II
110th CONGRESS
1st Session
S. 2517
IN THE SENATE OF THE UNITED STATES
December 18, 2007
Mr. Smith (for himself, Mr. Kerry, and Mr. Coleman) introduced the following bill; which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to provide that the proceeds of qualified mortgage bonds may be used to provide refinancing for subprime loans, to provide a temporary increase in the volume cap for qualified mortgage bonds, and for other purposes.
Modifications and increased volume cap with respect to qualified mortgage bonds
Use of qualified mortgage bonds proceeds for subprime refinancing loans
Section 143(k) of the Internal Revenue Code of 1986 (relating to other definitions and special rules) is amended by adding at the end the following new paragraph:
Special rules for subprime refinancings
In general
In the case of a residence which was originally financed by the mortgagor through a qualified subprime loan, this section shall be applied with the following modifications:
Subsection (i)(1) (relating to mortgages must be new mortgages) shall not apply.
Subsection
(a)(2)(D)(i) shall be applied by substituting 12-month period
for 42-month period
each place it appears.
Subsection (d) (relating to 3-year requirement) shall not apply.
Subsection (e) (relating to purchase price requirement) shall be applied by using the market value of the residence at the time of refinancing in lieu of the acquisition cost.
Qualified subprime loan
In general
The term qualified subprime loan means an adjustable rate single-family residential mortgage loan originated after December 31, 2001, and before January 1, 2008, that the bond issuer determines has characteristics that suggest both a reasonably foreseeable risk of default and a reasonable potential to avoid default with the benefit of a lower cost refinancing.
Considerations
In making the determination under clause (i), the bond issuer may consider the following characteristics:
Loan payments which are scheduled to increase by more than 10 percent after December 31, 2007, and before January 1, 2011.
A loan-to-value ratio of 97 percent or greater at the time of the original mortgage loan or at the time of the refinancing of such loan after adjustment for any decline in the fair market value of the residence.
A borrower whose creditworthiness is relatively low in comparison to a prime borrower, based on a lower credit score, such as a Fair Isaac Credit Organization credit score at the time of the original subprime loan of less than 660 and the absence of an increase in such score by more than 10 percent since the time of the original loan.
Whether loan payments on the original mortgage loan generally have been made in a current, timely manner, subject only to isolated late payments.
Termination
This paragraph shall not apply to any bonds issued after December 31, 2010.
.
Increased volume cap for qualified mortgage bonds
In general
Subsection (d) of section 146 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
Increase and set aside for qualified mortgage bonds for 2008
In general
The State ceiling for calendar year 2008 shall be increased by $15,000,000,000.
Set aside
In general
Not less than an amount equal to each State's allocable share of the increase in the State ceiling under subparagraph (A) shall be allocated solely for the purpose of a qualified mortgage issue which meets the requirement clause (ii).
Requirement
A
qualified mortgage issue meets the requirement of this clause if such issue
meets the requirement of section 143(a)(2)(D)(i) (determined by substituting
12-month period
for 42-month period
each place it
appears).
.
Carryforward of unused limitations
Subsection (f) of section 146 of such Code is amended by adding at the end the following new paragraph:
Special rules for increased volume cap under subsection (d)(5)
No amount which is attributable to the increase under subsection (d)(5) may be used—
for a carryforward purpose other than issuing qualified mortgage bonds, and
to issue any bond after calendar year 2010.
.
Alternative minimum tax
In general
Clause (ii) of section 57(a)(5)(C) of the Internal
Revenue Code of 1986 is amended by striking shall not include
and all that follows and inserting
shall not include—
any qualified 501(c)(3) bond (as defined in section 145), or
any qualified mortgage bond (as defined in section 143(a)) or qualified veterans' mortgage bond (as defined in section 143(b)) issued after December 31, 2007, and before January 1, 2011.
.
Conforming amendment
The heading for section 57(a)(5)(C)(ii) is amended by
striking qualified
501(c)(3) bonds
and
inserting certain
bonds
.
Effective date
The amendments made by this section shall apply to bonds issued after December 31, 2007.