 |
 |
| 14.167 MORTGAGE INSURANCE_TWO YEAR OPERATING LOSS LOANS, SECTION 223(D) |
| (Two Year Operating Loss Loans) |
| FEDERAL AGENCY |
| HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT |
| AUTHORIZATION |
| National Housing Act, as amended, Public Law 90- 448, as amended, Public Law 91-152, 12 U.S.C. 1715x. |
| OBJECTIVES |
| To insure a separate loan covering operating losses incurred during the first 2 years following the date of completion or any other 2-year period occurring within 10 years following the date of completion of a multifamily project with a HUD-insured first mortgage. |
| TYPES OF ASSISTANCE |
| Guaranteed/Insured Loans. |
| USES AND USE RESTRICTIONS |
| Eligibility is limited to currently insured HUD projects. Section 223(d) insures a loan to cover the excess of expenses over project gross income incurred during the first two years following the date of completion of the project or for any other two-year period within 10 years of project completion, for such amounts and upon such terms and conditions as HUD may prescribe. A project can receive both loans but not for the same two year period. The loan is insured by HUD under the same section as the original mortgage in an amount not exceeding the excess of operating expenses over project income. The loan term is limited to the unexpired term of the original mortgage. This program requires appropriated credit subsidy, which is limited. |
| Applicant Eligibility |
| Owners of a multifamily project or facility subject to a mortgage insured by HUD are eligible to apply. |
| Beneficiary Eligibility |
| Individuals/families and property owner. |
| Credentials/Documentation |
| A formal application for insurance accompanied by a financial statement prepared by an independent certified public accountant or independent public accountant. This program is excluded from coverage under OMB Circular No. A-87. |
| Preapplication Coordination |
| The HUD Multifamily Hub and Program Center will hold a preliminary conference with the sponsor to provide general application guidance. This program is excluded from coverage under OMB Circular No. A-102. This program is excluded from coverage under E.O. 12372. |
| Application Procedure |
| The sponsor submits a formal application through a HUD-approved mortgagee to the local HUD Multifamily Hub or Program Center. This program is excluded from coverage under OMB Circular No. A-110. |
| Award Procedure |
| Information submitted by the applicant will be reviewed and analyzed using data available through office records, field review and general current working knowledge of the project and background. A determination is then made as to the maximum insurable loan amount. |
| Deadlines |
| Application shall be made within three years after the end of the two-year operating loss period for the 2-year loan. A loan covering losses occurring within 10 years of project completion must be made within 10 years of the end of the 2-year loss period covered by the loan. |
| Range of Approval/Disapproval Time |
| Processing time will be dependent upon the degree of preparation by the sponsor and HUD Multifamily Hub or Program Center workload. |
| Appeals |
| If an application for operating loss loan is refused, HUD will state the reason for the refusal. |
| Renewals |
| Not applicable. |
| Formula and Matching Requirements |
| The amount of the 2-year loan shall be limited to the lesser of (1) The amount of the operating loss loan requested; (2) the amount of the operating loss established by HUD review or, (3) the maximum loss supported by debt service limitation. The 10-year loan shall be further limited to 80 percent of unreimbursed funds invested in the project. |
| Length and Time Phasing of Assistance |
| The loan may not exceed the remaining term of the insured mortgage. |
| Reports |
| Defaults in meeting the mortgage terms must be reported. |
| Audits |
| HUD reserves the right to audit the accounts of the mortgagee or mortgagor to determine compliance and conformance with HUD regulations and standards. |
| Records |
| Mortgagees are required to service and maintain records in accordance with acceptable practices of prudent lending institutions and the HUD regulations. |
| Account Identification |
| 86-4077-0-3-371. |
| Obligations |
| (Loans insured) FY 07 $7,044,000; FY 08 est $11,250,000; and FY 09 est $15,000,000. |
| Range and Average of Financial Assistance |
| Loan sizes range from $750,000 to $7,000,000 with an average of $2.0 million. Project sizes range from 117 to 210 units with an average of 151 units. |
| PROGRAM ACCOMPLISHMENTS |
| In Fiscal Year 2007 HUD insured mortgages for one operating loss loan with 210 units/beds, totaling $7.0 million. It is estimated that approximately the same number of projects will be insured in Fiscal Year 2008. |
| REGULATIONS, GUIDELINES, AND LITERATURE |
| 24 CFR 207.4(f) et seq; HUD Handbook 4470.1 REV-2 CHG-1 (Chapter 17), "Operating Loss Loans", no charge, available on HUDCLIPS at http://www.hudclips.org. |
| Regional or Local Office |
| All projects are processed in HUD Multifamily Hubs or Program Centers. Persons are encouraged to communicate with the nearest local Multifamily Hub or Program Center. These offices are listed under HUD resources on the Multifamily industry website at: http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm. |
| Headquarters Office |
| Office of Multifamily Development, Department of Housing and Urban Development, 451 7th Street, S.W., Washington, DC 20410. Telephone: (202) 708-1142. Use the same number for FTS. |
| Web Site Address |
| http://www.hud.gov/offices/hsg/hsgmulti.cfm |
| RELATED PROGRAMS |
| None. |
| EXAMPLES OF FUNDED PROJECTS |
| Not applicable. |
| CRITERIA FOR SELECTING PROPOSALS |
| Not applicable. |
|
General Services Administration Office of Chief Acquisition Officer Regulatory and Federal Assistance Division (VIR) |
|