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

This section establishes an FHA insurance program, to be implemented not later than two years after enactment, to insure certain second liens secured by properties for financing accessory dwelling unit (ADU) construction. The maximum insurable principal amount is the lesser of (1) 30% of the dollar limit under FHA section 203(b)(2)(A) for a one-unit property or (2) 100% of the property's projected value after ADU construction (including any prior liens); this amount may increase based on 50% of projected annual rental income from the ADU. The program requires borrower applications with ownership certification, annual premiums of up to 1% of the insured principal obligation, annual reports to Congress beginning one year after enactment, and HUD rulemaking authority. An ADU is defined as a habitable dwelling (with kitchen, sleeping, and bathroom facilities) that is a modular or prefabricated unit built to at least one of the three most recent state- or local-adopted consensus building codes, a manufactured home (as defined in 42 U.S.C. 5402), or a conversion of an existing structure, and that is added to, created within, or detached from a single-family dwelling on the same property.

This section requires the Director of the Federal Housing Finance Agency (FHFA) to permit the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to purchase and securitize loans insured under section 259 of the National Housing Act (i.e., Federal Housing Administration-insured loans for construction of accessory dwelling units on properties with an existing single-family dwelling). The Director may prohibit such purchases and securitization if market pressures pose excessive and unmitigable risk, beginning on the date of a written notice to Congress. The section further requires the FHFA Director to include information on these activities in the annual report to Congress under 12 U.S.C. 4521(a).