July 2, 1996
 
                                   PRESERVATION LETTER No. 7
 
MEMORANDUM FOR:  All Housing Directors; Directors of Multifamily
                   Housing; Production Chiefs; Asset Management
                   Chiefs; Preservation Coordinators; and
                   Mortgage Credit Examiners
 
       /s/
FROM:  Nicolas P. Retsinas, Assistant Secretary for Housing-
         Federal Housing Commissioner, H
 
SUBJECT:  Waiver of the Comment Period for Tenants and State or
            Local Governments for Certain Priority Transactions
 
     On April 12, 1996, the Department issued Preservation Letter
No. 1, which contained a number of regulatory waivers.  The
purpose of these waivers was to streamline the sales process to
enable Field Office staffs to process and fund sales projects
expeditiously.
 
     Subsequent to issuance of Preservation Letter No. 1, several
program participants questioned why the waiver of 24 CFR Section
248.135(h), Comment Period for Tenants and State or Local
Governments, was not extended to other priority categories
identified in the statute.  Specifically, the Housing Opportunity
Program Extension Act of 1996 also provides that between
August 16, 1996, and September 15, 1996, certain classes of
projects with approved Plans of Action (POA) may be funded:
 
     A.   Projects that are subject to a repayment or settlement
          agreement that was executed between the owner and the
          Secretary before September 1, 1995,
 
     B.   Projects for which submissions were delayed as a result
          of their location in areas that were designated as a
          Federal disaster area in a Presidential Disaster
          declaration,
 
     C.   Projects whose processing was, in fact, or in practical
          effect, suspended, deferred, or interrupted for a
          period of 9 months or more because of differing
          interpretations, by the Secretary and an owner
          concerning the time of the ability of an uninsured
          Section 236 property to prepay, or by the Secretary and
          a State or local rent regulatory agency, concerning the
 
          effect of a presumptively applicable State or local rent control
          law or regulation on the determination of preservation value
          under Section 213 of Low-Income Housing Preservation and Resident
          Homeownership Act (LIHPRHA), as amended, if the owner of such
          project filed notice of intent to extend the low-income
          affordability restrictions of the housing, or transfer to a
          qualified purchaser who would extend such restrictions, on or
          before November 1, 1993.
 
     Section 217, of LIHPRHA required that copies of the POA be
submitted to the tenants and the Office of the Chief Executive
Office of the appropriate State or local government for the
jurisdiction within which the housing is located.  Furthermore,
an appropriate agency of such State or local government is
required to review the plan and advise the tenants of the
results.  Section 248.135(h) requires that upon submission of the
POA by the owner, and as of the date of the posting of a summary
of the POA, the tenants of the affected project and the State and
local government shall have 60 days in which to provide comments
on the POA to the Commissioner.  In Preservation Letter No. 1, we
waived the requirement for sales to priority purchasers because
the priority purchaser must have the support of a majority of the
tenants.  To obtain and keep this support, the priority purchaser
must consider the tenant comments it receives.
 
     To be equitable, projects in priority categories A, B, and C
described above, should be afforded the same opportunity for a
streamlined process as sales projects.  Therefore, I hereby waive
24 CFR Section 248.135(h), for those projects meeting the
requirements of A, B or C above.  This waiver is based on a
determination and finding of good cause based on the Preservation
program changes contained in the Housing Opportunity Program
Extension Act of 1996 provided an owner demonstrates to the local
State/Area HUD Office that the tenants and their representatives
and State and local government officials, had a 14-day period to
review and comment on the POA.
 
CHANGES 6/21/96, 7/1/96
HMDE1:Mulholland HMDE:Mayfield HMD:Cheatham HM:Greer
OGC:Bohling/Potts H:9100     6/17/96
CC:HMDE1:MULHOLLAND:amd  RM.6128  H:\PRESERV\NEWPREZ\PRELTR.7
 
     HMDE1          HMDE      HMD        HM         OGC       H
     MULHOLLAND    Mayfield   CHEATHAM  GREER     BOHLING   SMITH