| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
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| #6619 | Closed | public | Multifamily | Les Sparks |
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We have two clients that operate Section 202 properties. There are still loan amounts outstanding with HUD and they are receiving rental assistance as well. These properties are related to a non-profit organization and the NFP would like to, and has the resources to pay-off the HUD loans, and then terminate the regulatory agreement and stop receiving rental assistance payments. We are having a hard time finding guidance on if that is an option and how it should work. Can you point me in the right direction and provide any insights you have on that situation? Thanks! |
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From Les Sparks: It appears that you are talking about a 202 direct loan. This is a loan that is being serviced by HUD and not a capital advance. As far as the loan is concerned, that is easy – issues. I am assuming that the note agreement has no restrictions on prepayment of the mortgage. The bigger issue is the HAP contract. How many year years are left before it is set to renew? If you have copy of that, I could look at it and go from there. Last, are there any Use Agreements in place that might affect any of this. They key is in the documents. From client: You are correct that it is a 202 direct loan program. I don’t remember seeing any restrictions on repayment of the mortgage, but we will take another look. I do have copies of the HAP contracts – one was renewed in 2011 (for 15 years) and the other in 2009 (for 16 years). What is the best way to send those to you? I am not sure about any Use Agreements, but will follow-up with the client. From client: I did take another look at the mortgage documents and prepayment of the loans is only allowed with prior written consent from HUD. I’m not sure how easy or hard that written consent would be to get, but it may not be an issue if they are stuck until the HAP contracts expire. From Les: In general, there is little ability for the owner to terminate the HUD contract. Usually, they sell the contract to someone else. If they desire to terminate, it is basically a negotiation with HUD. Get an attorney and start complaining. Why are they trying to terminate? |