H.R. 4568: Supporting Upgraded Property Projects and Lending for Yards (SUPPLY) Act

This bill, known as the Supporting Upgraded Property Projects and Lending for Yards (SUPPLY) Act, seeks to amend the National Housing Act to create a program aimed at encouraging the construction of accessory dwelling units (ADUs), which are smaller residential units that can be added to existing properties. The key components of the bill are as follows:

Insurance Program for Accessory Dwelling Units

The bill directs the Secretary of Housing and Urban Development to establish a program to insure second liens on properties. This insurance would support financing for the construction of accessory dwelling units. The main details include:

• The program must be set up within two years of the bill’s enactment.
• The Secretary will have discretion over the terms and conditions of the insurance.

Loan Amounts and Rental Income Consideration

Under the program, there are specific limits on the amount of loans that can be insured:

• The maximum loan amount can be either 30% of a specified value related to a one-unit residence or 100% of the projected value of the property after the ADU is built, including other outstanding loans.
• The maximum can be increased by taking into account 50% of projected rental income from the ADU.

Application Process

Individuals seeking this insurance must submit an application that provides various information, including proof of ownership of the property where the ADU will be constructed.

Insurance Premiums and Reporting

The bill specifies that the Secretary will determine the insurance premium, which cannot exceed 1% of the insured amount each year. Additionally, an annual report will be required to inform Congress about the implementation of this program and its activities.

Definition of Accessory Dwelling Unit

The bill provides a detailed definition of what constitutes an accessory dwelling unit, which can include:

• Modular or prefabricated units built according to accepted building codes.
• Manufactured units as defined in existing housing laws.
• Conversions of existing structures on a property.
• ADUs must contain kitchen, sleeping, and bathroom facilities and be added to, created within, or detached from a single-family dwelling.

Support for Securitization of Loans

The bill also clarifies that the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation may purchase and securitize loans that are insured under this new program, with some exceptions based on market risk.

Reporting by the Federal Housing Finance Agency

The Federal Housing Finance Agency is required to include information about the purchase and securitization of these loans in its annual report to Congress.

Relevant Companies

• FNMA (Federal National Mortgage Association) - May be involved in the purchase and securitization of loans insured under this program, which could impact its operations regarding ADUs.
• FHLMC (Federal Home Loan Mortgage Corporation) - Similarly, this entity might participate in the securitization of these loans, potentially affecting its balance sheet and lending practices.