fha multifamily demonstration authority

fha multifamily demonstration authority Sec. 210. (a) On and after October 1, 1995, and before October 1, 1997, the Secretary of Housing and Urban Development shall initiate a demonstration program with respect to multifamily projects whose owners agree to participate and whose mortgages are insured under the National Housing Act and that are assisted under section 8 of the United States Housing Act of 1937 and whose present section 8 rents are, in the aggregate, in excess of the fair market rent of the locality in which the project is located. These programs shall be designed to test the feasibility and desirability of the goal of ensuring, to the maximum extent practicable, that the debt service and operating expenses, including adequate reserves, attributable to such multifamily projects can be supported with or without mortgage insurance under the National Housing Act and with or without above-market rents and utilizing project-based assistance or, with the consent of the property owner, tenant-based assistance, while taking into account the need for assistance of low- and very low-income families in such projects. In carrying out this demonstration, the Secretary may use arrangements with third parties, under which the Secretary may provide for the assumption by the third parties (by delegation, contract, or otherwise) of some or all of the functions, obligations, and benefits of the Secretary. (1) Goals.— The Secretary of Housing and Urban Development shall carry out the demonstration programs under this section in a manner that— (A) will protect the financial interests of the Federal Government; (B) will result in significant discretionary cost savings through debt restructuring and subsidy reduction; and (C) will, in the least costly fashion, address the goals of— (i) maintaining existing housing stock in a decent, safe, and sanitary condition; (ii) minimizing the involuntary displacement of tenants; (iii) restructuring the mortgages of such projects in a manner that is consistent with local housing market conditions; (iv) supporting fair housing strategies; (v) minimizing any adverse income tax impact on property owners; and (vi) minimizing any adverse impact on residential neighborhoods. 110 STAT. 1321–286 In determining the manner in which a mortgage is to be restructured or the subsidy reduced, the Secretary may balance competing goals relating to individual projects in a manner that will farther the purposes of this section. (2) Demonstration approaches.— In carrying out the demonstration programs, subject to the appropriation in subsection (f), the Secretary may use one or more of the following approaches: (A) Joint venture arrangements with third parties, under which the Secretary may provide for the assumption by the third parties (by delegation, contract, or otherwise) of some or all of the functions, obligations, and benefits of the Secretary. (B) Subsidization of the debt service of the project to a level that can be paid by an owner receiving an unsubsidized market rent. (C) Renewal of existing project-based assistance con-tracts where the Secretary shall approve proposed initial rent levels that do not exceed the greater of 120 percent of fair market rents or comparable market rents for the relevant metropolitan market area or at rent levels under a budget-based approach. (D) Nonrenewal of expiring existing project-based assistance contracts and providing tenant-based assistance to previously assisted households. (b) For purposes of carrying out demonstration programs under subsection (a)— (1) the Secretary may manage and dispose of multifamily properties owned by the Secretary as of October 1, 1995 and multifamily mortgages held by the Secretary as of October 1, 1995 for properties assisted under section 8 with rents above 110 percent of fair market rents without regard to any other provision of law; and (2) the Secretary may delegate to one or more entities the authority to carry out some or all of the functions and responsibilities of the Secretary in connection with the foreclosure of mortgages held by the Secretary under the National Housing Act. (c) For purposes of carrying out demonstration programs under subsection (a), subject to such third party consents (if any) as are necessary including but not limited to (i) consent by the Government National Mortgage Association where it owns a mortgage insured by the Secretary; (ii) consent by an issuer under the mortgage-backed securities program of the Association, subject to the responsibilities of the issuer to its security holders and the Association under such program; and (iii) parties to any contractual agreement which the Secretary proposes to modify or discontinue, and subject to the appropriation in subsection (c), the Secretary or one or more third parties designated by the Secretary may take the following actions: (1) Notwithstanding any other provision of law, and subject to the agreement of the project owner, the Secretary or third party may remove, relinquish, extinguish, modify, or agree to the removal of any mortgage, regulatory agreement, project-based assistance contract, use agreement, or restriction that had been imposed or required by the Secretary, including restrictions on distributions of income which the Secretary or 110 STAT. 1321–287third party determines would interfere with the ability of the project to operate without above market rents. The Secretary or third party may require an owner of a property assisted under the section 8 new construction/substantial rehabilitation program to apply any accumulated residual receipts toward effecting the purposes of this section. (2) Notwithstanding any other provision of law, the Secretary of Housing and Urban Development may enter into contracts to purchase reinsurance, or enter into participations or otherwise transfer economic interest in contracts of insurance or in the premiums paid, or due to be paid, on such insurance to third parties, on such terms and conditions as the Secretary may determine. (3) The Secretary may offer project-based assistance with rents at or below fair market rents for the locality in which the project is located and may negotiate such other terms as are acceptable to the Secretary and the project owner. (4) The Secretary may offer to pay all or a portion of the project’s debt service, including payments monthly from the appropriate Insurance Fund, for the full remaining term of the insured mortgage. (5) Notwithstanding any other provision of law, the Secretary may forgive and cancel any FHA-insured mortgage debt that a demonstration program property cannot carry at market rents while bearing full operating costs. (6) For demonstration program properties that cannot carry full operating costs (excluding debt service) at market rents, the Secretary may approve project-based rents sufficient to carry such full operating costs and may offer to pay the full debt service in the manner provided in paragraph (4). (d) Community and Tenant Input.— In carrying out this section, the Secretary shall develop procedures to provide appropriate and timely notice to officials of the unit of general local government affected, the community in which the project is situated, and the tenants of the project. (e) Limitation on Demonstration Authority.— The Secretary may carry out demonstration programs under this section with respect to mortgages not to exceed 15,000 units. The demonstration authorized under this section shall not be expanded until the reports required under subsection (g) are submitted to the Congress. (f) Appropriation.— For the cost of modifying loans held or guaranteed by the Federal Housing Administration, as authorized by this subsection (a)(2) and subsection (c), $30,000,000, to remain available until September 30, 1997: Provided, That such costs shall be as defined in section 502 of the Congressional Budget Act of 1974, as amended. (g) Report to Congress.— The Secretary shall submit to the Congress every six months after the date of enactment of this Act a report describing and assessing the programs carried out under the demonstrations. The Secretary shall also submit a final report to the Congress not later than six months after the end of the demonstrations. The reports shall include findings and recommendations for any legislative action appropriate. The reports shall also include a description of the status of each multifamily housing project selected for the demonstrations under this section. The final report may include— (1) the size of the projects; 110 STAT. 1321–288 (2) the geographic locations of the projects, by State and region; (3) the physical and financial condition of the projects; (4) the occupancy profile of the projects, including the income, family size, race, and ethnic origin of current tenants, and the rents paid by such tenants; (5) a description of actions undertaken pursuant to this section, including a description of the effectiveness of such actions and any impediments to the transfer or sale of multi-family housing projects; (6) a description of the extent to which the demonstrations under this section have displaced tenants of multifamily housing projects; (7) a description of any of the functions performed in connection with this section that are transferred or contracted out to public or private entities or to States; (8) a description of the impact to which the demonstrations under this section have affected the localities and communities where the selected multifamily housing projects are located; and (9) a description of the extent to which the demonstrations under this section have affected the owners of multifamily housing projects.