FEDERAL AGENCY:

HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

AUTHORIZATION:

Housing and Community Development Act of 1992, Section 542(b), Public Law 102-550, 12 U.S.C. 1701; Public Law 106-377. HUD's fiscal year 2001 Appropriations Bill amended Section 235 of the Housing and Community Development Act of 1992 to extend the 542 Risk Sharing Program to a permanent multifamily insurance program.

OBJECTIVES:

Under this program HUD provides reinsurance on multifamily housing projects whose loans are originated, underwritten, serviced, and disposed of by qualified participating entities (QPEs) and/or its approved lenders. The program encourages the development and preservation of affordable housing. The Section 542(b) program was originally designed as a pilot to test innovative mortgage insurance and reinsurance products to provide affordable multifamily housing through a partnership between HUD and QPEs, including Government Sponsored Enterprises, financial institutions, and the Federal Housing Finance Board.

TYPES OF ASSISTANCE:

Guaranteed/Insured Loans. Place Cursor Here for Definition

USES AND USE RESTRICTIONS:

QPEs and/or its approved lenders may originate and underwrite affordable housing loans. HUD's mortgage credit enhancements are used to support the underwriting and production strengths of Fannie Mae, Freddie Mac, and other qualified Federal, State, and local public financial and housing institutions. In the event of a default, the QPE will pay all costs associated with loan disposition and will seek reimbursement from HUD. In most cases, the HUD risk share will be 50 percent. The program provides a new insurance authority independent of the National Housing Act.

ELIGIBILITY REQUIREMENTS:

Applicant Eligibility:   Eligible mortgagors include investors, builders, developers, public entities, and private nonprofit corporations or associations may apply to a qualified QPE and/or its lender.

Beneficiary Eligibility:   Individuals, families, and property owners may be eligible for affordable housing.

Credentials/Documentation:   Documentation regarding the characteristics of the property and the qualifications of the mortgagor are submitted to the QPE and/or its lender.

Pre-application Coordination:   An applicant should consult the QPE as the single point of contact for more information on the process. The sponsor will have a preapplication meeting with the QPE. This program is excluded from coverage under E.O. 12372.

Application Procedure:   An applicant submits a formal application directly to the QPE.

Award Procedure:   QPEs are vested with the maximum amount of processing responsibilities and decision-making to approve or reject individual projects.

Deadlines:   Deadlines are established on a case-by-case basis by the QPE.

Range of Approval/Disapproval Time:   Within 15 days of HUD's receipt of a complete and acceptable Risk Sharing Request, HUD will execute the Addendum to Risk Sharing Agreement which signifies that HUD has undertaken a Risk Sharing Obligation for a specific mortgage loan.

Appeals:   If a Risk Sharing Request is refused, HUD will state the reasons for the refusal.

Renewals:   HUD will provide reinsurance on multifamily housing projects whose loans are originated, underwritten, serviced, and disposed of by QPEs.

ASSISTANCE CONSIDERATIONS:

Formula and Matching Requirements:   The program is a pilot designed to assess the feasibility of risk-sharing partnerships between HUD and qualified participating entities.

Length and Time Phasing of Assistance:   Legislation has been enacted to make this program permanent.

POST ASSISTANCE REQUIREMENTS:

Reports:   QPEs must submit a bi-annual report listing (1) the original mortgage amount and outstanding unpaid principal balance for each reinsured loan, and (2) the status of the reinsured loan.

Audits:   The Department of Housing and Urban Development reserves the right to audit the Mortgage Loans which HUD has reinsured.

Records:   QPEs are required to service and maintain records in accordance with acceptable mortgage practices of prudent lending institutions.

FINANCIAL INFORMATION:

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

Obligations:   (Insured Loans) FY 01 $1,449,318; FY 02 est $100,000,000; and FY 03 est $105,000,000.

Range and Average of Financial Assistance:  
No Data Available.

In fiscal year 2001, HUD insured three mortgage loans totaling $21 million. The Department expects to insure a similar number of mortgage loans in fiscal year 2002.

REGULATIONS, GUIDELINES, AND LITERATURE:

Pilot program implemented without regulations.

INFORMATION CONTACTS:

Regional or Local Office:   See Regional Agency Offices. Persons are encouraged to communicate with the nearest local HUD Multifamily Hub or Program Center listed at http://www.hud.gov/offices/hsg/mfh/mfbroch/hubs_pcs.cfm or the nearest HUD Field Office listed in the Catalog Address Appendix IV.

Headquarters Office:   Carmelita James 451 Seventh Street SW, Washington, District of Columbia 20410 Email: carmelita_a._james@hud.gov Phone: (202) 402-2579

Web Site Address:  
http://www.hud.gov/offices/hsg/hsgmulti.cfm

EXAMPLES OF FUNDED PROJECTS:

Not applicable.

CRITERIA FOR SELECTING PROPOSALS:

Not applicable.