Exiting Old Federally Financed Multifamily Housing Developments — Prepayment Litigation
FOR YOUR INFORMATION
I consult with owners and managers on the full range of 515 issues:
— appeals related to OIG audits;
— Workout Plans;
— appeals of RHS decisions;
— processing and servicing issues; and,
— prepayment as part of an acquisition strategy.
I have the following comments on the state of the program.
CLASS ACTION FOR DAMAGES: It is a fascinating topic that seems to have a substantial legal basis. I am not an attorney, so I defer to that profession. As to any amounts for damages, I think some projects will have a better chance than others because of the complexity of determining losses in the past.
PREPAYMENT — EQUITY LOANS: Because of a lack of effective incentives, I am seeing more prepayments of projects; and owners are chafing at the overall Agency servicing efforts. Prepayment requests can still be submitted and processed despite the lack of equity loan funds.
DOWNSIZING: The Agency is still reducing staff and restructuring the field offices. There will be a substantial impact on existing staff and Agency operations and on project servicing in this highly complex program. The ancient Chinese malediction holds sway: May you live in interesting times.
PROJECT SERVICING: Despite the attentions being paid to revising 1930-C, the Agency still doesn’t understand how real estate operates, and that 515 projects are simply real estate. Agency micromanagement continues to create problem projects. Watch for discussions of Lender Liability.
SECTION 8/515: The replacement of expired Section 8 with RA is, at first blush, an attractive proposal, but the Devil will be in the details. How will full profit 8/515 projects be treated? If you have an increased Return on a 515 because of a prepayment incentive, will you keep the increased Return? If you have an overfunded reserve, is a transition policy needed?
RETURN TO OWNER: If you are not getting a Return, it’s time to look at the options, especially with the Agency emphasis on servicing.
I have worked with and advised owners, developers and managers
on 515 program issues and problems since 1988. If you have an
issue with the Agency or on your projects, or don’t have the expertise
on your staff, please contact me.