Sec. 811. PREPAYMENT AND REFINANCING
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## SEC. 811 PREPAYMENT AND REFINANCING **[**[12 U.S.C. 1701q note](/us/usc/t12/s1701q)**]** ###
(a)Approval of Prepayment of Debt Upon request of the project sponsor of a project assisted with a loan under section 202 of the Housing Act of 1959 (as in effect before the enactment of the Cranston-Gonzalez National Affordable Housing Act7), for which the Secretary's consent to prepayment is required,,8 the Secretary shall approve the prepayment of any indebtedness to the Secretary relating to any remaining principal and interest under the loan as part of a prepayment plan under which— 7November 28, 1990. 8Two commas so in law. See amendment made by section 201(1) of Public Law 111–372. ####
(1)the project sponsor agrees to operate the project until at least 20 years following the maturity date of the original loan under terms at least as advantageous to existing and future tenants as the terms required by the original loan agreement or any project-based rental assistance payments contract under section 8 of the United States Housing Act of 1937 (or any other project-based rental housing assistance programs of the Department of Housing and Urban Development, including the rent supplement program under section 101 of the Housing and Urban Development Act of 1965 (12 U.S.C. 1701s)), or any successor project-based rental assistance program, relating to the project; and ####
(2)the prepayment may involve refinancing of the loan if such refinancing results in— #####
(A)a lower interest rate on the principal of the loan for the project and in reductions in debt service related to such loan; or #####
(B)a transaction in which the project owner will address the physical needs of the project, but only if, as a result of the refinancing— ######
(i)the rent charges for unassisted families residing in the project do not increase or such families are provided rental assistance under a senior preservation rental assistance contract for the project pursuant to subsection (e); and ######
(ii)the overall cost for providing rental assistance under section 8 for the project (if any) is not increased, except, upon approval by the Secretary to— ######
(I)mark-up-to-market contracts pursuant to section 524(a)(3) of the Multifamily Assisted Housing Reform and Affordability Act (42 U.S.C. 1437f note), as such section is carried out by the Secretary for properties owned by nonprofit organizations; or ######
(II)mark-up-to-budget contracts pursuant to section 524(a)(4) of the Multifamily Assisted Housing Reform and Affordability Act (42 U.S.C. 1437f note), as such section is carried out by the Secretary for properties owned by eligible owners (as such term is defined in section 202(k) of the Housing Act of 1959 (12 U.S.C. 1701q(k)); and ####
(3)notwithstanding paragraph (2)(A), the prepayment and refinancing authorized pursuant to paragraph (2)(B) involves an increase in debt service only in the case of a refinancing of a project assisted with a loan under such section 202 carrying an interest rate of 6 percent or lower. ###
(b)Sources of Refinancing In the case of prepayment under this section involving refinancing, the project sponsor may refinance the project through any third party source, including financing by State and local housing finance agencies, use of tax-exempt bonds, multi-family mortgage insurance under the National Housing Act, reinsurance, or other credit enhancements, including risk sharing as provided under section 542 of the Housing and Community Development Act of 1992 (12 U.S.C. 1707 note). For purposes of underwriting a loan insured under the National Housing Act, the Secretary may assume that any section 8 rental assistance contract relating to a project will be renewed for the term of such loan. ###
(c)Use of Proceeds Upon execution of the refinancing for a project pursuant to this section, the Secretary shall ensure that proceeds are used in a manner advantageous to tenants of the project, or are used in the provision of affordable rental housing and related social services for elderly persons that are tenants of the project or are tenants of other HUD-assisted senior housing by the private nonprofit organization project owner, private nonprofit organization project sponsor, or private nonprofit organization project developer, including— ####
(1)not more than 15 percent of the cost of increasing the availability or provision of supportive services, which may include the financing of service coordinators and congregate services, except that upon the request of the non-profit owner, sponsor, or organization and determination of the Secretary, such 15 percent limitation may be waived to ensure that the use of unexpended amounts better enables seniors to age in place; ####
(2)rehabilitation, modernization, or retrofitting of structures, common areas, or individual dwelling units, including reducing the number of units by reconfiguring units that are functionally obsolete, unmarketable, or not economically viable; ####
(3)construction of an addition or other facility in the project, including assisted living facilities (or, upon the approval of the Secretary, facilities located in the community where the project sponsor refinances a project under this section, or pools shared resources from more than one such project); ####
(4)rent reduction of unassisted tenants residing in the project; ####
(5)rehabilitation of the project to ensure long-term viability; and ####
(6)the payment to the project owner, sponsor, or third party developer of a developer's fee in an amount not to exceed or duplicate— #####
(A)in the case of a project refinanced through a State low income housing tax credit program, the fee permitted by the low income housing tax credit program as calculated by the State program as a percentage of acceptable development cost as defined by that State program; or #####
(B)in the case of a project refinanced through any other source of refinancing, 15 percent of the acceptable development cost. For purposes of paragraph (6)(B), the term “**acceptable development cost**” shall include, as applicable, the cost of acquisition, rehabilitation, loan prepayment, initial reserve deposits, and transaction costs. ###
(d)Use of Certain Project Funds The Secretary shall allow a project sponsor that is prepaying and refinancing a project under this section— ####
(1)to use any residual receipts held for that project in excess of $500 per individual dwelling unit for the cost of activities designed to increase the availability or provision of supportive services9; and 9Section 203(2) of Public Law 111–372 provides an amendment to paragraph
(1)of section 811(d) by inserting before the period at the end the following: “or other purposes approved by the Secretary”. The amendment could not be executed because a period does not appear at the end in paragraph (1). ####
(2)to use any reserves for replacement in excess of $1,000 per individual dwelling unit for activities described in paragraphs
(2)and
(3)of subsection (c). ###
(e)Senior Preservation Rental Assistance Contracts Notwithstanding any other provision of law, in connection with a prepayment plan for a project approved under subsection
(a)by the Secretary or as otherwise approved by the Secretary to prevent displacement of elderly residents of the project in the case of refinancing or recapitalization and to further preservation and affordability of such project, the Secretary shall provide project-based rental assistance for the project under a senior preservation rental assistance contract, as follows: ####
(1)Assistance under the contract shall be made available to the private nonprofit organization owner— #####
(A)for a term of at least 20 years, subject to annual appropriations; and #####
(B)under the same rules governing project-based rental assistance made available under section 8 of the Housing Act of 1937 or under the rules of such assistance as may be made available for the project. ####
(2)Any projects for which a senior preservation rental assistance contract is provided shall be subject to a use agreement to ensure continued project affordability having a term of the longer of
(A)the term of the senior preservation rental assistance contract, or
(B)such term as is required by the new financing. ###
(f)Subordination or Assumption of Existing Debt In lieu of prepayment under this section of the indebtedness with respect to a project, the Secretary may approve— ####
(1)in connection with new financing for the project, the subordination of the loan for the project under section 202 of the Housing Act of 1959 (as in effect before the enactment of the Cranston-Gonzalez National Affordable Housing Act) and the continued subordination of any other existing subordinate debt previously approved by the Secretary to facilitate preservation of the project as affordable housing; or ####
(2)the assumption (which may include the subordination described in paragraph (1)) of the loan for the project under such section 202 in connection with the transfer of the project with such a loan to a private nonprofit organization. ###
(g)Flexible Subsidy Debt The Secretary shall waive the requirement that debt for a project pursuant to the flexible subsidy program under section 201 of the Housing and Community Development Amendments of 1978 (12 U.S.C. 1715z–1a) be prepaid in connection with a prepayment, refinancing, or transfer under this section of a project if the financial transaction or refinancing cannot be completed without the waiver. ###
(h)Tenant Involvement in Prepayment and Refinancing The Secretary shall not accept an offer to prepay the loan for any project under section 202 of the Housing Act of 1959 unless the Secretary— ####
(1)has determined that the owner of the project has notified the tenants of the owner's request for approval of a prepayment; and ####
(2)has determined that the owner of the project has provided the tenants with an opportunity to comment on the owner's request for approval of a prepayment, including on the description of any anticipated rehabilitation or other use of the proceeds from the transaction, and its impacts on project rents, tenant contributions, or the affordability restrictions for the project, and that the owner has responded to such comments in writing. ###
(i)Definition of Private Nonprofit Organization For purposes of this section, the term “**private nonprofit organization**” has the meaning given such term in section 202(k) of the Housing Act of 1959 (12 U.S.C. 1701q(k)). * * * * * * *
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- Pub. L. 111-372
- 12 USC 1715z–1a
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Sec. 811
PREPAYMENT AND REFINANCING
Pub. L.Pub. L. 111-372
Cite12 USC 1715z–1a
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