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U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410-8000

April 9, 1991
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 91 - 19
      TO:   ALL HUD-APPROVED MORTGAGEES
      SUBJECT:  Auction of Section 221(g)(4) Multifamily Mortgages
 
           Section 221(g)(4) of the National Housing Act provided
      mortgagees with mortgages insured under Section 221 prior to
      November 30, 1983, the option to assign to HUD any such mortgage
      not in default at the end of twenty years from the date of final
      endorsement.  Section 2201 of the Omnibus Budget Reconciliation
      Act of 1990 and Section 336 of the National Affordable Housing
      Act of 1990 provide that, when a mortgagee elects to assign a
      mortgage to HUD under Section 221(g)(4), the Secretary shall, in
      lieu of accepting the assignment, arrange an auction sale of the
      mortgage and pay the purchaser monthly interest enhancement
      payments sufficient to provide the purchaser with the interest
      amount bid at the auction.
 
          The Department has implemented Section 336 as of
      December 5, 1990.  However, for those notices of election to
      assign that were dated on or before December 5, and for which no
      assignment of mortgage has been recorded, the mortgagee may
      request the Department to (1) continue processing the claim or
      (2) cease the assignment process and include the mortgage in the
      first auction.  Any and all notices of election dated after
      December 5, 1990, shall be subject to Section 336.  Your written
      request for HUD to continue processing the claim or to include
      the mortgage in the first auction must be submitted to the
      attention of William Hill, Director, Operations Division, Room
      6170; Office of Multifamily Housing Management, at the address
      below:
 
               U.S. Dept. Housing and Urban Development
               451 - Seventh Street, SW
               Washington, DC 20410
 
      A copy of your request should also be sent to Harold Levy, Chief
      Attorney, Room 9234, Office of General Counsel; and to Gary
      Zimmerman, Chief, Multifamily Claims Branch, Room 6234, Office of
      Mortgage Insurance Accounting and Servicing.
 
         To be eligible to assign a mortgage under Section 221(g)(4),
      the mortgagee must make an election to assign anytime after the
      20th anniversary of final endorsement through the 21st
      anniversary of final endorsement, provided the mortgage is not in
      default.
 
_____________________________________________________________________
                                                           2
 
     In accordance with the Paperwork Reduction Act of 1980, we
have developed the OMB paperwork submission covering the
requirements for Section 221(g)(4) mortgages subject to the
provisions of Section 336.  The paperwork requirements must
receive the approval of the Office of Management and Budget
(OMB).  Until we receive OMB approval, we are unable to request
project information and other pertinent data from the mortgagee
necessary to conduct the auction.  In the interim period,
however, all rights and privileges of the mortgagee of record are
recognized and protected under Section 336.
 
     Until the sale of the mortgage has been completed, you, as
the mortgagee of record, will continue to be responsible for
protecting the Secretary's interest in the mortgage.  The
mortgagee must continue to maintain all escrow accounts, pay
taxes and insurance, and bill for, and accept, all payments from
the mortgagor.
 
                            Very sincerely yours,
 
                            ___________________________________
                            Arthur J. Hill
                            Acting Assistant Secretary for
                             Housing-Federal Housing Commissioner