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.

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. Place Cursor Here for Definition

USES AND USE RESTRICTIONS:

Eligibility is limited to currently insured HUD projects. HUD insures a loan to cover the excess of expenses over project gross income incurred during the first 2 years following the date of completion of the project or for any other 2-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 2 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.

ELIGIBILITY REQUIREMENTS:

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.

Pre-application Coordination:   The sponsor has a preapplication conference with the local HUF Multifamily Hub and Program Center to determine preliminary feasibility and 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 mortgage 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.

ASSISTANCE CONSIDERATIONS:

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.

POST ASSISTANCE REQUIREMENTS:

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.

FINANCIAL INFORMATION:

Account Identification:   86-4077-0-3-371.

Obligations:   (loans insured) FY 01 $8,229,000; FY 02 est $3,580,000; and FY 03 est $8,500,000.

Range and Average of Financial Assistance:   The amount of the two-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.

In fiscal year 2001, HUD insured four operating loss loans on nursing homes totaling $6 million. HUD expects to insure the same amount of loans in fiscal year 2002.

REGULATIONS, GUIDELINES, AND LITERATURE:

24 CFR 207.4(f) et seq; HUD Handbook 4470.1 REV (Chapter 3), "Project Mortgages Insured Under Section 207 of the Housing Act", No charge.

INFORMATION CONTACTS:

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/fha/mfh/fhamfbus.html

EXAMPLES OF FUNDED PROJECTS:

Not applicable.

CRITERIA FOR SELECTING PROPOSALS:

Not applicable.