SEC-602 -- RELATED NATIONAL HOUSING ACT AMENDMENTS. 

 
 (a) Insurance for Second Mortgage Financing.-Section 241(f) of the
National Housing Act is amended to read as follows:
 
 "(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 and
acquisition loans made by financial institutions approved by the
Secretary and State housing finance agencies that enter into
risk-sharing agreements with the Secretary.
 
 "(2)(A) 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 229 of the Low-Income Housing Preservation and
Resident Homeownership Act of 1990) who agrees to extend the low-income
affordability restrictions on the housing pursuant to an approved plan
of action under such Act.
 
 "(B) To be eligible for insurance under this paragraph, an equity loan
shall-
 
 "(i) be limited to an amount equal to the lesser of (I) 70 percent of
the preservation equity in the project, as determined by the Secretary
under such Act, or (II) the amount the Secretary determines can be
supported by the project on the basis of an 8 percent return on the
preservation equity (assuming normal debt service coverages); and
 
 "(ii) provide for the lender to deposit (on behalf of the borrowing
owner) 10 percent of the loan amount in an escrow account, controlled
by the Secretary or a State housing finance agency approved by the
Secretary, which shall be made available to the owner upon the
expiration of the 5-year period beginning on the date the loan is made,
subject to compliance with section 222(d) of such Act; and
 
 "(3)(A) For purposes of this section, the term `acquisition loan'
means a loan or advance of credit to a qualified purchaser of eligible
low income housing (as defined in section 231 of the Low-Income Housing
Preservation and Resident Homeownership Act of 1990) acquiring the
housing under section 220 or 221 of such Act who agrees to extend the
low-income affordability restrictions pursuant to an approved plan of
action under such Act.
 
 "(B) To be eligible for insurance under this paragraph, an acquisition
loan shall be limited to 95 percent of the preservation equity of the
housing determined under section 229(8) of the Low-Income Housing
Preservation and Resident Homeownership Act of 1990, except that the
loan may include, if the qualified purchaser is a priority purchaser as
defined under section 231 of such Act, any expenses associated with the
acquisition, loan closing, and implementation of the plan of action,
subject to approval by the Secretary.
 
 "(4) The provisions of subsections (d), (e), (g), (h), (i), (j), (k),
(l), and (n) of section 207 shall be applicable to loans insured under
this subsection, 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 obligations 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 mortgage, the Secretary may-
 
 "(i) issue regulations providing that, in order to receive insurance
benefits, the insured mortgagee shall either assign the equity or
acquisition 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 or acquisition 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 or acquisition loan, plus taxes,
insurance, foreclosure costs, fees, and other expenses.
 
 "(5) Loans insured under this subsection shall-
 
 "(A) 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
 
 "(B) contain such other terms, conditions, and restrictions as the
Secretary may prescribe, including phased advances of equity loan
proceeds to reflect project rent levels.
 
 "(6) The Secretary may provide for combination of loans insured under
subsection (d) with equity and acquisition loans insured under this
subsection.
 
 "(7) When underwriting an equity or acquisition loan under this
subsection, the Secretary may assume that the rental assistance provided
in accordance with an approved plan of action under section 222 of the
Cranston-Gonzalez National Affordable Housing Act will be extended for
the full term of the contract entered into under such Act. The Secretary
may accelerate repayment of a loan under this subsection if rental
assistance is not extended under section 222(b) of such Act or the
Secretary is unable to develop a revised package of incentives to the
owner comparable to those received under the original approved plan of
action.
 
 "(8) If the Secretary is unable to extend the term of rental
assistance for the full term of the contract entered into under section
222(b) of the Cranston-Gonzalez National Affordable Housing Act, the
Secretary may take such actions as the Secretary determines to be
appropriate to avoid default, avoid disruption of the sound ownership
and management of the housing, and otherwise minimize the cost to the
Federal Government.
 
 "(9) A mortgagee approved by the Secretary may not withhold consent
to an equity or acquisition loan on a property on which that mortgagee
holds a mortgage.
 
 (b) Approval Prior to Foreclosure.-Section 250(b) of such Act (12
U.S.C. 1715z-15(b)) is amended to read as follows:
 
 "(b) A mortgagee may foreclose the mortgage on, or acquire by deed in
lieu of foreclosure, any eligible low-income housing project (as such
term is defined in section 229 of the Low-Income Housing Preservation
and Resident Homeownership Act of 1990) only if the mortgagee also
conveys title to the project to the Secretary in connection with a claim
for insurance benefits.".
 
 (c) Repealer.-Section 250(c) of such Act is hereby repealed, and
section 250(d) is redesignated as section 250(c).