housing and Community Development Amendments of 1978, as amended by section 181(h) of this Act)
shall refuse—
(1) to lease any available dwelling unit in any such project of
such owner that rents for an amount not greater than the fair
r market rent for a comparable unit, as determined by the Secretary under section 8 of the United States Housing Act of 1937,
to a holder of a certificate of eligibility under such section, a
proximate cause of which is the status of such prospective
tenant as a holder of such certificate, and to enter into a
li/; housing assistance payments contract respecting such unit; or
(2) to lease any available dwelling unit in any such project of
•: such owner to a holder of a voucher under section 8(o) of such
Act, and to enter into a voucher contract respecting such unit, a
proximate cause of which is the status of such prospective
tenant as holder of such voucher.
SEC. 184. MULTIFAMILY HOUSING DISPOSITION PARTNERSHIP.
(a) ESTABLISHMENT OF DEMONSTRATION PROGRAM.—The Secretary

of Housing and Urban Development (referred to in this section as
the "Secretary") shall carry out a program to demonstrate the
effectiveness of disposing of distressed multifamily housing projects
owned by the Department of Housing and Urban Development
through a partnership with State housing finance agencies. The
demonstration program may be carried out with not more than 4
State housing finance agencies and shall be designed to determine
the feasibility of entering into similar relationships with other State
housing finance agencies.
Ot)) REQUIREMENTS OF DEMONSTRATION PROGRAM.—
(1) OPPORTUNITY TO PARTICIPATE IN SALE.—Not

less than 30
days before offering to sell any multifamily housing project that
is located in a State participating in the demonstration program
and that is subject to section 204 of the Housing and Community Development Amendments of 1978, the Secretary shall—
(A) notify the State housing finance agency of the plan of
the Secretary to sell the project; and
(B) provide the State housing finance agency with the
option to provide the long-term financing for the sale of the
project through the co-insurance program of the Secretary,
if the project complies with the State laws applicable to the
-;, ^
State housing finance agency. 1, - . , , i^4^,,^,^ -.4,, ,^„.^-B,^

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1873

(2) TERMS OF PARTICIPATION.—If the State housing finance

Loans.

agency agrees to participate in the sale of a project under this
section, the terms of the sale shall be as follows:
(A) The State housing finance agency shall provide a loan
to the purchaser of the property.
(B) The mortgage securing the loan shall be insured by
the Secretary and the State housing finance agency under
paragraph (3) or (4) of section 221(d) of the National Housing Act.
(C) The terms and conditions of the loan shall be consistent with the terms and conditions of the sale.
(3) COOPERATIVE AGREEMENT.—Not later than the expiration
of the 3-month period beginning on the date of the enactment of
this Act, the Secretary shall enter into cooperative agreements
with State housing finance agencies to carry out the demonstration program under this section.
(c) TERMINATION OF DEMONSTRATION PROGRAM.—

(1) I N GENERAL.—Except as provided in paragraph (2), the
demonstration program under this section shall terminate upon
the expiration of the 3-year period beginning on the date of the
enactment of this Act.
(2) CONTINUATION OF PROGRAM.—

(A) The Secretary may continue the demonstration program under this section after the termination date established in paragraph (1) for such additional period as the
Secretary determines to be appropriate.
(B) The Secretary shall continue the demonstration program under this section with respect to any project for
which the Secretary notifies the State housing finance
agency under subsection (b)(1)(A) before the termination
date established in paragraph (1) or under subparagraph
(A).
(d) REPORT TO CONGRESS.—Not later than 6 months after the
termination date established in subsection (c)(1), the Secretary shall
submit to the Congress a report evaluating the effectiveness of the
demonstration program under this section as a national model for
the disposition of distressed multifamily housing projects owned by
the Department of Housing and Urban Development.
SEC. 185. MULTIFAMILY HOUSING CAPITAL IMPROVEMENTS ASSISTANCE.

(a) PURPOSE.—Section 201(a) of the Housing and Community
Development Amendments of 1978 is amended by inserting after 12 use
"management," the following: "to permit capital improvements to 1715z-la.
be made to maintain certain projects as decent, safe, and sanitary
housing,".
(b) ELIGIBILITY.—Section 201(c)(1)(B) of the Housing and Community Development Amendments of 1978 is amended by inserting
after "is assisted under" the following: "section 23 of the United
States Housing Act of 1937, as in effect immediately before January 1, 1975,".
(c) BORROWER REQUIREMENTS.—Section 201(d) of the Housing and
Community Development Amendments of 1978 is amended—
(1) in paragraph (1), by inserting "or physical" after "maintain the financial"; and
(2) in paragraph (6), by striking the final period, and inserting
the following: "; except that the Secretary may excuse an owner
from compliance with the plan requirement set forth in this

101 STAT. 1874

PUBLIC LAW 100-242—FEB. 5, 1988
paragraph in any case in which such owner seeks only assistance for capital improvements under this section.".
(d) AMOUNT AND CONDITIONS OF ASSISTANCE.—Section 201(f) of the

12 use

1715z-la.

Housing and Community Development Amendments of 1978 is
amended—
(1) in paragraph (1), by inserting after "to any project" in the
matter preceding subparagraph (A) the following: "(except a
project assisted only for capital improvements)"; and
(2) in paragraph (4), by inserting after "for any year" the
following: "for a project (other than a project receiving assistance only for capital improvements)".
(e) REGULATIONS.—Section 201(g) of the Housing and Community
Development Amendments of 1978 is amended by inserting before
the period at the end the following: ", to the extent applicable.".
(f) FLEXIBLE SUBSIDY FUND.—Section 201(j) of the Housing and
Community Development Amendments of 1978 is amended to read
as follows:
"(j)(l) For purposes of carrying out the provisions of this section,
there is hereby established in the Treasury of the United States a
revolving fund, to be known as the Flexible Subsidy Fund. The Fund
shall, to the extent approved in appropriation Acts, be available to
the Secretary to provide assistance under this section (including
assistance for capital improvements).
"(2) The Fund shall consist of (A) any amount appropriated to
carry out the purposes of this section;- (B) any amount repaid on any
assistance provided under this section; (C) any amounts credited to
the reserve fund described in section 236(g) of the National Housing
Act; and (D) any other amount received by the Secretary under this
section (including any amount realized under paragraph (3)).
"(3) Any amounts in the Fund determined by the Secretary to be
in excess of the amounts currently required to carry out the provisions of this section shall be invested by the Secretary in obligations
of, or obligations guaranteed as to both principal and interest by, the
United States or any agency of the United States.
"(4) The Secretary may use not more than $50,000,000 from the
Fund in any fiscal year for purposes of providing assistance for
capital improvements in accordance with this section.".
(g) ASSISTANCE FOR CAPITAL IMPROVEMENTS.—Section 201 of the

Loans.

Housing and Community Development Amendments of 1978 is
amended by adding at the end the following new subsections:
"(k)(l) Assistance for capital improvements under this section
shall include assistance for any major repair or replacement of a
capital item in a multifamily housing project, including any such
repair or replacement required as a result of deferred or inadequate
maintenance. Capital improvements do not include maintenance of
any such item. Assistance for capital improvements under this
section shall be in the form of a loan.
"(2) The owner of a project receiving assistance for capital
improvements shall agree to contribute assistance to such project in
such amounts, from such sources, and in such manner as the
Secretary determines to be appropriate, except that—
"(A) such contribution shall not be less than 20 percent of the
total estimated cost of the capital improvements involved,
unless the Secretary, upon application of the owner, determines
that such contribution is financially infeasible and waives or
;L reduces such contribution to the extent necessary;
., .

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1875

"(B) the Secretary may not require an amount to be contributed, from the reserve funds established by the owner of such
projects for the purpose of making capital improvements, in
excess of 50 percent of the amount of such reserve funds on the
date of such loan; and
"(C) The Secretary shall waive the requirements of this paragraph if such owner is a private nonprofit corporation or an
association.
"(3) The Secretary may provide assistance for capital improvements under this section if the Secretary finds that the reserve
funds established by the owner of a project for the purpose of
making capital improvements are insufficient to finance both the
capital improvements for which such assistance is to be used and
other capital improvements that are reasonably expected to be
required in the near future, and such insufficiency is not the result
of the failure of such owner to comply with any standard established
by the Secretary for management of such reserve funds.
"(4) In providing, and contracting to provide, assistance for capital
improvements under this section, the Secretary shall—
"(A) give priority to projects that are eligible for incentives
under section 224(b) of the Emergency Low Income Housing
Preservation Act of 1987; and
"(B) with respect to any amounts not required for projects
under subparagraph (A), give priority among other projects
based on the extent to which—
"(i) the capital improvements for which such assistance is
requested are immediately required;
"(ii) the projects serve as the residences of lower income
families, and the extent which other suitable housing is
unavailable for such families in the areas in which such
projects are located;
"(iii) the capital improvements for which such assistance
is requested involve the life, safety, or health of the residents of the project or involve major capital improvements
in the projects; and
"(iv) the projects demonstrate the greatest financial distress, while continuing to meet the requirements of
subsection (dXD.
"(1)(1) The principal amount of any sissistance for capital improvements under this section that is provided to the owner of a project
shall not exceed the difference between the contribution made by
the owner in accordance with subsection (kX2) and the sum of—
"(A) the amount determined by the Secretary to be necessary
for such owner to make capital improvements with respect to
capital items that have failed, or are likely to deteriorate
seriously or fail in the near future, in such projects;
"(B) the amount determined by the Secretary to be necessary
to carry out a plan to upgrade the capital items being improved,
and any other capital items determined by the Secretary to be
associated with such capital items being improved and to require upgrading, to meet cost-effective energy efficiency standards prescribed by the Secretary; and
"(C) the amount determined by the Secretary to be necessary
to comply with the requirements of section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794).
"(2)(A) The term of any gissistance for capital improvements in the
form of a loan under this section shall not exceed the remaining

91-194 O - 90 - 19 : QL.3 Part 3

Safety.
Health and
medical care.

Energy.

Loans.

101 STAT. 1876

Loans.

PUBLIC LAW 100-242—FEB. 5, 1988

term of the mortgage of the project with respect to which such loan
is provided.
"(B) Each loan for capital improvements provided under this
section shall bear interest at a rate determined by the Secretary to
be appropriate, except that—
"(i) such rate shall not be more than 3 percentage points
below a rate determined by the Secretary of the Treasury
taking into consideration the average interest rate on all interest bearing obligations of the United States then forming a
part of the public debt, computed at the end of the fiscal year
next preceding date on which the loan is made, adjusted to the
nearest 1/8 of 1 percent, plus an allowance adequate in the
judgment of the Secretary of Housing and Urban Development
to cover administrative costs and probable losses under the
program; and
"(ii) such interest rate plus such allowance shall not exceed 6
percent per annum nor be less than 3 percent per annum.
"(C) Each loan for capital improvements provided under this
section shall be considered to be a liability of the project involved,
and shall not be dischargeable in any bankruptcy proceeding under
section 727, 1141, or 1328(b) of title 11, United States Code.
"(D) The Secretary may establish such additional conditions on
loans provided under this section as the Secretary determines to be
appropriate.
"(E) The Secretary may provide more than one loan or assistance
in any other form to any project under this section, if each loan or
other assistance complies with the provisions of this section.
"(m)(l) Increases in rental payments that may occur as a result of
the debt service and other expenses of a loan for capital improvements provided under this section for a project subject to a plan of
action approved under subtitle B of the Emergency Low Income
Housing Preservation Act of 1987 shall be governed by the rent
agreements entered into under such subtitle.
"(2) In order to minimize any increases in rental payments that
may occur as a result of the debt service and other expenses of a
loan for capital improvements provided under this section for a
project not subject to paragraph (1) and that would be incurred by
lower income residents of the project involved whose rental payments are, or would as a result of such expenses be, in excess of the
amount allowable if section 3(a) of the United States Housing Act of
1937 were applicable to such residents, the Secretary may take any
or all of the following actions:
"(A) Provide assistance with respect to such project under
section 8(b)(1) of the United States Housing Act of 1937, to the
extent amounts are available for such assistance and without
regard to section 16 of such Act.
"(B) Reduce the rate of interest charged on such loan to a rate
of not less than 1 percent.
"(C) Increase the term of such loan to a term that does not
exceed the remaining term of the mortgage on such project.
"(D) Increase the amount of assistance to be provided by the
owner of such project under subsection (k)(2), if applicable, to an
amount not to exceed 30 percent of the total estimated cost of
the capital improvements involved.".

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1877

(h) CONFORMING AMENDMENT.—The section heading for section
201 of the Housing and Community Development Amendments of
1978 is amended by striking "OPERATING".

12 use

1715z-la.

SEC. 186. FLEXIBLE SUBSIDY PROGRAM.
(a) U S E OF SECTION 236 EXCESS RENTAL CHARGES.—Section 236(f)(3)

of the National Housing Act is amended by striking "September 30,
1985" and inserting "September 30,1989".

12 u s e 1715Z-1.

(b) ASSISTANCE FOR CERTAIN HOUSING PROJECTS FOR ELDERLY OR
HANDICAPPED FAMILIES.—

(1) Section 201(a) of the Housing and Community Development Amendments of 1978 is amended by inserting "the Housing Act of 1959," after "1937,".
(2) Section 201(cXl)(A) of the Housing and Community Development Amendments of 1978 is amended by inserting before the
semicolon at the end the following: ", or received a loan under
section 202 of the Housing Act of 1959 more than 15 years
before the date on which assistance is made available under this
section".

TITLE II—PRESERVATION OF LOW
INCOME HOUSING

Emergency Low
Income Housing
Preservation Act
of 1987.

Subtitle A—General Provisions
SEC. 201. SHORT TITLE.

This title may be cited as the "Emergency Low Income Housing
Preservation Act of 1987".
SEC. 202. FINDINGS AND PURPOSE.

(a) FINDINGS.—The Congress finds that—
(1) in the next 15 years, more than 330,000 low income
housing units insured or assisted under sections 221(d)(3) and
236 of the National Housing Act could be lost as a result of the
termination of low income affordability restrictions;
(2) in the next decade, more than 465,000 low income housing
units produced with assistance under section 8 of the United
States Housing Act of 1937 could be lost as a result of the
expiration of the rental assistance contracts;
(3) some 150,000 units of rural low income housing financed
under section 515 of the Housing Act of 1949 are threatened
with loss as a result of the prepayment of mortgages by owners;
(4) the loss of this privately owned and federally assisted
housing, which would occur in a period of sharply rising rents
on unassisted housing and extremely low production of additional low rent housing, would inflict unacceptable harm on
current tenants and would precipitate a grave national crisis in
the supply of low income housing that was neither anticipated
nor intended when contracts for these units were entered into;
(5) the loss of this affordable housing, to encourage the
production of which the public has provided substantial benefits
over past years, would irreparably damage hard-won progress
toward such important and long-established national objectives
as—

12 u s e 1715/
note.

12 u s e 1715/
note.

}'•.''.

\l

101 STAT. 1878

PUBLIC LAW 100-242—FEB. 5, 1988
(A) providing a more adequate supply of decent, safe,
and sanitary housing that is affordable to low income
Americans;
(B) increasing the supply of housing affordable to low
income Americans that is accessible to employment
opportunities; and
(C) expanding housing opportunities for all Americans,
particularly members of disadvantaged minorities;
(6) the provision of an adequate supply of low income housing
has depended and will continue to depend upon a strong, longterm partnership between the public and private sectors that
accommodates a fair return on investment;
(7) recent reductions in Federal housing assistance and tax
benefits related to low income housing have increased the
incentives for private industry to withdraw from the production
and management of low income housing;
(8) efforts to retain this housing must take account of specific
financial and market conditions that differ markedly from
project to project;
(9) a major review of alternative responses to this threatened
loss of affordable housing is now being undertaken by numerous
private sector t£isk forces as well as State and local organizations; and
(10) until the Congress can act on recommendations that will
emerge from this review, interim measures are needed to avoid
the irreplaceable loss of low income housing and irrevocable
displacement of current tenants.
(b) PURPOSE.—It is the purpose of this title—
(1) to preserve and retain to the maximum extent practicable
as housing affordable to low income families or persons those
privately owned dwelling units that were produced for such
purpose with Federal assistance;
(2) to minimize the involuntary displacement of tenants currently residing in such housing; and
(3) to continue the partnership between all levels of government and the private sector in the production and operation of
housing that is affordable to low income Americans.

12 u s e 1715/

SEC. 203. TERMINATION OF CERTAIN PROVISIONS.

"° •

(a) IN GENERAL.—Effective upon the expiration of the 2-year
period beginning on the date of the enactment of this Act—
(1) subtitles B and D are repealed; and
(2) each provision of law amended by subtitle B or D is
amended to read as it would without such amendment.
(b) SAVINGS PROVISION.—The repeal or amendment of any provision under subsection (a) shall have no effect on any action taken or
authorized under the provision prior to such repeal or amendment.

Subtitle B—Prepayment of Mortgages Insured
Under National Housing Act
12 u s e 1715/

"° •

SEC. 221. GENERAL PREPAYMENT LIMITATION.
(a) PRIOR APPROVAL OF PLAN OF ACTION.—An owner of eligible low

income housing may prepay, and a mortgagee may accept prepayment of, a mortgage on such housing only in accordance with a plan

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1879

of action approved by the Secretary of Housing and Urban Development under this subtitle.
(b) ALTERNATIVE PREPAYMENT MORATORIUM.—In the event any
court of the United States or any State invalidates the requirements
established in this subtitle, an owner of eligible low income housing
located in the geographic area subject to the jurisdiction of such
court may not prepay, and a mortgagee may not accept prepayment
of, a mortgage on such housing during the 2-year period following
the date of such invalidation.
SEC. 222. NOTICE OF INTENT.

12 u s e 1715/
note.

An owner of eligible low income housing seeking to initiate
prepayment or other changes in the status or terms of the mortgage
or regulatory agreement shall file with the Secretary a notice of the
intent of the owner in such form and manner as the Secretary shall
prescribe. The owner shall simultaneously file the notice or intent State and local
with any appropriate State or local government agency for the governments.
jurisdiction within which the housing is located.
SEC. 223. PLAN OF ACTION.
(a) PREPARATION AND SUBMISSION.—Upon receipt of a notice of

intent, the Secretary shall provide the owner with such information
as the owner needs to prepare a plan of action, which information
shall include a description of the Federal incentives authorized
under this title. The owner shall submit the plan of action to the
Secretary in such form and manner as the Secretary shall prescribe.
The owner may simultaneously submit the plan of action to any
appropriate State or local government agency for the jurisdiction
within which the housing is located, which agency shall, in reviewing the plan, consult with representatives of the tenants of the
housing.
(b) CONTENTS.—The plan of action shall include—
(1) a description of any proposed changes in the status or
terms of the mortgage or regulatory agreement, which may
include a request for incentives to extend the low income use of
the housing;
(2) a description of any assistance that could be provided by
State or local government agencies, as determined by prior
consultation between the owner and any appropriate State or
local agencies;
(3) a description of any proposed changes in the low income
affordability restrictions;
(4) a description of any change in ownership that is related to
prepayment;
(5) an assessment of the effect of the proposed changes on
existing tenants;
(6) a statement of the effect of the proposed changes on the
supply of housing affordable to lower and very low income
families or persons in the community within which the housing
is located and in the area that the housing could reasonably be
expected to serve; and
(7) any other information that the Secretary determines is
necessary to achieve the purposes of this title.
(c) REVISIONS.—The owner may from time to time revise and
amend the plan of action as may be necessary to obtain approval of
the plan under this subtitle.

12 u s e 1715/
note.

State and local
governments.

State and local
governments.

101 STAT. 1880
12 u s e 1715Z

PUBLIC LAW 100-242—FEB. 5, 1988

SEC. 224. INCENTIVES TO EXTEND LOW INCOME USE.

(a) AGREEMENTS BY SECRETARY.—After receiving a plan of action
from an owner of eligible low income housing, the Secretary may
enter into such agreements as are necessary to satisfy the criteria
for approval under section 225.
(b) PERMISSIBLE INCENTIVES.—Such agreements may include one
or more of the following incentives that the Secretary, after taking
into account local market conditions, determines to be necessary to
achieve the purposes of this title:
(1) An increase in the allowable distribution or other measures to increase the rate of return on investment.
(2) Revisions to the method of calculating equity.
(3) Increased access to residual receipts accounts or excess
replacement reserves.
(4) Provision of insurance for a second mortgage under section
241(f) of the National Housing Act.
(5) An increase in the rents permitted under an existing
contract under section 8 of the United States Housing Act of
1937, or (subject to the availability of amounts provided in
appropriation Acts) additional assistance under such section 8
or an extension of any project-based assistance attached to the
housing.
(6) Financing of capital improvements under section 201 of
the Housing and Community Development Amendments of
1978.
(7) Other actions, authorized in other provisions of law, to
facilitate a transfer or sale of the project to a qualified nonprofit
organization, limited equity tenant cooperative, public agency,
or other entity acceptable to the Secretary.
(8) Other incentives authorized in law.
12 u s e 1715/

SEC. 225. CRITERIA FOR APPROVAL OF PLAN OF ACTION.
(a) PLAN OF ACTION INVOLVING TERMINATION OF LOW INCOME
AFFORDABILITY RESTRICTIONS.—The Secretary may approve a plan of

Safety.
Health and
medical care.

Minorities.
State and local
governments.

action that involves termination of the low income affordability
restrictions only upon a written finding that—
(1) implementation of the plan of action will not materially
increase economic hardship for current tenants or involuntarily
displace current tenants (except for good cause) where comparable and affordable housing is not readily available; and
(2)(A) the Supply of vacant, comparable housing is sufficient to
ensure that such prepayment will not materially affect—
^) ^j^^ availability of decent, safe, and sanitary housing
affordable to lower income and very low-income families or
persons in the area that the housing could reasonably be
expected to serve;
(ii) the ability of lower income and very low-income families or persons to find affordable, decent, safe, and sanitary
housing near employment opportunities; or
(iii) the housing opportunities of minorities in the
community within which the housing is located; or
(B) the plan has been approved by the appropriate State
agency and any appropriate local government agency for the
jurisdiction within which the housing is located as being in
accordance with a State strategy approved by the Secretary
under section 226,

PUBLIC LAW 100-242—FEB. 5, 1988
(b) PLAN OF ACTION INCLUDING INCENTIVES.—The Secretary

101 STAT. 1881
may

approve a plan of action that includes incentives only upon finding
that—
(1) the package of incentives is necessary to provide a fair
return on the investment of the owner;
(2) due diligence has been given to ensuring that the packsige
of incentives is, for the Federal Government, the least costly
alternative that is consistent with the full achievement of the
purposes of this title; and
(3) binding commitments have been made to ensure that—
(A) the housing will be retained as housing affordable for
very low-income families or persons, lower income families
or persons, and moderate income families or persons for the
remaining term of the mortgage;
(B) throughout such period, adequate expenditures will be
made for maintenance and operation of the housing;
(C) current tenants shall not be involuntarily displaced
(except for good cause);
(D) any increase in rent contributions for current tenants
shall be to a level that does not exceed 30 percent of the
adjusted income of the tenant or the fair market rent for
comparable housing under section S(b) of the United States
Housing Act of 1937, whichever is lower;
(E)(i) any resulting increase in rents for current tenants
(except for increases made necessary by increased operating
costs)—
(I) shall be phased in equally over a period of not less
than 3 years, if such increase is 30 percent or more; and
(II) shall be limited to not more than 10 percent per
year if such increase is more than 10 percent but less
than 30 percent; and
(ii) assistance under section 8 of the United States Housing Act of 1937 shall be provided if necessary to mitigate
any adverse affect on current income eligible tenants; and
(F)(i) rents for units becoming available to new tenants
shall be at levels approved by the Secretary that will
ensure, to the extent practicable, that the units will be
available and affordable to the same proportions of very
low-income families or persons, lower income families or
persons, and moderate income families or persons (including families or persons whose incomes are 95 percent or
more of area median income) as resided in the housing as of
January 1,1987; and
(ii) in approving rents under this paragraph, the Secretary shall take into account any additional incentives
provided under this subtitle and shall make provision for
such annual rent adjustments as may be made necessary by
future reasonable increases in operating costs.
SEC. 226. ALTERNATIVE STATE STRATEGY.

(a) CRITERIA FOR APPROVAL.—The Secretary may approve a State
strategy for purposes of section 225(a) only upon finding that it is a
practicable statewide strategy that ensures at a minimum that—
(1) current tenants will not be involuntarily displaced (except
for good cause);

12 USC 1715/

101 STAT. 1882
Minorities.

PUBLIC LAW 100-242—FEB. 5, 1988
(2) housing opportunities for minorities will not be adversely
affected in the communities within which the housing is
located;
(3) any increase in rent for current tenants shall be to a level
that does not exceed 30 percent of the adjusted income of the
tenants or the fair market rent for comparable housing under
section SOt)) of the United States Housing Act of 1937, whichever
is lower, except that any increase not necessitated by increased
operating costs shall be phased in equally over not less than 3
years if such increase exceeds 10 percent;
(4) housing approved under the State strategy will remain
affordable to very low-income, lower income or moderate
income families and persons for not less than the remaining
term of the original mortgage, if the housing is to be made
available for rental, or for not less than 40 years, if the housing
is to be made available for homeownership;
(5XA) not less than 80 of all units in eligible low income
housing approved under the State strategy shall be retained as
affordable to families or persons meeting the income eligibility
standards for initial occupancy that applies to the housing on
January 1,1987; and
(B) not less than 60 percent of the units in any one project
shall remain available and affordable to such families or persons, within which not less than 20 percent of the units shall
remain available and affordable to very low income families or
persons as determined by the Secretary with adjustments for
smaller and larger families;
(6) expenditures for rehabilitation, maintenance and operation shall be at a level necessary to maintain the housing as
decent, safe and sanitary for the period specified in paragraph
(4);
(7) not less than 25 percent of new assistance required to
maintain low income affordability in accordance with this section shall be provided through State and local actions, such as
tax exempt financing, low-income tax credits. State or local tax
concessions, and other incentives provided by the State or local
governments; and
(8) for each unit of eligible low income housing approved
under the State strategy that is not retained as affordable to
families or persons meeting the income eligibility standards for
initial occupancy on January 1,1987, the State will provide with
State funds 1 additional unit of comparable housing in the same
market area that is available and affordable to such families or
persons, and such units or funds shall be made available before
the Secretary approves the State strategy.
(b) ADDITIONAL REQUIREMENTS.—

(1) The Secretary may not approve a State strategy until the
State has entered into all of the agreements necessary to carry
out the strategy.
(2) Each State strategy shall include any other provision that
the Secretary determines to be necessary to implement an
approved State strategy.
(c) IMPLEMENTATION AGREEMENTS.—The Secretary may enter into
such agreements as are necessary to implement an approved State
strategy, which agreements may include incentives that are authorized in other provisions of this subtitle.

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1883

SEC. 227. TIMETABLE FOR APPROVAL OF PLAN OF ACTION

(a) NOTIFICATION OF DEFICIENCIES.—Not later than 60 days after
receipt of a plan of action, the Secretary shall notify the owner in
writing of any deficiencies that prevent the plan of action from
being approved. If deficiencies are found, such notice shall describe
alternative ways in which the plan could be revised to meet the
criteria for approval

12 u s e 1715/
note.

(bi NOTIFICATION OF APPROVAL.—

(1) IN GENERAL.—Not later than 180 days after receipt of a
plan of action, or such longer period as the owner requests, the
Secretary shall notify the owner in writing whether the plan of
action, including any revisions, is approved. If approval is withheld, the notice shall describe—
(A) the reasons for withholding approval; and
(B) the actions that could be taken to meet the criteria for
approval.
(2) OPPORTUNITY TO REVISE.—The Secretary shall subsequently give the owner a reasonable opportunity to revise the
plan of action and seek approval.
SEC. 228. MODIFICATION OF EXISTING REGULATORY AGREEMENTS.

(a) IN GENERAL.—If a plan of action cannot be approved within
300 days after a plan of action is submitted, the Secretary may, upon
the request of the owner, modify existing regulatory agreements
to—
(1) prevent involuntary displacement of current tenants
(except for good cause);
(2) ensure that adequate expenditures will be made for
maintenance and operation of the housing;
(3) extend any expiring project-based assistance on the housing for the term of the agreement;
(4) permit an increase in the allowable distribution that could
be accommodated by a rise in rents on occupied units to rise to a
level no higher than 30 percent of the adjusted income of the
current tenants, as determined by the Secretary, except that
rents shall not exceed the fair market rent for comparable
housing under section 8(b) of the United States Housing Act of
1937 and any resulting increase in rents for current tenants
shall be phased in equally over a period of no less than 3 years
unless such increase is less than 10 percent; and
(5) ensure that units becoming vacant during the term of the
agreement are made available in accordance with section
225(b)(6)
lb) EXPIRATION.—Agreements entered into under this section shall
expire upon the expiration of the 4-year period beginning on the
date of the enactment of this Act. Upon the expiration of the
agreements, the housing covered by the agreements shall be subject
to any law then affecting low income affordability restrictions.
SEC. 229. CONSULTATIONS WITH OTHER INTERESTED PARTIES.

The Secretary shall confer with any appropriate State or local
government agency to confirm any State or local assistance that is
available to achieve the purposes of this title and shall give consideration to the views of any such agency when making determinations
under section 225 The Secretary shall also confer with appropriate
interested parties that the Secretary believes could assist in the

12 u s e 1715Z
note.

State and local
governments.
12 u s e 1715/
note.

101 STAT. 1884

PUBLIC LAW 100-242—FEB. 5, 1988

development of a plan of action that best achieves the purposes of
this title.
12 u s e 1715/
note-

SEC. 230. RIGHT OF CONVERSION TO ALTERNATIVE PREPAYMENT
SYSTEM.

Any agreement to extend low income affordability restrictions
under section 225(b) shall, for 4 years from the date of the enactment of this Act, provide the owner the right to convert to any
system of incentives and restrictions provided in law during such
period, with such adjustments as the Secretary determines are
appropriate to compensate for the value of any benefits the owner
had received under this title.
SEC. 231. INSURANCE FOR SECOND MORTGAGE FINANCING.

Loans.
Section 241 of the National Housing Act is amended by adding at
12 use 1715Z-6. the end the following new subsection:
"(f)(1) Notwithstanding any other provision of this section, the
Secretary may, upon such terms and conditions as the Secretary
may prescribe, make a commitment to insure and insure equity
loans made by financial institutions approved by the Secretary. For
purposes of this section, the term 'equity loan' means a loan or
advance of credit to the owner of eligible low income housing (as
defined in section 233 of the Emergency Low Income Housing
Preservation Act of 1987) that is made for the purpose of implementing a plan of action approved under such Act.
"(2) To be eligible for insurance under this subsection, an equity
loan shall—
"(A) be limited to an amount equal to 90 percent of the value
of the equity in the project, as determined by the Secretary, and
the Secretary, in making the determination, shall take into
account that rental income for the project may rise within
limits established by section 225(b) of the Emergency
Low Income Housing Preservation Act of 1987;
"(B) have a maturity and provisions for amortization satisfactory to the Secretary, bear interest at such rate as may be
agreed upon by the mortgagor and mortgagee, and be secured in
such manner as the Secretary may require; and
"(C) contain such other terms, conditions, and restrictions as
the Secretary may prescribe, including phased advances of
equity loan proceeds to reflect project rent levels.
"(3) A qualified nonprofit organization or limited equity tenant
cooperative corporation, when purchasing an otherwise eligible
project, may constitute an owner of eligible low income housing for
purposes of receiving a loan insured under this subsection.
"(4) The provisions of subsections (d), (ej, (g), (h), (i), 0*)» (k), (1), and
(n; of section 207 shall be applicable to loans insured under this
section, except that—
"(A) all references to the term 'mortgage' shall be construed
to refer to the term 'loan' as used in this subsection;
"(B) loans involving projects covered by a mortgage insured
under section 236 shall be insured under and shall be the
obligation of the Special Risk Insurance Fund; and
"(C) with respect to any sale under foreclosure of a mortgage
on the project that is senior to the equity loan insured under
this subsection and when the equity loan is secured by a mortg£ige, the Secretary may—
: * i,^ • -;

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1885

"(i) issue regulations providing that, in order to receive
insurance benefits, the insured mortgagee shall either
assign the equity loan to the Secretary or bid the amount
necessary to acquire the project and convey title to the
project to the Secretary, in which case the insurance benefits paid by the Secretary shall include the amount bid by
the mortgagee to satisfy the senior mortgage at the foreclosure sale; and
"(ii) if the equity loan has been assigned to the Secretary,
bid, in addition to amounts authorized under section 207(k),
any sum not in excess of the total unpaid indebtedness
secured by such senior mortgage and the equity loan, plus
taxes, insurance, foreclosure costs, fees, and other expenses.
"(5) A mortgagee approved by the Secretary may not withhold
consent to an equity loan on a property on which that mortgagee
holds a mortgage.".
SEC. 232. REPORT TO CONGRESS.

12 USC 1715/

Not later than 1 year after the date of the enactment of this Act,
the Secretary shall submit to the Congress a report setting forth the
activities carried out under this subtitle. The report shall include a
description of the plans of action approved under subsections (a) and
(b) of section 225 and an analysis of the extent to which the plans
retain housing affordable for very low-income families or persons,
lower income families or persons, and moderate income families or
persons.
SEC. 233. DEFINITIONS.

For purposes of this subtitle:
(1) The term "eligible low income housing" means any housing financed by a loan or mortgage—
(A) that is—
(i) insured or held by the Secretary under section
221(d)(3) of the National Housing Act and assisted
under section 101 of the Housing and Urban Development Act of 1965 or section 8 of the United States
Housing Act of 1937;
(ii) insured or held by the Secretary and bears interest at a rate determined under the proviso of section
221(d)(5) of the National Housing Act;
(iii) insured, assisted, or held by the Secretary under
section 236 of the National Housing Act; or
(iv) held by the Secretary and formerly insured under
a program referred to in clause (i), (ii), or (iii); and
(B) that, under regulation or contract in effect before the
date of the enactment of this Act, is or will within 1 year
become eligible for prepayment without prior approval of
the Secretary.
(2) The term "low income affordability restrictions" means
limits imposed by regulation or regulatory agreement on tenant
rents, rent contributions, or income eligibility in eligible low
income housing.
(3) The terms "lower income families or persons" and "very
low-income families or persons" mean families or persons whose
incomes do not exceed the respective levels established for lower
income families and very low-income families under section
3(b)(2) of the United States Housing Act of 1937.

12 USC 1715/

101 STAT. 1886

PUBLIC LAW 100-242—FEB. 5, 1988
(4) The term "moderate income families or persons" means
families or persons whose incomes are between 80 percent and
95 percent of median income for the area, as determined by the
Secretary with adjustments for smaller and larger families,
(5) The term "owner" means the current or subsequent owner
or owners of eligible low income housing.
(6) The term "Secretary" means the Secretary of Housing and
Urban Development.
(7) The term "termination of low income affordability restrictions" means any elimination or relaxation of low income
affordability restrictions (other than those permitted under an
approved plan of action under section 225(b)).

12 u s e 1715/
note.

12 u s e 1715Z
note.

SEC. 234. REGULATIONS.

The Secretary shall issue final regulations to carry out this
subtitle not later than 60 days after the date of the enactment of
this Act. The Secretary shall provide for the regulations to take
effect not later than 45 days after the date on which the regulations
are issued.
SEC. 235. EFFECTIVE DATE.

The requirements of this subtitle shall apply to any project that is
eligible low income housing on or after November 1,1987.

Subtitle C—Rural Rental Housing
Displacement Prevention
SEC. 241. PREPAYMENT AND REFINANCING PROCEDURES.
42 u s e 1472.
State and local
governments.

Loans.
Contracts.

Section 502(c) of the Housing Act of 1949 is amended by adding at
the end the following new paragraphs:
"(3) NOTICE OF OFFER TO PREPAY.—Not less than 30 days after
receiving an offer to prepay any loan made or insured under section
514 or 515, the Secretary shall provide written notice of the offer or
request to the tenants of the housing and related facilities involved,
to interested nonprofit organizations, and to any appropriate State
and local agencies.
"(4)(A) AGREEMENT BY BORROWER TO EXTEND LOW INCOME USE.—
Before accepting any offer to prepay, or requesting refinancing in
accordance with subsection (b)(3) of, any loan made or insured under
section 514 or 515 pursuant to a contract entered into before December 21, 1979, the Secretary shall make reasonable efforts to enter
into an agreement with the borrower under which the borrower will
make a binding commitment to extend the low income use of the
assisted housing and related facilities involved for not less than the
20-year period beginning on the date on which the agreement is
executed.
"(B) ASSISTANCE AVAILABLE TO BORROWER TO EXTEND LOW INCOME

USE.—To the extent of amounts provided in appropriation Acts, the
agreement under subparagraph (A) may provide for 1 or more of the
following forms of assistance that the Secretary, after taking into
account local market conditions, determines to be necessary to
extend the low income use of the housing and related facilities
involved:
"(i) Increase in the rate of return on investment.

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1887

"(ii) Reduction of the interest rate on the loan through the
provision of interest credits under section 521(aXlXB).
"(iii) Additional rental assistance, or an increase in assistance
provided under existing contracts, under section 521(aX2) or
under section 8 of the United States Housing Act of 1937.
"(iv) An equity loan to the borrower under paragraphs (7) and
(8) of section 515(b).
"(v) Incremental rental assisteince in connection with loans
under clauses (ii) and (iv) to the extent necessary to avoid
increases in the rental pa)mients of current tenants not receiving rental assistance under section 521(a)(2) or under section 8
of the United States Housing Act of 1937.
"(C) APPROVAL OF ASSISTANCE.—The Secretary may approve assistance under subparagraph (B) only if the Secretary determines that
the combination of assistance provided—
"(i) is necessary to provide a fair return on the investment of
the borrower; and
"(ii) is the least costly alternative for the Federal Government that is consistent with carrying out the purposes of this
subsection.
"(5XA) OFFER TO SELL TO NONPROFIT ORGANIZATIONS AND PUBUC

Contracts.

AGENCIES.—

"(i) IN GENERAL.—If the Secretary determines after a reasonable period that an agreement will not be entered into with a
borrower under paragraph (4), the Secretary shall require the
borrower (except as provided in subparagraph (G)) to offer to
sell the assisted housing and related facilities involved to any
qualified nonprofit organization or public agency at a fair
market value determined by 2 independent appraisers, one of
whom shall be selected by the Secretary and one of whom shall
be selected by the borrower. If the 2 appraisers fail to agree on
the fair market value, the Secretary and the borrower shall
jointly select a third appraiser, whose appraisal shall be binding
on the Secretary and the borrower.
"(ii) PERIOD FOR WHICH REQUIREMENT APPLICABLE.—If, upon
the expiration of 180 days after an offer is made to sell housing
and related facilities under clause (i), no qualified nonprofit
organization or public agency has made a bona fide offer to
purchase, the Secretary may accept the offer to prepay, or may
request refinancing in accordance with subsection (bX3) of, the
loan. This clause shall apply only when funds are available for
purposes of carrying out a transfer under this paragraph.
"(B) QUAUFIED N O N P R O F I T ORGANIZATIONS AND PUBUC AGENCIES.—
"(i) LOCAL NONPROFIT ORGANIZATION OR PUBUC AGENCY.—A

local nonprofit organization or public agency may purchase
housing and related facilities under this paragraph only if—
"(I) the organization or agency is determined by the Contracts.
Secretary to be capable of managing the housing and related facilities (either directly or through a contract) for the
remaining useful life of the housing and related facilities;
and
"(II) the organization or agency has entered into an
agreement that obligates it (and successors in interest
thereof) to maintain the housing and related facilities as
affordable for very low-income families or persons and low
income families or persons for the remaining useful life of
the housing and related facilities.

101 STAT. 1888

PUBLIC LAW 100-242—FEB. 5, 1988
"(ii) NATIONAL OR REGIONAL NONPROFIT ORGANIZATION.—If the

Loans.

Loans.

Secretary determines that there is no local nonprofit organization or public agency qualified to purchase the housing and
related facilities involved, the Secretary shall require the
borrower to offer to sell the assisted housing and related facilities to an existing qualified national or regional nonprofit
organization.
"(C) FINANCING OF SALE.—To facilitate the sale described in
subparagraph (A), the Secretary shall—
"(i) to the extent provided in appropriation Acts, make an
advance to the nonprofit organization or public agency whose
offer to purchase is accepted under this paragraph to cover any
direct costs (other than the purchase price) incurred by the
organization or agency in purchasing and assuming responsibility for the housing and related facilities involved;
"(ii) approve the assumption, by the nonprofit organization or
public agency involved, of the loan made or insured under
section 514 or 515;
"(iii) to the extent provided in appropriation Acts, transfer
any rental assistance payments that are received under section
521(a)(2)(A), or under section 8 of the United States Housing Act
of 1937, with respect to the housing and related facilities involved; and
"(iv) to the extent provided in appropriation Acts, provide a
loan under section 515(c)(3) to the nonprofit organization or
public agency whose offer to purchase is accepted under this
paragraph to enable the organization or agency to purchase the
housing and related facilities involved.
"(D) RENT UMITATION AND ASSISTANCE.—The Secretary shall, to
the extent provided in appropriation Acts, provide to each nonprofit
organization or public agency purchasing housing and related facilities under this paragraph financial assistance (in the form of
monthly payments or forgiveness of debt) in an amount necessary to
ensure that the monthly rent payment made by each low income
family or person residing in the housing does not exceed the maximum rent permitted under section 521(aX2)(A).
"(E) RESTRICTION ON SUBSEQUENT TRANSFERS.—Except as provided

in subparagraph (B)(ii), the Secretary may not approve the transfer
of any housing and related facilities purchased under this paragraph during the remaining useful life of the housing and related
facilities, unless the Secretary determines that—
"(i) the transfer will further the provision of housing and
related facilities for low income families or persons; or
"(ii) there is no longer a need for such housing and related
facilities by low income families or persons.
Loans.
Contracts.

"(F) GENERAL RESTRICTION ON PREPAYMENTS AND REFINANCINGS.-—

Following the transfer of the maximum number of dwelling units
set forth in subparagraph (H)(i) in any fiscal year or the maximum
number of dwelling units for which budget authority is available in
any fiscal year, the Secretary may not accept in such fiscal year any
offer to prepay, or request refinancing in accordance with subsection
(b)(3) of, any loan made or insured under section 514 or 515 pursuant
to a contract entered into before December 21, 1979, except in
accordance with subparagraph (G). The limitation established in
this subparagraph shall not apply to an offer to prepay, or request to
refinance, if, following the date on which such offer or request is
made (or following the date of the enactment of the Housing and

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1889

Community Development Act of 1987, whichever occurs later) a 15month period expires during which no budget authority is available
to carry out this paragraph. For purposes of this subparagraph, the
Secretary shall allocate budget authority under this paragraph in
the order in which offers to prepay, or request to refinance, are
made.
"(G) EXCEPTION.—This paragraph shall not apply to any offer to Loans.
prepay, or any request to refinance in accordance with subsection
(b)(3), any loan made or insured under section 514 or 515 pursuant to
a contract entered into before December 21,1979, if—
"(i) the borrower enters into an agreement with the Secretary
that obligates the borrower (and successors in interest
thereof)—
"(I) to utilize the assisted housing and related facilities
for the purposes specified in section 514 or 515, as the case
may be, for a period determined by the Secretary (but not
less than the period described in paragraph (1)(B) calculated
from the date on which the loan is made or insured); and
"(II) upon termination of the period described in paragraph (1)(B), to offer to sell the assisted housing and related
facilities to a qualified nonprofit organization or public
agency in accordance with this paragraph; or
"(ii) the Secretary determines that housing opportunities of
minorities will not be materially affected as a result of the
prepayment or refinancing, and that—
"(I) the borrower (and any successor in interest thereof)
are obligated to ensure that tenants of the housing and
related facilities financed with the loan will not be displaced due to a change in the use of the housing, or to an
increase in rental or other charges, as a result of the
prepayment or refinancing; or
"(II) there is an adequate supply of safe, decent, and
affordable rental housing within the market area of the
housing and related facilities and sufficient actions have
been taken to ensure that the rental housing will be made
available to each tenant upon displacement.
"(H) FUNDING.—
"(i) BUDGET UMITATION.—Not more than 5,000 dwelling units

may be transferred under this paragraph in any fiscal year, and
the budget authority that may be provided under this paragraph for any fiscal year may not exceed the amounts required
to carry out this paragraph with respect to such number.
"(ii) REIMBURSEMENT OF RURAL HOUSING INSURANCE FUND.—

There are authorized to be appropriated to the Rural Housing
Insurance Fund such sums as may be necessary to reimburse
the Fund for financial assistance provided under this paragraph, paragraph (4), and section 517(jX7).
"(I) DEFINITION.—For purposes of this paragraph, the term 'nonprofit organization' means any private organization—
"(i) no part of the net earnings of which inures to the benefit
of any member, founder, contributor, or individual; and
"(ii) that is approved by the Secretary as to financial responsibility.
"(J) REGULATIONS.—Notwithstanding section 534, the Secretary
shall issue final regulations to carry out this paragraph not later
than 60 days after the date of the enactment of the Housing and
Community Development Act of 1987. The Secretary shall provide

101 STAT. 1890

PUBLIC LAW 100-242—FEB. 5, 1988

for the regulations to take effect not later than 45 days after the
date on which the regulations are issued".
SEC. 242. EQUITY RECAPTURE LOANS AND LOANS TO
ORGANIZATIONS AND PUBLIC AGENCIES.

42 use 1485.

42 use 1487.

NONPROFIT

Section 515 of the Housing Act of 1949 is amended—
(1) by redesignating subsections (c) through (p) as subsections
(d) through (q), respectively; and
(2) by inserting after subsection (b) the following:
"(c) With respect to a loan made or insured under subsection (a) or
(b), the Secretary is authorized to—
"(1) make or insure an equity loan in the form of a supplemental loan for the purpose of equity takeout to the owner of
housing financed with a loan made or insured under this section
pursuant to a contract entered into before December 21, 1979,
for the purpose of extending the affordability of the housing for
low income families or persons and very low-income families or
persons for not less than 20 years, except that such loan may
not exceed 90 percent of the value of the equity in the project as
determined by the Secretary;
"(2) transfer and reamortize an existing loan in connection
with assistance provided under paragraph (1); and
"(3) make or insure a loan to enable a nonprofit organization
or public agency to make a purchase described in section
502(c)(5).".
SEC. 243. USE OF RURAL HOUSING INSURANCE FUND.
Section 517(j) of the Housing Act of 1949 is amended—
(1) by striking "and" at the end of paragraph (5);
(2) by striking the period at the end of paragraph (6) and
inserting "; and'; and
(3) by adding at the end the following new paragraph:
"(7) to provide advances and assistance required to carry out
paragraphs (4) and (5) of section 502(c).".

Subtitle D—Other Measures to Preserve Low
Income Housing
I2usei7i5z-15.

42USei437f.
Contracts.

SEC. 261. EARLY PREPAYMENT.
Section 250(a)(1) of the National Housing Act is amended by
striking "or" and all that follows through "needs" the last place it
appears
SEC. 262. SECTION 8 ASSISTANCE.
(a) REQUIRED NOTICE.—Section 8(c) of the United States Housing
Act of 1937 is amended by adding at the end the following new
paragraph:
"(9) Not less than 1 year prior to terminating any contract under
which assistance payments are received under this section (but not
less than 90 days in the case of housing certificates or vouchers
under subsection (b) or (o)), an owner shall provide written notice to
the Secretary and the tenants involved of the proposed termination,
specifying the reasons for the termination with sufficient detail to
enable the Secretary to evaluate whether the termination is lawful
and whether there are additional actions that can be taken by the
Secretary to avoid the termination. The Secretary shall review the

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1891

owner's notice, shall consider whether there are additional actions
that can be taken by the Secretary to avoid the termination, and
shall ensure a proper adjustment of the contract rents for the
project in conformity with the requirements of paragraph (2). The
Secretary shall issue a written finding of the legality of the termination and the reasons for the termination, including the actions
considered or taken to avoid the termination. For purposes of this
paragraph, the term 'termination' means the expiration of the
assistance contract or an owner's refusal to renew the assistance
contract.".
(b) ADJUSTMENT OF ALLOWABLE RENT.—Section 8(c) of the United
States Housing Act of 1937 (as amended by subsection (a) of this
section) is further amended by adding at the end the following new
paragraph:
"(10) If an owner provides notice of proposed termination under
paragraph (9) and the contract rent is lower than the maximum
monthly rent for units assisted under subsection Ot>)(l), the Secretary
shall adjust the contract rent based on the maximum monthly rent
for units assisted under subsection (b)(1) and the value of the lower
income housing after rehabilitation.".
(c) LOAN MANAGEMENT AND PROPERTY DISPOSITION PROGRAMS.—

Contracts.

Contracts.

Section 8 of the United States Housing Act of 1937 (as amended by
section 149 of this Act) is further amended by adding at the end the
following new subsection:
"(vXD Each contract entered into by the Secretary under this
section for loan management assistance shall be for a term of 180
months.
"(2) The Secretary shall extend any expiring contract entered into
under this section for loan management assistance or execute a new
contract, if the owner agrees to continue providing housing for lower
income families during the term of the contract.".
SEC. 263. SECTION 515 OPERATING RESERVE AND EQUITY CONTRIBUTION
REQUIREMENTS.

Section 515 of the Housing Act of 1949 (as amended by section
242) is further amended by adding at the end the following new
subsection:
"(r) The Secretary—
"(1) may require that the initial operating reserve under this
section may be in the form of an irrevocable letter of credit; and
"(2) may not require more than a 3 percent contribution to
equity.".

TITLE III—RURAL HOUSING
SEC. 301. PROGRAM AUTHORIZATIONS.

(a) INSURANCE AND GUARANTEE AUTHORITY.—Section 513(aXl) of
the Housing Act of 1949 is amended to read as follows:
"(aXD The Secretary may, to the extent approved in appropriation
Acts, insure and guarantee loans under this title during fiscal years
1988 and 1989 in aggregate amounts not to exceed $1,775,395,000
and $1,794,925,000, respectively, as follows:
"(A) For insured or guaranteed loans under section 502 on
behalf of borrowers receiving assistance under section 521(aXl)
or receiving guaranteed loans pursuant to section 304 of the
Housing and Community Development Act of 1987,

42 u s e 1483.

101 STAT. 1892

PUBLIC LAW 100-242—FEB. 5, 1988
$1,104,000,000 for fiscal year 1988 and $1,116,144,000 for fiscal
year 1989.
"(B) For loans under section 504, $11,335,000 for fiscal year
1988 and $11,460,000 for fiscal year 1989.
"(C) For insured loans under section 514, $11,485,000 for fiscal
year 1988 and $11,612,000 for fiscal year 1989.
"(D) For insured loans under section 515, $647,000,000 for
fiscal year 1988 and $654,117,000 for fiscal year 1989.
"(E) For loans under section 523(b)(1)(B), $1,000,000 for fiscal
year 1988 and $1,011,000 for fiscal year 1989.
"(F) For site loans under section 524, $575,000 for fiscal year
1988 and $581,000 for fiscal year 1989.".
(b) AUTHORIZATION OF APPROPRIATIONS.—Section 5130t)) of

42 use 1483.

the

Housing Act of 1949 is amended to read as follows:
"(b) There are authorized to be appropriated for fiscal years 1988
and 1989, and to remain available until expended, the following
amounts:
"(1) For grants under section 504, $13,113,000 for fiscal year
1988 and $13,362,000 for fiscal year 1989.
"(2) For purposes of section 509(c), $713,000 for fiscal year
1988 and $727,000 for fiscal year 1989.
"(3) Such sums as may be necessary to meet payments on
notes or other obligations issued by the Secretary under section
511 equal to—
"(A) the aggregate of the contributions made by the
Secretary in the form of credits on principal due on loans
made pursuant to section 503; and
"(B) the interest due on a similar sum represented by
notes or other obligations issued by the Secretary.
"(4) For financial assistance under section 516, $9,979,000 for
fiscal year 1988 and $10,169,000 for fiscal year 1989.
"(5) For grants under section 523(f), $8,392,000 for fiscal year
1988 and $8,551,000 for fiscal year 1989.
"(6) For grants under section 533, $20,078,000 for fiscal year
1988 and $20,460,000 for fiscal year 1989.".
(c) RENTAL ASSISTANCE PAYMENT CONTRACTS.—Section 513(c) of
the Housing Act of 1949 is amended to read as follows:
"(c)(1) The Secretary, to the extent approved in appropriation Acts
for fiscal years 1988 and 1989, may enter into rental assistance
payment contracts under section 521(a)(2)(A) aggregating
$275,310,000 for fiscal year 1988 and $280,000,000 for fiscal year
1989.
"(2) Any authority approved in appropriation Acts for fiscal year
1988 or any succeeding fiscal year for rental assistance payment
contracts under section 521(a)(2)(A) shall be used by the Secretary—
"(A) to renew rental assistance payment contracts that expire
during such fiscal year;
"(B) to provide amounts required to continue rental assistance
payments for the remaining period of an existing contract, in
any case in which the original amount of rental assistance is
used prior to the end of the term of the contract; and
"(C) to make additional rental assistance payment contracts
for existing or newly constructed dwelling units.".
(d) SUPPLEMENTAL RENTAL ASSISTANCE CONTRACTS.—Section 513 of

the Housing Act of 1949 is amended by adding at the end the
following new subsection:

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1893

"(d) The Secretary, to the extent approved in appropriation Acts
for fiscal years 1988 and 1989, may enter into 5-year supplemental
rental assistance contracts under section 502(c)(5XD) aggregating
$26,000,000 for fiscal year 1988 and $27,534,000 for fiscal year 1989.".
(e) RENTAL HOUSING LOAN AUTHORITY.—Section 515(b)(4) of

the

Housing Act of 1949 is amended by striking "March 15, 1988" and
inserting "September 30,1989".

42 u s e 1485.

(f) MUTUAL AND SELF-HELP HOUSING GRANT AND LOAN AUTHOR-

ITY.—Section 523(f) of the Housing Act of 1949 is amended by
striking "March 15, 1988" and inserting "September 30, 1989'\
(g) RURAL HOUSING VOUCHER DEMONSTRATION.—Section 513 of the

42 u s e 1490c.
eontracts.

Housing Act of 1949 (as amended by subsection (d) of this section) is State and local
governments.
further amended by adding at the end the following:
"(e)(1) To such extent or in such amounts as are approved in
appropriation Acts, the Secretary shall carry out a demonstration
rural housing voucher program during fiscal years 1988 and 1989.
For such purpose, the Secretary shall enter into contracts using a
payment standard in accordance with section 8(o) of the United
States Housing Act of 1937 covering up to 7,500 dwelling units
located in rural areas in not more than 5 States during each such
fiscal year.
"(2) The Secretary may use the authority conferred by paragraph
(1) in a State only if the State Farmers Home Administration
Administrator certifies that—
"(A) such Administrator has completed an inventory of the
State's housing supply, including housing suitable for rehabilitation, using currently available data; and
"(B) there is an adequate supply of decent, safe, and sanitary
housing available for occupancy by voucher holders in that
State.
"(3) In carrying out the voucher demonstration program under
this subsection, the Secretary shall coordinate activities under this
subsection with activities assisted under sections 515 and 533 of this
title and under section 17 of the United States Housing Act of 1937.
"(4) Funding for the voucher demonstration program under this
subsection shall be from amounts in the Rural Housing Insurance
Fund authorized for loans under sections 502 and section 515 in
proportion to the amounts authorized for such loans. Any reduction
in the amounts available for such loans shall be made from the total
amounts available for such loans in all States.".
SEC. 302. ELIGIBILITY REQUIREMENTS.

(a) RESIDENT ALIENS.—Section 501 of the Housing Act of 1949 is
amended by adding at the end the following new subsection:
"(h)(1) The Secretary may not restrict the availability of assistance under this title for any alien for whom assistance may not be
restricted by the Secretary of Housing and Urban Development
under section 214 of the Housing and Community Development Act
of 1980.
"(2) In carrying out any restriction established by the Secretary
on the availability of assistance under this title for any alien, the
Secretary shall follow procedures comparable to the procedures
established in section 214 of the Housing and Community Development Act of 1980.".

42 u s e 1471.

(b) INCOME LEVELS.—

(1) Section 501(b)(4) of the Housing Act of 1949 is amended by
adding at the end the following new sentence: "Notwithstand-

Virgin Islands.

101 STAT. 1894

Effective date.
42 u s e 1471
note.

42 u s e 1471.

Loans.
42 u s e 1472
note.

State and local
governments.

PUBLIC LAW 100-242—FEB. 5, 1988

ing the preceding sentence, the maximum income levels established for purposes of this title for such families and persons in
the Virgin Islands shall not be less than the highest such levels
established for purposes of this title for such families and
persons in American Samoa, Guam, the Northern Mariana
Islands, and the Trust Territory of the Pacific Islands.".
(2) The amendment made by paragraph (1) shall be applicable
to any determination of eligibility for assistance under title V of
the Housing Act of 1949 made on or after the date of the
enactment of this Act.
SEC. 303. ESCROWING TAXES AND INSURANCE.
Section 501(e) of the Housing Act of 1949 is amended to read as
follows:
"(e) The Secretary shall establish procedures under which borrowers under this title are required to make periodic payments for the
purpose of taxes, insurance, and other necessary expenses as the
Secretary may deem appropriate. Notwithstanding any other provision of law, such payments shall not be considered public funds. The
Secretary shall direct the disbursement of the funds at the appropriate time or times for the purposes for which the funds were
escrowed. If the prepayments made by the borrower are not sufficient to pay the amount due, advances may be made by the Secretary to pay the costs in full, which advances shall be charged to
the account of the borrower, bear interest, and be payable in a
timely fashion as determined by the Secretary. The Secretary shall
notify a borrower in writing when loan payments are delinquent.".
SEC. 304. RURAL HOUSING GUARANTEED LOAN DEMONSTRATION.
(a) ESTABLISHMENT OF DEMONSTRATION.—The Secretary of Agriculture (referred to in this section as the "Secretary") shall carry
out a rural housing guaranteed loan demonstration program under
which the Secretary shall, to the extent of amounts provided in
appropriation Acts, provide guaranteed loans in accordance with
section 502, section 517(d), and the last sentence of section
521(a)(1)(A), of the Housing Act of 1949.
(b) AMOUNT AVAILABLE FOR DEMONSTRATION.—

(1) There shall be available for guaranteed loans under this
section for any fiscal year in each State an amount equal to
whichever of the following is lower:
(A) 10 percent of the total loan authority allocated under
section 502 of the Housing Act of 1949 to the State for the
fiscal year.
(B) The average, during the preceding 3 fiscal years, of
the funds allocated to the State under section 502 of the
Housing Act of 1949 that have not been utilized.
(2) Any amount made available under this subsection that is
not used before the last 60 days of a fiscal year shall become
available for assistance for low income families or persons
under section 502 of the Housing Act of 1949.
(c) ELIGIBILITY FOR LOANS.—Loans guaranteed pursuant to this
section shall be made only to borrowers with moderate incomes that
do not exceed the median income of the area, as determined by the
Secretary, with adjustments for smaller and larger families.
(d) REPORTS TO CONGRESS.—The Secretary shall submit to the
Congress—

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1895

(1) as soon as practicable after September 30, 1989, an interim
report setting forth the findings and recommendations of the
Secretary as a result of the demonstration; and
(2) £is soon as practicable after September 30, 1991, a final
report setting forth the findings and recommendations of the
Secretary as a result of the demonstration.
(e) TERMINATION.—The Secretary may not provide any guaranteed
loan under this section after September 30, 1991, except pursuant to
a commitment entered into on or before such date.
SEC. 305. DEFINITION OF DOMESTIC FARM LABOR.

(a) INSURED LOAN PROGRAM.—Section 514(f)(3) of the Housing Act

of 1949 is amended to read as follows:
42 USC 1484.
"(3) the term 'domestic farm labor' means any person (and the
family of such person) who receives a substantial portion of his
or her income from primary production of agricultural or
aquacultural commodities or the handling of such commodities
in the unprocessed stage, without respect to the source of
employment, except that—
"(A) such person shall be a citizen of the United States or
a person legally admitted for permanent residence;
"(B) such term includes any person (and the family of
such person) who is retired or disabled, but who was domestic farm labor at the time of retirement or becoming disabled; and
"(C) in applying this paragraph with respect to vacant
units in farm labor housing, the Secretary shall make units
available for occupancy in the following order of priority:
"(i) to active farm laborers (and their families);
"(ii) to retired or disabled farm laborers (and their
families) who were active in the local farm labor
market at the time of retiring or becoming disabled;
and
"(iii) to other retired or disabled farm laborers (and
their families).".
(b) GRANT PROGRAM.—Section 516(g) of the Housing Act of 1949 is 42 USC i486.
amended—
(1) by striking "and" at the end of paragraph (2);
(2) by striking the period at the end of paragraph (3) and
inserting "; and'; and
(3) by adding at the end the following new paragraph:
"(4) the term 'domestic farm labor' has the meaning given
such term in section 514(fK3).".
SEC. 306. CONFORMANCE WITH LOW-INCOME HOUSING TAX CREDIT
ELIGIBILITY REQUIREMENTS.

Section 515(p) of the Housing Act of 1949 (as so redesignated by
section 242 of this Act) is amended by adding at the end the
following:
"(4) In projects financed under this section, units that have been
allocated a low-income housing tax credit by a housing credit agency
pursuant to section 42 of the Internal Revenue Code of 1986 shall
not be available for occupancy by persons or families other than
persons or families with incomes not in excess of the qualifying
income applicable to such units pursuant to subparagraph (A) or (B)
of section 42(gXl) of such Code, except when the Secretary determines that the continued vacancy of units that have been unoccu-

101 STAT. 1896

PUBLIC LAW 100-242—FEB. 5, 1988

pied for at least 6 months threatens the financial viability of the
project.".
SEC. 307. LIMITATION OF FEES ON RURAL RENTAL HOUSING LOANS.

Section 515 of the Housing Act of 1949 (as amended by section 263
of this Act) is further amended by adding at the end the following
new subsection:
"(s) No fee other than a late fee may be imposed by or for the
Secretary or any other Federal agency on or with respect to a loan
made or insured under this section.".
SEC. 308. RURAL AREA CLASSIFICATION.
42 u s e 1490.

(a) HOLD HARMLESS.—Section 520 of the Housing Act of 1949

is

amended by striking "March 15, 1988" in the last sentence and
inserting "September 30,1989".
California.

(b) ELIGIBIUTY OF RURAL AREA PROXIMATE TO URBAN AREA.—

Section 520 of the Housing Act of 1949 is amended in the first
sentence by inserting before "part of or associated with" the following: "(except in the case of Pajaro, in the State of California)".
SEC. 309. PROCEDURES FOR REDUCTION OF INTEREST CREDITS.
Loans.
42 u s e 1490a.

42 u s e 1490m.
Regulations.

Section 521(a)(1)(B) of the Housing Act of 1949 is amended by
adding at the end the following new sentence: "In the case of
assistance provided under this subparagraph with respect to a loan
under section 502, the Secretary may not reduce, cancel, or refuse to
renew the assistance due to an increase in the adjusted income of
the borrower if the reduction, cancellation, or nonrenewal will cause
the borrower to be unable to reasonably afford the resulting payments required under the loan.".
SEC. 310. RURAL HOUSING PRESERVATION GRANT PROGRAM.
Section 533(h) of the Housing Act of 1949 is amended—
(1) by inserting "(1)" after the subsection designation; and
(2) by adding at the end the following new paragraph:
"(2) The Secretary shall, not later than the expiration of the 30day period following the date of the enactment of the Housing and
Community Development Act of 1987 issue regulations to carry out
the program of grants under subsection (a)(2).".
SEC. 3 n . RURAL RENTAL REHABILITATION DEMONSTRATION.

42 u s e 1490m
note.

Grants.

(a) ESTABLISHMENT OF DEMONSTRATION.—The Secretary of Housing and Urban Development (referred to in this section as the
"Secretary") shall carry out a rural rental rehabilitation demonstration program in accordance with this section.
(b) AVAILABILITY OF AMOUNTS.—For purposes of the demonstration program, any rental rehabilitation grant amount provided to a
State under section 17 of the United States Housing Act of 1937 that
is unutilized from any prior fiscal year shall be available for use in
areas eligible for assistance under title V of the Housing Act of 1949.
(c) REPORT TO CONGRESS.—The Secretary shall submit to the Congress as soon as practicable after September 30, 1989, a report
setting forth the findings and recommendations of the Secretary as
a result of the demonstration program. The report shall include an
evaluation of the following:
(1) The effectiveness of the program in meeting the need for
the rehabilitation of rental housing in rural areas.
(2) The extent of participation by the owners of rental properties in the program.

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1897

(3) The cost of the program,
(d) TERMINATION.—The authority provided in this section shall
terminate after September 30, 1989.
SEC. 312. STUDY OF MORTGAGE CREDIT IN RURAL AREAS.

The Secretary of Housing and Urban Development shall conduct a
study of the availability and use of funds (including mortgages and
loans insured under title II of the National Housing Act, loans made
or insured under title V of the Housing Act of 1949, and conventional mortgages and loans) for the purchase and improvement of
residential real property in rural areas, particularly in communities
that have populations of not more than 2,500 individuals. Not later
than April 1, 1988, the Secretary shall submit to the Congress a
detailed report setting forth the findings of the Secretary as a result
of the study.
SEC. 313. DEBT SETTLEMENT AUTHORITY OF SECRETARY.

Section 510(c) of the Housing Act of 1949 is amended to read as
follows:
"(c) compromise, adjust, reduce, or charge-off claims, and
adjust, modify, subordinate, or release the terms of security
instruments, leases, contracts, and agreements entered into or
administered by the Secretary under this title, as circumstances
may require, including the release of borrowers or others obligated on a debt from personal liability with or without payment
of any consideration at the time of the compromise, adjustment,
reduction, or charge-off of any claim;".

Loans.

Reports.

Claims.
Contracts.
42 u s e 1480.

SEC. 314. MANUFACTURED HOUSING.

Loans.

Section 502(e) of the Housing Act of 1949 is amended by adding at
the end the following:
"(3) A loan that may be made or insured under this section with
respect to a manufactured home on a permanent foundation, or a
manufactured home on a permanent foundation and a lot, shall be
repayable over the same period as would be applicable under section
203(b) of the National Housing Act.".

42 USC 1472.

SEC. 315. LOAN PACKAGING BY NONPROFIT ORGANIZATIONS.

Grants.

Section 501 of the Housing Act of 1949 (as amended by section 302
of this Act) is further amended by adding at the end the following
new subsection:
"(i) For the purposes of this title, the term 'development cost' shall
include the packaging of loan and grant applications and actions
related thereto by public and private nonprofit organizations tax
exempt under the Internal Revenue Code of 1986.".
SEC. 316. RURAL HOUSING TECHNICAL AMENDMENTS.

(a) DEFINITIONS.—Section 5010t>)(3) of the Housing Act of 1949 is
amended by striking "is a developmentally disabled individual as
defined in section 102(7) of the Development Disabilities Services
and Facilities Construction Act" and inserting the following: "has a
developmental disability as defined in section 102(7) of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C.
6001(7))".
Ot)) FARM LABOR HOUSING.—Section 514(fKl) of the Housing Act of

1949 is amended by striking "and" at the end.

42 USC 1484.

PUBLIC LAW 100-242—FEB, 5, 1988

101 STAT. 1898

(c) HOUSING FOR ELDERLY FAMILIES.—Section 515(p)(l) of the Housing Act of 1949 (as so redesignated by section 242 of this Act) is
amended by striking "effective",
(d) LOANS TO LOW- AND MODERATE-INCOME FAMILIES.—Section
42 u s e 1490a.

42 u s e 1490b.
42 u s e 1490f.

521(a) of the Housing Act of 1949 is amended—
(1) in paragraph (IXA), by striking ", except" and all that
follows through "charges"; and
(2) in paragraph (2)(A), by striking "; or" and inserting ", or".
(e) HOUSING FOR RURAL TRAINEES.—Section 522(a) of the Housing
Act of 1949 is amended by striking the comma after "Health".
(f) CONDOMINIUM HOUSING.—

(1) Section 526(a) of the Housing Act of 1949 is amended by
striking "and" the first place it appears.
(2) Section 526(c) of the Housing Act of 1949 is amended by
striking "and" the first place it appears.
(g) HOUSING PRESERVATION GRANTS.—
42 u s e 1490m.

(1) Section 533(eXl)(B)(iii) of the Housing Act of 1949 is amended by inserting "to" before "refuse".
(2) Section 533(g) of the Housing Act of 1949 is amended by
striking "persons of low income and very low-income" and
inserting "low income families or persons and very low-income
families or persons".

TITLE IV—MORTGAGE INSURANCE AND
SECONDARY MORTGAGE MARKET PROGRAMS
Subtitle A—FHA Mortgage Insurance
Programs
SEC. 401. INSURANCE AUTHORITY FOR FHA.

12 use I715h.
12 u s e 1715/.

12 use 1715Z-9.
12USei715z-10.
12 use I748h-l.
12 use 1748h-2.
12 use I749bb.
12 use I749aaa.
12 use 1703.

(a) REPEALS.—Each of the following provisions of law is repealed:
(1) Section 217 of the National Housing Act.
(2) The fifth sentence of section 221(f) of the National Housing
Act.

(3) Section 244(d), and the last sentence of section 244(h), of
the National Housing Act.
(4) The last sentence of section 245(a) of the National Housing
Act.
(5) The second sentence of section 809(f) of the National
Housing Act.
(6) The second sentence of section 81(Kk) of the National
Housing Act.
(7) The second sentence of section 1002(a) of the National Housing Act.
(8) The second sentence of section 1101(a) of the National
Housing Act.
(b) AMENDMENT.—The first sentence of section 2(a) of the National
Housing Act is amended by striking "and not later than March 15,
1988,".
(c) EXTENSION OF SECTION 235.—The last sentence of section
235(hXl), section 235(m), and the last sentence of section 235(qXl), of

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1899

the National Housing Act are each amended by striking out 12 u s e 1715z.
"March 15,1988" and inserting in lieu thereof "September 30,1989".
12 u s e 1715z
(d) TERMINATION OF SECTION 235.—
(1) IN GENERAL.—Effective on October 1, 1989, the program note.
under section 235 of the National Housing Act shall terminate.
(2) SAVINGS PROVISION.—The provisions of paragraph (1) shall
not affect—
(A) any mortgage insurance commitment issued; or
(B) any assistance pursuant to a reservation of funds
made;
under section 235 of the National Housing Act prior to October 1, 1989.
SEC. 402. AMOUNT TO BE INSURED UNDER NATIONAL HOUSING ACT.

Section 531 of the National Housing Act is amended—
12 u s e 1735f-9.
(1) by inserting "(a)" after "SEC. 531."; and
(2) by adding at the end thereof the following:
"(b) Notwithstanding any other provision of law and subject only
to the absence of qualified requests for insurance, to the authority
provided in this Act, and to the limitation in subsection (a), the
Secretary shall enter into commitments to insure mortgages under
this Act with an aggregate principal amount of $100,000,000,000
during fiscal year 1988, and $104,000,000,000 during fiscal year
1989.".
SEC. 403. LIMITATION ON FEDERAL HOUSING ADMINISTRATION INSURANCE PREMIUMS.

Section 203(c) of the National Housing Act is amended by adding
at the end the following new sentence: "In the case of any mortgage
secured by a 1- to 4-family dwelling, the total premium charge shall
not exceed an amount equal to 3.8 percent of the original principal
obligation of the mortgage if the Secretary requires (1) a single
premium charge to cover the total premium obligation of the insurance of the mortgage; or (2) a periodic premium charge over less
than the term of the mortgage.".

12 u s e 1709.

SEC. 404. INCREASE IN MAXIMUM MORTGAGE AMOUNT UNDER SINGLE
FAMILY INSURANCE PROGRAM.

Section 2O30t))(2)(A) of the National Housing Act is amended by
striking "133 Vs per centum" and inserting "150 percent".
SEC. 405. CHANGE IN DEFINITION OF VETERAN.

The National Housing Act is amended—
(1) by inserting before the period at the end of the first
undesignated paragraph of section 2030oX3)(2) the following: ",
except that persons enlisting in the armed forces after September 7, 1980, or entering active duty after October 16, 1981, shall
have their eligibility determined in accordance with section
3103A(d) of title 38, United States Code"; and
(2) by inserting before the semicolon at the end of section
220(d)(3XAXi) the following: ", except that persons enlisting in
the armed forces after September 7, 1980, or entering active
duty after October 16, 1981, shall have their eligibility determined in accordance with section 3103A(d) of title 38, United
States Code".

12 u s e 1715k.

101 STAT. 1900

PUBLIC LAW 100-242—FEB. 5, 1988

SEC. 406. LIMITATION ON USE OF SINGLE FAMILY MORTGAGE INSURANCE BY INVESTORS.

12 use 1709.

(a) IN GENERAL.—Section 203 of the National Housing Act is
amended by inserting the following new subsection before subsection (h):
"(g)(1) The Secretary may insure a mortgage under this title that
is secured by a 1- to 4-family dwelling, or approve a substitute
mortgagor with respect to any such mortgage, only if the mortgagor
is to occupy the dwelling as his or her principal residence or as a
secondary residence, as determined by the Secretary.
"(2) The occupancy requirement established in paragraph (1) shall
apply only if the mortgage involves a principal obligation that
exceeds, as appropriate, 75 percent of—
"(A) the appraised value of the dwelling;
"(B) the estimate of the Secretary of the replacement cost of
the property;
"(C) the sum of the estimates of the Secretary of the cost of
repair and rehabilitation and the value of the property before
repair and rehabilitation; or
"(D) the sum of the estimates of the Secretary of the cost of
repair and rehabilitation and the amount (as determined by the
Secretary) required to refinance existing indebtedness secured
by the property, and, in the case of a property refinanced under
section 220(dX3)(A), any existing indebtedness incurred in
connection with improving, repairing, or rehabilitating the
property.
"(3) The occupancy requirement established in paragraph (1) shall
not apply to any mortgagor (or co-mortgagor, as appropriate) that
is—
"(A) a public entity, £is provided in section 214 or 247;
"(B) a private nonprofit or public entity, as provided in section
221(h) or 235(j);
"(C) an Indian tribe, as provided in section 248;
"(D) a serviceperson who is unable to meet such requirement
because of his or her duty eissignment, as provided in section 216
or subsection (b)(4) or (f) of section 222; or
"(E) a mortgagor or co-mortgagor under subsection (k).
"(4) For purposes of this subsection, the term 'substitute mortgagor' means a person who, upon the release by a mortgagee of a
previous mortgagor from personal liability on the mortgage note,
assumes such liability and agrees to pay the mortgage debt.".
(b) CONFORMING AMENDMENTS.—

(1) Section 203(bX2) of the National Housing Act is amended—
(A) in the first sentence, by striking "(whether" and all
that follows through "purposes)"; and
(B) in the second sentence, by striking the following: "to
be occupied as a principal residence of the owner".
(2) Section 203(b) of the National Housing Act is amended by
striking paragraph (8).
(3) Section 203(h) of the National Housing Act is amended by
striking "is the owner and occupant and".
(4) Section 203(i) of the National Housing Act is amended—
(A) by striking the first proviso; and
(B) by striking "further' the first place it appears.
(5) The first sentence of section 203(oX2) of the National
Housing Act is amended by striking "occupant".

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1901

(6) The first sentence of section 203(p)(2) of the National
Housing Act is amended by striking "owner-occupant" and
inserting "owner".
(7) The fourth sentence of section 214 of the National Housing
Act is amended by striking the following: "shall be the owner
and occupant of the property or".
(8) Section 216 of the National Housing Act is amended—
(A) by striking "that the mortgagor be the occupant" and
inserting "with respect to the occupancy of the mortgagor";
and
(B) by striking "occupy the property" each place it appears and inserting "meet such requirement".
(9) Section 220(d)(3XA) of the National Housing Act is
amended—
(A) by inserting "and" at the end of clause (i);
(B) by striking clauses (ii) and (iii);
(C) in clause (iv), by striking the following: "(except as
provided in clause (iii))"; and
(D) by redesignating clause (iv) as clause (ii).
(10) Section 221(dX2) of the National Housing Act is
amended—
(A) by striking the colon at the end of subparagraph
(A)(iv) and all that follows through "Provided further,
That" the first place it appears, and inserting ", except
that";
(B) by striking "Provided, That (i)" and all that follows
through "(1) i n ' and inserting the following: "Provided,
That (i)(l) in";
(C) by striking the penultimate proviso; and
(D) in the last proviso, by striking the following: ", if the
mortgagor is the owner and an occupant of the property
such' and inserting "the".
(11) Section 221(dX6)(ii) of the National Housing Act is
amended by striking the following: "is an owner-occupant of the
property and".
(12) The first sentence of section 221(hX6) of the National
Housing Act is amended by striking "and occupied".
(13) Section 221(hX8) of the National Housing Act is amended
by striking the following: "if one of the units is to be occupied by
the owner'.
(14) Subsections (bX4) and (f) of section 222 of the National
Housing Act are amended by inserting "as a principal residence" after "occupies the property" each place it appears.
(15) Section 223(a) of the National Housing Act is amended by
inserting after "this Act," the first place it appears the following: "other than the limitation in section 203(g),".
(16) The first sentence of section 223(e) of the National Housing Act is amended by inserting after "title XI," the following:
"other than the limitation in section 203(g),".
(17) Section 234(c) of the National Housing Act is amended by
striking the fourth sentence.
(18) Section 235(iX3XA) of the National Housing Act is amended by striking the following: "one of the units of which is to be
occupied by the owner and'.
(19) Section 235(jX6) of the National Housing Act is amended
by striking the following: "if one of the units is to be occupied by
the owner'.

12 u s e 1709.
12 u s e 1715d.
12 u s e 1715g.

12 u s e 1715k.

12 u s e 1715Z.

12 u s e 1715m.
12 u s e 1715n.

12 u s e 1715y.
12 u s e 1715z.

101 STAT. 1902

PUBLIC LAW 100-242—FEB. 5, 1988
(c) REPEAL OF VACATION AND SEASONAL HOME INSURANCE PRO-

12 u s e 1709.
12 u s e 1709
note.

12 u s e 1709
note.

GRAM.—Section 203 of the National Housing Act is amended by
striking subsection (m).
(d) APPLICABILITY.—The amendments made by this section shall
apply only with respect to—
(1) mortgages insured—
(A) pursuant to a conditional commitment issued on or
after the date of the enactment of this Act; or
(B) in accordance with the direct endorsement program
(24 CFR 200.163), if the approved underwriter of the mortgagee signs the appraisal report for the property on or after
the date of the enactment of this Act; and
(2) the approval of substitute mortgagors, referred to in the
amendment made by subsection (a), if the original mortgagor
was subject to such amendment.
(e) TRANSITION PROVISIONS.—Any mortgage insurance provided

under title II of the National Housing Act, as it existed immediately
before the date of the enactment of this Act, shall continue to be
governed (to the extent applicable) by the provisions specified in
subsections (a) through (c), as such provisions existed immediately
before such date.
SEC. 407. ACTIONS TO REDUCE LOSSES UNDER SINGLE FAMILY MORTGAGE INSURANCE PROGRAM.
(a) IN GENERAL.—
(1) AMENDMENT TO SECTION 203.—Section 203 of the National

12 u s e 1709
note.

12 u s e 1709
note.

Housing Act is amended by adding at the end the following new
subsection:
"(r) The Secretary shall take appropriate actions to reduce losses
under the mortgage insurance program carried out under this section. Such actions shall include—
"(1) an annual review by the Secretary of the rate of early
serious defaults and claims, in accordance with section 533;
"(2) requiring reviews of the credit standing of each person
seeking to assume a mortgage insured under this section (A)
during the 12-month period following the date on which the
mortgage is endorsed for insurance, or (B) during the 24-month
period following the date on which the mortgage is endorsed for
insurance in the case of an investor originated mortgage; and
"(3) in any case where a mortgage is assumed after the period
specified in paragraph (2), requiring that the original mortgagor
be advised of the procedures by which he or she may be released
from liability.
In any case where the homeowner does not request a release from
liability, the purchaser and the homeowner shall have joint and
several liability for any default for a period of 5 years following the
date of the assumption. After the close of such 5-year period, only
the purchaser shall be liable for any default on the mortgage unless
the mortgage is in default at the time of the expiration of the 5-year
period.".
(2) EFFECTIVE DATE.—The amendment made by paragraph (1)
shall apply to mortgages endorsed for issuance on or after
December 1,1986.
(b) REPORTS BY MORTGAGEES.—Title V of the National Housing Act

is amended by adding at the end thereof the following new section:

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1903

DIRECTION TO THE SECRETARY TO REQUIRE MORTGAGEES WITH ABOVE
NORMAL RATES OF EARLY, SERIOUS DEFAULTS AND CLAIMS TO SUBMIT
REPORTS AND TAKE CORRECTIVE ACTION

"SEC. 533. (a) To reduce losses in connection with mortgage insur- 12USC I735f-ll.
ance programs under this Act, the Secretary shall review, at least
once a year, the rate of early serious defaults and claims involving
mortgagees approved under this Act. On the basis of this review, the
Secretary shall notify each mortgagee which, as determined by the
Secretary, had a rate of early serious defaults and claims during
the preceding year which was higher than the normal rate for the
geographic area or areas in which that mortgagee does business. In
the notification, the Secretary shall require each mortgagee to
submit a report, within a time determined by the Secretary, containing the mortgagee's (1) explanation for the above normal rate of
early serious defaults and claims; (2) plan for corrective action, if
applicable, both with regard to (A) mortgages in default; and (B) its
mortgage-processing system in general; and (3) a timeframe within
which this corrective action will be begun and completed. If the
Secretary does not agree with this timeframe or plan, a mutually
agreeable timeframe and plan will be determined.
"(b) Failure of the mortgagee to submit a report required under
subsection (a) within the time determined by the Secretary or to
commence or complete the plan for corrective action within the
timeframe agreed upon by the Secretary may be cause for suspension of the mortgagee from participation in programs under this
Act.".
SEC. 408. INSURANCE OF GRADUATED PAYMENT MORTGAGES.

(a) AUTHORITY TO INSURE REFINANCING.—Section 223(a)(7) of the

National Housing Act is amended in the first proviso by inserting 12 USC I7l5n.
after "except that" the following: "(A) the principal amount of any
such refinancing mortgage may equal the outstanding balance of an
existing mortgage insured pursuant to section 245, if the amount of
the monthly payment due under the refinancing mortgage is less
than that due under the existing mortgage for the month in which
the refinancing mortgage is executed; and (B)".
(b) TERMINATION OF AUTHORITY TO INSURE.—Section 245(b) of the
National Housing Act is amended by adding at the end the following 12 USC I7l5z-10.
new sentence: "No loan or mortgage may be insured under this
subsection after the date of the enactment of the Housing and
Community Development Act of 1987, except pursuant to a commitment to insure entered into on or before such date.".
SEC. 409. REFINANCING MORTGAGE INSURANCE FOR HOSPITALS, NURSING HOMES, INTERMEDIATE CARE FACILITIES, AND BOARD
AND CARE HOMES.

(a) STATE CERTIFICATION REQUIREMENT.—Section 223(f)(4)(D) of the
National Housing Act is amended to read as follows:
"(D) the applicable requirements for certificates, studies, and
statements of section 232 (for the existing nursing home, intermediate care facility, board and care home, or any combination
thereof, proposed to be refinanced) or of section 242 (for the
existing hospital proposed to be refinanced) have been met.".
(b) REFINANCING INSURANCE FOR NURSING HOMES, INTERMEDIATE
CARE FACILITIES, AND BOARD AND CARE HOMES.—Section 223(f) of the

National Housing Act is amended—

101 STAT. 1904

12 u s e 1715n
note.

PUBLIC LAW 100-242—FEB. 5, 1988

(1) in paragraph (1), by inserting after "existing hospital" the
following: "(or existing nursing home, existing intermediate
care facility, existing board and care home, or any combination
thereof)"; and
(2) in paragraph (4) (other than in subparagraph (D)), by
inserting after "existing hospital" each place it appears the
following: "(or existing nursing home, existing intermediate
care facility, existing board and care home, or any combination
thereof)".
(c) REGULATIONS.—The Secretary of Housing and Urban Development shall issue such regulations as may be necessary to carry out
the amendment made by this section by not later than the expiration of the 90-day period following the date of the enactment of this
Act.
SEC. 410. MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE
CARE FACILITIES, AND BOARD AND CARE HOMES.
(a) INSURANCE FOR PUBUC NURSING HOMES.—Section 232(b)(1) of

12 u s e 1715w.

the National Housing Act is amended by inserting "public facility,"
before "proprietary".
(b) REQUIREMENT OF STATE APPROVAL.—Section 232(d)(4)(A) of the

12 u s e 1715w
note.

National Housing Act is amended by inserting at the end the
following new sentences: "If no such State agency exists, or if the
State agency exists but is not empowered to provide a certification
that there is a need for the home or facility or combined home and
facility as required in clause (i) of the first sentence, the Secretary
shall not insure any mortgage under this section unless (i) the State
in which the home or facility or combined home and facility is
located has conducted or commissioned and paid for the preparation
of an independent study of market need and feasibility that (I) is
prepared in accordance with the principles established by the American Institute of Certified Public Accountants; (II) assesses, on a
marketwide basis, the impact of the proposed home or facility or
combined home and facility on, and its relationship to, other health
care facilities and services, the percentage of excess beds, demographic projections, alternative health care delivery systems, and
the reimbursement structure of the home, facility, or combined
home and facility; (III) is addressed to and is acceptable to the
Secretary in form and substance; and (IV) in the event the State
does not prepare the study, is prepared by a financial consultant
who is selected by the State or the applicant for mortgage insurance
and is approved by the Secretary; and (ii) the State complies with
the other provisions of this subparagraph that would otherwise be
required to be met by a State agency designated in accordance with
section 604(aXl) or section 1521 of the Public Health Service Act.
The proposed mortgagor may reimburse the State for the cost of the
independent feasibility study required in the preceding sentence. In
the CEise of a small intermediate care facility for the mentally
retarded or developmentally disabled, or a board and care home
housing less than 10 individuals, the State program agency or
agencies responsible for licensing, certifying, financing, or monitoring the facility or home may, in lieu of the requirements of clause (i)
of the third sentence, provide the Secretary with written support
identifying the need for the facility or home.'.
(c) REGULATIONS.—The Secretary of Housing and Urban Development shall issue such regulations as may be necessary to carry out
the amendments made by this section by not later than the expira-

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1905

tion of the 90-day period following the date of the enactment of this
Act.
SEC. 411. REQUIREMENT OF STATE APPROVAL FOR MORTGAGE INSURANCE FOR HOSPITALS.

(a) IN GENERAL.—Section 242(d)(4) of the National Housing Act is 12 u s e 1715Z-7.
amended by inserting at the end the following new sentences: "If no
such State agency exists, or if the State agency exists but is not
empowered to provide a certification that there is a need for the
hospital as set forth in clause (A) of the first sentence, the Secretary
shall not insure any mortgage under this section unless (A) the State
in which the hospital is located has conducted or commissioned and
paid for the preparation of an independent study of market need
and feasibility that (i) is prepared in accordance with the principles
established by the American Institute of Certified Public Accountants; (ii) assesses, on a marketwide basis, the impact of the proposed
hospital on, and its relationship to, other health care facilities and
services, the percentage of excess beds, demographic projections,
alternative health care delivery systems, and the reimbursement
structure of the hospital; (iii) is addressed to and is acceptable to the
Secretary in form and substance; and (iv) in the event the State does
not prepare the study, is prepared by a financial consultant selected
by the State and approved by the Secretary; and (B) the State
complies with the other provisions of this paragraph that would
otnerwise be required to be met by a State agency designated in
accordance with section 604(a)(1) or section 1521 of the Public
Health Service Act. The proposed mortgagor may reimburse the
State for the cost of the independent feasibility study required in the
preceding sentence.".
(b) REGULATIONS.—The Secretary of Housing and Urban Develop- 12 u s e 1715Z-7
ment shall issue such regulations as may be necessary to carry out note.
the amendment made by this section by not later than the expiration of the 90-day period following the date of the enactment of this
Act.
SEC. 412. MORTGAGE INSURANCE FOR PUBLIC HOSPITALS.
(a) ELIMINATION OF ADDITIONAL COLLATERAL REQUIREMENTS FOR

PUBLIC HOSPITALS.—Section 242(a) of the National Housing Act is
amended by adding at the end the following: "Such assistance shall
be provided regardless of the amount of public financial or other
support a hospital may receive, and the Secretary shall neither
require additional security or collateral to guarantee such support,
nor impose more stringent eligibility or other requirements on
publicly owned or supported hospitals.".
(b) CREDIT FOR EXISTING EQUIPMENT AND IMPROVEMENTS.—Section

242(d)(2) of the National Housing Act is amended by striking the
matter preceding subparagraph (A) and inserting the following:
"(2) The mortgage shall involve a principal obligation in the
amount requested by the mortgagor if such amount does not exceed
90 percent of the estimated replacement cost of the property or
project including—".
(c) CONTINUED USE OF LETTERS OF CREDIT.—Section 242(d) of the
National Housing Act is amended by adding at the end the following
new paragraph:
"(6) To the extent that a private nonprofit or public facility
mortgagor is required by the Secretary to provide cash equity in
excess of the amount of the mortgage to complete the project, the

101 STAT. 1906

PUBLIC LAW 100-242—FEB. 5, 1988

mortgagor shall be entitled, at the option of the mortgagee, to fund
the excess with a letter of credit. In such event, mortgage proceeds
may be advanced to the mortgagor prior to any demand being made
on the letter of credit.".
(d)

12 use 1715Z-7.

IMMEDIATE PROCESSING OF APPLICATIONS FOR PUBLIC HOS-

PiTALS.—Section 242(f) of the National Housing Act is amended by
adding at the end the following: "The Secretary shall begin immediately to process applications of public facilities for mortgage insurance under this section in accordance with regulations, guidelines,
and procedures applicable to facilities of private nonprofit corporations and associations.".
(e) REPORT ON INSURANCE UNDER SECTION 242.—The Comptroller
General of the United States shall conduct a study of the long-term
financial exposure of the Federal Government under the mortgage
insurance program pursuant to section 242 of the National Housing
Act. Not later than October 1, 1988, the Comptroller General of the
United States shall transmit to the Congress a report setting forth
the results of such study, including documentation of the long-term
financial exposure determined in the course of such study and
recommendations for such legislation as the Comptroller General
deems appropriate.
SEC. 413. MORTGAGE INSURANCE ON HAWAIIAN HOME LANDS AND
INDIAN RESERVATIONS.
(a) APPLICABILITY OF MORTGAGE INSURANCE ON HAWAIIAN HOME

12 use 1715Z-12.

LANDS.—Section 247(c)(1) of the National Housing Act is amended
by inserting before the period at the end the following: "(or, in the
case of an individual who succeeds a spouse or parent in an interest
in a lease of Hawaiian home lands, such lower percentage as may be
established for such succession under section 209 of the Hawaiian
Homes Commission Act, 1920, or under the corresponding provision
of the Constitution of the State of Hawaii adopted under section 4 of
the Act entitled 'An Act to provide for the admission of the State of
Hawaii into the Union', approved March 18, 1959 (73 Stat. 5))".
Oa) MORTGAGE INSURANCE ON HAWAIIAN HOME LANDS AS OBUGATIONS OF GENERAL INSURANCE FUND.—Section 247 of the National

Housing Act is amended—
(1) by redesignating subsection (c) as subsection (d); and
(2) by inserting after subsection (b) the following new subsection:
"(c) Notwithstanding any other provision of this Act, the insurance of a mortgage using the authority contained in this section
shall be the obligation of the General Insurance Fund established in
section 519. The mortgagee shall be eligible to receive the benefits of
insurance as provided in section 204 with respect to mortgages
insured pursuant to this section, except that (1) all references in
section 204 to the Mutual Mortgage Insurance Fund or the Fund
shall be construed to refer to the General Insurance Fund; and (2)
all references in section 204 to section 203 shall be construed to refer
to the section under which the mortgage is insured.".
(c) MORTGAGE INSURANCE ON INDIAN RESERVATIONS AS OBLIGATIONS OF GENERAL INSURANCE FUND.—Section 248 of the National

12 use 1715Z-13.

Housing Act is amended—
(1) in paragraphs (3) and (5) of subsection (f), by striking
"insurance fund' each place it appears and inserting "General
Insurance Fund";

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1907

(2) by redesignating subsections (f), (g), and (h) as subsections
(g), (h), and (i), respectively; and
(3) by inserting after subsection (e) the following new subsection:
"(f) Notwithstanding any other provision of this Act, the insurance of a mortgage using the authority contained in this section
shall be the obligation of the General Insurance Fund established in
section 519. The mortgagee shall be eligible to receive the benefits of
insurance as provided in section 204 with respect to mortgages
insured pursuant to this section, except that (1) all references in
section 204 to the Mutual Mortgage Insurance Fund or the Fund
shall be construed to refer to the General Insurance Fund; and (2)
all references in section 204 to section 203 shall be construed to refer
to the section under which the mortgage is insured.".

^

SEC. 414. CO-INSURANCE PROGRAM.

(a) REPEALER.—Section 244 of the National Housing Act is
amended by striking subsection (c).
Ot)) CO-INSURANCE AMENDMENTS.—Section 244 of the

12 use i7i5z-9.

National

Housing Act is amended—
(1) in subsection (h), by striking "coinsurance" each place it
appears and inserting "co-insurance"; and
(2) by adding at the end the following new subsection:
"(i) Any mortgagee which enters into a contract of co-insurance Contracts.
under this section shall have the authority to assign its interest in
any note or mortgage subject to a contract of co-insurance to a
warehouse bank or other financial institution which provides interim funding for a loan co-insured under this section, and to retain
the co-insurance risk of such note or mortgage, upon such terms and
conditions as the Secretary shall prescribe.".
SEC. 415. INCREASE IN AUTHORITY TO INSURE ADJUSTABLE RATE
SINGLE FAMILY MORTGAGES.

(a) IN GENERAL.—Section 251(c) of the National Housing Act is I2usci7i5z-16.
amended to read as follows:
"(c) The aggregate number of mortgages and loans insured under Loans.
this section in any fiscal year may not exceed 30 percent of the
aggregate number of mortgages and loans insured by the Secretary
under this title during the preceding fiscal year.".
(h) CONFORMING AMENDMENTS.—

(1) Section 245(c) of the National Housing Act is amended in 12 USC I7l5z-10.
the last sentence by striking ", section 251,".
(2) Section 252(g) of the National Housing Act is amended— l2USCl7l5z-l7.
(A) by striking the first comma and inserting "and"; and
(B) by striking ", and section 251".
SEC. 416. PENALTIES FOR EQUITY SKIMMING.
(a) PURCHASE OF DWELUNG SUBJECT TO LOAN IN DEFAULT.—Sec-

tion 912 of the Housing and Urban Development Act of 1970 is 12 USC 1709-2.
amended—
(1) in parajgraph (1), bv inserting "(including condominiums
and cooperatives)" after dwellings ;
(2) in paragraph (2), by inserting after "due" the following:
", regardless of whether the purchaser is obligated on the
loan'; and
(3) in the matter following paragraph (3)—
(A) by striking "$5,000" and inserting "$250,000"; and

91-194 O - 90 - 20 : QL.3 Part 3

101 STAT. 1908

PUBLIC LAW 100-242—FEB. 5, 1988
(B) by striking "three" and inserting "5".
(b) USE OF FUNDS DERIVED FROM PROPERTY SUBJECT TO LOAN IN

DEFAULT.—Title II of the National Housing Act is amended by
adding at the end the following new section:
EQUITY SKIMMING P E N A L T Y

12 use 1715Z-19.

%-M ; •

> fc

"SEC. 254. Whoever, as an owner, agent, or manager, or who is
otherwise in custody, control, or possession of property that is
security for a mortgage note that is insured, acquired, or held by the
Secretary pursuant to section 203, 207, 213, 220, 221(d)(3), 221(d)(4),
223(f), 231, 232, 234, 236, 238(c), 241, 242, 244, 608, or 810, or title XI,
or is made pursuant to section 202 of the Housing Act of 1959,
willfully uses or authorizes the use of any part of the rents, Eissets,
proceeds, income or other funds derived from property covered by
such mortgage note during a period when the mortgage note is in
default or t h e project is in a n o n s u r p l u s cash position as defined by
t h e regulatory a g r e e m e n t covering such property, for a n y purpose

12 use 1715Z-4.

other than to meet actual or necessary expenses that include expenses approved by the Secretary if such approval is required under
the terms of the regulatory agreement, shall be fined not more than
$250,000 or imprisoned not more than 5 years, or both.",
(c) CONFORMING AMENDMENTS.—Section 239 of the National Housing Act is amended—
(1) by striking "INSURED" in the section heading;
J(2) by striking "(a)" after "SEC. 239."; and
(3) by striking subsection (b).
SEC. 417. HOME
EQUITY
CONVERSION
DEMONSTRATION.

MORTGAGE

INSURANCE

(a) IN GENERAL.—Title II of the National Housing Act (as
amended by section 416 of this Act) is further amended by adding at
the end the following new section:
>p,'
•ixiUiKi

12 use 1715Z-20.
--;•.

r

V J*

J

e?>r' > -

"DEMONSTRATION PROGRAM OF INSURANCE OF HOME EQUITY
CONVERSION MORTGAGES FOR ELDERLY HOMEOWNERS

"SEC. 255. (a) PURPOSE.—The purpose of this section is to authorize
the Secretary to carry out a demonstration program of mortgage
insurance designed—
"(1) to meet the special needs of elderly homeowners by
reducing the effect of the economic hardship caused by the
increasing costs of meeting health, housing, and subsistence
needs at a time of reduced income, through the insurance of
home equity conversion mortgages to permit the conversion of a
portion of accumulated home equity into liquid assets;
"(2) to encourage and increase the involvement of mortgagees
and participants in the mortgage markets in the making and
>
servicing of home equity conversion mortgages for elderly
homeowners; and
"(3) to require the evaluation of data to determine—
"(A) the extent of the need and demand among elderly
homeowners for insured and uninsured home equity
conversion mortgages;
"(B) the types of home equity conversion mortgages that
best serve the needs and interests of elderly homeowners,
S^'
the Federal Government, and lenders; and

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1909

"(C) the appropriate scope and nature of participation by
the Secretary in connection with home equity conversion
mortgages for elderly homeowners.
"(b) DEFINITIONS.—For purposes of this section:
"(1) The terms 'elderly homeowner' and 'homeowner' mean
any homeowner who is, or whose spouse is, at least 62 years of
age or such higher age as the Secretary may prescribe.
"(2) The terms 'mortgage', 'mortgagee', 'mortgagor', and
'State' have the meanings given such terms in section 201.
"(3) The term 'home equity conversion mortgage' means a
first mortgage which provides for future payments to the
homeowner based on accumulated equity and which a housing
creditor (as defined in section 803(2) of the Garn-St Germain
Institutions Act of 1982) is authorized to make (A) under any
law of the United States (other than section 804 of such Act) or
applicable agency regulations thereunder; (B) in accordance
with section 804 of such Act, notwithstanding any State constitution, law, or regulation; or (C) under any State constitution,
law, or regulation,
"(c) INSURANCE AUTHORITY.—The Secretary may, upon application
by a mortgagee, insure any home equity conversion mortgage eligible for insurance under this section and, upon such terms and
conditions as the Secretary may prescribe, make commitments for
the insurance of such mortgages prior to the date of their execution
or disbursement to the extent that the Secretary determines such
mortgages—
"(1) have promise for improving the financial situation or
otherwise meeting the special needs of elderly homeowners;
"(2) will include appropriate safeguards for mortgagors to
offset the special risks of such mortgages; and
"(3) have a potential for acceptance in the mortgage market.
"(d) ELIGIBILITY REQUIREMENTS.—To be eligible for

,.^.

insurance

under this section, a mortgage shall—
"(1) have been made to a mortgagee approved by the Secretary as responsible and able to service the mortgage properly;
"(2) have been executed by a mortgagor who—
"(A) qualifies as an elderly homeowner;
"(B) has received adequate counseling by a third party
(other than the lender) as provided in subsection (f); and
"(C) meets any additional requirements prescribed by the
Secretary;
"(3) be secured by a dwelling that is designed principally for a
1-family residence and is occupied by the mortgagor and that
h a s a value not t o exceed t h e m a x i m u m dollar a m o u n t established b y t h e Secretary u n d e r section 203(b)(2) for a 1-family
residence;
"(4) provide t h a t prepayment, in whole or in part, m a y b e
m a d e without penalty a t a n y time d u r i n g t h e period of t h e
mortgage;
"(5) provide for a fixed or variable interest rate or future
sharing between the mortgagor and the mortgagee of the appreciation in the value of the property, as agreed upon by the
mortgagor and the mortgagee;
"(6) contain provisions for satisfaction of the obligation satisfactory to the Secretary;
"(7) provide that the homeowner shall not be liable for any
difference between the net amount of the remaining indebted-

«9jt&'

> ',.-.•:

101 STAT. 1910

Taxes.

PUBLIC LAW 100-242—FEB. 5, 1988

ness of the homeowner under the mortgage and the amount
recovered by the mortgagee from—
"(A) the foreclosure sale; or
"(B) the insurance benefits paid pursuant to subsection
(i)(l)(C);and
"(8) Contain such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, default reserve,
delinquency charges, foreclosure proceedings, anticipation of
maturity, additional and secondary liens, and other matters as
the Secretary may prescribe.
"(e) DISCLOSURES BY MORTGAGEE.—The Secretary shall require
each mortgagee of a mortgage insured under this section to make
available to the homeowner—
"(1) at the time of the loan application, a written list of the
names and addresses of third-party information sources who are
approved by the Secretary as responsible and able to provide
the information required by subsection (f);
"(2) at least 10 days prior to loan closing, a statement explaining the homeowner's rights, obligations, and remedies with
respect to temporary absences from the home, late payments,
and payment default by the lender, all conditions requiring
satisfaction of the loan obligation, and any other information
that the Secretary may require; and
"(3) on an annual basis (but not later than January 31 of each
year), a statement summarizing the total principal amount paid
to the homeowner under the loan secured by the mortgage, the
total ,amount of deferred interest added to the principal, and the
outstanding loan balance at the end of the preceding year.
"(f)

Taxes.

Termination

date.

INFORMATION SERVICES FOR MORTGAGORS.—The Secretary

shall provide or cause to be provided by entities other than the
lender the information required in subsection (d)(2)(B). Such
information shall be discussed with the mortgagor and shall
include—
"(1) options other than a home equity conversion mortgage
that are available to the homeowner, including other housing,
social service, health, and financial options;
"(2) other home equity conversion options that are or may
become available to the homeowner, such as sale-leaseback
financing, deferred payment loans, and property tax deferral;
"(3) the financial implications of entering into a home equity
conversion mortgage;
"(4) a disclosure that a home equity conversion mortgage may
have tax consequences, affect eligibility for assistance under
Federal and State programs, and have an impact on the estate
and heirs of the homeowner; and
"(5) any other information that the Secretary may require.
"(g) LIMITATION ON INSURANCE AUTHORITY.—No m o r t g a g e m a y b e

insured under this section after September 30,1991, except pursuant
to a commitment to insure issued on or before such date. The total
number of mortgages insured under this section may not exceed
2,500. In no case may the benefits of insurance under this section
exceed the maximum dollar amount established under section
203(b)(2) for a 1-family residence.
"(h) ADMINISTRATIVE AUTHORITY.—The Secretary may—
"(1) enter into such contracts and agreements with Federal,
State, and local agencies, public and private entities, and such

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1911

other persons as the Secretary determines to be necessary or
desirable to carry out the purposes of this section; and
"(2) make such investigations and studies of data, and pubUsh
and distribute such reports, as the Secretary determines to be
appropriate.

Reports.

"(i) PROTECTION OF HOMEOWNER AND LENDER.—

"(1) Notwithstanding any other provision of law, and in order
to further the purposes of the demonstration program authorized in this section, the Secretary shall take any action
necessary—
"(A) to provide any mortgagor under this section with Contracts.
funds to which the mortgagor is entitled under the insured
•
mortgage or ancillary contracts but that the mortgagor has
not received because of the default of the party responsible
for payment;
"(B) to obtain repayment of disbursements provided
under subparagraph (A) from any source; and
., .,.
"(C) to provide any mortgagee under this section with Contracts.
funds not to exceed the limitations in subsection (g) to
which the mortgagee is entitled under the terms of the
insured mortgage or ancillary contracts authorized in this
section.
"(2) Actions under paragraph (1) may include—
"(A) disbursing funds to the mortgagor or mortgagee
from the General Insurance Fund;
"(B) accepting an assignment of the insured mortgage
notwithstanding that the mortgagor is not in default under
its terms, and calculating the amount and making the
payment of the insurance claim on such assigned mortgage;
'(C) requiring a subordinate mortgage from the mortgagor at any time in order to secure repayments of any funds
advanced or to be advanced to the mortgagor;
"(D) requiring a subrogation to the Secretary of the rights
of any parties to the transaction against any defaulting
parties; and
"(E) imposing premium charges,
"(j) SAFEGUARD TO PREVENT DISPLACEMENT OF HOMEOWNER.—The

Loans.

Secretary may not insure a home equity conversion mortgage under
this section unless such mortgage provides that the homeowner's
obligation to satisfy the loan obligation is deferred until the homeowner's death, the sale of the home, or the occurrence of other
events specified in regulations of the Secretary. For purposes of
this subsection, the term 'homeowner' includes the spouse of a
homeowner.
"(k) REPORTS TO CONGRESS.—

"(1) The Secretary shall, not later than September 30, 1989,
submit an interim report to Congress describing—
"(A) design and implementation of the demonstration;
"(B) number and types of reverse mortgages written to
date;
"(C) profile of participant homeowner-borrowers, including incomes, home equity, and regional distribution; and
"(D) problems encountered in implementation, including
impediments associated with State or Federal laws or regulations governing taxes, insurance, securities, public benefits, banking, and any other problems in implementation
that the Secretary encounters.

Taxes.
Insurance.
Securities.
Banks and
banking.

101 STAT. 1912

PUBLIC LAW 100-242—FEB. 5, 1988

"(2) Not later than March 30,1992, the Secretary shall submit
to Congress a preliminary evaluation of the program authorized
jail
in this section. Such evaluation shall include an updated report
on the matters referred to in paragraph (1) and shall in
addition—
"(A) describe the types of mortgages appropriate for
inclusion in such program;
"(B) describe any changes in the insurance programs
under this title, or in other Federal regulatory provisions,
determined to be appropriate;
Insur£ince.
"(C) describe any risk created under such mortgages to
mortgagors and mortgagees or the insurance programs
under this title, and whether the risk is adequately covered
by the premiums under the insurance programs;
Aged persons.
"(D) evaluate whether such program has improved the
financial situation or otherwise met the special needs of
participating elderly homeowners;
"(E) evaluate whether such program has included appropriate safeguards for mortgagors to offset the special risks
of such mortgages; and
"(F) evaluate whether home equity conversion mortgages
have a potential for acceptance in the mortgage markets.
"(3) The preliminary evaluation shall incorporate comments
and recommendations solicited by the Secretary from the Board
of Governors of the Federal Reserve System, the Secretary of
Health and Human Services, the Federal Council on Aging,
Federal Home Loan Bank Board, the Comptroller of the Currency, and the National Credit Union Administration Board
regarding any of the matters referred to in paragraph (1) or (2).
t
"(4) Following submission of the preliminary evaluation, the
Secretary shall, on a biennial basis, submit to the Congress an
updated report and evaluation covering the period since the
most recent report under this subsection and shall include
analysis of the repayment of the home equity conversion mortgages under this demonstration during such period.".
12 use 1715Z-20
(b) REGULATIONS.—The Secretary of Housing and Urban Developnote.
ment shall—
(1) not later than 6 months after the date of enactment of this
Act, consult with lenders, insurers, and organizations and
individuals with expertise in home equity conversion in developing proposed regulations implementing section 254 of the National Housing Act; and
(2) not later than 9 months after the date of the enactment of
this Act, issue proposed regulations implementing section 254 of
.(?)(2) of the National Housing
Act is amended—
12 USC I7i5e.
(1) by striking out "$19,500", "$21,600", "$25,800", "$31,800",
and "$36,000" and inserting in lieu thereof "$25,350", "$28,080",
"$33,540", "$41,340", and "$46,800", respectively; and

101 STAT. 1916

' '^-^
12 use 1715k.

12USC1715Z.

• -' - - ^ - "^

PUBLIC LAW 100-242—FEB, 5, 1988

(2) by striking out "$22,500", "$25,200", "$30,900", "$38,700",
and "$43,758" and inserting in lieu thereof "$29,250", "$32,760",
"$40,170", "$50,310", and "$56,885", respectively.
(c) SECTION 220 LIMITS.—Section 220(d)(3)(B)(iii) of the National
Housing Act is amended—
(1) by striking out "$19,500", "$21,600", "$25,800", "$31,800",
and "$36,000" and inserting in lieu thereof "$25,350", "$28,080",
"$33,540", "$41,340", and "$46,800", respectively; and
(2) by striking out "$22,500", "$25,200", "$30,900", "$38,700",
and "$43,758" and inserting in lieu thereof "$29,250", "$32,760",
"$40,170", "$50,310", and "$56,885", respectively.
(d) SECTION 221(d)(3) LIMITS.—Section 221(d)(3)(ii) of the National
Housing Act is amended by striking out "$21,563"; "$24,862";
"$29,984"; "$38,379"; "$42,756"; "$22,692"; "$26,012"; "$31,631";
"$40,919"; and "$44,917" and inserting in lieu thereof "$28,032";
"$32,321"; "$38,979"; "$49,893"; "$55,583"; "$29,500"; "$33,816";
"$41,120"; "$53,195"; and "$58,392", respectively.
(e) SECTION 221(dX4) LIMITS.—Section 221(d)(4)(ii) of the National
Housing Act of 1934 is amended by striking out "$19,406";
"$22,028"; "$26,625"; "$33,420"; "$37,870"; "$20,962"; "$24,030";
"$29,220"; "$37,800"; and "$41,494" and inserting in lieu thereof
"$25,228"; "$28,636"; "$34,613"; "$43,446"; "$49,231"; "$27,251";
"$31,239"; "$37,986"; "$49,140"; and "$53,942", respectively.
(f) SECTION 231 LIMITS.—Section 231(c)(2) of the National Housing

12 use I7l5v.

Act is amended—
(1) by striking out "$18,450", "$20,625", "$24,630", "$29,640",
and "$34,846" and inserting in lieu thereof "$23,985", "$26,813",
"$32,019", "$38,532", and "$45,300", respectively; and
(2) by striking out "$20,962", "$24,030", "$29,220", "$37,800",
and "$41,494" and inserting in lieu thereof "$27,251", "$31,239",
"$37,986", "$49,140", and "$53,942", respectively.

12 use I7l5y.

Act is amended—
(1) by striking out "$19,500", "$21,600", "$25,800", "$31,800",
and "$36,000" and inserting in lieu thereof "$25,350", "$28,080",
"$33,540", "$41,340", and "$46,800", respectively; and
(2) by striking out "$22,500", "$25,200", "$30,900", "$38,700",
and "$43,758" and inserting in lieu thereof "$29,250", "$32,760",
"$40,170", "$50,310", and "$56,885", respectively.

(g) SECTION 234 LIMITS.—Section 234(e)(3) of the National Housing

12 u s e 1713,
1715e, 1715k,
1715/, 1715v,
1715y.

12 use I7i5n.

(h) LIMITS FOR MULTIFAMILY PROJECTS IN HIGH-COST AREAS.—

Section 207(c)(3), the second proviso of section 21303)(2), the first
proviso of section 220(d)(3)(BXiii), section 221(dX3Xii), section
221(dX4Xii), section 231(cX2), and section 234(eX3) of the National
Housing Act are each amended by striking "not to exceed 75 per
centum and all that follows through "involved) in such an area"
and inserting the following: "not to exceed 110 percent in any
geographical area where the Secretary finds that cost levels so
require and by not to exceed 140 percent where the Secretary
determines it necessary on a project-by-project basis, but in no case
may any such increase exceed 90 percent where the Secretary
determines that a mortgage purchased or to be purchased by the
Government National Mortgage Association in implementing its
special assistance functions under section 305 of this Act (as such
section existed immediately before November 30, 1983) is involved".
SEC. 427. OPERATING LOSS LOAN INSURANCE.
Section 223(d) of the National Housing Act is amended— , t

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1917

(1) by inserting "(D" after the subsection designation;
(2) by striking the first and second sentences and inserting the
following:
"Notwithstanding any other provision of this Act, the Secretary is
authorized to insure loans made to cover the operating losses of
certain projects that have existing project mortgages insured by the
Secretary. Insurance under this subsection shall be in the Secretary's discretion and upon such terms and conditions as the
Secretary may prescribe, and shall be provided in accordance with
the provisions of this subsection. For purposes of this subsection, the
term 'operating loss' means the amount by which the sum of the
taxes, interest on the mortgage debt, mortgage insurance premiums,
hazard insurance premiums, and the expense of maintenance and
operation of the project covered by the mortgage, exceeds the
income of the project.
"(2) To be eligible for insurance pursuant to this paragraph—
"(A) the existing project mortgage (i) shall have been insured
by the Secretary at any time before or after the date of enactment of the Housing and Community Development Act of 1987;
and (ii) shall cover any property, other than a property upon
which there is located a 1- to 4-family dwelling;
"(B) the operating loss shall have occurred during the first 24
months after the date of completion of the project, as determined by the Secretary; and
"(C) the loan shall be in an amount not exceeding the operating loss.
"(3) To be eligible for insurance pursuant to this paragraph—
"(A) the existing project mortgage (i) shall have been insured
by the Secretary at any time before or after the date of enactment of the Housing and Community Development Act of 1987;
(ii) shall cover any property, other than a property upon which
there is located a 1- to 4-family dwelling; and (iii) shall not cover
a subsidized project, as defined by the Secretary;
"(B) the loan shall be in an amount not exceeding 80 percent of the unreimbursed cash contributions made on or after
March 18, 1987, by the project owner for the use of the project,
during any period of consecutive months (not exceeding 24
months) in the first 10 years after the date of completion of the
project, as determined by the Secretary, except that in no event
may the amount of the loan exceed the operating loss during
such period;
"(C) the loan shall be made within 10 years after the end of
the period of consecutive months referred to in the preceding
subparagraph; and
"(D) the project shall meet all applicable underwriting and
other requirements of the Secretary at the time the loan is to be
made.
"(4) Any loan insured pursuant to this subsection shall (A) bear
interest at such rate as may be agreed upon by the mortgagor and
mortgagee; (B) be secured in such manner as the Secretary shall
require; (C) be limited to a term not exceeding the unexpired term of
the original mortgage; and (D) be insured under the same section as
the original mortgage. The Secretary may provide insurance pursuant to paragraph (2) or (3), or pursuant to both such paragraphs, in
connection with an existing project mortgage, except that the Secretary may not provide insurance pursuant to both such paragraphs

101 STAT. 1918

PUBLIC LAW 100-242—FEB. 5, 1988

in connection with the same period of months referred to in paragraphs (2)(B) and (3)(B)." ; and
(3) by inserting "(5)" before "A loan" at the beginning of the
undesignated paragraph at the end.
SEC. 428. INTEREST CHARGES ON TEMPORARY MORTGAGE ASSISTANCE
PAYMENTS AND ASSIGNMENT OR OTHER ASSISTANCE.

12 use I7l5u.

Section 230(a)(5) of the National Housing Act is amended by
striking the third sentence and inserting the following: "The interest rate on payments made under this subsection shall be the rate
established under section 1803(c) of title 38, United States Code. The
interest rate to be charged shall be determined when the Secretary
approves assistance under this subsection.".
SEC. 429. MORTGAGE INSURANCE TECHNICAL AMENDMENTS.

12 use 1702.
12 use I706d.

(a) ADMINISTRATIVE PROVISIONS.—The second sentence of section 1
of the National Housing Act is amended by striking the last comma.
Ot)) APPLICABUTY.—Section 9 of the National Housing Act is
amended by inserting the following section heading:
APPUCABILITY .

12 u s e 1709,
1715Z-5.

(c) LOAN INSURANCE PROGRAMS.—Sections 203(k)(3)(B) and
241(b)(3) of the National Housing Act are amended—
(1) by striking "mortgagor" each place it appears and inserting "borrower"; and
(2) by striking "mortgagee" each place it appears and inserting "financial institution".
(d) MISCELLANEOUS HOUSING INSURANCE.—

12 u s e 1715n.

'^"^

(1) Section 223(a)(7) of the National Housing Act is amended—
(A) in the first proviso, by striking "a rate not in excess of
the maximum rate prescribed under the applicable section
or title of this Act" and inserting the following: "such rate
as may be agreed upon by the mortgagor and the
mortgagee";
(B) in the second proviso, by striking "maturity, a principal obligation, and an interest rate" and inserting the
following: "maturity and a principal obligation"; and
(C) by inserting before the semicolon at the end the
following: ", and shall bear interest at such rate as may be
agreed upon by the mortgagor and the mortgagee".
(2) Section 223(d)(1) of the National Housing Act is amended
by striking "bear interest (exclusive of premium charges for
insurance) at not to exceed the per centum per annum currently
permitted for mortgages insured under the section under which
it is to be insured" and inserting the following: "bear interest at
such rate as may be agreed upon by the mortgagor and the
mortgagee".
(e) INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE FACIU-

TiES, AND B O A R D A N D C A R E H O M E S . —

12 u s e 1715w.

(1) Section 232(b) of the National Housing Act is amended—
(A) by indenting as a separate paragraph (in the same
manner as paragraph (1)) "(3) a nursing" and all that
follows through "day; and";
(B) in such new paragraph (3)—
(i) by inserting "the term" after the paragraph des,,,.,^,.., .,,,,. _ ignation;and
.,,«.:.,.. ..^........ ....... ., ...,...-. ..,
...--..

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1919

f.'

(ii) by striking "and" at the end;
(C) by redesignating the second paragraph (3) as paragraph (4); and
(D) by redesignating paragraph (4) as paragraph (5).
(2) Section 232(i)(2)(B) of the National Housing Act is amended
i to read as follows:
"(B) bear interest at such rate as may be agreed upon by the
mortgagor and the mortgagee;".
(f) MuLTiFAMiLY ASSISTANCE.—Scction 236 of such Act is amended
by striking out "(h)" in the last sentence of subsection (i)(l) and
inserting in lieu thereof "(f)(4)".

12 u s e 1715w.

12 u s e 1715Z-1.

(g) CO-INSURANCE.—

(1) Section 244(g) of the National Housing Act is amended—
(A) by striking paragraph (2); and
(B) by redesignating paragraphs (3) through (6) as paragraphs (2) through (5), respectively.
(2) Section 244(h) of the National Housing Act is amended by
striking "coinsurance" each place it appears and inserting "coinsurance".

12 u s e 1715Z-9.

(h) INSURANCE ON HAWAIIAN HOME LANDS.—Section 247(a)(2) of

the National Housing Act is amended by striking "Mortgagor" and
inserting "mortgagor'.
(i) INSURANCE ON INDIAN RESERVATIONS.—Section 248 of the

12 u s e 1715Z-12.

Na-

12USei715z-13.
tional Housing Act is amended—
(1) in subsection (a)(1), by striking "lands" and inserting
: "land";
(2) in subsection (a)(2), by striking "lands"; and
(3) in subsection (d), by striking "tribal or trust land" and
inserting "trust or otherwise restricted land".
(j) SHARED APPRECIATION MORTGAGES.—Section 253 of the

Na-

tional Housing Act is amended—
(1) in subsection (b), by striking the fourth sentence and
inserting the following: "For purposes of this section, the term
'net appreciated value' means the amount by which the sales
price of the property (less the mortgagor's selling costs) exceeds
the actual project cost after completion, as approved by the
Secretary.";
(2) in the first sentence of subsection (c), by striking "204" and
inserting "207"; and
(3) in subsection (c), by striking the last sentence and inserting the following: "The term 'original principal face amount of
the mortgage' as used in section 207 shall not include the
mortgagee's share of net appreciated value.".
(k) DEFENSE HOUSING FOR IMPACTED AREAS.—The first sentence of
section 810(h) of the National Housing Act is amended—
(1) by striking "(exclusive of premium charges for insurance)
at not to exceed the rate applicable to mortgages insured under
section 207" and inserting the following: "at such rate as may
be agreed upon by the mortgagor and the mortgagee"; and
(2) by striking "not to exceed the rate applicable to mortgages
insured under section 203" and inserting the following: "such
rate as may be agreed upon by the mortgagor and the
mortgagee".

12USei715z-18.

SEC. 430. RELEASE OF POOL FUNDS.

State and local
governments.
Contracts.
12 u s e 1715Z-1.

(a) SECTION 236.—Section 236 of the National Housing Act is
amended by adding at the end thereof the following:

12 u s e 1748h-2.

101 STAT. 1920

f?:

'

' -• '

'

PUBLIC LAW 100-242—FEB. 5, 1988

"(r) The Secretary shall, not later than 45 days after receipt of an
application by the mortgagee, provide interest reduction and rental
assistance payments for the benefit of projects assisted under this
section whose mortgages were made by State or local housing
finance agencies or State or local government agencies for a term
equal to the remaining mortgage term to maturity on projects
assisted under this section to the extent of—
"(1) unexpended balances of amounts of authority as set forth
?g -. r«
in certain letter agreements between the Department of Housing and Urban Development and such State or local housing
finance agencies or State or local government agencies, and
"(2) existing allocation under section 236 contracts on projects
i'
whose mortgages were made by State or local housing finance
agencies or State or local government agencies which are not
being funded, to the extent of such excess allocation, for any
purposes permitted under the provisions of this section, including without limitation rent supplement and rental assistance
pa3mient unit increases and mortgage increases for any eligible
purpose under this section, including without limitation operating deficit loans.
An application shall be eligible for assistance under the previous
sentence only if the mortgagee submits the application within 548
days after the effective date of this subsection, along with a certification of the mortgagee that amounts hereunder are to be utilized
only for the purpose of either (A) reducing rents or rent increases to
tenants, or (B) making repairs or otherwise increasing the economic
viability of a related project. Unexpended balances referred to in the
first sentence of this subsection which remain after disposition of all
such applications is favorably concluded shall be rescinded. The
,^
calculation of the amount of assistance to be provided under an
'^
interest reduction contract pursuant to this subsection shall be
made on the basis of an assumed mortgage term equal to the lesser
of a 40-year amortization period or the term of that part of the
mortgage which relates to the additional assistance provided under
this subsection, even though the additional assistance may be provided for a shorter period. The authority conferred by this subsection to provide interest reduction and rental assistance payments
shall be available only to the extent approved in appropriation
Acts.",
(b) RENT SUPPLEMENT PROGRAM.—Section 101 of the Housing and

12 use 1701s.
js iiaiT

^

I h.

i ;

Urban Development Act of 1965 is amended by adding at the end
thereof the following:
"(m) The Secretary shall, not later than 45 days after receipt of an
application by the mortgagee, provide interest reduction and rental
assistance payments for the benefit of projects assisted under this
section whose mortgages were made by State or local housing
finance agencies or State or local government agencies for a term
equal to the remaining mortgage term to maturity on projects
assisted under this section to the extent of—
"(1) unexpended balances of amounts of authority as set forth
in certain letter agreements between the Department of Housing and Urban Development and such State or local housing
finance agencies or State or local government agencies, and
"(2) existing allocation under section 236 contracts on projects
whose mortgages were made by State or local housing finance
agencies or State or local government agencies which are not

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1921

being funded, to the extent of such excess allocation, for any
purposes permitted under the provisions of this section.
An application shall be eligible for assistance under the previous
sentence only if the mortgagee submits the application within 548
days after the effective date of this subsection, along with a certification of the mortgagee that amounts are to be utilized hereunder
for the purpose of either (A) reducing rents or rent increases to
tenants, or (B) making repairs or otherwise increasing the economic
viability of a related project. Unexpended balances referred to in the
first sentence of this subsection which remain after disposition of all
such applications is favorably concluded shall be rescinded. The
authority conferred by this subsection to provide interest reduction
and rental assistance payments shall be available only to the extent
approved in appropriation Acts.".

Subtitle B—Secondary Mortgage Market
Programs

^
-5'

^

,

,,
"'

«? j

SEC. 441. LIMITATIONS ON CERTAIN SECONDARY MORTGAGE MARKET
FEES.
(a) FEDERAL NATIONAL MORTGAGE ASSOCIATION.—Section 304 of

the Federal National Mortgage Association Charter Act is amended
by adding at the end the following new subsection:
"(f) Except for fees paid pursuant to section 309(g), no fee or
charge may be assessed or collected by the United States (including
any executive department, agency, or independent establishment of
the United States) on or with regard to the purchase, acquisition,
sale, pledge, issuance, guarantee, or redemption of any mortgage,
asset, obligation, trust certificate of beneficial interest, or other
security by the corporation. No provision of this subsection shall
affect the purchase of any obligation by the Secretary of the Treasury pursuant to subsection (c).".

12 USC 1719.
i.:

(b) FEDERAL HOME LOAN MORTGAGE CORPORATION.—Section 306 of

the Federal Home Loan Mortgage Corporation Act is amended by
adding at the end the following new subsection:
"(i) Except for fees paid pursuant to section 303(c) or 306(c), no fee
or charge may be assessed or collected by the United States (including any executive department, agency, or independent establishment of the United States) on or with regard to the purchase,
acquisition, sale, pledge, issuance, guarantee, or redemption of any
mortgage, asset, obligation, or other security by the Corporation. No
provision of this subsection shall affect the purchase of any obligation by any Federal home loan bank pursuant to section 303(a).".

12 USC 1455.

^r<

SEC. 442. F N M A CUMULATIVE VOTING.

Section 303(a) of the Federal National Mortgage Association Charter Act is amended by inserting after the first sentence the following
new sentence: "The corporation may eliminate such rights of cumulative voting by a resolution adopted by its board of directors and
approved by the holders of a majority of the shares of common stock
voting in person or by proxy at the annual meeting, or other special
meeting, at which such resolution is considered.".

12 USC 1718.

101 STAT. 1922

PUBLIC LAW 100-242—FEB. 5, 1988

SEC. 443. PERMANENT AUTHORITY TO PURCHASE SECOND MORTGAGES
ON SINGLE-FAMILY PROPERTIES.
(a)
12 u s e 1717.

(b)
12 u s e 1454.

FEDERAL

NATIONAL

MORTGAGE

ASSOCIATION.—Section

302(b)(5)(A)(i) of the Federal National Mortgage Association Charter
Act is amended by striking "through March 15,1988,".
FEDERAL

HOME

LOAN

MORTGAGE

CORPORATION.—Section

305(a)(4)(A)(i) of the Federal Home Loan Mortgage Corporation Act
is amended by striking "through March 15,1988, .
SEC. 444. PERIOD FOR APPROVAL OF ACTIONS OF FNMA.

12 u s e 1723a.

Section 309(i) of the Federal National Mortgage Association Charter Act is amended in the second sentence by inserting before the
period at the end the following: ", but such 45-day period may not be
extended for any other reason or for any period in addition to or
other than such 15-day period".
SEC. 445. PROHIBITION OF
OPERATIONS.

12 u s e 1454.

LIMITATION

ON

FHLMC

MORTGAGE

Section 305 of the Federal Home Loan Mortgage Corporation Act
is amended by adding at the end the following new subsection:
"(c) The Board of Directors may not impose any annual limitation
on the maximum aggregate principal amount of mortgages purchased by the Corporation.".
SEC. 446. LIMITATION ON GNMA GUARANTEES OF MORTGAGE-BACKED
SECURITIES.

12 u s e 1721.

Section 306(g)(2) of the Federal National Mortgage Association
Charter Act is amended to read as follows:
"(2) Notwithstanding any other provision of law and subject only
to the absence of qualified requests for guarantees, to the authority
provided in this subsection, and to any funding limitation approved
in appropriation Acts, the Association shall enter into commitments
to issue guarantees under this subsection in an aggregate amount of
$150,000,000,000 for fiscal year 1988, and $156,000,000,000 for fiscal
year 1989.".

TITLE V—COMMUNITY DEVELOPMENT
AND MISCELLANEOUS PROGRAMS
Disadvantaged
persons.

Subtitle A—Community and Neighborhood
Development and Preservation
SEC. 501. COMMUNITY DEVELOPMENT AUTHORIZATIONS.

42 use 5303.

(a) COMMUNITY DEVELOPMENT BLOCK GRANTS.—The second sentence of section 103 of the Housing and Community Development
Act of 1974 is amended to read as follows: "There are authorized to
be appropriated for purposes of assistance under sections 106 and
107 $3,000,000,000 for fiscal year 1988, and $3,000,000,000 for fiscal
year 1989.".
(b) DISCRETIONARY FUND.—

42 use 5307.

(1) The first sentence of section 107(a) of the Housing and
Community Development Act of 1974 is amended to read as
follows: "Of the total amount provided in appropriation Acts
under section 103 for fiscal years 1988 and 1989, $60,000,000

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1923

may be set aside in each year in a special discretionary fund for
grants under subsection (b).".
(2) Section 107 of the Housing and Community Development
Act of 1974 is amended—
42 u s e 5307.
(A) by redesignating subsections (c) and (d) as subsections
(d) and (e), respectively; and
(B) by inserting after subsection 0^) the following new
subsection:
"(c) Of the amount set aside for use under subsection (h) in any Grants.
fiscal year, the Secretary shall, to the extent approved in appropriation Acts, make available not less than $3,000,000 in the form of
grants to institutions of higher education, either directly or through
areawide planning organizations or States, for the purpose of providing assistance to economically disadvantaged and minority students
who participate in community development work study programs
and are enrolled in full-time graduate or undergraduate programs
in community and economic development, community planning, or
community management.".
(c) URBAN DEVELOPMENT ACTION GRANTS.—Section 119(a) of the

Housing and Community Development Act of 1974 is amended by
striking the second and last sentences and inserting the following
new sentences: "There are authorized to be appropriated to carry
out this section $225,000,000 for fiscal year 1988, and $225,000,000
for fiscal year 1989. Any amount appropriated under this subsection
shall remain available until expended.'.

42 u s e 5318.

SEC. 502. TARGETING OF BENEFITS TO PERSONS OF LOW AND MODERATE
INCOME.
(a) PRIMARY OBJECTIVE.—Section 101(c) of the Housing and

Community Development Act of 1974 is amended in the second
sentence by striking "51 percent" and inserting "60 percent".
(b) SPECIFIC OBJECTIVES.—Section 101(c)(6) of the Housing and
Community Development Act of 1974 is amended by striking "to
attract persons of higher income".
(c) CERTIFICATION.—Section 104(b)(3) of the Housing and Community Development Act of 1974 is amended by striking "51 percent"
and inserting "60 percent".

42 u s e 5301.

42 u s e 5304.

SEC. 503. CITY AND COUNTY CLASSIFICATIONS.
(a) METROPOUTAN CITY.—Section 102(a)(4) of the Housing and

State and local
governments.

Community Development Act of 1974 is amended—
(1) in the second sentence, by striking "March 15, 1988" and
inserting "September 30, 1989";
(2) by striking out the third sentence and inserting in lieu
thereof the following: "Any unit of general local government
that becomes eligible to be classified as a metropolitan city, and
was not classified as a metropolitan city in the immediately
preceding fiscal year, may, upon submission of written notification to the Secretary, defer its classification as a metropolitan
city for all purposes under this title, if it elects to have its
population included in an urban county under subsection (d).
Notwithstanding the second sentence of this paragraph, a city
may elect not to retain its classification £is a metropolitan city
for fiscal year 1988 or 1989."; and
(3) by adding at the end thereof the following new sentence:
"Any city classified as a metropolitan city pursuant to the first
or second sentence of this paragraph, and that no longer quali-

42 u s e 5302.

101 STAT. 1924

PUBLIC LAW 100-242—FEB. 5, 1988

fies as a metropolitan city under such first or second sentence in
a fiscal year beginning after fiscal year 1989, shall retain its
classification as a metropolitan city for such fiscal year and the
' .>rf J Si
succeeding fiscal year, except that in such succeeding fiscal year
(A) the amount of the grant to such city shall be 50 percent of
the amount calculated under section 1060b); and (B) the remaining 50 percent shall be added to the amount allocated under
section 106(d) to the State in which the city is located and the
:; 97€
city shall be eligible in such succeeding fiscal year to receive a
distribution from the State allocation under section 106(d) as
increased by this sentence.".
Ot>) URBAN COUNTY.—Section 102(a)(6) of the Housing and Commu42 use 5302.
nity Development Act of 1974 is amended to read as follows:
"(6)(A) The term 'urban county' means any county within a
metropolitan area which—
"(i) is authorized under State law to undertake essential
community development and housing assistance activities in its
unincorporated areas, if any, which are not units of general
local government, and
'• -U uc J '*4
"(ii) either—
"(I) has a population of 200,000 or more (excluding the
population of metropolitan cities therein) and has a
combined population of 100,000 or more (excluding the
i
population of metropolitan cities therein) in such unincorporated areas and in its included units of general local
government (and in the case of counties having a combined
'
population of less than 200,000, the areas and units of
general local government must include the areas and units
hm
of general local government which in the aggregate have
?" •: 5 :
fenu
the preponderance of the persons of low and moderate
income who reside in the county) (a) in which it has authorlit .
ity to undertake essential community development and
?!
housing assistance activities and which do not elect to have
their population excluded, or (b) with which it has entered
.'i«i
into cooperation agreements to undertake or to assist in the
. ',« ^ 4^
undertaking of essential community development and housing assistance activities, or
^
, + ,
"(II) has a population in excess of 100,000, a population
*"'„ .., , ,
density of at least 5,000 persons per square mile, and
,*ft^
contains within its boundaries no incorporated places as
•
defined by the United States Bureau of the Census.
"(B) In order to permit an orderly transition of each county losing
its classification as an urban county by reason of a decrease in
population, any county classified as or deemed to be an urban
county under this paragraph for purposes of receiving assistance
under any section of this title for fiscal year 1983 or subsequent
years shall retain such qualification for purposes of receiving such
assistance through September 30, 1989, or for such longer period
covered by a cooperation agreement entered into during fiscal year
1984, except that the provisions of this subparagraph shall not apply
with respect to any county losing its classification as an urban
county by reason of the election of any unit of general local government included in such county to have its population excluded under
clause (iiXIXa) of subparagraph (A) or to not renew a cooperation
agreement under clause (iiXDO)) of such subparagraph.
"(C) Notwithstanding the combined population amount set forth
in clause (ii) of subparagraph (A), a county shall also qualify as an

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1925

urban county lor purposes of assistance under section 106 if such
county—
"(i) complies with all other requirements set forth in the first
sentence;
"(ii) has, according to the most recent available decennial
census data, a combined population between 190,000 and
199,999, inclusive (excluding the population of metropolitan
cities therein) in all its unincorporated areas that are not units
of general local government and in all units of general local
government located within such county;
"(iii) had a population growth rate of not less than 15 percent
during the most recent 10-year period measured by applicable
censuses; and
"(iv) has submitted data satisfactory to the Secretary that it
has a combined population of not less than 200,000 (excluding
the population of metropolitan cities therein) in all its unincorporated areas that are not units of general local government
and in all units of general local government located within such
county.
"(D) Such term also includes a county that—
"(i) has a combined population in excess of 175,000, has more
than 50 percent of the housing units of the area unsewered, and
has an aquifer that was designated before March 1, 1987, a sole
source aquifer by the Environmental Protection Agency;
"(ii) has taken steps, which include at least one public referendum, to consolidate substantial public services with an
adjoining metropolitan city, and in the opinion of the Secretary,
has consolidated these services with the city in an effort that is
expected to result in the unification of the two governments
within 6 years of the date of enactment of the Housing and
Community Development Act of 1987; or
"(iii) had a population between 180,000 and 200,000 on October 1, 1987, was eligible for assistance under section 119 of the
Housing and Community Development Act of 1974 in fiscal year
1986, and does not contain any metropolitan cities.
"(E) Any county classified as an urban county pursuant to
subparagraph (A), (B), or (C) of this paragraph, and that no longer
qualifies as an urban county under such subparagraph in a fiscal
year beginning after fiscal year 1989, shall retain its classification as
an urban county for such fiscal year and the succeeding fiscal year,
except that in such succeeding fiscal year (i) the amount of the grant
to such an urban county shall be 50 percent of the amount calculated under section 106(b); and (ii) the remaining 50 percent shall
be added to the amount allocated under section 106(d) to the State in
which the urban county is located and the urban county shall be
eligible in such succeeding fiscal year to receive a distribution from
the State allocation under section 106(d) as increased by this
sentence.".

Water.

,

(c) INCLUSION OF UNITS OF GENERAL LOCAL GOVERNMENT IN
URBAN COUNTIES.—Section 102(d) of the Housing and Community

Development Act of 1974 is amended by striking the last sentence.

42 USC 5302.

SEC. 504. ELIGIBLE ACTIVITIES.

(a) ELIGIBLE ACTIVITIES.—Section 105(a)(15) of the Housing and
Community Development Act of 1974 is amended by striking out 42 USC 5305.
"grants" both places it appears and inserting in lieu thereof
"assistance".

101 STAT. 1926
42 use 5305.

42 use 5304.

PUBLIC LAW 100-242—FEB. 5, 1988

(b) ENERGY UsE STRATEGIES.—Section 105(a)(16) of such Act is
amended to read as follows:
"(16) activities necessary to the development of energy use
strategies related to a recipient's development goals, to assure
that those goals are achieved with maximum energy efficiency,
including items such as—
"(A) an analysis of the manner in, and the extent to,
which energy conservation objectives will be integrated into
• b •- local government operations, purchasing and service delivery, capital improvements budgeting, waste management,
district heating and cooling, land use planning and zoning,
and traffic control, parking, and public transportation functions; and
"(B) a statement of the actions the recipient will take to
foster energy conservation and the use of renewable energy
resources in the private sector, including the enactment
and enforcement of local codes and ordinances to encourage
or mandate energy conservation or use of renewable energy
resources, financial and other assistance to be provided
(principally for the benefit of low- and moderate-income
"*
persons) to make energy conserving improvements to resi^
dential structures, and any other proposed energy conservation activities;".
SEC. 505. STATEMENT OF ACTIVITIES AND REVIEW.
Section 104(a)(1) of the Housing and Community Development Act
of 1974 is amended by striking out the last sentence.
SEC. 506. ALLEVIATION OF LAKEFRONT FLOODING AND EROSION.
Section 104(b)(3) of the Housing and Community Development Act
of 1974 is amended—
(1) by inserting "(A)" after "except that"; and
(2) by inserting before the semicolon at the end the following:
"; and (B) a grantee that borders on the Great Lakes and that
experiences significant adverse financial and physical effects
due to lakefront erosion or flooding may include in the projected
use of funds activities that are clearly designed to alleviate the
threat posed, and rectify the damage caused, by such erosion or
flooding if such activities will principally benefit persons of low
and moderate income and the grantee certifies that such activities are necessary to meet other needs having a particular
urgency".
SEC. 507. HOUSING ASSISTANCE PLANS.
(a) HOUSING PRESERVATION.—Section 104(c)(1) of the Housing and

Community Development Act of 1974 is amended—
(1) by striking "and" at the end of subparagraph (B);
(2) by striking the period at the end of subparagraph (C) and
inserting "; and '; and
(3) by adding at the end the following new subparagraph:
''">'•
"(D) specifies activities that will be undertaken annually to
minimize displacement and preserve or expand the availability
of housing for persons of low and moderate income, such as the
preservation of single room occupancy housing and the develop' •' • >fc;' .'
ment by public and private nonprofit organizations of vacant
properties that become available under in rem proceedings, and
specifies separately the activities that will be undertaken for

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1927

persons of low income and the activities that will be undertaken
for persons of moderate income.",
(b) TECHNICAL AMENDMENTS.—Section 104(c)(1) of the Housing and
Community Development Act of 1974 is amended—
(1) by striking "lower income persons" each place it appears
and inserting "persons of low and moderate income"; and
(2) in subparagraph (C)(ii), by striking "low-income persons"
and inserting "persons of low and moderate income".
SEC. 508. CITIZEN PARTICIPATION PLAN.

42 USC 5304.

Grants.

Section 104(a) of the Housing and Community Development Act of
1974 is amended by adding at the end thereof the following:
"(3) A grant under section 106 may be made only if the grantee
certifies that it is following a detailed citizen participation plan
which—
"(A) provides for and encourages citizen participation, with
particular emphasis on participation by persons of low and
moderate income who are residents of slum and blight areas
and of areas in which section 106 funds are proposed to be used,
and in the case of a grantee described in section 106(a), provides
for participation of residents in low and moderate income
neighborhoods as defined by the local jurisdiction;
"(B) provides citizens with reasonable and timely access to
local meetings, information, and records relating to the
grantee's proposed use of funds, as required by regulations of
the Secretary, and relating to the actual use of funds under this
title;
"(C) provides for technical assistance to groups representative
of persons of low and moderate income that request such assistance in developing proposals with the level and type of assistance to be determined by the grantee;
"(D) provides for public hearings to obtain citizen views and to
respond to proposals and questions at all stages of the community development program, including at least the development
of needs, the review of proposed activities, and review of program performance, which hearings shall be held after adequate
notice, at times and locations convenient to potential or actual
beneficiaries, and with accommodation for the handicapped;
"(E) provides for a timely written answer to written complaints and grievances, within 15 working days where practicable; and
"(F) identifies how the needs of non-English speaking residents will be met in the case of public hearings where a
significant number of non-English speaking residents can be
reasonably expected to participate.
This paragraph may not be construed to restrict the responsibility
or authority of the grantee for the development and execution of its
community development program.".
SEC. 509. CONSERVING NEIGHBORHOODS AND HOUSING BY PROHIBITING
DISPLACEMENT.

(a) IN GENERAL.—Section 104 of the Housing and Community
Development Act of 1974 is amended—
(1) by redesignating subsections (d) through (j) as subsections
(e) through (k), respectively; and
(2) by inserting after subsection (c) the following new
subsection:

Grants.

101 STAT. 1928
Grants.
f"? w;^

^

ji i i

Claims.

PUBLIC LAW 100-242—FEB. 5, 1988

"(d)(1) A grant under section 106 or 119 may be made only if the
grantee certifies that it is following a residential antidisplacement
and relocation assistance plan. A grantee receiving a grant under
section 106(a) or section 119 shall so certify to the Secretary. A
grantee receiving a grant under section 106(d) shall so certify to the
State.
"(2) The residential antidisplacement and relocation assistance
plan shall in connection with a development project assisted under
section 106 or 119—
"(A) in the event of such displacement, provide that—
-'
"(i) governmental agencies or private developers shall
provide within the same community comparable replacement dwellings for the same number of occupants as could
ii
have been housed in the occupied and vacant occupiable
low and moderate income dwelling units demolished or
/converted to a use other than for housing for low and
moderate income persons, and provide that such replacement housing may include existing housing assisted with
project based assistance provided under section 8 of the
5
United States Housing Act of 1937;
"(ii) such comparable replacement dwellings shall be designed to remain affordable to persons of low and moderate
income for 10 years from the time of initial occupancy;
"(iii) relocation benefits shall be provided for all low or
''
moderate income persons who occupied housing demolished
or converted to a use other than for low or moderate income
housing, including reimbursement for actual and reasonable moving expenses, security deposits, credit checks, and
other moving-related expenses, including any interim living
^
costs; and in the case of displaced persons of low and
moderate income, provide either—
"(I) compensation sufficient to ensure that, for a 5year period, the displaced families shall not bear, after
relocation, a ratio of shelter costs to income that exceeds 30 percent; or
"(II) if elected by a family, a lump-sum payment
equal to the capitalized value of the benefits available
under subclause (I) to permit the household to secure
participation in a housing cooperative or mutual housing association;
"(iv) persons displaced shall be relocated into comparable
:' •••
replacement housing that is—
'. f •
"(I) decent, safe, and sanitary;
"(II) adequate in size to accommodate the occupants;
"(III) functionally equivalent; and
iJ^ d'- *• .
"(IV) in an area not subject to unreasonably adverse
':*r '•>
environmental conditions;
"(B) provide that persons displaced shall have the right to
elect, as an alternative to the benefits under this subsection, to
receive benefits under the Uniform Relocation Assistance and
Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4601 et
seq.) if such persons determine that it is in their best interest to
do so; and
"(C) provide that where a claim for assistance under subparagraph (A)(iv) is denied by a grantee, the claimant may appeal to
V
the Secretary in the case of a grant under section 106 or 119 or
to the appropriate State official in the case of a grant under

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1929

section 106(d), and that the decision of the Secretary or the
State official shall be final unless a court determines the decision was arbitrary and capricious.
"(3) Paragraphs (2)(AXi) and (2XA)(ii) shall not apply in any case in
which the Secretary finds, on the basis of objective data, that there
is available in the area an adequate supply of habitable affordable
housing for low and moderate income persons. A determination
•^''ik
under this paragraph is final and nonreviewable.".
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 42 USC 5304
shall take effect on October 1,1988.
note.
SEC. 510. LIMITED NEW CONSTRUCTION OF HOUSING UNDER COMMUNITY
DEVELOPMENT BLOCK GRANT PROGRAM.

Section 105(a) of the Housing and Community Development Act of
1974 is amended—
42 USC 5305.
(1) by striking out "and" at the end of paragraph (17);
(2) by striking out the period at the end of paragraph (18) and
inserting in lieu thereof "; and"; and
(3) by adding at the end thereof the following new paragraph:
"(19) provision of assistance to facilitate substantial reconstruction of housing owned and occupied by low and moderate income persons (A) where the need for the reconstruction
was not determinable until after rehabilitation under this sec35 ,,
tion had already commenced, or (B) where the reconstruction is
part of a neighborhood rehabilitation effort and the grantee (i)
determines the housing is not suitable for rehabilitation, and (ii)
demonstrates to the satisfaction of the Secretary that the cost of
substantial reconstruction is significantly less than the cost of
new construction and less than the fair market value of the
property after substantial reconstruction.".
SEC. 511. AVAILABILITY OF COMMUNITY DEVELOPMENT BLOCK GRANTS
FOR UNIFORM EMERGENCY TELEPHONE NUMBER SYSTEMS.

Section 105(c)(2) of the Housing and Community Development Act
of 1974 is amended—
(1) by inserting "(A)" after the paragraph designation;
(2) by redesignating subparagraphs (A) and (B) as clauses (i)
and (ii), respectively; and
(3) by adding at the end thereof the following new subparagraph:
"(B) The requirements of subparagraph (A) do not prevent the use
of assistance under this title for the development, establishment,
and operation for not to exceed 2 years after its establishment of a
uniform emergency telephone number system if the Secretary determines that—
"(i) such system will contribute substantially to the safety of
the residents of the area served by such system;
"(ii) not less than 51 percent of the use of the system will be
by persons of low and moderate income; and
"(iii) other Federal funds received by the grantee are not
available for the development, establishment, and operation of
such system due to the insufficiency of the amount of such
funds, the restrictions on the use of such funds, or the prior
commitment of such funds for other purposes by the grantee.
The percentage of the cost of the development, establishment, and
operation of such a system that may be paid from assistance under
this title and that is considered to benefit low and moderate income

101 STAT. 1930

PUBLIC LAW 100-242—FEB. 5, 1988

persons is the percentage of the population to be served that is made
up of persons of low and moderate income.".
SEC. 512. STATE CERTIFICATIONS FOR RECEIVING COMMUNITY DEVELOPMENT BLOCK GRANTS FOR NONENTITLEMENT AREAS.

42 use 5306.
^"

r

Section 106(dX2) of the Housing and Community Development Act
of 1974 is amended—
(1) in subparagraph (C), by striking "the Governor must certify that the State" and inserting "the State must certify that
it"; and
(2) in subparagraph (D), by striking "the Governor of each
State" and inserting "the State".
SEC. 513. ADMINISTRATIVE EXPENSES OF STATES DISTRIBUTING FUNDS
TO NONENTITLEMENT AREAS.

Section 106(d)(3)(A) of the Housing and Community Development
Act of 1974 is amended by striking "$102,000" and inserting
"$100,000".
SEC. 514. COMMUNITY DEVELOPMENT BLOCK GRANT LOAN GUARANTEES.

42 use 5308.

(a) LIMITATION ON COMMITMENTS.—The last sentence of section
108(a) of the Housing and Community Development Act of 1974 is
amended—
(1) by striking "during fiscal year 1984"; and
(2) by striking "$225,000,000" and inserting "$150,000,000
during fiscal year 1988, and $153,000,000 during fiscal year
1989".
(b) PROHIBITION ON FEES.—Section

108 of the Housing

and

Community Development Act of 1974 is amended by adding at the
end the following new subsection:
"(m) No fee or charge may be imposed by the Secretary or any
other Federal agency on or with respect to a guarantee made by the
Secretary under this section after the date of the enactment of the
Housing and Community Development Act of 1987.".
(c) ELIGIBLE USES OF LOAN GUARANTEES.—Section 108(a) of the
Housing and Community Development Act of 1974 is amended in
the first sentence—
(1) by inserting "(1)" after "purposes of financing"; and
(2) by inserting before the period at the end the following: ";
(2) housing rehabilitation; or (3) economic development activities permitted under paragraphs (14), (15), and (17) of section
105(a)".
SEC. 515. URBAN DEVELOPMENT ACTION GRANT SELECTION CRITERIA.
(a) PROJECT QUALITY CRITERIA.—Section 119(dXl) of the Housing

42 use 5318.

Employment

and
unemployment.

and Community Development Act of 1974 is amended—
(1) by inserting a dash before "(A)";
(2) by indenting subparagraphs (A) and (B) in the same
manner as subparagraphs (C) and (D), as inserted by this subsection;
(3) in subparagraph (A), by striking out "as the primary
criterion,";
(4) by striking out "and" at the end of subparagraph (B); and
(5) by striking out subparagraph (C) and inserting in lieu
thereof the following new subparagraphs:
"(C) the following Other criteria:
.-,>.- . r

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1931

"(i) the extent to which the grant will stimulate economic
recovery by leveraging private investment;
"(ii) the number of permanent jobs to be created and their
relation to the amount of grant funds requested;
"(iii) the proportion of permanent jobs accessible to lower
income persons and minorities, including persons who are
unemployed;
"(iv) the extent to which the project will retain jobs that
will be lost without the provision of a grant under this
section;
"(v) the extent to which the project will relieve the most
pressing employment or residential needs of the applicant
by"(I) reemploying workers in a skill that has recently
suffered a sharp increase in unemployment locally;
"(II) retraining recently unemployed residents in
^
new skills;
"(III) providing training to increase the local pool of
skilled labor; or
"(IV) producing decent housing for low- and moderate-income persons in cases where such housing is in
severe shortage in the area of the applicant, except
that an application shall be considered to produce housing for low- and moderate-income persons under this
clause only if such application proposes that (a) not less
than 51 percent of all funds available for the project
shall be used for dwelling units and related facilities;
and (b) not less than 30 percent of all funds used for
dwelling units and related facilities shall be used for
dwelling units to be occupied by persons of low and
moderate income, or not less than 20 percent of all
dwelling units made available to occupancy using such
funds shall be occupied by persons of low and moderate
income, whichever results in the occupancy of more
dwelling units by persons of low and moderate income;
"(vi) the impact of the proposed activities on the fiscal
base of the city or urban county and its relation to the
amount of grant funds requested;
"(vii) the extent to which State or local Government State and local
funding or special economic incentives have been commit- governments.
ted; and
"(viii) the extent to which the project will have a substantial impact on physical and economic development of the
city or urban county, the proposed activities are likely to be
accomplished in a timely fashion with the grant amount
available, and the city or urban county has demonstrated
performance in housing and community development programs; and
"(D) additional consideration for projects with the following
characteristics:
"(i) projects to be located within a city or urban county
which did not receive a preliminary grant approval under
this section during the 12-month period preceding the date
on which applications are required to be submitted for the
grant competition involved; and
"(ii) twice the amount of the additional consideration
provided under clause (i) for projects to be located in cities

101 STAT. 1932

PUBLIC LAW 100-242—FEB. 5, 1988

: . , V or urban counties which did not receive a preliminary grant
approval during the 24-month period preceding the date on
T .
which applications under this section are required to be
submitted for the grant competition involved.
If a city or urban county has submitted and has pending more
than one application, the additional consideration provided by
subparagraph (D) of the preceding sentence shall be available
r only to the project in such city or urban county which received
, ,: the highest number of points under subparagraph (C) of such
sentence.".
(b) SELECTION LIMITATIONS AND CRITERIA WEIGHT.—Section 119(d)
42 use 5318.
of the Housing and Community Development Act of 1974 is
amended by adding at the end thereof the following new paragraphs:
"(3) The Secretary shall award points to each application as
. follows:
"(A) not more than 35 points on the basis of the criteria
.;a ' referred to in paragraph (1)(A);
"(B) not more than 35 points on the basis of the criteria
referred to in paragraph (1)(B);
"(C) not more than 33 points on the basis of the criteria
referred to in paragraph (1)(C); and
"(D)(i) 1 additional point on the basis of the criterion referred
,
to in paragraph (l)(D)(i); or
"(ii) 2 additional points on the basis of the criterion referred
to in paragraph (l)(D)(ii).
"(4) The Secretary shall distribute grant funds under this section
so that to the extent practicable during each funding cycle—
"(A) 65 percent of the funds is first made available utilizing
all of the criteria set forth in paragraph (1); and
"(B) 35 percent of the funds is then made available solely on
the basis of the factors referred to in subparagraphs (C) and (D)
of paragraph (1).
"(5)(A) Within 30 days of the start of each fiscal year, the Secretary shall announce the number of competitions for grants to be
; held in that fiscal year. The number of competitions shall be not less
than two nor more than three.".
"(B) Each competition for grants described in any clause of
subparagraph (A) shall be for an amount equal to the sum of—
' .
"(i) approximately the amount of the funds available for such
grants for the fiscal year divided by the number of competitions
for those funds;
"(ii) any funds available for such grants in any previous
competition that are not awarded; and
"(iii) any funds available for such grants in any previous
t
competition that are recaptured.
"(6) In an application under this subsection, an urban county may
use data relating to the criteria under paragraph (1) that reflect
distress conditions of census tracts within a radius of 15 miles of the
proposed project and within that urban county and in metropolitan
cities within that urban county, except that if any data reflecting
conditions in a metropolitan city with a population of 100,000 or
more are included, then data reflecting conditions in any metropolitan city with a population of 75,000 or more may be used only with
the consent of that metropolitan city.".
(c) USE OF REPAID GRANT FUNDS.—Section 119(f) of the Housing

, and Community Development Act of 1974 is amended by adding at

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1933

the end thereof the following: "In any case in which the project
proposes the repayment to the applicant of the grant funds, such
funds shall be made available by the applicant for economic development activities that are eligible activities under this section or
section 104. The applicant shall annually provide the Secretary with
a statement of the projected receipt and use of repaid grant funds
during the next year together with a report acceptable to the
Secretary on the use of such funds during the most recent preceding
full fiscal year of the applicant.".
(d) NONDISCRIMINATION.—Section 119(r) of the Housing and
Community Development Act of 1974 is amended to read as follows:
"(r) In utilizing the discretion of the Secretary when providing
Eissistance and applying selection criteria under this section, the
Secretary may not discriminate against applications on the basis of
(1) the type of activity involved, whether such activity is primarily
housing, industrial, or commercial; or (2) the type of applicant,
whether such applicant is a city or urban county.".
(e) REPORTS OF COMPTROLLER GENERAL.—

j^

...

,1^
42 USC 5318.

42 use 5318

(1)(A) Not later than the expiration of the 1-year period note.
following the date of enactment of this Act and every 3 years
thereafter, the Comptroller General of the United States shall
prepare and submit to the Congress a comprehensive report
evaluating the eligibility standards and selection criteria applicable under section 119 of the Housing and Community
Development Act of 1974.
(B) Such report shall evaluate in detail the standards and
criteria specified in such section that measure the level or
comparative degree of economic distress of cities and urban
counties and the effect of the grants awarded on the basis of
such standards and criteria on stimulating the maximum economic development activity.
(C) Such report shall also evaluate in detail the extent to
which the economic and social data utilized by the Secretary in
awarding grants under such section is current and accurate,
and shall compare the data used by the Secretary with other
available data. The Comptroller General shall make recommendations to the Congress on whether or not other data
should be collected by the Federal Government in order to fairly
and accurately distribute grants under such section based on
the level or comparative degree of economic distress. The
Comptroller General shall also make recommendations on
whether or not existing data should be collected more frequently in order to ensure that timely data is used to evaluate
grant applications under such section.
(2) Not later than the expiration of the 3-month period follow- Grants.
ing the date of the final competition for grants for fiscal year
1988 under section 119 of the Housing and Community Development Act of 1974, the Comptroller General of the United States
shall prepare and submit to the Congress a comprehensive
report describing the effect of the amendments made by this
section on—
(A) the targeting of grant funds to cities and urban
counties having the highest level or degree of economic
distress;
(B) the distribution of grants funds among regions of the
United States;
(C) the number and types of projects receiving grants;

101 STAT. 1934

42 u s e 5318
note.
Federal
Register,
publication.

PUBLIC LAW 100-242—FEB. 5, 1988

(D) the per capita funding levels for each city, urban
county, or identifiable community described in subsection
(p) of such section 119, receiving assistance under such
section 119; and
(E) the stimulation of the maximum economic development activity.
(f) REGULATIONS.—The Secretary of Housing and Urban Development shall issue such regulations as may be necessary to carry out
the amendments made by this section. Such regulations shall be
published for comment in the Federal Register not later than 60
days after the date of enactment of this Act. The provisions of
section 119(d)(1)(D), section 119(d)(3), and section 119(d)(4) of the
Housing and Community Development Act of 1974, shall take effect
on the date of enactment of this Act.
(g) APPLICABILITY.—

42 u s e 5318
note.

Effective date.
42 u s e 5318.

(1) IN GENERAL.—The amendments made by this section shall
be applicable to the making of urban development action grants
that have not received the preliminary approval of the Secretary of Housing and Urban Development before the date on
which final regulations issued by the Secretary under subsection (f) become effective. For the fiscal year in which the
amendments made by this section become applicable, such
amendments shall only apply with respect to the aggregate
amount awarded for such grants on or after such effective date.
(2) SUNSET OF URBAN COUNTY COMPETITION RULE.—Effective

October 1, 1989, section 119(d)(6) of the Housing and Community
Development Act of 1974 is repealed.
(h) LIMITATION ON GRANT AMOUNTS.—Section 119 of the Housing

and Community Development Act of 1974 is amended by adding at
the end thereof the following:
"(s) For fiscal years 1988 and 1989, the maximum grant amount
for any project under this section is $10,000,000.".
Hawaii.

(i) CONSIDERATION OF CERTAIN COUNTIES AS CITIES UNDER URBAN
DEVELOPMENT ACTION GRANT PROGRAM.—Section 119(n)(l) of the

Housing and Community Development Act of 1974 is amended by
adding at the end thereof the following new sentence: "Such term
also includes the counties of Kauai, Maui, and Hawaii in the State of
Hawaii.".
SEC. 516. PROHIBITION ON USE OF URBAN DEVELOPMENT ACTION
GRANTS FOR BUSINESS RELOCATIONS.

(a) I N GENERAL.—Section 119(h) of the Housing and Community
Development Act of 1974 is amended—
(1) by inserting after the subsection designation the following:
"(1) SPECULATIVE PROJECTS.—";

(2) by adding at the end of paragraph (1) (as so redesignated
by paragraph (1) of this subsection) the following new sentence:
"The provisions of this paragraph shall apply only to projects
that do not have identified intended occupants."; and
(3) by adding at the end the following new paragraphs:
"(2) PROJECTS WITH IDENTIFIED INTENDED OCCUPANTS.—No assistance may be provided or utilized under this section for any project
with identified intended occupants that is likely to facilitate—
"(A) a relocation of any operation of an industrial or commer^ cial plant or facility or other business establishment—

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1935

"(i) from any city, urban county, or identifiable community described in subsection (p), that is eligible for assistance under this section; and
"(ii) to the city, urban county, or identifiable community
described in subsection (p), in which the project is located;
;

or

,

• i"

>

.f

"(B) an expansion of any such operation that results in a
reduction of any such operation in any city, county, or community described in subparagraph (A)(i).
"(3) SIGNIFICANT AND ADVERSE EFFECT.—The restrictions established in paragraph (2) shall not apply if the Secretary determines
that the relocation or expansion does not significantly and adversely
affect the employment or economic base of the city, county, or
community from which the relocation or expansion occurs.
"(4) APPEAL OF ADVERSE DETERMINATION.—Following notice of
intent to withhold, deny, or cancel assistance under paragraph (1) or
(2), the Secretary shall provide a period of not less than 90 days in
which the applicant can appeal to the Secretary the withholding,
denial, or cancellation of assistance. Notwithstanding any other
provision of this section, nothing in this section or in any legislative
history related to the enactment of this section may be construed to
permit an inference or conclusion that the policy of the Congress in
the urban development action grant program is to facilitate the
relocation of businesses from one area to another.
"(5) ASSISTANCE FOR INDIVIDUALS ADVERSELY AFFECTED BY PROHIBITED RELOCATIONS.—

-i

"(A) Any amount withdrawn by, recaptured by, or paid to the
Secretary due to a violation (or a settlement of an alleged
violation) of this subsection (or of any regulation issued or
contractual provision entered into to carry out this subsection)
by a project with identified intended occupants shall be made
? available by the Secretary as a grant to the city, county, or
community described in subsection (p), from which the operation of an industrial or commercial plant or facility or other
business establishment relocated or in which the operation was
reduced.
"(B)(i) Any amount made available under this paragraph Employment
shall be used by the grantee to assist individuals who were and
employed by the operation involved prior to the relocation or unemployment,
reduction and whose employment or terms of employment were
adversely affected by the relocation or reduction. The assistance
shall include job training, job retraining, and job placement.
"(ii) If any amount made available to a grantee under this
paragraph is more than is required to provide assistance under
clause (i), the grantee shall use the excess amount to carry out
community development activities eligible under section 105(a).
"(C)(i) The provisions of this paragraph shall be applicable to
any amount withdrawn by, recaptured by, or paid to the Secretary under this section, including any amount withdrawn,
recaptured, or paid before the effective date of this paragraph.
"(ii) Grants may be made under this paragraph only to the
extent of amounts provided in appropriation Acts.
"(6) DEFINITION.—For purposes of this subsection, the term 'operation' includes any plant, equipment, facility, position, employment
opportunity, production capacity, or product line.
(7) REGULATIONS.—Not later than 60 days after the date of the
enactment of the Housing and Community Development Act of 1987,

101 STAT. 1936

42 use 5318
note.

PUBLIC LAW 100-242—FEB. 5, 1988

the Secretary shall issue such regulations as may be necessary to
carry out the provisions of this subsection. Such regulations shall
include specific criteria to be used by the Secretary in determining
whether there is a significant and adverse effect under paragraph
(3).".
(b) APPLICABILITY.—Except as otherwise provided in section
119(h)(5) of the Housing and Community Development Act of 1974
(as added by subsection (a)), the amendments made by this section
shall be applicable to urban development action grants that have
not received the preliminary approval of the Secretary of Housing
and Urban Development before the date of the enactment of this
Act.
SEC. 517. URBAN HOMESTEADING.

*"

"

^ «*

(a) EXTENSIONS.—

12 use I706e.

(1) Section 810(h)(1) of the Housing and Community Development Act of 1974 is amended by striking out "1984 and 1985"
•s and inserting in lieu thereof "1988 and 1989".
(2) Section 810(i)(l) of such Act is amended by striking out
"1984 and 1985" and inserting in lieu thereof "1988 and 1989".
(3) Section 810(j) of such Act is amended by striking out
"December 31, 1985" and inserting in lieu thereof "December 1,
1987".
(b) STATE ADMINISTRATIVE EXPENSES.—

42 use 5306.
,

42 use 5307.

(1) The second sentence of section 106(d)(3)(A) of the Housing
and Community Development Act of 1974 is amended—
^r
(A) by inserting immediately after "such expenses" the
c
first time it appears the following: "and its administrative
expenses under section 810 of this Act"; and
(B) by inserting immediately after "such expenses" the
second time it appears the following: "under this title".
(2) Section 107(b)(4) of such Act is amended by inserting before
the first semicolon the following: "and section 810 of this Act".
(c) SELECTION PROCEDURE.—

12 use I706e*'

(1) Section 8100t))(2) of the Housing and Community Development Act of 1974 is amended to read as follows:
"(2) an equitable procedure for selecting recipients of homestead properties who have the capacity to make or cause to be
' made the repairs and improvements required under paragraph
(3) of this subsection, which procedure shall—
"(A) give special priority to applicants who are 'lower
income families' as defined in section 30t>)(2) of the United
e-.,.
States Housing Act of 1937;
"(B) exclude applicants who are currently homeowners;
^
"(C) take into account the applicant's capacity to contrib--'
ute a substantial amount of labor to the rehabilitation
process, or to obtain assistance from private sources,
community organizations, or other sources; and
"(D) include other reasonable selection criteria.".
(2) Section 8100t))(5) of such Act is amended by adding "and"
after the semicolon.
(3) Section 810(b)(6) of such Act is amended by striking out ";
and" and inserting in lieu thereof a period.
(4) Section 810(b)(7) of such Act is repealed.
(d) TRANSFER OF PROPERTY TO QUALIFIED COMMUNITY ORGANIZA-

TIONS.—Section 810 of the Housing and Community Development
Act of 1974 is amended— ,.,,,
,
w
,

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1937

^

(1) in subsection (a), by inserting "qualified community
organization or" before "public agency designated";
(2) in subsection (b), by inserting "qualified community
organization or" before "public agency designated";
(3) in subsection (b)(1), by inserting before the semicolon the
following: "or in accordance with subsection (1) to qualified
community organizations";
(4) in subsection (b)(3)(D), by inserting "qualified community
organization or" before "public agency designated";
(5) in subsection (b)(5), by inserting "qualified community
organization or" before "public agency designated";
(6) by redesignating subsection (k) as subsection (1); and
(7) by inserting after subsection (j) the following new subsection:
"(k) A unit of general local government or a State, or a public State and local
agency designated by a unit of general local government or a State, governments.
may transfer any real property that it receives under subsection (a) Real property.
or purchases under subsection (i) to a qualified community organization. Qualified community organizations shall be limited to
organizations that—
"(1) are incorporated and controlled by a board of directors
whose members receive no compensation of any kind for the
performance of their duties;
"(2) are organized exclusively for charitable, educational, scientific purposes, or the promotion of social welfare, and qualify
as exempt organizations under paragraph (3) or (4) of section
501(c) of the Internal Revenue Code of 1986; and
"(3) agree to assist the applicable State or unit of general local
government with the selection of homesteaders, the selection,
inspection, and rehabilitation of the properties, and to perform
such other functions as may be agreed between the State or unit
of general local government and the qualified nonprofit
. organization, including the acceptance of title to property from
the relevant Federal agency and the direct conveyance of the
property to the homesteaders subject to the terms and conditions specified in this section.".
(e) AUTHORIZATION OF APPROPRIATIONS.—The first sentence of section 810(1) of the Housing and Community Development Act of 1974
(as so redesignated by subsection (d) of this section) is amended to
read as follows: "To reimburse the housing loan funds for properties
transferred pursuant to this section, and to carry out subsections (c),
(g), (h), and (i), there are authorized to be appropriated $12,000,000
for fiscal year 1988, and $13,000,000 for fiscal year 1989.".
SEC. 518. REHABILITATION LOANS.

(a) EXTENSION OF LOAN AUTHORITY.—Section 312(h) of the Housing
Act of 1964 is amended by striking "March 15, 1988" and inserting
"September 30,1989".
(b) PROHIBITION OF CERTAIN FEES.—Section 312(g) of the Housing
Act of 1964 is amended by adding at the end the following new
sentence: "No risk premium or loan fee may be imposed by or for
the Secretary or any other Federal agency on or with respect to a
loan made under this section after the date of the enactment of the
Housing and Community Development Act of 1987.".
(c) PROHIBITION OF LOAN SALES.—Section 312 of the Housing Act of

1964 is amended by adding at the end the following new subsection:

42 u s e 1452b.

101 STAT. 1938

PUBLIC LAW 100-242—FEB. 5, 1988

"(1) The Secretary may not sell any loan made under this
section.".
SEC. 519. LOAN CANCELLATION.

The Secretary of Housing and Urban Development shall cancel
the indebtedness represented by loan number 070024914 under section 312 of the Housing Act of 1964. The obligor on such loan is
relieved of all liability to the Government for the outstanding
principal balance on such loan, for the amount of accrued interest
on such loan, and for any other fees and charges payable in connection therewith. This section shall be effective only to such extent or
in such amounts as may be approved in appropriation Acts.
SEC. 520. NEIGHBORHOOD REINVESTMENT CORPORATION.

(a) COMPOSITION OF BOARD.—Section 604 of the Neighborhood

42 use 8103.
r :,

42 use 8107.

Reinvestment Corporation Act is amended—
(1) by inserting before the semicolon in subsection (a)(1) the
following: "or a member of the Federal Home Loan Bank Board
to be designated by the Chairman";
(2) by striking out subsection (a)(3) and inserting in lieu
thereof the following: "(3) the Chairman of the Board of Gov*-' ernors of the Federal Reserve System, or a member of the Board
of Governors of the Federal Reserve System to be designated by
the Chairman;";
(3) by inserting before the semicolon in subsection (a)(4) the
following: "or the appointive member of the Board of Directors
of the Federal Deposit Insurance Corporation if so designated by
the Chairman"; and
(4) by striking out "Administrator" in subsection (a)(6) and
inserting in lieu thereof the word "Chairman"; and by inserting
after "Administration" the following: "or a member of the
Board of the National Credit Union Administration to be designated by the Chairman.".
(b) AUTHORIZATION OF APPROPRIATIONS.—Section 608(a) of the
Neighborhood Reinvestment Corporation Act is amended to read £is
follows:
"(a) There are authorized to be appropriated to the corporation to
carry out this title $19,000,000 for fiscal year 1988, and $19,000,000
for fiscal year 1989.".
SEC. 521. NEIGHBORHOOD DEVELOPMENT DEMONSTRATION PROGRAM.

42 use 5318
note.

Section 123(g) of the Housing and Urban-Rural Recovery Act of
1983 is amended to read as follows:
"(g) There are authorized to be appropriated to carry out this
section $2,000,000 for fiscal year 1988, and $2,000,000 for fiscal year
1989.".
SEC. 522. PARK CENTRAL NEW COMMUNITY PROJECT.

(a) HOUSING

12 use 1439.
Contracts.

ASSISTANCE.—Section

213 of the Housing

and

Community Development Act of 1974 is amended by adding at the
end the following new subsection:
"(e) From budget authority made available in appropriation Acts
for fiscal year 1988, the Secretary shall enter into an annual contributions contract for a term of 180 months to obligate sufficient
funds to provide assistance payments pursuant to section 8(b)(1) of
the United States Housing Act of 1937 on behalf of 500 lower income
families from budget authority made available for fiscal year 1988,

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1939

so long as such families occupy properties in the Park Central New
Community Project or in adjacent areas that are recognized by the
unit of general local government in which such Project is located as
being included within the Park Central New Town In Town Project.
If a lower income family receiving assistance payments pursuant to
this subsection ceases to qualify for assistance payments pursuant to
the provisions of section 8 of such Act or of this subsection during
the 180-month term of the annual contributions contract, assistance
payments shall be made on behalf of another lower income family
who occupies a unit identified in the previous sentence.".
(b) COMMUNITY DEVELOPMENT ASSISTANCE.—Section 107(a) of the
Housing and Community Development Act of 1974 is amended by 42 USC 5307.
adding at the end the following new sentence: "Of the amount set
aside for grants under subsection (b) for fiscal year 1988, $5,000,000
shall be made available by the Secretary for purposes of grants
under subsection ODXD for the Park Central New Community
Project.".
SEC. 523. COMMUNITY DEVELOPMENT PROJECTS LABOR STANDARDS.

Section 110 of the Housing and Community Development Act of
1974 is amended bv striking 'is designed for residential use of eight 42 USC 5310.
or more families and insert "contains not less than 8 units".
SEC. 524. URBAN PLANNING.

Section 702 of the Housing Act of 1954 is amended—
40 USC 462.
(1) by striking subsections (c) and (h); and
(2) by striking subsection (g) and inserting the following:
ii i^
"(g) Effective upon the date of the enactment of the Housing and
Community Development Act of 1987, and in accordance with such
accounting and other procedures as the Secretary may prescribe,
each advance made by the Secretary under this section that has any
principal amount outstanding shall be forgiven. The terms and Contracts.
conditions of any contract, or any amendment to a contract, for such
advance with respect to any promise to repay the advance shall be
canceled.".
SEC. 525. COMMUNITY DEVELOPMENT TECHNICAL AMENDMENTS.

Section 123(e)(3) of the Housing and Urban-Rural Recovery Act of
1983 is amended by striking "Act and inserting "section".
42 USC 5318
note.

Subtitle B—Flood and Crime Insurance
Programs
SEC. 541. EXTENSION OF FLOOD INSURANCE PROGRAM.

(a) GENERAL AUTHORITY.—Section 1319 of the National Flood
Insurance Act of 1968 is amended by striking "March 15, 1988" and 42 USC 4026.
inserting "September 30,1989".
Ot)) EMERGENCY IMPLEMENTATION.—Section 1336(a) of the National
Flood Insurance Act of 1968 is amended by striking "March 15, 42 USC 4056.
1988" and inserting "September 30,1989".
(c) ESTABUSHMENT OF FLOOD-RISK ZONES.—Section 1360(aX2) of the

National Flood Insurance Act of 1968 is amended by striking 42 USC 4101.
"March 15,1988" and inserting "September 30,1989".
(d) LIMITATION ON PREMIUMS.—The premium rates charged for 42 use 4015
flood insurance under any program established pursuant to the "ote.
National Flood Insurance Act of 1968 may not be increased during

91-194 O - 90 - 21: QL.3 Part 3

i

101 STAT. 1940

PUBLIC LAW 100-242—FEB. 5, 1988

the period beginning on the date of the enactment of this Act and
ending on September 30, 1989, by more than a prorated annual rate
of 10 percent.
SEC. 542. EXTENSION OF CRIME INSURANCE PROGRAM.
12 u s e 1749bbb.

Termination
date.

12 use

1749bbb-10c.

(a) GENERAL AUTHORITY.—Section 1201(b)(1) of the National Housing Act is amended by striking "March 15, 1988" in the matter
preceding subparagraph (A) and inserting "September 30, 1989".
Ot)) CONTINUATION OF EXISTING CONTRACTS.—Section 12010))(1)(A)
of the National Housing Act is amended by striking "September 30,
1986" and inserting "September 30,1990".
(c) LIMITATION ON PREMIUMS.—The premium rates charged for
crime insurance under any program established pursuant to part C
of title XII of the National Housing Act may not be increased during
the period beginning on the date of the enactment of this Act and
ending on September 30, 1989, by more than a prorated annual rate
of 5 percent.
SEC. 543. STUDIES UNDER NATIONAL FLOOD INSURANCE PROGRAM.

42 u s e 4127.

'Vi'j'
eontracts.

42 u s e 4013.

Section 1376(c) of the National Flood Insurance Act of 1968 is
amended to read as follows:
"(c) There are authorized to be appropriated for studies under this
title $37,000,000 for fiscal year 1988, and $37,000,000 for fiscal year
1989. Any amount appropriated under this subsection shall remain
available until expended. .
SEC. 544. SCHEDULE FOR PAYMENT OF FLOOD INSURANCE FOR STRUCTURES ON LAND SUBJECT TO IMMINENT COLLAPSE OR
SUBSIDENCE.

(a) IN GENERAL.—Section 1306 of the National Flood Insurance
Act of 1968 is amended by adding at the end the following new
subsection:
"(c)(1) If any structure covered by a contract for flood insurance
under this title and located on land that is along the shore of a lake
or other body of water is certified by an appropriate State or local
land use authority to be subject to imminent collapse or subsidence
as a result of erosion or undermining caused by waves or currents of
water exceeding anticipated cyclical levels, the Director shall (following final determination by the Director that the claim is in
compliance with regulations developed pursuant to paragraph
(6)(A)) pay amounts under such flood insurance contract for proper
demolition or relocation as follows:
«
"(A) For proper demolition—
"(i) Following final determination by the Director, 40
percent of the value of the structure; and
"(ii) Following demolition of the structure (including any
bi
septic containment system) prior to collapse, the remaining
60 percent of the value of the structure and 10 percent of
iB
the value of the structure, or the actual cost of demolition,
5
whichever amount is less.
"(B) For proper relocation (including removal of any septic
containment system) if the owner chooses to relocate the
structure—
"(i) following final determination by the Director, prior to
to
collapse, up to 40 percent of the value of the structure;
. '-•
"(ii) the total payment under this subparagraph shall not
-i
exceed the actual cost of relocation.

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1941

"(2) If any structure subject to a final determination under paragraph (1) collapses or subsides before the owner demolishes or
relocates the structure and the Director determines that the owner
has failed to take reasonable and prudent action to demolish or
relocate the structure, the Director shall not pay more than the
amount provided in subparagraph (A)(i) with respect to the
structure.
"(3) For purposes of paying flood insurance pursuant to this
subsection, the value of a structure shall be whichever of the
following is lowest:
"(A) The fair market value of a comparable structure that is
not subject to imminent collapse or subsidence,
"(B) The price paid for the structure and any improvement to
the structure, as adjusted for inflation in accordance with an
index determined by the Director to be appropriate.
"(C) The value of the structure under the flood insurance
contract issued pursuant to this title.
"(4)(A) The provisions of this subsection shall apply to contracts
for flood insurance under this title that are in effect on, or entered
into after, the date of the enactment of the Housing and Community
Development Act of 1987.
"(B) The provisions of this subsection shall not apply to any
structure not subject to a contract for flood insurance under this
title on the date of a certification under paragraph (1).
"(C) The provisions of this subsection shall not apply to any
structure unless the structure is covered by a contract for flood
insurance under this title—
"(i) on or before June 1,1988;
"(ii) for a period of 2 years prior to certification under paragraph (1); or
"(iii) for the term of ownership if less than 2 years.
"(D) The provisions of this subsection shall not apply to any
structure located in the area west of the groin field on the barrier
island from Moriches Inlet to Shinnecock Inlet on the southern
shore of Long Island of Suffolk County, New York.
"(5) For any parcel of land on which a structure is subject to a
final determination under paragraph (1), no subsequent flood insurance coverage under this title or assistance under the Disaster
Relief Act of 1974 (except emergency assistance essential to save
lives and protect property, public health and safety) shall be available for—
"(A) any structure consisting of one to four dwelling units
which is constructed or relocated at a point seaward of the 30year erosion setback; or
"(B) any other structure which is constructed or relocated at a
point seaward of the 60-year erosion setback.
"(6)(A) The Director shall promulgate regulations and guidelines
to implement the provisions of this subsection.
"(B) Prior to issuance of regulations regarding the State and local
certifications pursuant to paragraph (1), all provisions of this subsection shall apply to any structure which is determined by the
Director—
"(i) to otherwise meet the requirements of this subsection; and
"(ii) to have been condemned by a State or local authority and
;
to be subject to imminent collapse or subsidence as a result of
I erosion or undermining caused by waves or currents of water
exceeding anticipated cyclical levels.

. o'

\ Dcj i

., .it.

^

iOf

6^^'

New York. '

s

Regulations.

101 STAT. 1942

42 u s e 4013
note.

PUBLIC LAW 100-242—FEB. 5, 1988

"(7) No payments under this subsection may be made after
September 30, 1989, except pursuant to a commitment made on or
before such date.".
(b) EFFECTIVE DATE.—The amendment made by this section shall
become effective on the date of the enactment of this Act.
SEC. 545. FLOOD AND CRIME INSURANCE TECHNICAL AMENDMENTS.

12 u s e 1749bbb.

(a) CRIME INSURANCE PROGRAM AUTHORITY.—Section 1201(b) of the
National Housing Act is amended—
(1) by striking paragraphs (2) and (3);
(2) by striking "(bXD" and inserting "(b)"; and
(3) by redesignating subparagraphs (A) through (C) as paragraphs (1) through (3), respectively.
(b) REINSURANCE AGREEMENTS.—Section 1222(c) of the National

12 use
1749bbb-8.

12 use
1749bbb-13.

42 u s e 4017.

Housing Act is amended by striking "section 3679(a) of the Revised
Statutes of the United States (31 U.S.C. 665(a))," and inserting
"section 1341(a) of title 31, United States Code,".
(c) NATIONAL INSURANCE DEVELOPMENT FUND.—Section 1243(d) of
the National Housing Act is amended by striking "by law (sections
102, 103, and 104 of the Government Corporation Control Act (31
U.S.C. 847-849))" and inserting "by sections 9103 and 9104 of title
31, United States Code,".
(d) NATIONAL FLOOD INSURANCE FUND.—Section 1310(e) of the
National Flood Insurance Act of 1968 is amended by inserting a
comma after "Code".
(e) FLOOD INSURANCE IN COLORADO RIVER FLOODWAY.—The Na-

42 u s e 4029.

tional Flood Insurance Act of 1968 is amended by inserting the
following section heading for section 1322: "COLORADO RIVER
FLOODWAY".

42 u s e 2414.

(f) FEMA TREASURY BORROWINGS.—The third sentence of section
15(e) of the Federal Flood Insurance Act of 1956 is amended by
inserting a comma after "Code".

Subtitle C—Miscellaneous Programs
Grants.
Contracts.
State and local
governments.
42 u s e 3616
note.

Discrimination,
prohibition.

SEC. 561. FAIR HOUSING INITIATIVES PROGRAM.

(a) IN GENERAL.—The Secretary of Housing and Urban Development (in this section referred to as the "Secretary") may make
grants to, or (to the extent of amounts provided in appropriation
Acts) enter into contracts or cooperative agreements with, State or
local governments or their agencies, public or private nonprofit
organizations or institutions, or other public or private entities that
are formulating or carrying out programs to prevent or eliminate
discriminatory housing practices, to develop, implement, carry out,
or coordinate—
(1) programs or activities designed to obtain enforcement of
the rights granted by title VIII of the Act of April 11, 1968
(commonly referred to as the Civil Rights Act of 1968), or by
State or local laws that provide rights and remedies for alleged
discriminatory housing practices that are substantially equivalent to the rights and remedies provided in such title VIII,
through such appropriate judicial or administrative proceedings
(including informal methods of conference, conciliation, and
persuasion) as are available therefor; and
,

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1943

(2) education and outreach programs designed to inform the Education.
public concerning rights and obligations under the laws referred to in paragraph (1).
Ot)) PROGRAM ADMINISTRATION.—

(1) Not less than 30 days before providing a grant or entering
into any contract or cooperative agreement to carry out activities authorized by this section, the Secretary shall submit
notification of such proposed grant, contract, or cooperative
agreement (including a description of the geographical distribution of such contracts) 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.
(2) The Secretary shall provide to the Committee on Banking, Reports.
Housing, and Urban Affairs of the Senate and the Committee
on Banking, Finance and Urban Affairs of the House of Representatives a quarterly report that summarizes the activities
funded under this section and describes the geographical distribution of grants, contracts, or cooperative agreements funded
under this section,
(c) REGULATIONS.—

(1) The Secretary shall issue such regulations as may be
necessary to carry out the provisions of this section.
(2) The Secretary shall, for use during the demonstration Discrimination,
authorized in this section, establish guidelines for testing activi- prohibition,
ties funded under the private enforcement initiative of the fair
housing initiatives program. The purpose of such guidelines
shall be to ensure that investigations in support of fair housing
enforcement efforts described in subsection (a)(1) shall develop
credible and objective evidence of discriminatory housing practices. Such guidelines shall apply only to activities funded under
this section, shall not be construed to limit or otherwise restrict
the use of facts secured through testing not funded under this
section in any legal proceeding under Federal fair housing laws,
and shall not be used to restrict individuals or entities, including those participating in the fair housing initiatives program,
from pursuing any right or remedy guaranteed by Federal law.
Not later than 6 months after the end of the demonstration
period authorized in this section, the Secretary shall submit to
Congress the evaluation of the Secretary of the effectiveness of
such guidelines in achieving the purposes of this section.
(3) Such regulations shall include provisions governing applications for assistance under this section, and shall require
each such application to contain—
(A) a description of the assisted activities proposed to be
undertaken by the applicant, together with the estimated
v J
costs and schedule for completion of such activities;
(B) a description of the experience of the applicant in
formulating or carrying out programs to prevent or eliminate discriminatory housing practices;
(C) available information, including studies made by or
available to the applicant, indicating the nature and extent
of discriminatory housing practices occurring in the general
location where the applicant proposes to conduct its as: * i»
sisted activities, and the relationship of such activities to
such practices;
(D) an estimate of such other public or private resources
as may be available to cissist the proposed activities;

101 STAT. 1944

,t

PUBLIC LAW 100-242—FEB. 5, 1988

.oiniBoiilM ^tu H
under this section before the effective date of the regulations
required under this subsection.
(d) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to
be appropriated to carry out the provisions of this section, including
any program evaluations, $5,000,000 for fiscal year 1988, and
$5,000,000 for fiscal year 1989, of which not more than $3,000,000 in
each year shall be for the private enforcement initiative demonstration. Any amount appropriated under this section shall remain
available until expended.
(e) SUNSET.—The demonstration period authorized in this section
shall end on September 30,1989.

42 u s e 3608a.

SEC. 562. COLLECTION OF CERTAIN DATA.

(a) IN GENERAL.—To assess the extent of compliance with Federal
fair housing requirements (including the requirements established
under title VI of Public Law 88-352 and title VIII of Public Law 90284), the Secretary of Housing and Urban Development and the
Secretary of Agriculture shall each collect, not less than annually,
data on the racial and ethnic characteristics of persons eligible for,
assisted, or otherwise benefiting under each community development, housing assistance, and mortgage and loan insurance and
guarantee program administered by such Secretary. Such data shall
be collected on a building by building basis if the Secretary involved
determines such collection to be appropriate.
(b) REPORTS TO CONGRESS.—The Secretary of Housing and Urban
Development and the Secretary of Agriculture shall each include in
the annual report of such Secretary to the Congress a summary and
evaluation of the data collected by such Secretary under subsection
(a) during the preceding year.
SEC. 563. REGULATORY AUTHORITY.
(a) DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT.—Section

42 use 3535.

7(o) of the Department of Housing and Urban Development Act is
amended by adding at the end thereof the following new paragraph:
CI) The Secretary shall include with each rule or regulation
required to be transmitted to the Committees under this subsection
a detailed summary of all changes required by the Office of Management and Budget that prohibit, modify, postpone, or disapprove such
rule or regulation in whole or part.".

42 use I490n.

Act of 1949 is amended by adding at the end thereof the following
new subsection:
"(d) The Secretary shall include with each rule or regulation
required to be transmitted to the Committees under this section a
detailed summary of all changes required by the Office of Manage-

Ot)) FARMERS HOME ADMINISTRATION.—Section 534 of the Housing

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1945

ment and Budget that prohibit, modify, postpone, or disapprove such
rule or regulation in whole or part.".
SEC. 564. RESEARCH AND DEVELOPMENT.

Section 501 of the Housing and Urban Development Act of 1970 is 12 USC I70lz-l.
amended by striking the second and third sentences and inserting
the following: "There are authorized to be appropriated to carry out
this title $17,000,000 for fiscal year 1988, and $18,000,000 for fiscal
year 1989.".
SEC. 565. HOME MORTGAGE DISCLOSURE.
(a) APPUCABILITY TO MORTGAGE BANKING AFFIUATES.—

(1) Section 303(2) of the Home Mortgage Disclosure Act of
1975 is amended—
(A) by striking "or" the first place it appears; and
(B) by inserting before the semicolon at the end the
following: ", mortgage banking subsidiary of a bank holding
company or savings and loan holding company, or savings
and loan service corporation that originates or purchases
mortgage loans".
(2) Section 304 of the Home Mortgage Disclosure Act of 1975 is
amended by adding at the end the following new subsection:
"(g) The requirements of subsections (a) and (b) shall not apply
with respect to mortgage loans that are—
"(1) made by any mortgage banking subsidiary of a bank
holding company or savings and loan holding company or by
any savings and loan service corporation that originates or
purchases mortgage loans; and
"(2) approved by the Secretary for insurance under title I or II
of the National Housing Act.".
(3) The first sentence of section 311 of the Home Mortgage
Disclosure Act of 1975 is amended by inserting after "3060t>)"
the following: "(and for each mortgagee making mortgage loans
exempted under section 304(g))".
(4) The amendments made by this subsection shall be applicable to calendar years beginning after December 31, 1986.
(b) PERMANENT EXTENSION OF GENERAL AUTHORITY.—The Home
Mortgage Disclosure Act of 1975 is amended by striking section 312.
SEC. 566. LEAD-BASED PAINT POISONING PREVENTION.
(a) DETECTION AND ABATEMENT PROCEDURES.—Section 302 of

12 USC 2802.

12 USC 2803.

12 USC 2810.

Effective date.
12 USC 2802
note.
12 USC 2811.
Safety.

the

42 USC 4822.
Lead-Based Paint Poisoning Prevention Act is amended—
(1) by inserting after the section designation the following:
"(a) GENERAL REQUIREMENTS.—";

m-

^"^
!ii

(2) in the second sentence, by striking "housing constructed
prior to 1950" and inserting the following: "housing constructed
or substantially rehabilitated prior to 1978";
(3) in clause (1) of the second sentence, by striking "paint Children and
which may contain lead and to which children may be exposed" youth.
and inserting the following: "accessible intact, intact, and
nonintact interior and exterior painted surfaces that may contain lead in any such housing in which any child who is less
than 7 years of age resides or is expected to reside";
(4) in clause (2) of the second sentence, by inserting after
"notification" the following: "(using a brochure developed after
consultation with the National Institute of Building Sciences)";
(5) by striking the third sentence; and

101 STAT. 1946

PUBLIC LAW 100-242—FEB. 5, 1988

(6) by adding at the end the following new subsections:
"(b) MEASUREMENT CRITERIA.—The procedures established by the
Secretary under this section for the detection and abatement of leadbsised paint poisoning hazards in any housing, including housing
i
.''';
assisted under section 8 of the United States Housing Act of 1937—
"(1) shall be based upon criteria that measure the condition of
the housing; and
•'ij
"(2) shall not be based upon criteria that measure the health
of the residents of the housing.
"(c) INSPECTION REQUIREMENTS.—The Secretary shall require the
inspection of all intact and nonintact interior and exterior painted
surfaces of housing subject to this section for lead-based paint using
an approved x-ray fluorescence analyzer or comparable approved
' %:>«T; S; sampling or testing technique. A qualified inspector shall certify in
writing the precise results of the inspection. If the results equal or
exceed a level of 1.0 milligrams per centimeter squared, the results
shall be provided to any potential purchaser or tenant of the housing. The Secretary shall periodically review and reduce the level
below 1.0 milligram per centimeter squared to the extent that
reliable technology makes feasible the detection of a lower level and
X'A:I.':^J ^
medical evidence supports the imposition of a lower level. The
requirements of this subsection shall apply as provided in subsection
(d).
"(d) ABATEMENT REQUIRED.—

I
n

...

•

.^i'
'

V'
•j;

"(1) PuBUC HOUSING.—In the case of public housing assisted
under section 9 of the United States Housing Act of 1937, the
Secretary shall require the inspection described in subsection (c)
for—
"(A) each vacant dwelling prior to rerenting;
"(B) a random sample of all occupied dwellings; and
"(C) each dwelling in any housing in which there is a
dwelling determined under subparagraph (A) or (B) to have
lead-based paint hazards.
The Secretary shall require the inspection of all housing subject
to this paragraph prior to the expiration of 5 years from the
date of the publication of final regulations pursuant to this
subsection. The Secretary shall prioritize, within such 5-year
period, inspections on the basis of vacancy, age of housing, or
projected modernization or rehabilitation. The Secretary shall
require abatement to eliminate the lead-based paint poisoning
hazards in housing in which the test results equal or exceed the
standard established by or under subsection (c). Final inspection
and certification after abatement shall be made by a qualified
inspector.

b>

fe.; :

tuiir .

(2) HUD-OWNED PROPERTIES.—
"(A) ABATEMENT DEMONSTRATION PROGRAM.—In

carrying
out the requirements of this subsection with respect to
single-family and multifamily properties owned by the
Department of Housing and Urban Development, the Secretary shall utilize a sufficient variety of abatement methods in a sufficient number of areas and circumstances to
J.' • -i» demonstrate their relative cost-effectiveness and their
applicability to various types of housing.
"(B) REPORT.—Not later than 18 months after the
'^ ! effective date of the regulations issued to carry out this
subsection, the Secretary shall transmit to the Congress the
findings and recommendations of the Secretary as a result

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1947

of the demonstration program, including any recommendations of the Secretary for legislation to revise the requirements of this subsection. In preparing such report, the
Secretary shall examine—
"(i) the most reliable technology available for detecting lead-b£ised paint;
"(ii) the most efficient and cost-effective methods for
abatement;
"(iii) safety considerations in testing;
"(iv) the overall accuracy and reliability of laboratory
testing of physical samples, x-ray fluorescence
machines, and other available testing procedures;
"(v) availability of qualified samplers and testers;
and
!
"(vi) an estimate of the amount, characteristics, and
i
regional distribution of housing in the United States
that contains lead-based paint hazards at differing
u ,
levels of contamination.
*'(3) REPORT REQUIRED.—Not later than 9 months after completion of the demonstration required by paragraph (2), the Secretary shall, based on the demonstration, prepare and transmit
I
to the Congress, a comprehensive and workable plan, including
any recommendations for changes in legislation, for the prompt
and cost effective inspection and abatement of privately owned
single family and multifamily housing, including housing assisted under section 8 of the United States Housing Act of 1937.
After the expiration of the 9-month period referred to in the
preceding sentence, the Secretary may not obligate or expend
any funds or otherwise carry out activities related to any other
policy development and research project until the report is
transmitted.
"(e) EXCEPTIONS.—The provisions of this section shall not apply
to—
"(1) housing for the elderly or handicapped, except for any
dwelling in such housing in which any child who is less than 7
:
years of age resides or is expected to reside;
"(2) any project for which an application for insurance is
submitted under section 231, 232, 241, or 242 of the National
Housing Act; or
"(3) any 0-bedroom dwelling.
Vf) FUNDING.—The Secretary shall carry out the provisions of this
section utilizing available Federal funding sources. The Secretary
shall use funds available for comprehensive improvement assistance
under section 14 of the United States Housing Act of 1937 to carry
out this section in public housing.",
(hi REGULATIONS.—
(1) PROPOSED REGULATIONS.—Not later than the expiration of

the 60-day period following the date of the enactment of this
Act, the Secretary of Housing and Urban Development shall
publish proposed regulations to carry out the amendments
made by this section.
(2) FINAL REGULATIONS.—The Secretary shall publish final
regulations to carry out the amendments made by this section,
which shall become effective not later than the expiration of the
120-day period following the date of the enactment of this Act.
(3) REQUIRED CONSULTATIONS.—Before issuing proposed regulations under this subsection, the Secretary shall consult with—

' >• , :

.,; ".yj

42 use 4822

note.

101 STAT. 1948

PUBLIC LAW 100-242—FEB. 5, 1988

-K^ o*^ •

(A) the National Institute of Building Sciences and the
National Bureau of Standards with respect to the most costeffective methods of detecting and abating lead-based paint
poisoning hazards; and
-joejf;fr
(B) public housing agencies to develop a cost-efficient plan
^
, for detecting and abating lead-based paint poisoning hazlOi abort ards in dwelling assisted under section 8 of the United
States Housing Act of 1937 and dwellings in public housing
assisted under such Act.
42 u s e 1437a

SEC. 567. MEDIAN AREA INCOME.

For purposes of calculating the median income for any area that
is not within a metropolitan statistical area (as established by the
Office of Management and Budget) for programs under title I of the
Housing and Community Development Act of 1974, the United
States Housing Act of 1937, the National Housing Act, or title V of
the Housing Act of 1949, the Secretary of Housing and Urban
Development or the Secretary of Agriculture (as appropriate) shall
use whichever of the following is higher:
(1) the median income of the county in which the area is
located; or
(2) the median income of the entire nonmetropolitan area of
\
the State.
Energy.

42 use 5403.

SEC. 568. MANUFACTURED
STANDARDS.

HOUSING

CONSTRUCTION

AND

SAFETY

Section 604 of the National Manufactured Housing Construction
and Safety Standards Act of 1974 is amended by adding at the end
the following new subsection:
"(i)(l) The Federal manufactured home construction and safety
standards established by the Secretary under this section shall
include preemptive energy conservation standards in accordance
with this subsection.
"(2) The energy conservation standards established under this
subsection shall be cost-effective energy conservation performance
standards designed to ensure the lowest total of construction and
operating costs.
"(3) The energy conservation standards established under this
subsection shall take into consideration the design and factory
construction techniques of manufactured homes and shall provide
for alternative practices that result in net estimated energy
consumption equal to or less than the specified standards.".
SEC. 569. NULLIFICATION OF RIGHT OF REDEMPTION OF SINGLE-FAMILY
MORTGAGORS.

12 use 1710.

Section 204 of the National Housing Act is amended by adding at
the end the following new subsection:
"(1)(1) Whenever the Secretary or a contract mortgagee (pursuant
to its contract with the Secretary) forecloses on a Secretary-held
single family mortgage in any Federal or State court or pursuant to
a power of sale in a mortgage, the purchaser at the foreclosure sale
shall be entitled to receive a conveyance of title to, and possession of,
the property, subject to the interests senior to the interests of the
Secretary or the contract mortgagee, as the case may be. Notwithstanding any State law to the contrary, there shall oe no right of
redemption (including in all instances any right to possession oased
upon any right of redemption) in the mortgagor or any other person

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1949

subsequent to the foreclosure sale in connection with a Secretaryheld single family mortgage. The appropriate State official or the
trustee, as the case may be, shall execute and deliver a deed or other
appropriate instrument conveying title to the purchaser at the
foreclosure sale, consistent with applicable procedures in the jurisdiction and without regard to any such right of redemption.
"(2) The following actions shall be taken in order to verify title in
the purchaser at the foreclosure sale:
"(A) In the case of a judicial foreclosure in any Federal or
State court, there shall be included in the petition and in the
judgment of foreclosure a statement that the foreclosure is in
accordance with this subsection and that there is no right of
redemption in the mortgagor or any other person.
"(B) In the case of a foreclosure pursuant to a power of sale
provision in the mortgage, the statement required in subparagraph (A) shall be included in the advertisement of the sale and
either in the recitals of the deed or other appropriate instrument conveying title to the purchaser at the foreclosure sale
or in an affidavit or addendum to the deed.
"(3) For purposes of this subsection:
"(A) The term 'contract mortgagee' means a person or entity
under a contract with the Secretary that provides for the
assignment of a single-family mortgage from the Secretary to
the person or entity for the purpose of pursuing foreclosure.
"(B) the term 'mortgage' means a deed of trust, mortgage,
deed to secure debt, security agreement, or any other form of
instrument under which any interest in property, real, personal, or mixed, or any interest in property, including leaseholds, life estates, reversionary interests, and any other estates
under applicable State law, is conveyed in trust, mortgaged,
encumbered, pledged, or otherwise rendered subject to a lien,
for the purpose of securing the payment of money or the
performance of an obligation.
"(C) The term 'Secretary-held single family mortgage' means
a single-family mortgage held by the Secretary or by a contract
mortgagee at the time of initiation of foreclosure that—
"(i) was formerly insured by the Secretary under any
section of this title; or
"(ii) was taken by the Secretary as a purchase money
mortgage in connection with the sale or other transfer of
Secretary-owned property under any section of this title.
"(D) The term 'single-family mortgage' means a mortgage that covers property on which is located a l-to-4 family
residence.".

,,,,.> ..- ^
:{rr3»t «;:

"-'*' * •

^ >^

* •-

^,

. ,
> • < ->

i

s'"

SEC. 570. MISCELLANEOUS PROGRAMS TECHNICAL AMENDMENTS.
(a) HUD ADMINISTRATIVE PROVISIONS.—

(1) Section 502(a) of the Housing Act of 1948 is amended by 12 USC 1701c.
striking the fourth sentence.
(2) Section 502(b) of the Housing Act of 1948 is amended— 42 USC I404a.
(A) by striking "United States Housing Authority" each
place it appears and inserting "Secretary of Housing and
Urban Development"; and
(B) by striking "the Authority" each place it appears
and inserting "the Secretary of Housing and Urban
Development'.

101 STAT. 1950

PUBLIC LAW 100-242—FEB. 5, 1988

12 use 1701c.

(3) Section 502(cX2) of the Housing Act of 1948 is amended by
adding "and" at the end.

12 use 1701o.

Act of 1954 is amended by inserting the following section heading:

(b) ANNUAL REPORT OF SECRETARY.—Section 802 of the Housing

"ANNUAL REPORT OF SECRETARY".
(c) ENERGY CONSERVATION IN N E W BUILDINGS.—Section 303(11) of

42 use 6832.

42 use 6862.

the Energy Conservation Standards for New Buildings Act of 1976 is
amended by striking "Secretary of Housing and Urban Development" and inserting "Secretary of Energy".
(d) WEATHERIZATION ASSISTANCE.—Section 412(9)(G) of the Energy
Conservation in Existing Buildings Act of 1976 is amended by
striking the first comma after "determine".
(e) SOLAR ENERGY AND ENERGY CONSERVATION BANK.—Sections

12 use 3604,
3607, 3613.

506(0(1),
509(b)(2)(E),
509(c),
515a))(l)(A)(iii),
515(b)(1)(B),
515(b)(l)(C)(ii), 515(b)(1)(D), and 515(b)(2) of the Solar Energy and
Energy Conservation Bank Act are amended—
(1) by striking "section 38" each place it appears and inserting
"section 23";
(2) by striking "section 44C" each place it appears and inserting "section 38 ; and
(3) by striking "Internal Revenue Code of 1954" each place it
appears and inserting "Internal Revenue Code of 1986".
if) NATIONAL INSTITUTE OF BUILDING SCIENCES.—

12 use 1701J-2.

(1) Section 809(g)(4) of the Housing and Community Development Act of 1974 is amended by striking "and its" and inserting
"of its".
(2) Section 809(h) of the Housing and Community Development Act of 1974 is amended by striking "preceeding" in the
last sentence and inserting "preceding".
(g) REAL ESTATE SETTLEMENT PROCEDURES.—Section 8(c)(5) of the

12 u s e 2607.
12 use 2803.

Real Estate Settlement Procedures Act of 1974 is amended by
striking "clause 4(B)" and inserting "clause (4)(B)".
(h) HOME MORTGAGE DISCLOSURE.—Section 304(a)(1) of the Home
Mortgage Disclosure Act of 1975 is amended by striking "at at" and
inserting "at",
(i) STEWART B . MCKINNEY HOMELESS ASSISTANCE ACT.—

42 use 11382.
42 use 11391.
12 u s e 1735e-l.

J. „
Reports.

V

(1) Section 422(1) of the Stewart B. McKinney Homeless
Assistance Act is amended by inserting "governmental entity,"
after "urban county,".
(2) Section 431(1) of such Act is amended by inserting "governmental entity," after "urban county,".
SEC. 571. USE OF AMERICAN MATERIALS AND PRODUCTS.

In the administration of housing assistance programs, the Secretary of Housing and Urban Development shall encourage the use
of materials and products mined and produced in the United States.
SEC. 572. STUDY OF VOLUNTARY STANDARDS FOR MODULAR HOMES.
(a) IN GENERAL.—In order to facilitate the construction and delivery of housing, the National Institute of Building Sciences shall
prepare and submit to the Congress not later than 6 months after
the date of the enactment of this Act a report describing feasible
alternative systems for implementing one or more voluntary
preemptive national codes for modular housing, including the
method for inspecting the structures to ensure compliance with the

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1951

selected code or set of codes. Such codes may be national model
codes and shall provide for periodic upgrading through recognized
model code development procedures and the development of modular housing standards for construction, design, and performance
that ensure quality, durability, and safety and are in accordance
with life-cycle cost-effective energy conservation standards established by the Secretary of Housing and Urban Development and
designed to ensure the lowest total construction and operating costs
over the estimated life of such housing.
(b) DEFINITION.—For purposes of this section, the term "modular
housing" means factory-built single-family and multifamily housing
(including closed wall panelized housing) not subject to the requirements of the National Manufactured Housing Construction and
Safety Standards Act of 1974.
(c) GRANT.—From amounts appropriated pursuant to section 501
of the Housing and Urban Development Act of 1970, the Secretary of
Housing and Urban Development shall make a grant to the National Institute of Building Sciences in an amount not to exceed
$50,000 to cover the cost of the report under this section.

TITLE VI—NEHEMIAH HOUSING
OPPORTUNITY GRANTS
SEC. 601. STATEMENT OF PURPOSE.

12 USC 1715/

It is the purpose of this title—
(1) to encourage homeownership by families in the United
States who are not otherwise able to afford homeownership;
(2) to undertake a concentrated effort to rebuild the depressed
areas of the cities of the United States and to create sound and
attractive neighborhoods; and
(3) to increase the employment of neighborhood residents.
SEC. 602. DEFINITIONS.

For purposes of this title:
(1) The term "Fund" means the Nehemiah Housing Opportunity Fund established in section 609(a).
(2) The term "home" means any 1- to 4-family dwelling. Such
term includes any dwelling unit in a condominium project or
cooperative project consisting of not more than 4 dwelling units,
any town house, and any manufactured home.
(3) The term "lower income families" has the meaning given
such term in section 3(b)(2) of the United States Housing Act of
1937.
(4) The term "metropolitan statistical area" means a metropolitan statistical area as established by the Office of Management and Budget.
(5) The term "nonprofit organization" means a private nonprofit corporation, or other private nonprofit legal entity, that is
approved by the Secretary as to financial responsibility.
(6) The term "Secretary" means the Secretary of Housing and
Urban Development.
(7) The term "State" means each of the several States, the
District of Columbia, the Commonwealth of Puerto Rico, the
Virgin Islands, Guam, American Samoa, the Northern Mariana

12 USC 1715/

101 STAT. 1952

PUBLIC LAW 100-242—FEB. 5, 1988
* Islands, the Trust Territory of the Pacific Islands, and any other
territory or possession of the United States.
(8) The term "substantial rehabilitation" means—
(A) rehabilitation involving costs in excess of 60 percent
of the maximum sale price of a home assisted under this
title in the market area in which it is located; or
(B) the rehabilitation of a vacant, uninhabitable
structure.
(9) The term "unit of general local government" means any
borough, city, county, parish, town, township, village, or other
general purpose political subdivision of a State.

12 u s e 1715/

SEC. 603. ASSISTANCE TO NONPROFIT ORGANIZATIONS.

(a) I N GENERAL.—The Secretary may provide assistance to nonprofit organizations to carry out Nehemiah housing opportunity
programs in accordance with the provisions of this title. Such
assistance shall be made in the form of grants.
(b) APPLICATIONS.—Applications for assistance under this title
shall be made in such form, and in accordance with such procedures,
as the Secretary may prescribe.
Loans.
12 u s e 1715/

SEC. 604. USE OF ASSISTANCE.

note.

(a) IN GENERAL.—Any nonprofit organization receiving assistance
under this title shall use such assistance to provide loans to families
purchasing homes constructed or substantially rehabilitated in
accordance with a Nehemiah housing opportunity program approved under this title.
(h) SPECIFIC REQUIREMENTS.—Each loan made to a family under
this section shall—
(1) be secured by a second mortgage held by the Secretary on
the property involved;
(2) be in an amount not exceeding $15,000;
(3) bear no interest; and
(4) be repayable to the Secretary upon the sale, lease, or other
transfer of such property.

•

12 u s e 1715/

'^

m

'¥

-

? "

SEC. 605. PROGRAM REQUIREMENTS.

(a) I N GENERAL.—Assistance provided under this title may be used
only in connection with a Nehemiah housing opportunity program
of construction or substantial rehabilitation of homes.
(b) FAMILY NEED.—Each family purchasing a home under this title
shall—
(1) have a family income on the date of such purchase that is
not more than whichever of the following is higher:
(A) the median income for a family of 4 persons in the
metropolitan statistical area involved, except that if and to
"^^l
the extent that the unit of general local government dem•^S
onstrates to the Secretary that such action is necessary to
achieve or maintain neighborhood stability, not to exceed
15 percent of the families in a project at any time during
development or occupancy may have incomes up to 115
percent of such median income; or
bn<
(B) the national median income for a family of 4 persons;
and
(2) not have owned a home during the 3-year period preceding
such purchase.
(c) DOWNPAYMENT.—

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1953

(1) Each family purchasing a home under this title shall make
a downpayment of not less than 10 percent of the sale price of
such home unless—
(A) the nonprofit organization determines a higher downpayment to be appropriate; or
!
(B) the first mortgage on the home is held by a State or State and local
unit of general local government under a home loan pro- governments.
b n:;
gram of the State or unit of general local government, and
the program provides for a lower downpayment.
(2) Any downpayment made under this subsection shall
accrue interest from the date on which such downpayment is
made through the date of settlement, at a rate not less than the
passbook rate. Such interest shall be paid by the nonprofit
organization involved to the family purchasing the home for
which such downpayment was made.
(d) LEASING PROHIBITION.—No family purchasing a home under
this title may lease such home.
SEC. 606. TERMS AND CONDITIONS OF ASSISTANCE.

State and local
governments.

(a) LOCAL CONSULTATION.—No proposed Nehemiah housing oppor- 12 u s e 1715Z
tunity program may be approved by the Secretary under this title note.
unless the nonprofit organization involved demonstrates to the satisfaction of the Secretary that—
(1) it has consulted with and received the support of residents
of the neighborhood in which such program is to be located; and
(2) it has the approval of each unit of general local government in which such program is to be located.
0)) PROGRAM SCHEDULE.—Each nonprofit organization applying
for assistance under this title shall submit to the Secretary an
estimated schedule for completion of its proposed Nehemiah housing
opportunity program, which schedule shall have been agreed to by
each unit of general local government in which such program is to
be located.
(c) MINIMUM PARTICIPATION.—No nonprofit organization receiving
assistance under this title may commence any construction or
substantial rehabilitation (except with respect to homes to be constructed or substantially rehabilitated for the purpose of display)
until not less than 25 percent of the homes to be constructed or
substantially rehabilitated are contracted for sale to purchasers who
intend to live in such homes and the required downpayments are
made.
(d) FINANCIAL FEASIBILITY.—The Secretary may not provide any
assistance under this title to any nonprofit organization unless such
nonprofit organization demonstrates the financial feasibility of its
proposed Nehemiah housing opportunity program, including the
availability of non-Federal public and private funds.
(e) HOME QUALITY AND LOCATION.—A Nehemiah housing opportunity program may be approved under this title only if it provides
that—
(1) the number of homes to be constructed or substantially
rehabilitated under such program will not be less than whichever of the following is less:
(A) the greater of (i) 50 homes; or (ii) 0.25 percent of the
number of existing dwelling units in the unit of general
local government that provides the most assistance to such
iii .
program; or
-^'.-.i
(B) 250 homes;

1101 STAT. 1954

PUBLIC LAW 100-242—FEB. 5, 1988

|Energy.

•it

Cntracts.

except that the Secretary may waive the requirements of this
paragraph for any unit of general local government if the
Governor of the State or the unit of general local government
requests such waiver and certifies with supporting documentation that such requirements will prevent the State or the unit of
general local government from being able to use such program
effectively;
(2) each home constructed or substantially rehabilitated
under such program will comply with—
(A)(i) applicable local building code standards;
(ii) in any case in which there is not an applicable local
building code, a nationally recognized model building code
mutually agreed upon by the sponsoring nonprofit
organization and the Secretary; or
(iii) in the case of a manufactured home, the standards
prescribed pursuant to title VI of the Housing and Community Development Act of 1974 and the installation, structural, and site requirements that would apply under title II
of the National Housing Act; and
(B) the energy performance requirements established
under section 526 of the National Housing Act or, in the
case of manufactured housing, the energy conservation
requirements prescribed in accordance with section 203(b)
of the National Housing Act;
(3) all homes constructed or substantially rehabilitated under
such program will be located in census tracts, or identifiable
neighborhoods within census tracts, in which the median family
income is not more than 80 percent of the median family
income of the area in which such program is to be located, as
such median family income and area are determined for purposes of assistance under section 8 of the United States Housing
Act of 1937;
(4) all homes constructed or substantially rehabilitated under
such program will be concentrated in a single neighborhood and
located on contiguous parcels of land, except that homes may be
constructed or substantially rehabilitated in up to 4 identifiable
neighborhoods that each consist of contiguous parcels of land
if—
(A) the unit of general local government in which the
project is located certifies that land cannot be made available in a single neighborhood for a program of the size
required by paragraph (1);
(B) the nonprofit organization submits evidence satisfactory to the Secretary that construction or substantial rehabilitation in more than 1 identifiable neighborhood will
result in cost reductions through economies of scale comparable to the cost reductions achieved by other programs
eligible for assistance under this title; and
(C) the nonprofit organization submits evidence satisfactory to the Secretary that the program, bv itself or together
with improvement efforts that are or will be undertaken in
the identifiable neighborhoods by the unit of general local
government or private entities, will result in a substantial
improvement in the overall quality and long-term viability
of the neighborhoods; and
(5) sales contracts entered into under such program will
contain provisions requiring repayment of any loan made under

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1955

this title upon the sale or other transfer of the home involved,
unless the Secretary approves a transfer of such home without
repayment (in which case the second mortgage held by the
Secretary on such home shall remain in force until such loan is
fully repaid).
SEC. 607. PROGRAM SELECTION CRITERIA.

12 USC 1715/

(a) IN GENERAL.—In selecting Nehemiah housing opportunity programs for assistance under this title from among eligible programs,
the Secretary shall make such selection on the basis of the extent to
which—
(1) non-Federal public or private entities will contribute land
necessary to make each program feasible;
(2) non-Federal public and private financial or other contributions (including tax abatements, waivers of fees related to development, waivers of construction, development, or zoning
requirements, and direct financial contributions) will reduce the
cost of homes constructed or substantially rehabilitated under
each program;
(3) each program will produce the greatest number of units
for the least amount of assistance provided under this title,
taking into consideration the cost differences among different
market areas;
(4) each program is located in a neighborhood of severe physical and economic blight (and, in determining the degree of
physical blight, the Secretary shall consider the condition of the
housing, other buildings, and infrastructure, in the neighborhood of the proposed program);
(5) each program uses construction methods that will reduce
the cost per square foot below the average construction cost in
the market area involved; and
(6) each program provides for the involvement of local residents in the planning, and construction or substantial rehabilitation, of homes.
(b) EXCEPTION.—To the extent that non-Federal public entities are
prohibited by the law of any State from making any form of
contribution described in paragraph (1) or (2) of subsection (a), the
Secretary shall not consider such form of contribution in evaluating
such program.

i . -^ •
'

SEC. 608. DISTRIBUTION OF ASSISTANCE TO NONPROFIT ORGANIZA- 12 USC 1715/
TIONS.
note.
(a) RESERVATION OF AMOUNTS.—Following the selection of

any

Nehemiah housing opportunity program for assistance under this
title, the Secretary shall reserve sufficient amounts in the Nehemiah Housing Opportunity Fund for such assistance.
(b) DISTRIBUTION OF ASSISTANCE.—Following the sale of any home
constructed or substantially rehabilitated under a Nehemiah housing opportunity program selected for Eissistance under this title, the
Secretary shall provide to the sponsoring nonprofit organization an
amount equal to the amount of the loan made to the family purchasing such home. Such amount shall be provided not more than 30
days after the sale of such home.
(c) MAXIMUM ASSISTANCE.—The assistance provided to any nonprofit organization under this title may not exceed $15,000 per
home.

,; i r y^^,

101 STAT. 1956
12 use 1715Z

•'','.,

12 use 1715/

12 use 1715Z
ki

12 use 1715/

12 use 1715/

PUBLIC LAW 100-242—FEB. 5, 1988

SEC. 609. NEHEMIAH HOUSING OPPORTUNITY FUND.
(a) EsTABUSHMENT.—There is established in the Treasury of the
United States a revolving fund, to be known as the Nehemiah
Housing Opportunity Fund. The Fund shall be available to the
Secretary, to the extent approved in appropriation Acts, for purposes of providing assistance under section 603.
Ot)) ASSETS.—The Fund shall consist of—
(1) any amount appropriated under section 612;
(2) any amount received by the Secretary under section
604(b)(4); and
(3) any amount received by the Secretary under subsection (c).
(c) ADMINISTRATION.—Any amount in the Fund determined by the
Secretary to be in excess of the amount currently required to carry
out the provisions of this title shall be invested by the Secretary in
obligations of, or obligations guaranteed as to both principal and
interest by, the United States or any agency of the United States.
SEC. 610. REPORT.
Not later than March 1, 1990, the Secretary shall prepare and
submit to the Congress a comprehensive report setting forth the
activities carried out under this title. Such report shall include—
(1) an analysis of the characteristics of the families assisted
under this title, including family size, number of children,
family income, sources of family income, race, age, and sex;
(2) an analysis of the market value of homes purchased under
this title;
(3) an analysis of the non-Federal public and private financial
or other contributions made to reduce the cost of homes constructed or substantially rehabilitated under each program;
(4) an analysis of the sales prices of homes under this title;
(5) an analysis of the amounts of the grants made to programs
under this title; and
(6) any recommendations of the Secretary for modifications in
the program established by this title in order to ensure the
effective implementation of such program.
SEC. 611. REGULATIONS.
Not later than July 1, 1988, the Secretary shall issue final regulations to carry out the provisions of this title. Any such regulations
shall be issued in accordance with section 553 of title 5, United
States Code, notwithstanding the provisions of subsection (a)(2) of
such section.
SEC. 612. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated to carry out this title
$25,000,000 for fiscal year 1988 and $100,000,000 for fiscal year 1989.
Any amount appropriated under this section shall be deposited in
the Nehemiah Housing Opportunity Fund, and shall remain available until expended.
SEC. 613. SUNSET.
No assistance may be provided under this title after September 30,
1989, except pursuant to a commitment made on or before such date.

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1957

TITLE VII—ENTERPRISE ZONE
DEVELOPMENT
SEC. 701. DESIGNATION OF ENTERPRISE ZONES.
(a) DESIGNATION OF ZONES.—

(1) DEFINITION.—For purposes of this section, the term "enterprise zone" means any area that—
(A) is nominated by one or more local governments and
the State or States in which it is located for designation as
an enterprise zone (in this section referred to as a "nominated area"); and
(B) the Secretary of Housing and Urban Development
designates as an enterprise zone, after consultation with—
•eMfc
(i) the Secretaries of Agriculture, Commerce, Labor,
and the Treasury, the Director of the Office of Manageoi H ^
ment and Budget, and the Administrator of the Small
Business Administration; and
iA
(ii) in the case of an area on an Indian reservation,
the Secretary of the Interior.
iiit (2) NUMBER OF DESIGNATIONS.—
(A) I N GENERAL.—The Secretary of Housing and Urban
Development may designate not more than 100 nominated
areas as enterprise zones.
(B) MINIMUM DESIGNATION IN RURAL AREAS.—Of the areas
designated under clause (i), not less than Va shall be aresis
that—
(i) are within a local government jurisdiction or jurisdictions with a population of less than 50,000 (as determined under the most recent census data available);
(ii) are outside of a metropolitan statistical area (as
designated by the Director of the Office of Management
and Budget); or
(iii) that are determined by the Secretary, after consultation with the Secretary of Commerce, to be rural
areas.
(3) AREAS DESIGNATED BASED SOLELY ON DEGREE OF POVERTY.—

srf;
"''

(A) IN GENERAL.—Except as provided in subparagraph (B),
the Secretary shall designate the nominated areas with the
highest average ranking with respect to the criteria set
forth in subparagraphs (C), (D), and (E) of subsection (c)(3).
For purposes of the preceding sentence, an area shall be
ranked within each such criterion on the basis of the
amount by which the area exceeds such criterion, with the
area that exceeds such criterion by the greatest amount
given the highest ranking.
(B) EXCEPTION WHERE INADEQUATE COURSE OF ACTION,

«t

ETC.—An area shall not be designated under subparagraph
(A) if the Secretary determines that the course of action
with respect to such area is inadequate.
(C) SEPARATE APPLICATION TO RURAL AND OTHER AREAS.—

Subparagraph (A) shall be applied separately with respect
to areas described in paragraph (2)(B) and to other areas.
(4) LIMITATION ON DESIGNATIONS.—
(A) PUBLICATION OF REGULATIONS.—Before designating

any area as an enterprise zone, the Secretary shall pre-

State and local
governments.
42 use iisoi.

^

i/r

101 STAT. 1958

Regulations.

PUBLIC LAW 100-242—FEB. 5, 1988

scribe by regulation not later than 4 months following the
date of the enactment of this Act, after consultation with
the officials described in paragraph (1)(B)—
(i) the procedures for nominating an area under paragraph (1)(A);
(ii) the parameters relating to the size and population
characteristics of an enterprise zone; and
'5Hiuf>
(iii) the manner in which nominated areas will be
evaluated based on the criteria specified in subsection
.; /;
(d).
(B) TIME LIMITATIONS.—The Secretary shall designate
nominated areas as enterprise zones only during the 24month period beginning on the 1st day of the 1st month
following the month in which the effective date of the
regulations described in subparagraph (A) occurs.
(C) PROCEDURAL RULES.—The Secretary shall not make
any designation under paragraph (1) unless—
(i) the local governments and the State in which the
nominated area is located have the authority—
-,,
.
(I) to nominate such area for designation as an
enterprise zone;
(II) to make the State and local commitments
under subsection (d); and
(III) to provide assurances satisfactory to the
Secretary that such commitments will be fulfilled;
(ii) a nomination therefor is submitted in such a
manner and in such form, and contains such information, as the Secretary shall by regulation prescribe;
.jl
(iii) the Secretary determines that any information
furnished is reasonably accurate; and
(iv) the State and local governments certify that no
portion of the area nominated is already included in an
enterprise zone or in an area otherwise nominated to
be an enterprise zone.
(5) NOMINATION PROCESS FOR INDIAN RESERVATIONS.—In

the

case of a nominated area on an Indian reservation, the reservation governing body (as determined by the Secretary of the
Interior) shall be deemed to be both the State and local governments with respect to such area.
(b) PERIOD FOR WHICH DESIGNATION Is IN EFFECT.—

(1) IN GENERAL.—Any designation of an area as an enterprise
zone shall remain in effect during the period beginning on the
date of the designation and ending on the earliest of—
(A) December 31 of the 24th calendar year following the
calendar year in which such date occurs;
(B) the termination date designated by the State and local
governments as provided for in their nomination pursuant
to subsection (a)(4)(C)(ii); or
(C) the date the Secretary revokes such designation under
paragraph (2).
(2) REVOCATION OF DESIGNATION.—The Secretary, after consultation with the officials described in subsection (aXlXB) and a
hearing on the record involving officials of the State or local
government involved, may revoke the designation of an area if
the Secretary determines that the local government or the State
in which it is located is not complying substantially with the
State and local commitments pursuant to subsection (d).

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1959

(c) AREA AND ELIGIBILITY REQUIREMENTS.—

^

(1) IN GENERAL.—The Secretary may make a designation of
any nominated area under subsection (a)(1) only if it meets the
requirements of paragraphs (2) and (3).
(2) AREA REQUIREMENTS.—A nominated area meets the
requirements of this paragraph if—
(A) the area is within the jurisdiction of the local
government;
(B) the boundary of the area is continuous; and
(C) the area—
(i) has a population, as determined by the most
recent census data available, of not less than—
(I) 4,000 if any portion of such area (other than a
rural area described in subsection (a)(2)(B)(i)) is
located within a metropolitan statistical area (as
designated by the Director of the Office of Management and Budget) with a population of 50,000 or
more; or
(II) 1,000 in any other case; or
(ii) is entirely within an Indian reservation (as determined by the Secretary of the Interior).
(3) EuGiBiUTY REQUIREMENTS.—For purposes of paragraph (1),
a nominated area meets the requirements of this paragraph if
the State and local governments in which -it is located certify
and the Secretary, after such review of supporting data as he
deems appropriate, accepts such certification, that—
(A) the area is one of pervasive poverty, unemployment,
and general distress;
(B) the area is located wholly within the jurisdiction of a
local government that is eligible for Federal assistance
under section 119 of the Housing and Community Development Act of 1974, as in effect on the date of the enactment
of this Act;
(C) the unemployment rate, as determined by the appropriate available data, was not less than 1.5 times the national unemployment rate for that period;
(D) the poverty rate (as determined by the most recent
census data available) for each populous census tract (or
where not tracted, the equivalent county division as defined
by the Bureau of the Census for the purpose of defining
poverty areas) within the area was not less than 20 percent
for the period to which such data relate; and
(E) the area meets at least one of the following criteria:
(i) Not less than 70 percent of the households living
in the area have incomes below 80 percent of the
median income of households of the local government
(determined in the same manner as under section
119(b)(2) of the Housing and Community Development
Act of 1974).
(ii) The population of the area decreased by 20 percent or more between 1970 and 1980 (as determined
from the most recent census available).

„, ;;

^
,,

(4) EUGIBIUTY REQUIREMENTS FOR RURAL AREAS.—For pur-

oses of paragraph (1), a nominated area that is a rural area
escribed in subsection (a)(2XB) meets the requirements of paragraph (3) if the State and local governments in which it is
located certify and the Secretary, after such review of support-

S

*

101 STAT. 1960

PUBLIC LAW 100-242—FEB. 5, 1988
ing data as he deems appropriate, accepts such certification,
that the area meets—
(A) the criteria set forth in subparagraphs (A) and (B) of
paragraph (3); and
(B) not less than one of the criteria set forth in the other
subparagraphs of paragraph (3).
(d) REQUIRED STATE AND LOCAL COMMITMENTS.—

Employment
and
unemployment.

Minorities.
Gifts and
property.

(1) IN GENERAL.—No nominated area shall be designated as an
enterprise zone unless the local government and the State in
which it is located agree in writing that, during any period
during which the area is an enterprise zone, such governments
will follow a specified course of action designated to reduce the
various burdens borne by employers or employees in such area.
A course of action shall not be treated as meeting the requirements of this paragraph unless the course of action include
provisions described in not less than 4 of the subparagraphs of
paragraph (2).
(2) COURSE OF ACTION.—The course of action under paragraph
(1) may be implemented by both such governments and private
nongovernmental entities, may be funded from proceeds of any
program administered by the Secretary of Housing and Urban
Development or of any program administered by the Secretary
of Agriculture under title V of the Housing Act of 1949, and
may include, but is not limited to—
(A) a reduction of tax rates or fees applying within the
enterprise zone;
" (B) an increase in the level of public services, or in the
efficiency of the delivery of public services, within the
enterprise zone;
(C) actions to reduce, remove, simplify, or streamline
paperwork requirements within the enterprise zone;
'
(D) involvement in the program by public authorities or
private entities, organizations, neighborhood associations,
and community groups, particularly those within the nominated area, including a written commitment to provide jobs
and job training for, and technical, financial, or other
assistance to, employers, employees, and residents of the
nominated area;
(E) the giving of special preference to contractors owned
and operated by members of any minority; and
(F) the gift (or sale at below fair market value) of surplus
land in the enterprise zone to neighborhood organizations
agreeing to operate a business on the land.
(3) RECOGNITION OF PAST EFFORTS.—In evaluating courses of
action agreed to by any State or local government, the Secretary
shall take into account the past efforts of such State or local
government in reducing the various burdens borne by employers and employees in the area involved.
.,

Contracts.
~iv

(4) PROHIBITION OF ASSISTANCE FOR BUSINESS RELOCATIONS.—

(A) IN GENERAL.—The course of action implemented
under paragraph (1) may not include any action to assist—
(i) any establishment relocating from one area to
another area; or
(ii) any subcontractor whose purpose is to divest, or
whose economic success is dependent upon divesting,
any other contractor or subcontractor of any contract

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1961

jT«l^!UMI»:

customarily performed by such other contractor or subcontractor.
(B) EXCEPTION.—The limitations established in subparagraph (A) shall not be construed to prohibit assistance for
the expansion of an existing business entity through the
establishment of a new branch, affiliate, or subsidiary if the
-,.
Secretary—
(i) finds that the establishment of the new branch,
,. :,'
affiliate, or subsidiary will not result in an increase in
yr, ;.
unemployment in the area of original location or in any
other area where the existing business entity conducts
business operations; and
r. u .'(ii) has no reason to believe that the new branch,
affiliate, or subsidiary is being established with the
intention of closing down the operations of the existing
1. o
business entity in the area of its original location or in
any other area where the existing business entity conducts business operations.
(e) DEFINITIONS.—For purposes of this section:
(1) GOVERNMENT.—If more than one government seeks to
nominate an area as an enterprise zone, any reference to, or
requirement of, this section shall apply to all such governments.
(2) LOCAL GOVERNMENT.—The term "local government"
means—
;.;
(A) any county, city, town, township, parish, village, or
other general purpose political subdivision of a State;
ui
(B) any combination of political subdivisions described in
subparagraph (A) recognized by the Secretary; and
(C) the District of Columbia.
(3) SECRETARY.—The term "Secretary" means the Secretary of
Housing and Urban Development.
(4) STATE.—The term "State" includes Puerto Rico, the Virgin
Islands, Guam, American Samoa, the Northern Mariana Islands, and any other possession of the United States.
SEC. 702. EVALUATION AND REPORTING REQUIREMENTS.

42 u s e 11502.

Not later than the close of the 4th calendar year after the year in
which the Secretary of Housing and Urban Development first designates areas as enterprise zones, and at the close of each 4th
calendar year thereafter, the Secretary shall prepare and submit
to the Congress a report on the effects of such designation in
accomplishing tne purposes of this title.
SEC. 703. INTERACTION WITH OTHER FEDERAL PROGRAMS.
(a)

COORDINATION WITH RELOCATION ASSISTANCE.—The desig-

nation of an enterprise zone under section 701 shall not—
(1) constitute approval of a Federal or federally assisted
program or project (within the meaning of the Uniform Relocation Assistance and Real Property Acquisition Policy Act of 1970
(42 U.S.C. 4601 et seq.)); or
(2) entitle any person displaced from real property located in
such zone to any rights or any benefits under such Act.
(b) ENTERPRISE ZONES TREATED AS LABOR SURPLUS AREAS.—Any

area that is designated as an enterprise zone under section 701 shall
be treated for all purposes under Federal law as a labor surplus
area.

42 u s e 11508.

101 STAT. 1962
42 u s e 11504.

Discrimination,
prohibition.

Health and
medical care.
Safety.

PUBLIC LAW 100-242—FEB. 5, 1988

SEC. 704. WAIVER OR MODIFICATION OF HOUSING AND COMMUNITY
DEVELOPMENT RULES IN ENTERPRISE ZONES.

(a) IN GENERAL.—Upon the written request of the governments
that designated and approved an area that has been designated as
an enterprise zone under section 701, the Secretary of Housing and
Urban Development (or, with respect to any rule issued under title
V of the Housing Act of 1949, the Secretary of Agriculture) may, in
order to further the job creation, community development, or economic revitalization objectives of the zone, waive or modify all or
part of any rule that the Secretary has authority to promulgate, as
such rule pertains to the carrying out of projects, activities, or
undertakings within the zone.
Ot)) LIMITATION.—No provision of this section may be construed to
authorize the Secretary to waive or modify any rule adopted to carry
out a statute or Executive order that prohibits, or the purpose of
which is to protect persons against, discrimination on the basis of
race, color, religion, sex, marital status, national origin, age, or
handicap.
(c) SUBMISSION OF REQUESTS.—A request under subsection (a) shall
specify the rule or rules to be waived or modified and the change
proposed, and shall briefly describe why the change would promote
the achievement of the job creation, community development, or
economic revitalization objectives of the enterprise zone. If a request
is made to the Secretary of Agriculture, the requesting governments
shall send a copy of the request to the Secretary of Housing and
Urban Development at the time the request is made.
(d) CONSIDERATION OF REQUESTS.—In considering a request, the
Secretary shall weigh the extent to which the proposed change is
likely to further job creation, community development, or economic
revitalization within the enterprise zone against the effect the
change is likely to have on the underlying purposes of applicable
statutes in the geographic area that would be affected by the
change. The Secretary shall approve the request whenever the
Secretary finds, in the discretion of the Secretary, that the public
interest that the proposed change would serve in furthering such job
creation, community development or economic revitalization outweighs the public interest that continuation of the rule unchanged
would serve in furthering such underlying purposes. The Secretary
shall not approve any request to waive or modify a rule if that
waiver or modification would—
»,., , (1) directly violate a statutory requirement; or
(2) be likely to present a significant risk to the public health,
including environmental health or safety.
(e) NOTICE OF DISAPPROVAL.—If a request is disapproved, the
Secretary shall inform the requesting governments in writing of the
reasons therefor and shall, to the maximum extent possible, work
with such governments to develop an alternative, consistent with
the standards contained in subsection (d).
(f) PERIOD FOR DETERMINATION.—The Secretary shall discharge
the responsibilities of the Secretary under this section in an expeditious manner, and shall make a determination on requests not later
than 90 days after their receipt.
(g) APPLICABLE PROCEDURES.—A waiver or modification of a rule
under subsection (a) shall not be considered to be a rule, rulemaking, or regulation under chapter 5 of title 5, United States Code.
To facilitate reaching a decision on any requested waiver or modi-

PUBLIC LAW 100-242—FEB. 5, 1988

101 STAT. 1963

fication, the Secretary may seek the views of interested parties and,
if the views are to be sought, determine how they should be obtained
and to what extent, if any, they should be taken into account in
considering the request. The Secretary shall publish a notice in the Federal
Federal Register stating any waiver or modification of a rule under Register,
publication.
this section.
(h) EFFECT OF SUBSEQUENT AMENDMENT OF RULES.—In the event
that the Secretary proposes to amend a rule for which a waiver or
modification under this section is in effect, the Secretary shall not
change the waiver or modification to impose additional requirements unless the Secretary determines, consistent with standards
contained in subsection (d), that such action is necessary.
(i) EXPIRATION OF WAIVERS AND MODIFICATIONS.—No waiver or
modification of a rule under this section shall remain in effect for a
longer period than the period for which the enterprise zone designation remains in effect for the area in which the waiver or modification applies.
(j) DEFINITIONS.—For purposes of this section:
(1) RULE.—The term "rule" means—
(A) any rule as defined in section 551(4) of title 5, United
States Code; or
(B) any rulemaking conducted on the record after opportunity for an agency hearing pursuant to sections 556 and
557 of such title 5.
(2) SECRETARY.—The term "Secretary" means the Secretary of
Housing and Urban Development or, with respect to any rule
issued under title V of the Housing Act of 1949, the Secretary of
Agriculture.
SEC. 705. COORDINATION OF HOUSING AND URBAN DEVELOPMENT PROGRAMS IN ENTERPRISE ZONES.

Section 3 of the Department of Housing and Urban Development
Act is amended by adding at the end the following new subsection: 42 USC 3532.
"(d) The Secretary shall—
"(1) promote the coordination of all programs under the
jurisdiction of the Secretary that are carried on within an
enterprise zone designated pursuant to section 701 of the Housing and Community Development Act of 1987;
"(2) expedite, to the greatest extent possible, the consideration
of applications for programs referred to in paragraph (1)
/ through the consolidation of forms or otherwise; and
"(3) provide, whenever possible, for the consolidation of peri- Reports,
odic reports required under programs referred to in paragraph
(1) into one summary report submitted at such intervals as may
be designated by the Secretary.".

101 STAT. 1964
Grants.

PUBLIC LAW 100-242—FEB. 5, 1988

SEC. 706. COORDINATION WITH CDBG AND UDAG PROGRAMS.

"J

-r. i^

It is the policy of the Congress that amounts provided under the
community development block grant and urban development action
grant programs under title I of the Housing and Community Development Act of 1974 shall not be reduced in any fiscal year in which
the provisions of this title are in effect.
1 Approved February 5, 1988.

;• -,

'.

.'--.•>•
ni''

.'{rti.'uij'yrj'gA

, : r . - v . - ( , + - '^.,-,

.--'

•

LEGISLATIVE HISTORY—S. 825 (H.R. 4):
HOUSE REPORTS: No. 100-122 and Pt. 2 accompanying H.R. 4 (Comm. on Banking,
Finance and Urban Affairs) and No. 100-426 (Comm. of ConferGnce).
SENATE REPORTS: No. 100-21 (Comm. on Banking, Housing, and Urban Affairs).
CONGRESSIONAL RECORD, Vol. 133 (1987):
/
Mar. 30, 31, considered and passed Senate.
June 10, 11, H.R. 4 considered and passed House.
June 17, S. 825 considered and passed House, amended.
Nov. 9, House agreed to conference report.
Nov. 12, 13, 17, Senate considered conference report.
Dec. 21, Senate concurred in House amendments with an amendment. House
concurred in Senate amendment.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 24 (1988):
Feb. 5, Presidential remarks.