SEC-258 -- SECOND MORTGAGE ASSISTANCE FOR FIRST-TIME HOMEBUYERS.


 (a) In General.-The Secretary shall make available a model program
under which units of general local government provide loans (secured by
second mortgages) with deferred payment of interest and principal to
first-time homebuyers.

 (b) Homeownership Counseling.-The program under this section shall
provide for homeownership counseling to first-time homebuyers assisted,
which shall include-

 (1) counseling before and after purchase of the property;

 (2) assisting first-time homebuyers in identifying the most suitable
and affordable properties;

 (3) providing homebuyers with financial management assistance;

 (4) assisting homebuyers in understanding mortgage transactions and
home sales contracts; and

 (5) assisting homebuyers with eliminating any credit problems that may
prevent the homebuyers from purchasing the property.

 (c) Eligibility Requirements.-Deferred payment loans secured by second
mortgages may be provided under the model program under this section if-

 (1) the homebuyer assisted is a first-time homebuyer;

 (2) the property secured by the second mortgage is a single-family
residence and is the principal residence of the homebuyer; and

 (3) the principal obligation of the deferred payment loan secured by
a second mortgage does not exceed 30 percent of the acquisition price
of the residence to the homebuyer.

 (d) Payment terms.

 (1) Period of deferral.-The payment of any principal and interest on
a loan under this section shall be deferred for not less than the 5-year
period beginning on the date of the acquisition of the residence by the
homebuyer.

 (2) Interest rate.-The interest rate on the unpaid balance of a loan
under this section shall be at least 4 percent.

 (3) Repayment period.-A deferred payment loan secured by a second
mortgage shall be repayable over the 15-year period beginning at the end
of the deferral period.

 (e) Security.-A deferred payment loan assisted with amount provided
under a grant under this section shall be secured by a lien on the
property involved, which lien shall be subordinate to the first mortgage
on the property.