After my presentation at the Alabama CARH meeting in May, 1997, I concluded that legislation is needed to address the issues in prepayment. I concluded:
— If you want to prepay a pre-1979 project without any restrictive use clauses, the Agency attaches a restrictive use clause that makes it impossible to prepay the loan if it has any RA or Section 8.
— If you want to prepay a post-1979 project with a restrictive use clause (which has not expired), then you can easily prepay at the end of the term of the clause.
— If you want to prepay a post-1979 project with a restrictive use clause (which has expired), the Agency attaches a restrictive use clause that makes it impossible to prepay the loan if it has any RA or Section 8.
— Post-1979 projects with an unexpired restrictive use clause can no longer be offered any incentives to stay in because legislation last year prohibited any incentive offers.
— The Agency has offered incentives for projects not to prepay, but the Agency isn't funding adequate amounts of incentives, so you're forced to stay in the program because you can't get out.
In an effort to refine the administration of the legislation and present the Agency with the tools to preserve this valuable housing asset, I have drafted the following proposed legislation.
The intent is to cause the Agency to fund incentive offers made, to offer incentives (but not equity loans) to post-1979 projects, and to accept prepayment when incentives are not accepted. This does not address (and is not intended to affect) any litigation under way relating to any damages resulting from previous legislation.
If you agree that legislation would be useful, please contact the Rural Housing Service, NAHB and CARH to express your support. Of course, you're free to work with your Congressional delegation.
Please feel free to contact me to discuss this.
A BILL
To amend the Housing Act of 1949.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1, SHORT TITLE.
This Act may be cited as the “Rural Rental Housing Preservation Act of 1997”.
SECTION 2. APPROVAL OF ASSISTANCE - Section 502 (c) (4) (C) of the Housing Act of 1949 is amended by striking “(C)” and all that follows through “provided —” and inserting the following:
(C) APPROVAL OF ASSISTANCE - The Secretary may approve assistance under subparagraph (B) as follows:
(1) For assisted housing for any loan for the housing made or insured under section 514 or 515 pursuant to a contract entered into prior to or on December 21, 1979.
(2) For assisted housing for any loan for the housing made or insured under section 514 or 515 pursuant to a contract entered into after December 21, 1979 but before the date of the enactment of the Department of Housing and Urban Development Reform Act of 1989, except:
(a) Where the restrictive use period has not expired, the Secretary may not approve assistance under subparagraph (B) (iv);
(b) Where the restrictive use period has expired, the Secretary may approve assistance under subparagraph (B).
and the Secretary determines that the combination of assistance provided —
SECTION 3. FUNDING OF ASSISTANCE - Section 502 (c) (4) (C) of the Housing Act of 1949 is amended by inserting the following:
( ) FUNDING OF ASSISTANCE - The Secretary shall fund the assistance offered under subparagraph (B) within 6 months of acceptance. The Secretary may not place a higher priority on funding new projects over such offers of assistance and subsequent loans for other, existing projects.
SECTION 4. ACCEPTANCE OF PREPAYMENT - Section 502 (c) (4) (C) of the Housing Act of 1949 is amended by inserting the following:
( ) ACCEPTANCE OF PREPAYMENT - Where the Secretary accepts prepayment of a loan without a restrictive use clause, or where the clause has expired, the Secretary may not impose any restrictions as a condition of accepting prepayment.
SECTION 5. FINAL REGULATIONS
The Secretary shall issue implementing regulations to carry out the amendments made by sections 2, 3 and 4 of this Act not later than 30 days after the date of enactment of this Act.
See also: A Letter to My Clients