Mortgage Lending 

U.S. Code > Title 12 > Chapter 42 > Subchapter I > § 4111 - Mandatory sale for housing exceeding Federal cost limits

    (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)

        (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)

          (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.

      (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.

            (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.

Legislative History

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