Grant Community.com

Catalog of Federal Domestic Assistance

Program Descriptions

14.167:  Mortgage Insurance: Two Year Operating Loss Loans, Section 223(d)

Popular Name:  Two Year Operating Loss Loans

Objectives:  To insure a separate loan covering operating losses incurred during the first two years following the date of completion or any other 2 year period occurring within 10 years following the date of completion of a multifamily project with a HUD-insured first mortgage.

PROGRAM AND AWARD	FINANCIAL AND INFORMATION CONTACTS
ELIGIBILITY REQUIREMENTS	FINANCIAL AND ADMINISTRATIVE INFO.
APPLICATION AND AWARD PROCESS	INFORMATION CONTACTS
RELATED PROGRAMS	ASSISTANCE CONSIDERATIONS
PROGRAM ACCOMPLISHMENTS	POST ASSISTANCE REQUIREMENTS

14.167 ELIGIBILITY REQUIREMENTS:

Applicant Eligibility:  Owners of a multifamily project or facility subject to a mortgage insured by HUD or held by HUD are eligible to apply.

Beneficiary Eligibility:  Individuals/families and property owner.

Credentials/Documentation:  A formal application for insurance accompanied by a financial statement prepared by an independent certified public accountant or independent public accountant. This program is excluded from coverage under OMB Circular No. A-87.

14.167 APPLICATION AND AWARD PROCESS:

Preapplication Coordination:  The HUD Field Office will hold a preliminary conference with the sponsor to provide general application guidance. This program is excluded from coverage under OMB Circular No. A-102. This program is excluded from coverage under E.O. 12372.

Application Procedure:  The sponsor submits a formal application through a HUD-approved mortgagee to the local HUD office. This program is excluded from coverage under OMB Circular No. A-110.

Award Procedure:  Information submitted by the applicant will be reviewed and analyzed using data available through office records, field review and general current working knowledge of the project and background. A determination is then made as to the maximum insurable loan amount.

Deadlines:  Application shall be made within three years after the end of the two-year operating loss period for the two year loan. A loan covering losses occurring within 10 years of project completion must be made within 10 years of the end of the 2-year loss period covered by the loan.

Range of Approval/Disapproval Time:  Processing time will be dependent upon the degree of preparation by the sponsor and will range from 3 to 6 months from the first conference with local HUD officials.

Appeals:  If an application for operating loss loan is refused, HUD will state the reason for the refusal.

Renewals:  Not applicable.

Criteria for Selecting Proposals:  Not applicable.

Examples of Funded Projects:  Not applicable.

Range and Average of Financial Assistance:  The amount of the two-year loan shall be limited to the lesser of (1) the amount of the operating loss loan requested; (2) the amount of the operating loss established by HUD review or, (3) the maximum loss supported by debt service limitation. The 10-year loan shall be further limited to 80 percent of unreimbursed funds invested in the project.

14.167 RELATED PROGRAMS:

None.

14.167 PROGRAM ACCOMPLISHMENTS:

In fiscal year 1999, HUD insured 9 loans (1,385 units).

14.167 FINANCIAL AND ADMINISTRATIVE INFO:

Federal Agency:  HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Type of Assistance:  Guaranteed/Insured Loans.

Obligations:  (Loans insured) Reported under program 14.135.

Budget Account Number:  86-4077-0-3-371.

Authorization:  National Housing Act, as amended, Public Law 90-448, as amended, Public Law 91-152, 12 U.S.C. 1715x.

Regulations, Guidelines, and Literature:  24 CFR 207.4(f) et seq; HUD Handbook 4470.1 REV (Chapter 3), "Project Mortgages Insured Under Section 207 of the Housing Act", No charge.

14.167 INFO CONTACTS:

Regional or Local Office:  All projects are processed in HUD Offices. Persons are encouraged to communicate with the nearest local HUD Field Office listed in the Catalog Address Appendix IV.

Headquarters Office:  Office of Business Products, Department of Housing and Urban Development, Washington, DC 20410. Phone: (202) 708-2866. Use the same number for FTS.

(See Appendix IV for more contact info.)

14.167 ASSISTANCE CONSIDERATIONS:

Formula and Matching Requirements:  The amount of the two-year loan shall be limited to the lesser of (1) the amount of the operating loss loan requested; (2) the amount of the operating loss established by HUD review or, (3) the maximum loss supported by debt service limitation. The 10-year loan shall be further limited to 80 percent of unreimbursed funds invested in the project.

Length and Time Phasing of Assistance:  The loan may not exceed the remaining term of the insured mortgage.

Uses and Use Restrictions:  Eligibility is limited to currently insured HUD projects. HUD insures a loan to cover the excess of expenses over project gross income incurred during the first two years following the date of completion of the project or for any other two-year period within 10 years of project completion, for such amounts and upon such terms and conditions as HUD may prescribe. A project can receive both loans but not for the same two year period. The loan is insured by HUD under the same section as the original mortgage in an amount not exceeding the excess of operating expenses over project income. The loan term is limited to the unexpired term of the original mortgage.

14.167 POST ASSISTANCE REQUIREMENTS:

Reports:  Defaults in meeting the mortgage terms must be reported.

Audits:  HUD reserves the right to audit the accounts of the mortgagee or mortgagor to determine compliance and conformance with HUD regulations and standards.

Records:  Mortgagees are required to service and maintain records in accordance with acceptable practices of prudent lending institutions and the HUD regulations.