www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 February 9, 1988 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 88-3 TO: ALL APPROVED MORTGAGEES SUBJECT: Prepayment of a HUD-Insured Mortgage by an Owner of Low- Income Housing Section 221 of the Housing and Community Development Act of 1987, which was signed into law on February 5, 1988, prohibits an owner of "eligible low-income housing" from prepaying, and prohibits a mortgagee from accepting prepayment of, a mortgage on such housing except in accordance with a plan of action approved by the Secretary of Housing and Urban Development. HUD is currently drafting regulations which will establish standards for the approval of such plans of action. Since Section 221 is now in effect, pending the issuance of HUD's regulations, mortgagees should not accept a prepayment from an owner of eligible low-income housing. The term "eligible low-income housing" includes housing financed by a mortgage: (a) that is - (i) insured under the Section 221(d)(3) market rate program, if the project receives Rent Supplement or Section 8 assistance; (ii) insured under the Section 221(d)(3) Below Market Interest Rate (BMIR) program; (iii) insured or assisted under the Section 236 program; or (iv) a Purchase Money Mortgage originated by HUD with respect to a project which, prior to HUD's acquisition, was insured under a program referred to in clauses (i), (ii) or (iii) above; and (b) that, under the terms of the mortgage or applicable regulations in effect before February 5, 1988, is or will within one year become eligible for prepayment without HUD's consent. Any requests for prepayment of mortgages to which Section 221 of the Housing and Community Development Act of 1987 is or may be applicable should be forwarded to the Department of Housing and Urban Development, 451-7th Street, S.W., Washington, D.C. 20410-8000, Attention: Office of Multifamily Housing Management. Sincerely, Thomas T. Demery Assistant Secretary