Mark-to-Market Extension Act of 2006

Mr. Speaker, I yield myself such time as I may consume.

(Ms. WATERS asked and was given permission to revise and extend her remarks.)

Mr. Speaker, I rise in support of H.R. 6115, the Mark-to- Market Extension Act of 2006.

I want to thank the gentlewoman from Ohio, Deborah Pryce, for sponsoring this bill, along with other cosponsors of the bill, including Mr. Gerlach of Pennsylvania; Mr. Tiberi of Ohio; and, of course, Ranking Member Frank. The distinguished chairman of the Committee on Financial Services, Mr. Oxley, must also be commended for moving this important bill to the floor. As the ranking member of the Subcommittee on Housing and Community Affairs, I am pleased to be an original cosponsor of this bill, and I would like to thank all of the members of the subcommittee who supported it.

H.R. 6115, the Mark-to-Market Extension Act of 2006, will reauthorize the Mark-to-Market program. The program is set to expire on September 30, 2006. Of course, we can ill afford to have any housing program eliminated by our failure to act, particularly since the Mark-to-Market program ensures that our multifamily rental housing stock remains on the market.

When Congress enacted the Multifamily Assisted Housing Reform and Affordability Act of 1997, it was designed to, number one, eliminate above-market rents at low- and moderate-income multifamily properties with FHA-insured mortgages and project-based section 8 assistance; and, number two, preserve affordable rental housing in markets where it is needed.

The Mark-to-Market program was created to address these program goals, and it relies basically on several tools: debt restructuring, full or partial payment of claims, deferment of mortgage payments, credit enhancements, and increased FHA mortgage insurance.

There is ample evidence that the Mark-to-Market program is critical to preserving multifamily housing and to cost savings. According to HUD, as of March 2006, the Mark-to-Market program has been used to preserve approximately 220,000 affordable rental apartments at savings of $1.9 billion. And, in fact, the Congressional Budget Office concluded 5 years ago that the cost of restructuring debt for many multifamily housing projects is less expensive that the cost of default by an estimated $1 million per project.

Because more than 1,000 projects could be assisted under the Mark-to- Market program, we will save many multifamily affordable housing units over the next 5 years. I am certainly not interested in seeing any of the multifamily rental units that are located in my district or in the State of California, projects that are in the pipeline in California, go into default because the Mark-to-Market program is allowed to expire. This tool is too valuable to preserving the affordable housing stock across the country to allow it to expire. When I think about it, we were very close to losing several major housing programs had our Subcommittee on Housing and the full committee not taken action on this and other programs.

Again, this bill not only demonstrates just how serious many members of the Committee on Financial Services have been on reaching consensus on programs that are important to fighting the affordable housing crisis in this country, but the bill recognizes low- and moderate- income housing needs in many of our communities.

Yes, H.R. 6115 is being considered by this House at a critical juncture because the Mark-to-Market program takes into account the serious shortage of the affordable multifamily rental housing in America. The Mark-to-Market program applies to FHA-insured multifamily projects with project-based assistance under the section 8 program. Rents for these projects are in excess of the rents for comparable rental units in the area. While many of these projects had been developed with rents which were above market, when the 20-year section 8 contracts began to expire back in the 1990s, the contracts were not renewed at above-market rents. This forced many projects into default because the owners of the projects could not operate or meet mortgage payments at market rents.

Restructuring the FHA-insured mortgage, which lowers debt service to a level that is sustainable at market rent, as well as mechanisms to rehabilitate and to replenish reserves, are what makes the Mark-to- Market program worthy of extension. Under the Mark-to-Market program, owners of multifamily projects that have been restructured are required to accept section 8 renewal offers and to keep rents affordable regardless of whether section 8 assistance is available. The critical requirement must be met for the next 30 years.

In addition, the committee included new provisions to the Mark-to- Market program that will enable Mark-to-Market mechanisms to be extended to damaged properties in disaster areas. The committee concluded that by including these properties, many of which are located in the gulf region where 170,000 units in New Orleans were lost, that the question of eligibility would be eliminated, making M-M tools quickly available to the rebuilding efforts. The bill also allows for continued debt relief upon the transfer of a Mark-to-Market project to any qualified nonprofit purchasers.

With regard to the use of exception rent, the committee recognized that the existing 5 percent cap on rents greater than 100 percent of the median is projected to be reached this year, requiring the committee to raise the rent ceiling to 9 percent of the Mark-to-Market portfolio.

For all of the above reasons, this is one of the most constructive housing bills reported by the Committee on Financial Services this year.

Mr. Speaker, we cannot let the Mark-to-Market program expire, and I certainly urge my colleagues to support the bill.

I yield to the gentleman from Massachusetts.

Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 6115) to extend the authority of the Secretary of Housing and Urban Development to restructure mortgages and rental assistance for certain assisted multifamily housing.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on this legislation and to insert extraneous material thereon.

Mr. Speaker, I yield myself such time as I may consume.

I rise in strong support of H.R. 6115, the Mark-to-Market Extension Act of 2006, legislation introduced by my friend and colleague from Ohio, Congresswoman Deborah Pryce. This legislation extends the Multifamily Assisted Housing Restructuring and Affordability Act of 1997 for 5 years beyond its current expiration date of September 30, 2006.

Legislation creating the Mark-to-Market program was enacted in 1997 to reduce the cost to the Federal Government of renewing section 8 contracts. At that time, 4,000 multifamily projects with FHA-insured mortgages were receiving project-based rent subsidies under section 8 of the U.S. Housing Act of 1937. The original Housing Assistance Payment contracts attached to these projects were written for periods ranging from 15 to 40 years. The majority of these projects had units with rents that exceeded those for comparable unassisted units; however, HUD did not have the authority

to renew the contract at above-market rents.

Consequently, few of these projects would have remained financially viable when their rental income was reduced to market rates, as owners would not have been able to cover their costs. With the reduced rents, such projects would most likely have gone into default on their mortgages, generating losses to the FHA insurance fund and possibly displacing many tenants in those projects.

Under the current law, if the Mark-to-Market program expires, HUD will be required to renew Housing Assistance Payment Contracts at market levels, but the authority to restructure mortgage debt will no longer be available for projects that have yet to enter the Mark-to- Market program. Without that authority, many projects would not generate sufficient cash flow to support their mortgage after rents are reduced to market levels.

CBO estimates that the cost of restructuring is less expensive than the cost of default by about $500,000 per project, on average. Consequently, CBO estimates that enacting H.R. 6115 will reduce direct spending by $188 million over 5 years principally by avoiding defaults on FHA-insured multifamily mortgages that otherwise would occur under current law.

H.R. 6115 will ensure that HUD continues to have the tools necessary to restructure mortgages and lower rents, thereby reducing the Fed's cost of oversubsidized section 8 properties.

I want to commend Congresswoman Pryce for her work on this important legislation. And I urge the adoption of H.R. 6115, the Mark-to-Market Extension Act of 2006.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, just in closing, let me salute our good friend from California, who has had a passionate interest in housing ever since she got here and has worked extremely well as the ranking member of the subcommittee with the chairman and with both the full committee chairmen, myself and the gentleman from Ohio. We have surprised a lot of people with what we have been able to produce.

They say politics is the art of the possible, and I think we have proven it time and time again. This is commonsense legislation that is good for all concerned, and I just want to salute her dedication to that effort.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, this week, due to a death in the family, I have requested and received a leave of absence. Since Monday, September 25, I have missed the following rollcall votes. I have noted how I would have voted had I been present:

Roll No. 471, September 25, H.R. 5059, on motion to suspend the rules and pass, ``nay''; 472, September 25, H.R. 5062, on motion to suspend the rules and pass, ``nay''; 473, September 25, H.R. 6102, on motion to suspend the rules and pass, as amended, ``yea''; 474 September 26, H. Res. 1038, on agreeing to the resolution, ``nay''; 475, September 26, H. Res. 1039, on agreeing to the resolution, ``nay''; 476, September 26, H.R. 5092, on motion to suspend the rules and pass, as amended, ``nay''; 477, September 26, H.R. 4772, on motion to suspend the rules and pass, as amended, ``nay''; 478, September 26, motion, motion to resolve into secret session, ``yea''; 479, September 26, S. 403, on passage, ``nay''; 480, September 26, H.R. 2679, on passage, ``nay''; 481, September 26, H. Res. 723, on motion to suspend the rules and agree, as amended, ``yea''; 482, September 26, H. Res. 992, on motion to suspend the rules and agree, as amended, ``yea''; 483, September 26, H. Res. 989, on motion to suspend the rules and agree, as amended, ``yea''; 484, September 26, H. Res. 1017, on motion to suspend the rules and agree, ``yea''; 485, September 26, H.R. 6164, on motion to suspend the rules and pass, ``yea''; 486, September 26, H.R. 5631, on agreeing to the conference report, ``yea''; 487, September 27, H. Con. Res. 483, on agreeing to the resolution, ``nay''; 488, September 27, H. Res. 1042, on ordering the previous question, ``nay''; 489, September 27, H. Res. 1042, on agreeing to the resolution, ``nay''; 490, September 27, H.R. 6166, on motion to recommit with instructions, ``yea''; 491, September 27, H.R. 6166, on passage, ``nay''; 492, September 27, H.R. 5637, on motion to suspend the rules and pass, as amended, ``yea''; 493, September 27, H.R. 6115, on motion to suspend the rules and pass, ``yea''; 494, September 27, S. 2856, on motion to suspend the rules and pass, as amended, ``yea''; 495, September 28, H. Res. 1045, on ordering the previous question, ``nay''; 496, September 28, H. Res. 1046, on ordering the previous question, ``nay''; 497, September 28, H. Res. 1046, on agreeing to the resolution, ``nay''; 498, September 28, H. Res. 1052, on ordering the previous question, ``nay''; 499, September 28, H. Res. 1052, on agreeing to the resolution, ``nay''; 500, September 28, H.R. 4954, on motion to instruct conferees, ``yea''; 501, September 28, H.R. 5825, on motion to recommit with instructions, ``yea''; 502, September 28, H.R. 5825, on passage, ``nay''; 503, September 28, H.R. 6143, on motion to suspend the rules and pass, as amended, ``yea''; 504, September 29, H. Res. 1054, on ordering the previous question, ``nay''; 505, September 29, H. Res. 1054, on agreeing to the resolution, ``nay''; 506, September 29, H. Res. 1053, on ordering the previous question, ``nay''; 507, September 29, H. Res. 1053, on agreeing to the resolution, ``nay''; 508, September 29, S. 8930, on passage, ``nay.''

Mr. Speaker, I would first like to thank Chairman Oxley, for this effort and for his great leadership of our Committee for the last 6 years. Six very challenging years in which fiscal policy really mattered. A time when security, reliability, transparency, made a difference. Ms. Waters, and Ranking Member Frank and their staffs for their hard work on this legislation. Clinton Jones, Cindy Chetti, and Tallman Johnson on the Majority staff have been invaluable.

We are here today to extend a program that works: A program that saves taxpayers money, reduces rents on tenants, and ensures the long- term viability of affordable housing properties.

The numbers speak louder than words--In just 7 years, Mark-to-Market has resulted in nearly $2 billion in net savings to taxpayers, reduced rent costs at over 2,700 properties by an estimated $216 million per year, and completed debt-restructuring on over 1,400 properties.

Central Ohio has been the beneficiary of many of these projects, including the Ohio Capital Corporation for Housing's purchase of 12 HUD-insured properties in urban Columbus, and the continued development of a home for disabled individuals near the Ohio State University, the Center for Creative Living.

This bill also includes an amendment I drafted in Committee, which provides relief for properties in rural and dense urban areas and non- profit purchasers, and erases any question of the eligibility of properties damaged by Hurricanes Katrina, Rita, Wilma or other natural disasters.

Our action today shows our commitment to acting before this program sunsets.

Mr. Speaker, I was unable to personally cast votes today because I was attending a memorial service for Sergeant First Class (SFC) Michael Fuga.

Had I been present for rollcall vote 487, a motion to adjourn, I would have voted ``nay'';

For rollcall 488, a motion ordering the Previous Question on the Rule for consideration of H.R. 6166, the Military Commissions Act, I would have voted ``nay''.

For rollcall 489, on agreeing to the H. Res. 1042, the Rule for consideration of H.R. 6166, I would have voted ``nay'';

For rollcall 490, the Skelton motion to recommit H.R. 6166 to establish a process for

expedited judicial review and require a reauthorization of the Act after December 31, 2009 or three year sunset, I would have voted yea;

For rollcall 491, on passage of H.R. 6166, the Military Commissions Act, I would have voted nay;

For rollcall 492, on passage of H.R. 5637, the Nonadmitted and Reinsurance Reform Act of 2006, I would have voted yea;

For rollcall 493, on passage of H.R. 6115, the Mark-to-Market Extension Act of 2006, I would have voted yea;

For rollcall 494, on passage of S. 2856, the Financial Services Regulatory Relief Act of 2006, I would have voted yea.