Preserving Multifamily Properties
Tools for Preservation of Section 202 Properties
Section 202 properties provide housing to low-income elderly residents. Thousands of properties were financed between 1959 and 1992 with HUD Direct Loans. These properties may, under certain conditions, prepay their existing mortgages for the benefit of the project and the project residents. The Supportive Housing for the Elderly Act of 2010 made changes to the law regarding allowable prepayments and refinances of Section 202 properties. Please refer to the Senior Preservation Rental Assistance Contracts (SPRAC) page for more information. Guidance is under development to implement this new authority. In the interim, Owners should refer to the below Notices.
- Housing Notice 12-08 - Section 202 Pre-payment & Refinance
- Housing Notice 02-16, Revised Prepayment of Direct Loans on Section 202 and Section 202/8 Projects
- Housing Notice 04-21, Amendments to Notice H2002-16
- Housing Notice 10-14, Policy and Procedure for Prepayment and Refinancing of Section 202 Projects Funded Prior to 1975
- Housing Notice 10-26, Subordination of Section 202 Direct Loans
- Housing Notice 11-03, Policies and Procedures for the Conversion of Efficiency Units to One-Bedroom Units
- Renewal of Expiring Project Assistance Contracts (PACs) for Fiscal Year 2012
- Frequently Asked Questions on Notice 2012-08
Using FHA Mortgage Insurance to Refinance Multifamily Properties
HUD works with approved lenders to issue Multifamily mortgage insurance for the new construction, refinance and substantial rehabilitation of Multifamily properties. Owners of HUD properties may find it beneficial to access HUD insured loans under Section 223(f) or Section 221(d)(4).
- The Multifamily Accelerated Processing (MAP) Guide
- MAP Lender List.
- Closing Documents (HUD has significantly revised its Multifamily Rental Project Closing Documents)
- Mortgagee Letter 08-19, Streamlined Processing of Multifamily Mortgage Applications Involving Low Income Housing Tax Credits (LIHTCs)
- Mortgagee Letter 09-24, Housing Tax Credit Coordination Act of 2008
- Mortgagee Letter 09-40, Policy and Procedures on Multifamily Mortgage Insurance Applications Involving Master Lease Structuring to facilitate the use of Tax Credits
- Notice 2011-04, Elimination of Hub and National Loan Committee Reviews for Section 223(a)(7) Transactions
Preserving FHA-insured Properties with Maturing Mortgages
Many HUD properties originally financed with FHA-insured mortgages under Section 236 or Section 221(d)(3) are approaching the maturity dates of their original mortgages. Some properties are also assisted with Rent Supplement or Rental Assistance Payment (RAP) Contracts, and these contracts are also reaching their expiration dates. HUD is working to provide tools and incentives to help Owners to prepay and refinance these properties before the affordability restrictions expire.
Effective, July 1, 2013, a new Section 236 Preservation program will launch. The program will be administered by the Office of Affordable Housing Preservation (OAHP) in HUD Headquarters. For more information visit the Section 236 Preservation web page.
- Notice H 2012-25: Policy for Amended and Restated Use Agreement for Multifamily Projects
- Rental Assistance Demonstration
- HUD Rental Assistance Demonstration Web Page
- Notice 11-31, Policy for Treatment of Proceeds Resulting from the Sale of FHA-insured or Secretary-held formerly insured Multifamily Projects by Nonprofit Owners
- Notice 11-05, Policies and Procedures for the Deferred Repayment of Operating Assistance Flexible Subsidy Loans
- Notice 12-04 – Extension of the deferral of flexible subsidy
- Notice 00-8, Guidelines for Continuation of Interest Reduction Payments after Refinancing
- Notice 06-11, Prepayments Subject to Section 250(a) of the National Housing Act
- Notice 96-63, Nonprofit Services and Fees in New Construction and Substantial Rehabilitation Projects Financed with Multifamily Mortgage Insurance
- Notice 12-01 – Low Income Housing Tax Credit Pilot
- Chapter 14 handbook revisions: PPC, Restructuring & Modifications
Renewing Section 8 Housing Assistance Payment (HAP) Contracts
More than 1.4 million homes are assisted through Section 8 HAP Contracts. HUD has authority to renew these contracts for multi-year terms. Owners are encouraged to request 20-year HAP contracts. HUD works with Owners to renew contracts and to preserve affordability through the Mark-to-Market program.
- The Section 8 Renewal Policy Guide
- The Office of Affordable Housing Preservation
- Notice 12-03 - Tenant Protection Vouchers
Mark to Market Resources
- Mark-to-Market: The Mark-to-Market (M2M) program preserves affordability and availability of low income rental multifamily properties with federally insured program. The purpose of M2M is to reduce rents to market levels by restructuring existing debt to levels supportable by these rents. The Green Initiative is also available through this program to assist owners in rehabilitating their properties in the most sustainable way feasible. For more information about the program and to view program related tools and resources visit the M2M web page.
- Post Mark-to-Market: A component of the M2M, addresses the processing of owner requests to refinance or to sell a property that has received the benefits of a debt restructuring under Mark-to-Market Program (M2M Program) or M2M Program’s predecessor program, the Portfolio Reengineering Demonstration Program (Demo Program). This also applies to applications for either debt assumption or forgiveness for a non-profit qualified by HUD for such benefits (QNP). These procedures require coordination between the Office of Recapitalizatoin (Recap) and other staff within Multifamily Housing (typically Field Office staff). All inquiries and requests related to Post Mark-to-Market (Assumption Subordination and Qualified Non Profit) transactions, which have been traditionally mailed and/or emailed should be submitted electronically to PostM2M@hud.gov. Post M2M Processing documentation is also available.
Renewing Section 8 Housing Assistance Payment (HAP) Contracts
HUD is committed to preserving rental assistance for tenants in properties at risk of loss due to sale, Opt-Out, foreclosure, or expiration of affordability. In some cases, when an Owner prepays a HUD mortgage before the mortgage matures, project residents may be eligible to receive Tenant Protection Vouchers (such vouchers are not provided when a mortgage matures). Vouchers are also provided following Opt-Outs and in other circumstances. Owners are encouraged to contact their local HUD office to discuss the potential benefit of prepaying the FHA-insured mortgage prior to mortgage maturity, to protect tenants from displacement.
- Notice 01-41, Section 8 Tenant-Based Assistance (Enhanced and Regular Housing Choice Vouchers) For Housing Conversion Actions ? Policy and Processing Guidance
- Residual receipts “new regs” FAQ for Housing Notice 2012-14
- Partners in Housing Advanced Training Slides
- Partners in Housing Multifamily Preservation Training Slides
- State certified and licensed real estate appraisers
Want More Information?
- Multifamily Portfolio Datasets
- Affordable Rental Housing: State and Local Partnerships, a resource guide.
- Multifamily Properties: Opting In, Opting Out and Remaining Affordable study
- Choice Neighborhoods is a grant program that provides support for HUD assisted housing.