IN THE UNITED STATES SENATE
Ms. Kaptur (for herself, Mr. Clay, Mr. Evans, Mr. Brady of Pennsylvania, Ms. Fudge, Ms. Jayapal, Ms. Pingree AND Mr. West of California) introduce the following bill;
To direct the Secretary of the Department of Housing and Urban Development and the Director of the Federal Housing Finance Agency to develop a program to provide assistance to creditworthy borrowers with Federal student debt in purchasing certain foreclosed homes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the “Student Debt to Home Equity Act”.
SEC. 2. FINDINGS.
Congress finds the following:
(1) In the fourth quarter of 2016, over 17,200,000 homes remain vacant in the United States.
(2) These extended vacancies depress neighborhood property values and create a downward spiral in neighborhood stability in already troubled communities.
(3) Meanwhile, due to climbing expenses of higher education, the total Federal student debt owed equals $1,300,000,000.
(4) More than 40,000,000 Americans have at least one outstanding student loan, up dramatically from 29,000,000 Americans just 10 years ago.
(5) Student loan repayments are forcing millions of young families out of purchasing their first home, as they cannot afford to save for a down payment or qualify for a mortgage.
(6) It is imperative to find a way to systematically convert debt streams into equity streams, otherwise housing purchases will continue to be sluggish and thousands more Americans will retire saddled with student loan debt never having had the opportunity to accumulate equity.
(7) It is in the interest of the Federal Government to use the resources at its disposal, including both housing properties held in trust and student debt obligations, to put reverse pressure on these downward trends.
(8) By arranging financing that recalculates terms, debt-to-income ratios, mortgage interest rates, and other factors, short-term student debt could transition into longer term home ownership.
(9) The goal is to connect creditworthy Federal student debt holders with housing properties for sale but held by the Federal Government.
(10) Eventually, participants can help restore neighborhoods, transform their debt to equity, and buy property values locally and on the Federal ledger simply by maintaining and investing in a home mortgage.
SEC. 3. PROGRAM TO EXPAND ACCESS TO MORTGAGES TO ELIGIBLE CREDITWORTHY HOMEBUYERS WITH FEDERAL STUDENT LOAN DEBT.
(a) Establishment.—From amounts appropriated pursuant to subsection (g), the Secretary of the Department of Housing and Urban Development and the Director of the Federal Housing Finance Agency shall jointly establish and carry out a pilot demonstration program to provide assistance to eligible applicants in purchasing eligible properties.
(b) Eligible Applicants.—To be eligible for the program established in this Act, an applicant—
(1) shall have an outstanding balance of principal or interest owing on a loan made, insured, or guaranteed under title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.);
(2) may not be subject to a judgment secured through litigation with respect to such a loan under title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.), may not be subject to an order for wage garnishment under section 488A of such Act (20 U.S.C. 1095a), and at the time of application for participation in the program under this section—
(A) such a loan shall be in repayment status as determined under section 428(b)(7)(A) of such Act (20 U.S.C. 1078(b)(7)(A)); or
(B) such a loan shall be in a grace period preceding repayment;
(3) may not have owned a home during the 4-year period immediately before the applicant purchases an eligible property with assistance provided under this Act;
(4) shall complete a program of counseling with respect to the responsibilities and financial management involved in homeownership that is approved by the Secretary;
(5) shall be creditworthy, as determined by the Secretary and the Director;
(6) shall agree to use an eligible property purchased with assistance provided under this Act as the applicant’s primary residence for not less than the 3-year period beginning on the date of such purchase; and
(7) shall be employed and earning sufficient income to repay a mortgage loan, as determined by the Secretary and the Director for the purposes of this program.
(c) Types Of Assistance.—
(1) IN GENERAL.—A program established under this Act may provide for any one or more of the following options:
(A) A discount on the appraised value of an eligible property.
(B) Flexibility in underwriting standards related to the purchase of eligible properties for mortgages insured under title II of the National Housing Act (12 U.S.C. 1707 et seq.) or owned or guaranteed by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.
(C) The development of new mortgage products specifically targeted to eligible applicants.
(D) In coordination with the Department of the Treasury and the Department of Education, the development of a program that will use actuarial information to determine how the repayment of loans described in subsection (b)(1) may be integrated into a mortgage repayment schedule to allow an eligible applicant to accumulate equity in the eligible property, including by reason of meeting the eligible applicant’s obligations under such student loan.
(E) Any other assistance that the Secretary and Director jointly deem appropriate.
(2) COLLABORATION.—In providing assistance described under paragraph (1), the Secretary and the Director may collaborate with community banks having less than $10,000,000,000 in total assets, credit unions (as defined in section 101 of the Federal Credit Union Act), and local fair housing organizations.
(d) Geographical Diversity.—In selecting eligible applicants to receive assistance under this Act, the Secretary and the Director shall, to the extent practicable, consider the location of the eligible property to be purchased by the eligible applicant, including whether the eligible property is located in a rural or urban area, to ensure geographic diversity of such eligible properties.
(1) INTERIM REPORT.—Not later than 90 days after the date of the enactment of this Act, the Secretary and the Director shall submit to Congress an interim report describing the type of assistance the Secretary and the Director shall provide under the program established under this Act.
(2) FINAL REPORT.—Not later than 5 years after the date of the enactment of this Act, the Secretary and the Director shall submit to Congress a final report evaluating the impact of the program carried out under this Act and describing other types of assistance the Secretary and the Director may offer.
(f) Definitions.—In this Act:
(1) DIRECTOR.—The term “Director” means the Director of the Federal Housing Finance Agency.
(2) SECRETARY.—The term “Secretary” means the Secretary of the Department of Housing and Urban Development.
(3) ELIGIBLE PROPERTY.—The term “eligible property” means a property that is designed as a dwelling for occupancy by 1 to 4 families—
(A) that is safe and habitable, as defined by the Secretary and the Director;
(B) for which, as determined by the Secretary and the Director, the occupancy of which will promote community revitalization; and
(i) was previously subject to a mortgage loan insured by the Federal Housing Administration under title II of the National Housing Act (12 U.S.C. 1707 et seq.) and is owned by the Secretary pursuant to the payment of insurance benefits under such Act; or
(ii) is a real estate owned property of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.
(g) Authorization Of Appropriations.—There are authorized to be appropriated such sums as necessary to carry out this Act for fiscal years 2018 to 2021.
PES: bill requires the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency to jointly establish and implement a pilot demonstration program to provide, to eligible applicants with federal student loan debt, assistance in purchasing eligible properties.