SEC-706 -- RURAL HOUSING LOAN GUARANTEES. 

 
 (a) Findings and Purpose.-
 
 (1) Findings.-The Congress finds that-
 
 (A) the Federal Government should encourage support for homeownership
through nonsubsidized mortgage loans guaranteed by the Secretary of
Agriculture for the purchase of modest homes located in rural areas and
small communities of the country that are not adequately served by
private conventional, federally insured, or guaranteed mortgage credit
providers; and
 
 (B) many rural areas contain disproportionate amounts of substandard
housing in need of repair, but lack the necessary funding and support
to modernize such housing through preservation.
 
 (2) Purpose.-The purpose of this section is to expand homeownership
opportunities to low- and moderate-income residents of rural areas of
the country through the establishment of guaranteed rural housing loans
to be made available in rural locations where there is an insufficient
availability of mortgage financing from other sources.
 
 (b) Guaranteed Loans for Housing Acquisition.-Section 502 of the
Housing Act of 1949 (42 U.S.C. 1472), as amended by the preceding
provisions of this Act, is further amended by adding at the end the
following new subsection:
 
 "(h) Guaranteed Loans.-
 
 "(1) Authority.-The Secretary shall, to the extent provided in
appropriation Acts, provide guaranteed loans in accordance with this
section, section 517(d), and the last sentence of section 521(a)(1)(A),
except as modified by the provisions of this subsection. Loans shall be
guaranteed under this subsection in an amount equal to 90 percent of the
loan.
 
 "(2) Eligible borrowers.-Loans guaranteed pursuant to this subsection
shall be made only to borrowers who are low- or moderate-income families
or persons, whose incomes do not exceed the median income of the area,
as determined by the Secretary.
 
 "(3) Eligible housing.-Loans may be guaranteed pursuant to this
subsection only if the loan is used to acquire or construct a
single-family residence that is-
 
 "(A) to be used as the principal residence of the borrower;
 
 "(B) eligible for assistance under this section, section 203(b) of the
National Housing Act, or chapter 37 of title 38, United States Code; and
 
 "(C) located in a rural area that is more than 25 miles from an urban
area or densely populated area.
 
 "(4) Priority and counseling for first-time homebuyers.-
 
 "(A) In providing guaranteed loans under this subsection, the
Secretary shall give priority to first-time homebuyers (as defined in
paragraph (12)(A)).
 
 "(B) The Secretary may require that, as a condition of receiving a
guaranteed loan pursuant to this subsection, a borrower who is a
first-time homebuyer successfully complete a program of homeownership
counseling under section 106(a)(1)(iii) of the Housing and Urban
Development Act of 1968 and obtain certification from the provider of
the program that the borrower is adequately prepared for the obligations
of homeownership.
 
 "(5) Eligible lenders.-Guaranteed loans pursuant to this subsection
may be made only by lenders approved by and meeting qualifications
established by the Secretary.
 
 "(6) Loan terms.-Loans guaranteed pursuant to this subsection shall-
 
 "(A) be made for a term not to exceed 30 years;
 
 "(B) involve a rate of interest that is fixed over the term of the
loan and does not exceed the rate for loans guaranteed under chapter 37
of title 38, United States Code, or comparable loans in the area that
are not guaranteed; and
 
 "(C) involve a principal obligation (including initial service
charges, appraisal, inspection, and other fees as the Secretary may
approve)-
 
 "(i) for a first-time homebuyer, in any amount not in excess of 100
percent of the appraised value of the property as of the date the loan
is accepted or the acquisition cost of the property, whichever is less,
subject to the maximum dollar limitation of section 203(b)(2) of the
National Housing Act; and
 
 "(ii) for any borrower other than a first-time homebuyer, in an amount
not in excess of the percentage of the property or the acquisition cost
of the property that the Secretary shall determine, subject to the
maximum dollar limitation of section 203(b)(2) of the National Housing
Act, such percentage or cost in any event not to exceed 100 percent of
the appraised value of the property as of the date the loan is accepted
or the acquisition cost of the property, whichever is less.
 
 "(7) Guarantee fee.-With respect to a guaranteed loan under this
subsection, the Secretary may collect from the lender at the time of
issuance of the guarantee a fee equal to not more than 1 percent of the
principal obligation of the loan.
 
 "(8) Refinancing.-Any guaranteed loan under this subsection may be
refinanced and extended in accordance with terms and conditions that the
Secretary shall prescribe, but in no event for an additional amount or
term which exceeds the limitations under this subsection.
 
 "(9) Nonassumption.-Notwithstanding the transfer of property for which
a guaranteed loan under this subsection was made, the borrower of a
guaranteed loan under this subsection may not be relieved of liability
with respect to the loan.
 
 "(10) Geographical targeting.-In providing guaranteed loans under this
subsection, the Secretary shall establish standards to target and give
priority to areas that have a demonstrated need for additional sources
of mortgage financing for low- and moderate-income families.
 
 "(11) Allocation.-The Secretary shall provide that, in each fiscal
year, guaranteed loans under this subsection shall be allocated among
the States on the basis of the need of eligible borrowers in each State
for such loans in comparison with the need of eligible borrowers for
such loans among all States.
 
 "(12) Definitions.-For purposes of this subsection:
 
 "(A) The term `displaced homemaker' means an individual who-
 
 "(i) is an adult;
 
 "(ii) has not worked full-time full-year in the labor force for a
number of years but has, during such years, worked primarily without
remuneration to care for the home and family; and
 
 "(iii) is unemployed or underemployed and is experiencing difficulty
in obtaining or upgrading employment.
 
 "(B) The term `first-time homebuyer' means any individual who (and
whose spouse) has had no present ownership in a principal residence
during the 3-year period ending on the date of purchase of the property
acquired with a guaranteed loan under this subsection except that-
 
 "(i) any individual who is a displaced homemaker may not be excluded
from consideration as a first-time homebuyer under this subparagraph on
the basis that the individual, while a homemaker, owned a home with his
or her spouse or resided in a home owned by the spouse; and
 
 "(ii) any individual who is a single parent may not be excluded from
consideration as a first-time homebuyer under this subparagraph on the
basis that the individual, while married, owned a home with his or her
spouse or resided in a home owned by the spouse.
 
 "(C) The term `single parent' means an individual who-
 
 "(i) is unmarried or legally separated from a spouse; and
 
 "(ii)(I) has 1 or more minor children for whom the individual has
custody or joint custody; or
 
 "(II) is pregnant.
 
 "(D) The term `State' means the States of the United States, the
Commonwealth of Puerto Rico, the District of Columbia, the Commonwealth
of the Northern Mariana Islands, Guam, the Virgin Islands, American
Samoa, the Trust Territories of the Pacific, and any other possession
of the United States.".
 
 (c) Conforming Amendments.-Section 106(a)(2) of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x(a)(2)) is amended-
 
 (1) by inserting "(A)" after "Secretary"; and
 
 (2) by striking "Act and" and inserting the following: "Act; (B)
shall, in consultation with the Secretary of Agriculture, provide such
services for borrowers who are first-time homebuyers with guaranteed
loans under section 502(h) of the Housing Act of 1949; and (C)".
 
 (d) Regulations and Implementation.-
 
 (1) Proposed regulations and comment period.-Not later than 120 days
after the date of the enactment of this Act, the Secretary of
Agriculture shall publish in the Federal Register proposed regulations
to implement the amendments made by this section. The Secretary shall
receive comments regarding the regulations during the 30-day period
beginning on the date of the publication of the proposed regulations.
 
 (2) Implementation.-Not later than 180 days after the date of the
enactment of this Act, the Secretary of Agriculture shall issue final
regulations to implement the amendments made by this section. The
Secretary shall provide for the regulations to take effect not later
than 30 days after the date on which the regulations are issued.
 
 (3) Applicability.-The amendments made by this section shall not apply
to guaranteed loans under title V of the Housing Act of 1949 (42 U.S.C.
1471 et seq.) made before the date on which the final regulations issued
by the Secretary under paragraph (2) take effect.
 
 (4) Consultation.-In developing and promulgating the regulations under
paragraphs (1) and (2), the Secretary of Agriculture shall consult with
the chairperson of the Federal Agricultural Mortgage Corporation and
shall solicit the views of borrowers, lenders, realtors, and
homebuilders experienced and knowledgeable regarding housing in rural
areas to provide that the regulations promulgated ensure that guaranteed
loans pursuant to the amendments made by this section-
 
 (A) are made in a manner that is cost-effective; and
 
 (B) are made in a manner that reduces, to the extent practicable, the
burden of administration and paperwork for borrowers and lenders.