Transforming Student Debt to Home Equity Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 3511 To direct the Secretary of the Department of Housing and Urban Develop- ment 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 owned by the Fed- eral Government, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and local land banks, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JUNE 26, 2019 Ms. KAPTUR (for herself, Mr. CLAY, Mrs. AXNE, and Ms. JAYAPAL) intro- duced the following bill; which was referred to the Committee on Finan- cial Services A 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 stu- dent debt in purchasing certain foreclosed homes owned by the Federal Government, the Federal National Mort- gage Association, the Federal Home Loan Mortgage Cor- poration, and local land banks, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS 2 •HR 3511 IH SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘Transforming Student 2 Debt to Home Equity Act of 2019’’. 3 SEC. 2. FINDINGS. 4 Congress finds the following: 5 (1) In the first quarter of 2019, over 6 16,800,000 homes remain vacant in the United 7 States. 8 (2) These extended vacancies depress neighbor- 9 hood property values and create a downward spiral 10 in neighborhood stability in already troubled commu- 11 nities. 12 (3) Meanwhile, due to climbing expenses of 13 higher education, the total Federal student debt 14 owed equals $1,560,000,000,000. 15 (4) More than 44,700,000 Americans have at 16 least one outstanding student loan, up dramatically 17 from 37,000,000 Americans just 7 years ago. 18 (5) Student loan repayments are forcing mil- 19 lions of young families out of purchasing their first 20 home, as they cannot afford to save for a down pay- 21 ment or qualify for a mortgage. 22 (6) Data from the United States Census Bu- 23 reau shows that non-Hispanic White households 24 have an average net worth of $130,800, while Black 25 households have an average net worth of $9,590 and 26 VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS 3 •HR 3511 IH Hispanic households have $17,530; providing inno- 1 vative financial products will allow the United States 2 to close the racial wealth gap and to ensure equi- 3 table access to housing and economic mobility. 4 (7) According to a report from Pew Research 5 Center, the median income of African-American 6 households decreased by 53 percent between 2008 7 and 2013. In the same time period, the income gap 8 between White households and African-American 9 households widened; increasing from 13 times great- 10 er to 17 times greater. 11 (8) It is imperative to create a demonstration 12 program to design financial pathways to, where pos- 13 sible, to systematically convert some student debt 14 streams into equity streams through negotiation of 15 mortgages; otherwise housing purchases will con- 16 tinue to be sluggish among first time home-buyers 17 and thousands more Americans will enter their mid- 18 years saddled with student loan debt never having 19 had the opportunity to accumulate equity. 20 (9) It is in the interest of the Federal Govern- 21 ment to use the resources at its disposal, including 22 both housing properties held in trust and student 23 debt obligations, to put reverse pressure on these 24 downward trends. 25 VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS 4 •HR 3511 IH (10) By arranging financing that recalculates 1 terms, debt-to-income ratios, mortgage interest 2 rates, and other factors, short-term student debt 3 could transition into longer term home ownership. 4 (11) The goal is to connect creditworthy Fed- 5 eral student debt holders with housing properties for 6 sale and held by the Federal Government and local 7 land banks. 8 (12) Over time, participants can help restore 9 neighborhoods, transform their debt to equity, and 10 stabilize secured property values locally and on the 11 Federal ledger by maintaining and investing in a 12 home mortgage. 13 SEC. 3. PROGRAM TO EXPAND ACCESS TO MORTGAGES TO 14 ELIGIBLE CREDITWORTHY HOMEBUYERS 15 WITH FEDERAL STUDENT LOAN DEBT. 16 (a) ESTABLISHMENT.—From amounts appropriated 17 pursuant to subsection (g), the Secretary of the Depart- 18 ment of Housing and Urban Development and the Direc- 19 tor of the Federal Housing Finance Agency shall establish 20 and carry out a pilot demonstration program to— 21 (1) provide assistance to eligible applicants in 22 purchasing eligible properties; and 23 (2) subsequently analyze the results of the pro- 24 vision of such assistance. 25 VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS 5 •HR 3511 IH (b) CONSULTATION.—In establishing and carrying 1 out the program pursuant to subsection (a), the Secretary 2 of the Department of Housing and Urban Development 3 and the Director of the Federal Housing Finance Agency 4 shall consult with— 5 (1) the Director of the Consumer Financial 6 Protection Bureau; 7 (2) the Secretary of Agriculture; 8 (3) the Secretary of Veteran Affairs; 9 (4) the Secretary of Education; and 10 (5) the Secretary of the Treasury. 11 (c) ELIGIBLE APPLICANTS.—To be eligible for the 12 program established pursuant to subsection (a), an appli- 13 cant— 14 (1) shall have an outstanding balance of prin- 15 cipal or interest owing on a Federal loan made, in- 16 sured, or guaranteed under title IV of the Higher 17 Education Act of 1965 (20 U.S.C. 1070 et seq.); 18 (2) may not be subject to a judgment secured 19 through litigation with respect to such a loan under 20 title IV of the Higher Education Act of 1965 (20 21 U.S.C. 1070 et seq.), may not be subject to an order 22 for wage garnishment under section 488A of such 23 Act (20 U.S.C. 1095a), and at the time of applica- 24 VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS 6 •HR 3511 IH tion for participation in the program under this sec- 1 tion— 2 (A) such a loan shall be in repayment sta- 3 tus as determined under section 428(b)(7)(A) 4 of such Act (20 U.S.C. 1078(b)(7)(A)); or 5 (B) such a loan shall be in a grace period 6 preceding repayment; 7 (3) may not have owned a home during the 3- 8 year period immediately before the applicant pur- 9 chases an eligible property with assistance provided 10 under this section; 11 (4) shall complete a program of counseling with 12 respect to the responsibilities and financial manage- 13 ment involved in homeownership that is approved by 14 the Secretary; 15 (5) shall be creditworthy, as determined by the 16 Secretary and the Director; 17 (6) shall agree to use an eligible property pur- 18 chased with assistance provided under this section as 19 the applicant’s primary residence for not less than 20 the 3-year period beginning on the date of such pur- 21 chase; and 22 (7) shall be employed and earning sufficient in- 23 come to repay a mortgage loan, as determined by 24 VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS 7 •HR 3511 IH the Secretary and the Director for the purposes of 1 this program. 2 (d) TYPES OF ASSISTANCE.— 3 (1) IN GENERAL.—A program established under 4 this section may provide for any one or more of the 5 following options: 6 (A) A discount on the appraised value of 7 an eligible property. 8 (B) Flexibility in underwriting standards 9 related to the purchase of eligible properties for 10 mortgages insured under title II of the National 11 Housing Act (12 U.S.C. 1707 et seq.) or owned 12 or guaranteed by the Federal National Mort- 13 gage Association or the Federal Home Loan 14 Mortgage Corporation. 15 (C) The development of new mortgage 16 products specifically targeted to eligible appli- 17 cants. 18 (D) Any other assistance that the Sec- 19 retary and Director jointly deem appropriate. 20 (2) REPAYMENT INTEGRATION.—A program es- 21 tablished under this section shall provide for the de- 22 velopment of a program that will use actuarial infor- 23 mation to determine how the repayment of loans de- 24 scribed in subsection (c)(1) may be integrated into 25 VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS 8 •HR 3511 IH a mortgage repayment schedule to allow an eligible 1 applicant to accumulate equity in the eligible prop- 2 erty, including by reason of meeting the eligible ap- 3 plicant’s obligations under such student loan. 4 (3) COLLABORATION.—In providing assistance 5 described under paragraph (1), the Secretary and 6 the Director may collaborate with— 7 (A) community banks having less than 8 $10,000,000,000 in total assets; 9 (B) credit unions (as defined in section 10 101 of the Federal Credit Union Act); 11 (C) and local fair housing organizations; 12 and 13 (D) local land banks. 14 (e) GEOGRAPHICAL DIVERSITY.—In selecting eligible 15 applicants to receive assistance under this section, the Sec- 16 retary and the Director shall, to the extent practicable, 17 consider the location of the eligible property to be pur- 18 chased by the eligible applicant, including whether the eli- 19 gible property is located in a rural or urban area, to ensure 20 geographic diversity of such eligible properties. 21 (f) REPORTS.— 22 (1) INTERIM REPORT.—Not later than 90 days 23 after the date of the enactment of this section, the 24 Secretary and the Director shall submit to Congress 25 VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS 9 •HR 3511 IH an interim report describing the type of assistance 1 the Secretary and the Director shall provide under 2 the program established under this section. 3 (2) FINAL REPORT.—Not later than 3 years 4 after the date of the enactment of this section, the 5 Secretary and the Director shall submit to Congress 6 a final report that— 7 (A) evaluates the impact of the program 8 carried out under this section and describes any 9 findings; 10 (B) identifies other types of assistance the 11 Secretary and the Director may offer; and 12 (C) includes any recommendations the Sec- 13 retary and Director may have for improving the 14 program. 15 (g) DEFINITIONS.—In this section: 16 (1) DIRECTOR.—The term ‘‘Director’’ means 17 the Director of the Federal Housing Finance Agen- 18 cy. 19 (2) SECRETARY.—The term ‘‘Secretary’’ means 20 the Secretary of the Department of Housing and 21 Urban Development. 22 (3) ELIGIBLE PROPERTY.—The term ‘‘eligible 23 property’’ means a property that is designed as a 24 dwelling for occupancy by 1 to 4 families— 25 VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS 10 •HR 3511 IH (A) that is safe and habitable, as defined 1 by the Secretary and the Director; 2 (B) for which, as determined by the Sec- 3 retary and the Director, the occupancy of which 4 will promote community revitalization; and 5 (C) that— 6 (i) was previously subject to a mort- 7 gage loan insured by the Federal Housing 8 Administration under title II of the Na- 9 tional Housing Act (12 U.S.C. 1707 et 10 seq.) and is owned by the Secretary pursu- 11 ant to the payment of insurance benefits 12 under such Act; 13 (ii) is a real estate owned property of 14 the Federal National Mortgage Association 15 or the Federal Home Loan Mortgage Cor- 16 poration; or 17 (iii) is owned by a local land bank. 18 (4) LOCAL LAND BANK.—The term ‘‘local land 19 bank’’ means— 20 (A) a governmental or nongovernmental 21 nonprofit entity established, at least in part, to 22 assemble, temporarily manage, and dispose of 23 vacant land for the purpose of stabilizing neigh- 24 VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS 11 •HR 3511 IH borhoods and encouraging re-use or redevelop- 1 ment of urban property; or 2 (B) such other governmental or nongovern- 3 mental entity as the Secretary and the Director 4 may determine appropriate. 5 (h) AUTHORIZATION OF APPROPRIATIONS.—There 6 are authorized to be appropriated such sums as necessary 7 to carry out this section for fiscal years 2021, 2022, and 8 2023. 9 Æ VerDate Sep 11 2014 03:02 Jul 10, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6301 E:\BILLS\H3511.IH H3511 SSpencer on DSKBBXCHB2PROD with BILLS