42 USC 1490 - Loan guarantees for multifamily rental housing in rural areas

View all text of Subchapter III [§ 1471 - § 1490t]

§ 1490p–2. Loan guarantees for multifamily rental housing in rural areas

(a) Authority

(b) Extent of guarantee

(d) Eligible housingA loan may be guaranteed under this section only if the loan is used for the development costs of housing and related facilities (as such terms are defined in section 1485(e) of this title) that—

(1) consists of 5 or more adequate dwellings;

(2) is available for occupancy only by low or moderate income 1

1 So in original. Probably should be “low- or moderate-income”.

families or persons, whose incomes at the time of initial occupancy do not exceed 115 percent of the median income of the area, as determined by the Secretary;

(3) will remain available as provided in paragraph (2), according to such binding commitments as the Secretary may require, for the period of the original term of the loan guaranteed, unless the housing is acquired by foreclosure (or instrument in lieu of foreclosure) or the Secretary waives the applicability of such requirement for the loan only after determining, based on objective information, that—

(A) there is no longer a need for low- and moderate-income housing in the market area in which the housing is located;

(B) housing opportunities for low-income households and minorities will not be reduced as a result of the waiver; and

(4) is located in a rural area.

(e) Eligible lenders

(1) RequirementA loan may be guaranteed under this section only if the loan is made by a lender that the Secretary determines—

(A) meets the qualifications, and has been approved by the Secretary of Housing and Urban Development, to make loans for multifamily housing that are to be insured under the National Housing Act [12 U.S.C. 1701 et seq.];

(B) meets the qualifications, and has been approved by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, to make loans for multifamily housing that are to be sold to such corporations; or

(C) meets any qualifications that the Secretary may, by regulation, establish for participation of lenders in the loan guarantee program under this section.

(2) Eligibility list and annual audit

(f) Loan termsEach loan guaranteed pursuant to this section shall—

(1) be made for a period of not less than 25 nor greater than 40 years from the date the loan was made and may provide for amortization of the loan over a period of not to exceed 40 years with a final payment of the balance due at the end of the loan term;

(2) involve a rate of interest agreed upon by the borrower and the lender that does not exceed the maximum allowable rate established by the Secretary for purposes of this section and is fixed over the term of the loan;

(3) involve a principal obligation (including initial service charges, appraisal, inspection, and other fees as the Secretary may approve) not to exceed—

(A) in the case of a borrower that is a nonprofit organization or an agency or body of any State or local government, 97 percent of the development costs of the housing and related facilities or the value of the housing and facilities, whichever is less;

(B) in the case of a borrower that is a for-profit entity not referred to in subparagraph (A), 90 percent of the development costs of the housing and related facilities or the value of the housing and facilities, whichever is less; and

(C) in the case of any borrower, for such part of the property as may be attributable to dwelling use, the applicable maximum per unit dollar amount limitations under section 207(c) of the National Housing Act [12 U.S.C. 1713(c)];

(4) be secured by a first mortgage on the housing and related facilities for which the loan is made, or otherwise, as the Secretary may determine necessary to ensure repayment of the obligation; and

(5) for at least 20 percent of the loans made under this section, the Secretary shall provide the borrower with assistance in the form of credits pursuant to section 1490a(a)(1)(B) of this title to the extent necessary to reduce the rate of interest under paragraph (2) to the applicable Federal rate, as such term is used in section 42(i)(2)(D) 2

2 See References in Text note below.

of title 26.

(g) Guarantee fee

(h) Authority for lenders to issue certificates of guarantee

(i) Payment under guarantee

(1) Notice of default

(2) Foreclosure

(3) Assignment by Secretary

(4) Requirements

(j) Violation of guarantee requirements by lenders issuing guarantees

(1) IndemnificationIf the Secretary determines that a loan guaranteed by an eligible lender pursuant to delegation of authority under subsection (h) was not originated in accordance with the requirements under this section and the Secretary pays a claim under the guarantee for the loan, the Secretary may require the eligible lender authorized under subsection (h) to issue the guarantee certificate for the loan—

(A) to indemnify the Secretary for the loss, if the payment under the guarantee was made within a reasonable period specified by the Secretary; or

(B) to indemnify the Secretary for the loss regardless of when payment under the guarantee was made, if the Secretary determines that fraud or misrepresentation was involved in connection with the origination of the loan.

(2) Termination of authority to issue guarantees

(k) Refinancing

(l) Geographical targeting

(1) Study

(2) Targeting

(m) Inapplicability of credit-elsewhere test

(n) Tenant protections

(o) Housing standards

(p) Limitation on commitments to guarantee loans

(1) Requirement of appropriations for cost subsidy

(2) Annual limitation on amount of loan guarantee

(q) Report

(1) In general

(2) ContentsThe report shall—

(A) describe the types of borrowers providing housing with loans guaranteed under this section, the areas served by the housing provided and the geographical distribution of the housing, the levels of income of the residents of the housing, the number of dwelling units provided, the extent to which borrowers under such loans have obtained other financial assistance for development costs of housing provided with the loans, and the extent to which borrowers under such loans have used low-income housing tax credits provided under section 42 of title 26 in connection with the housing provided with the loans;

(B) analyze the financial viability of the housing provided with loans guaranteed under this section and the need for project-based rental assistance for such housing;

(C) include any recommendations of the Secretary for expanding or improving the program under this section for guaranteeing loans; and

(D) include any other information regarding the program for guaranteeing loans under this section that the Secretary considers appropriate.

(r) DefinitionsFor purposes of this section, the following definitions shall apply:

(1) The term “development cost” has the meaning given the term in section 1485(e) of this title.

(2) The term “eligible lender” means a lender determined by the Secretary to meet the requirements of subparagraph (A), (B), (C), or (D) of subsection (e)(1).

(3) The terms “housing” and “related facilities” have the meanings given such terms in section 1485(e) of this title.

(4)Indian tribe.—The term “Indian tribe” means—

(A) any Indian tribe, band, nation, or other organized group or community of Indians, including any Alaska Native village or regional or village corporation, as defined by or established pursuant to the Alaska Native Claims Settlement Act (

(B) any entity established by the governing body of an Indian tribe described in subparagraph (A) for the purpose of financing economic development.

(s) Authorization of appropriations

(t) Tax-exempt financing

(u) Fee authority

(v) Defaults of loans secured by reservation lands

(July 15, 1949, ch. 338, title V, § 538, as added and amended Pub. L. 104–120, § 5, Mar. 28, 1996, 110 Stat. 835; Pub. L. 105–86, title VII, § 735(c), Nov. 18, 1997, 111 Stat. 2111; Pub. L. 105–276, title V, § 599C(c), Oct. 21, 1998, 112 Stat. 2661; Pub. L. 106–569, title VII, § 707, Dec. 27, 2000, 114 Stat. 3015.)