§ 4112. — Criteria for approval of plan of action involving incentives.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC4112]
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. 4112. Criteria for approval of plan of action involving
incentives
(a) In general
The Secretary may approve a plan of action for extension of the low-
income affordability restrictions on any eligible low-income housing or
transfer the housing to a qualified purchaser (other than a resident
council) only upon finding that--
(1) due diligence has been given to ensuring that the package of
incentives is, for the Federal Government, the least costly
alternative that is consistent with the full achievement of the
purposes of this title; \1\
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(2) binding commitments have been made to ensure that--
(A) the housing will be retained as housing affordable for
very low-income families or persons, low-income families or
persons, and moderate-income families or persons for the
remaining useful life of such housing (as determined under
subsection (c) of this section);
(B) throughout such period, adequate expenditures will be
made for maintenance and operation of the housing and that the
project meets housing standards established by the Secretary
under subsection (d) of this section, as determined by
inspections conducted under such subsection by the Secretary;
(C) current tenants will not be involuntarily displaced
(except for good cause);
(D) any increase in rent contributions for current tenants
will be to a level that does not exceed 30 percent of the
adjusted income of the tenant or the published existing fair
market rent for comparable housing established under section
1437f(c) of title 42, whichever is lower, except that the rent
contributions of any tenants occupying the housing at the time
of any increase may not be reduced by reason of this
subparagraph (except with respect to tenants receiving section 8
[42 U.S.C. 1437f] assistance in accordance with subparagraph
(E)(ii) of this paragraph);
(E)(i) any resulting increase in rents for current tenants
(except for increases made necessary by increased operating
costs)--
(I) shall be phased in equally over a period of not less
than 3 years, if such increase is 30 percent or more; and
(II) shall be limited to not more than 10 percent per
year if such increase is more than 10 percent but less than
30 percent; and
(ii) assistance under section 1437f of title 42 shall be
provided, to the extent available under appropriation Acts, if
necessary to mitigate any adverse effect on current income-
eligible very low- and low-income tenants; and \2\
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(F)(i) rents for units becoming available to new tenants
shall be at levels approved by the Secretary that will ensure,
to the extent practicable, that the units will be available and
affordable to the same proportions of very low-income families
or persons, low-income families or persons, and moderate-income
families or persons (including families or persons whose incomes
are 95 percent or more of area median income) as resided in the
housing as of January 1, 1987 (based on the area median income
limits established by the Secretary in February 1987), or the
date the plan of action is approved, whichever date results in
the highest proportion of very low-income families, except that
this limitation shall not prohibit a higher proportion of very
low-income families from occupying the housing; and
(ii) in approving rents under this paragraph, the Secretary
shall take into account any additional incentives provided under
this subchapter;
(G) future rent adjustments shall be--
(i) made by applying an annual factor (to be determined
by the Secretary) to the portion of rent attributable to
operating expenses for the housing and, where the owner is a
priority purchaser, to the portion of rent attributable to
project oversight costs; and
(ii) subject to a procedure, established by the
Secretary, for owners to apply for rent increases not
adequately compensated by annual adjustment under clause
(i), under which the Secretary may increase rents in excess
of the amount determined under clause (i) only if the
Secretary determines such increases are necessary to reflect
extraordinary necessary expenses of owning and maintaining
the housing; and
(H) any savings from reductions in operating expenses due to
management efficiencies shall be deposited in project reserves
for replacement and the owner shall have periodic access to such
reserves, to the extent the Secretary determines that the level
of reserves is adequate and that the housing is maintained in
accordance with the standards established under subsection (d)
of this section; and
(3) no incentives under section 4109 of this title (other than
to purchasers under section 4110 of this title) may be provided
until the Secretary determines the project meets housing standards
under subsection (d) of this section, except that incentives under
such section and other incentives designed to correct deficiencies
in the project may be provided.
(b) Implementation
Any agreement to maintain the low-income affordability restrictions
for the remaining useful life of the housing may be made through
execution of a new regulatory agreement, modifications to the existing
regulatory agreement or mortgage, or, in the case of the prepayment of a
mortgage or voluntary termination of mortgage insurance, a recorded
instrument.
(c) Determination of remaining useful life
(1) ``Remaining useful life'' defined
For purposes of this title,\3\ the term ``remaining useful
life'' means, with respect to eligible low-income housing, the
period during which the physical characteristics of the housing
remain in a condition suitable for occupancy, assuming normal
maintenance and repairs are made and major systems and capital
components are replaced as becomes necessary.
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(2) Standards
The Secretary shall, by rule under section 553 of title 5,
establish standards for determining when the useful life of an
eligible low-income housing project has expired. The determination
shall be made on the record after opportunity for a hearing.
(3) Owner petition
The Secretary shall establish a procedure under which owners of
eligible low-income housing may petition the Secretary for a
determination that the useful life of such housing has expired. The
procedure shall not permit such a petition before the expiration of
the 50-year period beginning upon the approval of a plan of action
under this subchapter with respect to such housing. In making a
determination pursuant to a petition under this paragraph, the
Secretary shall presume that the useful life of the housing has not
expired, and the owner shall have the burden of proof in
establishing such expiration. The Secretary may not determine that
the useful life of any housing has expired if such determination
results primarily from failure to make regular and reasonable
repairs and replacement, as became necessary.
(4) Tenant and community comment and appeal
In making a determination regarding the useful life of any
housing pursuant to a petition submitted under paragraph (3), the
Secretary shall provide for comment by tenants of the housing and
interested persons and organizations with respect to the petition.
The Secretary shall also provide the tenants and interested persons
and organizations with an opportunity to appeal a determination
under this subsection.
(d) Housing standards
(1) Establishment and inspection
The Secretary shall, by regulation, establish standards
regarding the physical condition in which any eligible low income
housing project receiving incentives under this subchapter shall be
maintained. The Secretary shall inspect each such project not less
than annually to ensure that the project is in compliance with such
standards.
(2) Sanctions
(A) In general
The Secretary shall take any action appropriate to require
the owner of any housing not in compliance with such standards
to bring such housing into compliance with the standards,
including--
(i) directing the mortgagee, with respect to an equity
take-out loan under section 1715z-6(f) \3\ of this title, to
withhold the disbursement to the owner of any escrowed loan
proceeds and requiring that such proceeds be used for repair
of the housing; and
(ii) reduce the amount of the annual authorized return,
as determined by the Secretary, for the period ending upon a
determination by the Secretary that the project is in
compliance with the standards and requiring that such
amounts be used for repair.
(B) Continued compliance
To ensure continued compliance with the standards for a
project subject to any action under subparagraph (A), the
Secretary may also limit access of the owner to such amounts and
use of such amounts for not more than the 2-year period
beginning upon the determination that the project is in
compliance with the standards.
(C) Removal of assistance
If, upon inspection, the Secretary determines that any
eligible low income housing project has failed to comply with
the standards established under this subsection for 2
consecutive years, the Secretary may take 1 or more of the
following actions:
(i) Subject to availability of amounts provided in
appropriations Acts, provide assistance under sections
1437f(b) and 1437f(o) of title 42 (other than project-based
assistance attached to the housing) for any tenant eligible
for such assistance who desires to terminate occupancy in
the housing. For each unit in the housing vacated pursuant
to the provision of assistance under this clause, the
Secretary may, notwithstanding any other law or contract for
assistance, cancel the provision of project-based assistance
attached to the housing for 1 dwelling unit, if the housing
is receiving such assistance.
(ii) In the case of housing for which an equity take-out
loan has been made under section 1715z-6(f) \4\ of this
title, declare such loan to be in default and accelerate the
maturity date of the loan.
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(iii) Declare any rehabilitation loan insured or
provided by the Secretary (with respect to the housing) to
be in default and accelerate the maturity date of the loan.
(iv) Suspend payments under or terminate any contract
for project-based rental assistance under section 1437f of
title 42.
(v) Take any other action authorized by law or the
project regulatory agreement to ensure that the housing will
be brought into compliance with the standards established
under this subsection.
(Pub. L. 100-242, title II, Sec. 222, as added Pub. L. 101-625, title
VI, Sec. 601(a), Nov. 28, 1990, 104 Stat. 4260; amended Pub. L. 102-550,
title III, Secs. 308, 317(a)(4), Oct. 28, 1992, 106 Stat. 3764, 3772;
Pub. L. 103-327, title II, Sept. 28, 1994, 108 Stat. 2316.)
References in Text
This title, referred to in subsecs. (a)(1) and (c)(1), means title
II of Pub. L. 100-242, as amended by Pub. L. 101-625, title VI,
Sec. 601(a), Nov. 28, 1990, 104 Stat. 4249, known as the Low-Income
Housing Preservation and Resident Homeownership Act of 1990, which is
classified principally to this chapter. For complete classification of
this Act to the Code, see Short Title note set out under section 4101 of
this title and Tables.
Section 1715z-6(f) of this title, referred to in subsec.
(d)(2)(A)(i), (C)(ii), was repealed by Pub. L. 104-204, title II, Sept.
26, 1996, 110 Stat. 2885.
Codification
Amendment by Pub. L. 103-327 is based on section 601(a)-(d) of title
VI of S. 2281, One Hundred Third Congress, as reported July 13, 1994,
which was enacted into law by Pub. L. 103-327.
Amendments
1994--Subsec. (a)(2)(D). Pub. L. 103-327 temporarily amended subpar.
(D) to read as follows: ``monthly rent contributions by current and
future tenants, including tenants receiving assistance under section
1437f of title 42, shall not exceed the lesser of--
``(i) 30 percent of the adjusted income of the tenant; or
``(ii) 90 percent of the actual rent paid for a comparable unit
in comparable unassisted housing in the market area in which the
eligible low-income housing is located;
except that the rent contributions of tenants (other than tenants
receiving assistance under section 1437f of title 42) occupying the
housing at the time of any increase may not be reduced under this
subparagraph.'' See Effective and Termination Dates of 1994 Amendment
note below.
Subsec. (a)(2)(E)(ii). Pub. L. 103-327, which directed the temporary
amendment of par. (1)(E)(ii) by substituting a period for ``; and'' and
inserting at end ``For any section 8 assistance provided under this
subchapter, whether through the extension of an existing contract or the
provision of a new contract for assistance, the Secretary shall have the
discretion to adjust contract rents within the limits established under
section 4105 of this title, irrespective of the comparable rent
requirements set forth in section 1437f(c) of title 42. Notwithstanding
any provision of law to the contrary, any conflict pertaining to the
computation of contract rents arising from differences between this
subchapter and section 1437f of title 42 shall, subject to the prior
approval of the Secretary, be resolved in favor of this subchapter;
and'', was executed by making the amendments to par. (2)(E)(ii) to
reflect the probable intent of Congress. See Effective and Termination
Dates of 1994 Amendment note below.
Subsec. (a)(2)(E)(iii). Pub. L. 103-327 temporarily added cl. (iii)
which read as follows:
``(iii)(I) to retain the tenant occupancy profile required by
subparagraph (F)(i), tenants that are determined by the Secretary to be
low-income tenants at initial income certification upon occupancy, or at
the time of implementation of a plan of action (whichever occurs last),
shall pay for rent an amount that is not less than the lesser of--
``(aa) 30 percent of 45 percent of median income for the area
(as determined by the Secretary and adjusted for family size); or
``(bb) 90 percent of the actual rent paid for a comparable unit
in comparable unassisted housing in the market area in which the
eligible low-income housing is located.
Subject to subclause (II), payment of this minimum rent shall be a
condition of continued occupancy and eligibility for section 8
assistance.
``(II) Notwithstanding the rents required under subclause (I), a
tenant who occupies a unit designated for occupancy by low-income
persons and families, and who becomes a very low-income tenant, shall be
provided with the next available unit designated for occupancy by very
low-income persons and families, and, until such unit becomes available,
shall pay for rent not more than the amount chargeable as rent under
section 1437a(a) of title 42. Such tenant shall not be evicted for
nonpayment of rent if the rent amounts set forth in this subclause are
paid. The costs resulting from the difference between rents required
under subclause (I) and the rents permitted under this subclause shall
be incorporated into the section 8 contract for units designated for
occupancy by low-income persons or families; and''. See Effective and
Termination Dates of 1994 Amendment note below.
Subsec. (a)(2)(F). Pub. L. 103-327, which directed the temporary
amendment of par. (1)(F) by substituting ``to the extent practicable,
the units becoming available to new tenants shall be'' for ``rents for
units becoming available to new tenants shall be at levels approved by
the Secretary that will ensure, to the extent practicable, that the
units will be'' in cl. (i), adding cl. (ii), and redesignating former
cl. (ii) as (iii), was executed by making the amendments to par. (2)(F)
to reflect the probable intent of Congress. Cl. (ii) read as follows:
``in order to maintain the proportions of very low- and low-income
families and persons required by clause (i), owners shall be required to
apply any required Federal preference rules only with respect to tenants
within each low- or very low-income category, in accordance with the
approved tenant profile; and''. See Effective and Termination Dates of
1994 Amendment note below.
1992--Subsec. (a)(2)(A). Pub. L. 102-550, Sec. 317(a)(4)(A),
substituted ``low-income'' for ``low income'' after ``families or
persons,''.
Subsec. (a)(2)(G)(i). Pub. L. 102-550, Sec. 308(b), substituted ``,
where the owner is a priority purchaser, to the portion of rent
attributable to project oversight costs'' for ``by making changes in the
annual authorized return under section 4104 of this title''.
Subsec. (c)(2). Pub. L. 102-550, Sec. 317(a)(4)(B), substituted ``a
hearing'' for ``an hearing''.
Subsec. (d)(2)(B). Pub. L. 102-550, Sec. 317(a)(4)(C), inserted
``the'' after ``that''.
Subsec. (d)(2)(C)(ii). Pub. L. 102-550, Sec. 317(a)(4)(D),
substituted ``in default'' for ``default''.
Subsec. (e). Pub. L. 102-550, Sec. 308(a), struck out subsec. (e)
which read as follows: ``(e) Windfall Profits.--The Secretary shall
submit a report to the Congress not later than 90 days after November
28, 1990, evaluating the availability, quality, and reliability of data
to measure the accessibility of decent, affordable housing in all areas
where properties are eligible to submit a notice of intent to prepay
under section 4102 of this title. To prevent payment of windfall
profits, the Secretary may make available incentive payments under
section 4109 or 4110 of this title only to owners in those rental
markets where there is an inadequate supply of decent, affordable
housing, if the Secretary determines that adequate data can be obtained
to permit objective and fair implementation or where necessary to
accomplish the other public policy objectives under this chapter. The
Secretary shall implement this subsection in a manner consistent with
the process established by this chapter.''
Effective and Termination Dates of 1994 Amendment
Title II of Pub. L. 103-327, Sept. 28, 1994, 108 Stat. 2316,
provided in part that: ``Section 601 [amending this section and section
4119 of this title and enacting provisions set out below] of title VI of
S. 2281 (103d Cong., 2d Sess[.]), as reported to the Senate on July 13
(legislative day, July 11), 1994 (S. Rep. 103-307), is hereby
incorporated into this Act [Pub. L. 103-327], and such section 601 is
deemed enacted into law upon enactment of this Act [Sept. 28, 1994]:
Provided, That the provisions of such section 601 shall be effective
only during fiscal year 1995.''
Section 601(f) of title VI of S. 2281, One-Hundred Third Congress,
as reported July 13, 1994, which was enacted into law by title II of
Pub. L. 103-327, Sept. 28, 1994, 108 Stat. 2316, provided in part, that:
``(1) In general.--Except as provided in paragraph (2), this section
[amending this section and section 4119 of this title] shall take effect
on the date of enactment of this Act [Sept. 28, 1994].
``(2) Exception.--If an owner of eligible low-income housing has a
plan of action that has been approved by the Secretary and that is being
implemented as of the date of enactment of this Act [Sept. 28, 1994],
subsections (a), (b), (c), and (d) [amending this section] shall not
apply to current tenants of such housing until the first date on which
the next annual rent adjustments are made following the date of
enactment of this Act.''
Section Referred to in Other Sections
This section is referred to in sections 4109, 4110, 4114, 4116,
4121, 4125 of this title.
