§ 4101. — General prepayment limitation.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC4101]
TITLE 12--BANKS AND BANKING
CHAPTER 42--LOW-INCOME HOUSING PRESERVATION AND RESIDENT HOMEOWNERSHIP
SUBCHAPTER I--PREPAYMENT OF MORTGAGES INSURED UNDER NATIONAL HOUSING ACT
Sec. 4101. General prepayment limitation
(a) Prepayment and termination
An owner of eligible low-income housing may prepay, and a mortgagee
may accept prepayment of, a mortgage on such housing only in accordance
with a plan of action approved by the Secretary under this subchapter or
in accordance with section 4114 of this title. An insurance contract
with respect to eligible low-income housing may be terminated pursuant
to section 1715t of this title only in accordance with a plan of action
approved by the Secretary under this subchapter or in accordance with
section 4114 of this title.
(b) Foreclosure
A mortgagee may foreclose the mortgage on, or acquire by deed in
lieu of foreclosure, any eligible low-income housing project only if the
mortgagee also conveys title to the project to the Secretary in
connection with a claim for insurance benefits.
(c) Effect of unauthorized prepayment
Any prepayment of a mortgage on eligible low-income housing or
termination of the mortgage insurance on such housing not in compliance
with the provisions of this subchapter shall be null and void and any
low-income affordability restrictions on the housing shall continue to
apply to the housing.
(Pub. L. 100-242, title II, Sec. 211, as added Pub. L. 101-625, title
VI, Sec. 601(a), Nov. 28, 1990, 104 Stat. 4249.)
Effective Date
Section 605 of Pub. L. 101-625 provided that: ``This subtitle
[subtitle A (Secs. 601-605) of title VI of Pub. L. 101-625, enacting
this chapter, amending sections 1715z-6 and 1715z-15 of this title and
section 1437f of Title 42, The Public Health and Welfare, and enacting
provisions set out below] shall take effect on the date of the enactment
of this Act [Nov. 28, 1990].''
Short Title
Section 201 of title II of Pub. L. 100-242, as added by Pub. L. 101-
625, title VI, Sec. 601(a), Nov. 28, 1990, 104 Stat. 4249, provided
that: ``This title [enacting this chapter, amending section 1715z-15 of
this title and sections 1437f, 1472, 1485, and 1487 of Title 42, The
Public Health and Welfare, and enacting provisions set out below] may be
cited as the `Low-Income Housing Preservation and Resident Homeownership
Act of 1990'.''
Applicability
Section 235 of Pub. L. 100-242, as added by Pub. L. 101-625, title
VI, Sec. 601(a), Nov. 28, 1990, 104 Stat. 4274, provided that: ``Subject
to section 605 of the Cranston-Gonzalez National Affordable Housing Act
[Pub. L. 101-625, set out above], the requirements of this subtitle
[subtitle B (Secs. 211-235) of title II of Pub. L. 100-242, enacting
this subchapter] shall apply to any project that is eligible low-income
housing on or after November 1, 1987.''
Regulations
Pub. L. 102-550, title III, Sec. 332, Oct. 28, 1992, 106 Stat. 3773,
provided that: ``Except as otherwise provided in this title [enacting
sections 4141 to 4147 of this title, amending sections 1715z-1, 1715z-6,
4103, 4105 to 4112, 4116, 4119, 4121, 4122, 4124, and 4125 of this
title, enacting provisions set out as notes under this section and
sections 1715z-6, 4109, and 4117 of this title, and amending provisions
set out as a note under this section], the Secretary of Housing and
Urban Development shall issue interim regulations implementing this
title and the amendments made by this title not later than the
expiration of the 90-day period beginning on the date of the enactment
of this Act [Oct. 28, 1992], which shall take effect upon issuance. The
Secretary shall issue final regulations implementing this title and the
amendments made by this title after notice and opportunity for public
comment regarding the interim regulations, pursuant to the provisions of
section 553 of title 5, United States Code (notwithstanding subsections
(a)(2), (b)(B), and (d)(3) of such section). The duration of the period
for public comment shall not be less than 60 days, and the final
regulations shall be issued not later than the expiration of the 60-day
period beginning upon the conclusion of the comment period and shall
take effect upon issuance.''
Low-Income Housing Preservation
Pub. L. 104-204, title II, Sept. 26, 1996, 110 Stat. 2883, provided
in part: ``That of the total amount provided under this head,
$350,000,000 shall be available for use in conjunction with properties
that are eligible for assistance under the Low-Income Housing
Preservation and Resident Homeownership Act of 1990 (LIHPRHA) [see Short
Title note above] or the Emergency Low Income Housing Preservation Act
of 1987 (ELIHPA) [see Codification note set out preceding this section],
of which $75,000,000 shall be available for obligation until March 1,
1997 for projects (1) that are subject to a repayment or settlement
agreement that was executed between the owner and the Secretary prior to
September 1, 1995; (2) whose submissions were delayed as a result of
their location in areas that were designated as a Federal disaster area
in a Presidential Disaster Declaration; or (3) whose processing was, in
fact or in practical effect, suspended, deferred, or interrupted for a
period of twelve months or more because of differing interpretations, by
the Secretary and an owner or by the Secretary and a State or local rent
regulatory agency, concerning the timing of filing eligibility or the
effect of a presumptively applicable State or local rent control law or
regulation on the determination of preservation value under section 213
of LIHPRHA, as amended [12 U.S.C. 4103], if the owner of such project
filed notice of intent to extend the low-income affordability
restrictions of the housing, or transfer to a qualified purchaser who
would extend such restrictions, on or before November 1, 1993; and of
which, up to $100,000,000 may be used for rental assistance to prevent
displacement of families residing in projects whose owners prepay their
mortgages; and the balance of which shall be available from the
effective date of this Act [Sept. 26, 1996] for sales to preferred
priority purchasers: Provided further, That with the exception of
projects described in clauses (1), (2), or (3) of the preceding proviso,
the Secretary shall, notwithstanding any other provision of law, suspend
further processing of preservation applications which have not
heretofore received approval of a plan of action: Provided further, That
$150,000,000 of amounts recaptured from interest reduction payment
contracts for section 236 [12 U.S.C. 1715z-1] projects whose owners
prepay their mortgages during fiscal year 1997 shall be rescinded:
Provided further, That an owner of eligible low-income housing may
prepay the mortgage or request voluntary termination of a mortgage
insurance contract, so long as said owner agrees not to raise rents for
sixty days after such prepayment: Provided further, That such
developments have been determined to have preservation equity at least
equal to the lesser of $5,000 per unit or $500,000 per project or the
equivalent of eight times the most recently published monthly fair
market rent for the area in which the project is located as the
appropriate unit size for all of the units in the eligible project:
Provided further, That the Secretary may modify the regulatory agreement
to permit owners and priority purchasers to retain rental income in
excess of the basic rental charge in projects assisted under section 236
of the National Housing Act, for the purpose of preserving the low- and
moderate-income character of the housing: Provided further, That
eligible low-income housing shall include properties meeting the
requirements of this paragraph with mortgages that are held by a State
agency as a result of a sale by the Secretary without insurance, which
immediately before the sale would have been eligible low-income housing
under LIHPRHA: Provided further, That notwithstanding any other
provision of law, subject to the availability of appropriated funds,
each low-income family, and moderate-income family who is elderly or
disabled or is residing in a low-vacancy area, residing in the housing
on the date of prepayment or voluntary termination, and whose rent, as a
result of a rent increase occurring no later than one year after the
date of the prepayment, exceeds 30 percent of adjusted income, shall be
offered tenant-based assistance in accordance with section 8 [42 U.S.C.
1437f] or any successor program, under which the family shall pay no
less for rent than it paid on such date: Provided further, That any
family receiving tenant-based assistance under the preceding proviso may
elect (1) to remain in the unit of the housing and if the rent exceeds
the fair market rent or payment standard, as applicable, the rent shall
be deemed to be the applicable standard, so long as the administering
public housing agency finds that the rent is reasonable in comparison
with rents charged for comparable unassisted housing units in the market
or (2) to move from the housing and the rent will be subject to the fair
market rent of the payment standard, as applicable, under existing
program rules and procedures: Provided further, That the tenant-based
assistance made available under the preceding two provisos are in lieu
of benefits provided in subsections [sic] 223(b), (c), and (d) of the
Low-Income Housing Preservation and Resident Homeownership Act of 1990
[12 U.S.C. 4113(b), (c), (d)]: Provided further, That any sales shall be
funded using the capital grant available under section 220(d)(3)(A) of
LIHPRHA [12 U.S.C. 4110(d)(3)(A)]: Provided further, That any extensions
shall be funded using a non-interest-bearing capital (direct) loan by
the Secretary not in excess of the amount of the cost of rehabilitation
approved in the plan of action plus 65 percent of the property's
preservation equity and under such other terms and conditions as the
Secretary may prescribe: Provided further, That any capital grant shall
be limited to seven times, and any capital loan limited to six times,
the annual fair market rent for the project, as determined using the
fair market rent for fiscal year 1997 for the area in which the project
is located, using the appropriate apartment sizes and mix in the
eligible project, except where, upon the request of a priority
purchaser, the Secretary determines that a greater amount is necessary
and appropriate to preserve low-income housing: Provided further, That
section 241(f) of the National Housing Act [12 U.S.C. 1715z-6(f)] is
repealed and insurance under such section shall not be offered as an
incentive under LIHPRHA and ELIHPA: Provided further, That up to
$10,000,000 of the amount of $350,000,000 made available by a preceding
proviso in this paragraph may be used at the discretion of the Secretary
to reimburse owners of eligible properties for which plans of action
were submitted prior to the effective date of this Act [Sept. 26, 1996],
but were not executed for lack of available funds, with such
reimbursement available only for documented costs directly applicable to
the preparation of the plan of action as determined by the Secretary,
and shall be made available on terms and conditions to be established by
the Secretary: Provided further, That, notwithstanding any other
provision of law, a priority purchaser may utilize assistance under the
HOME Investment Partnerships Act [42 U.S.C. 12721 et seq.] or the Low
Income Housing Tax Credit [see 26 U.S.C. 42]: Provided further, That
projects with approved plans of action which exceed the limitations on
eligibility for funding imposed by this Act may submit revised plans of
action which conform to these limitations by March 1, 1997, and retain
the priority for funding otherwise applicable from the original date of
approval of their plan of action, subject to securing any additional
necessary funding commitments by August 1, 1997.''
Pub. L. 104-134, title I, Sec. 101(e) [title II], Apr. 26, 1996, 110
Stat. 1321-257, 1321-267; renumbered title I, Pub. L. 104-140,
Sec. 1(a), May 2, 1996, 110 Stat. 1327, provided in part that: ``Of the
total amount provided under this head, $624,000,000, plus amounts
recaptured from interest reduction payment contracts for section 236 [12
U.S.C. 1715z-1] projects whose owners prepay their mortgages during
fiscal year 1996 (which amounts shall be transferred and merged with
this account), shall be for use in conjunction with properties that are
eligible for assistance under the Low Income Housing Preservation and
Resident Homeownership Act of 1990 (LIHPRHA) [see Short Title note
above] or the Emergency Low-Income Housing Preservation Act of 1987
(ELIHPA) [see Codification note set out preceding this section]:
Provided, That prior to August 15, 1996, funding to carry out plans of
action shall be limited to sales of projects to non-profit
organizations, tenant-sponsored organizations, and other priority
purchasers: Provided further, That of the amount made available by this
paragraph, up to $10,000,000 shall be available for preservation
technical assistance grants pursuant to section 253 of the Housing and
Community Development Act of 1987 [12 U.S.C. 4143], as amended: Provided
further, That with respect to amounts made available by this paragraph,
after August 15, 1996, if the Secretary determines that the demand for
funding may exceed amounts available for such funding, the Secretary (1)
may determine priorities for distributing available funds, including
giving priority funding to tenants displaced due to mortgage prepayment
and to projects that have not yet been funded but which have approved
plans of action; and (2) may impose a temporary moratorium on
applications by potential recipients of such funding: Provided further,
That an owner of eligible low-income housing may prepay the mortgage or
request voluntary termination of a mortgage insurance contract, so long
as said owner agrees not to raise rents for sixty days after such
prepayment: Provided further, That an owner of eligible low-income
housing who has not timely filed a second notice under section 216(d)
[12 U.S.C. 4106(d)] prior to the effective date of this Act [Apr. 26,
1996] may file such notice by April 15, 1996: Provided further, That
such developments have been determined to have preservation equity at
least equal to the lesser of $5,000 per unit or $500,000 per project or
the equivalent of eight times the most recently published fair market
rent for the area in which the project is located as the appropriate
unit size for all of the units in the eligible project: Provided
further, That the Secretary may modify the regulatory agreement to
permit owners and priority purchasers to retain rental income in excess
of the basic rental charge in projects assisted under section 236 of the
National Housing Act [12 U.S.C. 1715z-1], for the purpose of preserving
the low and moderate income character of the housing: Provided further,
That the Secretary may give priority to funding and processing the
following projects provided that the funding is obligated not later than
September 15, 1996: (1) projects with approved plans of action to retain
the housing that file a modified plan of action no later than August 15,
1996 to transfer the housing; (2) projects with approved plans of action
that are subject to a repayment or settlement agreement that was
executed between the owner and the Secretary prior to September 1, 1995;
(3) projects for which submissions were delayed as a result of their
location in areas that were designated as a Federal disaster area in a
Presidential Disaster Declaration; and (4) projects whose processing
was, in fact, or in practical effect, suspended, deferred, or
interrupted for a period of nine months or more because of differing
interpretations, by the Secretary and an owner concerning the time of
the ability of an uninsured section 236 [12 U.S.C. 1715z-1] property to
prepay or by the Secretary and a State or local rent regulatory agency,
concerning the effect of a presumptively applicable State or local rent
control law or regulation on the determination of preservation value
under section 213 of LIHPRHA, as amended [12 U.S.C. 4103], if the owner
of such project filed notice of intent to extend the low-income
affordability restrictions of the housing, or transfer to a qualified
purchaser who would extend such restrictions, on or before November 1,
1993: Provided further, That eligible low-income housing shall include
properties meeting the requirements of this paragraph with mortgages
that are held by a State agency as a result of a sale by the Secretary
without insurance, which immediately before the sale would have been
eligible low-income housing under LIHPRHA: Provided further, That
notwithstanding any other provision of law, subject to the availability
of appropriated funds, each unassisted low-income family residing in the
housing on the date of prepayment or voluntary termination, and whose
rent, as a result of a rent increase occurring no later than one year
after the date of the prepayment, exceeds 30 percent of adjusted income,
shall be offered tenant-based assistance in accordance with section 8
[42 U.S.C. 1437f] or any successor program, under which the family shall
pay no less for rent than it paid on such date: Provided further, That
any family receiving tenant-based assistance under the preceding proviso
may elect (1) to remain in the unit of the housing and if the rent
exceeds the fair market rent or payment standard, as applicable, the
rent shall be deemed to be the applicable standard, so long as the
administering public housing agency finds that the rent is reasonable in
comparison with rents charged for comparable unassisted housing units in
the market or (2) to move from the housing and the rent will be subject
to the fair market rent of the payment standard, as applicable, under
existing program rules and procedures: Provided further, That rents and
rent increases for tenants of projects for which plans of action are
funded under section 220(d)(3)(B) of LIHPRHA [12 U.S.C. 4110(d)(3)(B)]
shall be governed in accordance with the requirements of the program
under which the first mortgage is insured or made (sections 236 or
221(d)(3) BMIR [12 U.S.C. 1715z-1, 4111(d)(3)], as appropriate):
Provided further, That the immediately foregoing proviso shall apply
hereafter to projects for which plans of action are to be funded under
such section 220(d)(3)(B) [12 U.S.C. 4110(d)(3)(B)], and shall apply to
any project that has been funded under such section starting one year
after the date that such project was funded: Provided further, That up
to $10,000,000 of the amount made available by this paragraph may be
used at the discretion of the Secretary to reimburse owners of eligible
properties for which plans of action were submitted prior to the
effective date of this Act [Apr. 26, 1996], but were not executed for
lack of available funds, with such reimbursement available only for
documented costs directly applicable to the preparation of the plan of
action as determined by the Secretary, and shall be made available on
terms and conditions to be established by the Secretary: Provided
further, That, notwithstanding any other provision of law, effective
October 1, 1996, the Secretary shall suspend further processing of
preservation applications which do not have approved plans of action.''
For similar provisions see Pub. L. 104-120, Sec. 2(b), Mar. 28,
1996, 110 Stat. 834.
Conditions of Assistance
Pub. L. 102-550, title III, Sec. 314, Oct. 28, 1992, 106 Stat. 3770,
provided that:
``(a) Elihpa of 1987.--The Secretary may not require, as a condition
of eligibility for or receipt of technical assistance made available
under the Departments of Veterans Affairs and Housing and Urban
Development, and Independent Agencies Appropriations Act, 1992 (Public
Law 102-139 [105 Stat. 736, see Tables for classification]) (including
any phase of a grant), that an applicant participate in a training
program sponsored or conducted by the Department of Housing and Urban
Development for acquisition of eligible low income housing under the
provisions of the Emergency Low Income Housing Preservation Act of 1987
[see Codification note above], and may not provide any preference or
priority for such assistance for any applicant based on participation in
such a program.
``(b) Lihprha of 1990.--The Secretary may require, as a condition of
eligibility for or receipt of technical assistance made available under
the Departments of Veterans Affairs and Housing and Urban Development,
and Independent Agencies Appropriations Act, 1992 (Public Law 102-139)
(including any phase of a grant), that an applicant participate in a
training program sponsored or conducted by the Department of Housing and
Urban Development for acquisition of eligible low-income housing under
this title [enacting sections 4141 to 4147 of this title, amending
sections 1715z-1, 1715z-6, 4103, 4105 to 4112, 4116, 4119, 4121, 4122,
4124, and 4125 of this title, enacting provisions set out as notes under
this section and sections 1715z-6, 4109, and 4117 of this title, and
amending provisions set out as a note under this section], and may
provide preference or priority for such assistance for applicants based
on participation in such a program, but only if the program is made
available on a nationwide basis not later than March 1, 1993.''
Transition Provisions
Section 604 of Pub. L. 101-625, as amended by Pub. L. 102-550, title
III, Sec. 313, Oct. 28, 1992, 106 Stat. 3769, provided that:
``(a) Housing Eligible for Election.--Any owner of housing that
becomes eligible low-income housing before January 1, 1991 and who,
before such date, filed a notice of intent under section 222 of the
Emergency Low Income Housing Preservation Act of 1987 [formerly set out
in a note under section 1715l of this title] (as such section existed
before the date of the enactment of this Act [Nov. 28, 1990]) or under
section 212 of such Act [12 U.S.C. 4102] (as amended by section 601(a))
may elect to be subject to (1) the provisions of such Act as in effect
before the date of the enactment of this Act, or (2) the provisions of
the Low-Income Housing Preservation and Resident Homeownership Act of
1990 [see Short Title note above], after the date of the enactment of
this Act. The Secretary shall establish procedures for owners to make
the election under the preceding sentence. An owner that elects to be
subject to the provisions of the Emergency Low Income Housing
Preservation Act of 1987 shall comply with section 212(b), section
217(a)(2), and section 217(c) of the Low-Income Housing Preservation and
Resident Homeownership Act of 1990 [12 U.S.C. 4102(b) and 4107(a)(2),
(c)].
``(b) Right of Conversion to New System.--Any owner who has filed a
plan of action on or before October 11, 1990, shall have the right to
convert to the system of incentives and restrictions under this subtitle
[subtitle A of title VI of Pub. L. 101-625, see Effective Date note
above], with such adjustments as the Secretary determines to be
appropriate to compensate for the value of any incentives the owner
received under the Emergency Low Income Housing Preservation Act of 1987
[see Codification note preceding this section]. Owners filing plans
after such date shall not have any right under this subsection.
``(c) Effectiveness of Repealed Provisions.--Notwithstanding the
amendment made by section 601(a) [enacting this chapter], the provisions
of the Emergency Low Income Housing Preservation Act of 1987 (as in
effect immediately before the date of the enactment of this Act [Nov.
28, 1990]) shall apply with respect to any housing for which the
election under subsection (a)(1) is made. With respect to housing for
which such an election is made--
``(1) in making incentives under section 224 of such Act
[formerly set out in a note under section 1715l of this title]
available to such housing, the Secretary--
``(A) shall, for approvable plans of action, provide
assistance sufficient to enable a nonprofit organization that
has purchased or will purchase an eligible low income housing
project to meet project oversight costs; and
``(B) may not refuse to offer incentives referred to in such
section to any owner who filed a notice of intent under section
222 of such Act before October 15, 1991, based solely on the
date of filing of the plan of action for the housing; and
``(2) the provisions of section 233(1)(A)(i) of such Act
[formerly set out in a note under section 1715l of this title] shall
not apply, and the term `eligible low income housing' shall, for
purposes of such Act, shall [sic] include housing financed by a loan
or mortgage that is insured or held by the Secretary or a State or
State agency under section 221(d)(3) of the National Housing Act [12
U.S.C. 1715l(d)(3)] and receiving loan management assistance under
section 8 of the United States Housing Act of 1937 [42 U.S.C. 1437f]
due to a conversion from section 101 of the Housing and Urban
Development Act of 1965 [12 U.S.C. 1701s].
``(d) Regulations.--Not later than the expiration of the 90-day
period beginning on the date of the enactment of this Act [Nov. 28,
1990], the Secretary of Housing and Urban Development shall, subject to
the provisions of section 553 of title 5, United States Code, publish
proposed rules to implement this subtitle and the amendments made by
this subtitle. Not later than 45 days after the expiration of the period
under the preceding sentence the Secretary shall issue interim or final
rules to implement such provisions.''
