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.