[Link to
GHM-0050](http://www.hud.gov/offices/adm/hudclips/lops/GHM-0050LOPS.doc)

[Link to
GHM-0051](http://www.hud.gov/offices/adm/hudclips/lops/GHM-0051LOPS.doc)

[Link to
GHM-0070](http://www.hud.gov/offices/adm/hudclips/lops/GHM-0070LOPS.doc)

[Link to
GHM-0071](http://www.hud.gov/offices/adm/hudclips/lops/GHM-0071LOPS.doc)

[Link to
GHM-0072](http://www.hud.gov/offices/adm/hudclips/lops/GHM-0072LOPS.doc)

[Link to
GHM-0089](http://www.hud.gov/offices/adm/hudclips/lops/GHM-0089LOPS.doc)

[Link to
GHM-0092](http://www.hud.gov/offices/adm/hudclips/lops/GHM-0092LOPS.doc)

[Link to
GHM-0094](http://www.hud.gov/offices/adm/hudclips/lops/GHM-0094LOPS.doc)

Legal Opinion: CIM-0107

Index: 3.300

Subject: Eligibility of Low-Income Hsg for Assistance\--LIHPRHA

January 25, 1995

Mr. Joseph F. Carabetta

General Partner

Carabetta Developers

200 Pratt Street

Meriden, CT 06450

Dear Mr. Carabetta:

This is in response to your January 11, 1995 letter seeking

an appeal of the decision by the Hartford Office which rejected a

Notice of Intent (\"NOI\") filed on June 5, 1992 requesting

participation under the Low Income Housing Preservation and

Resident Homeownership Act of 1990, as amended (\"LIHPRHA\")

(12 U.S.C. Sections 4101 et seq.), for the project, Southford

Park Apartments, located in Waterbury, Connecticut (\"Southford

Park\").

It is our understanding that the Hartford Office rejected

the NOI based on Paragraph 2-4 of Handbook 4350.6 \"Processing

Plans of Action Under the Low Income Housing Preservation and

Resident Homeownership Act of 1990.\" Paragraph 2-4 provides that

projects which received a flexible subsidy loan on or after

December 21, 1979 are not eligible for assistance under LIHPRHA.

This project received a flexible subsidy loan after December 21,

1979 and executed a Use Agreement which was recorded on July 29,

1983\.

The Hartford Office was correct in its determination. In

addition to the Handbook provision, Southford Park is ineligible

for assistance under LIHPRHA pursuant to Section 248.101 of the

regulations (24 C.F.R. Section 248.101) because Southford Park is

subject to a Use Agreement in effect until the maturity date of

the mortgage. Section 248.101 defines \"Eligible Low Income

Housing\" as:

\"Any project that is not subject to a use restriction

imposed by the Commissioner that restricts the project

to low and moderate income use for a period at least

equal to the remaining term of the mortgage . . . .\"

Southford Park is subject to a Use Agreement which requires that

the project be operated in accordance with the provisions of

Section 221(d)(3) of the National Housing Act and the regulations

thereunder until the maturity date of the mortgage note.

Accordingly, Southford Park is not eligible for assistance under

LIHPRHA because the project is subject to a Use Agreement that

\"restricts the project to low and moderate income use for a

period at least equal to the remaining term of the mortgage.\"

In your letter you cite to Footnote (A) of the Use Agreement

and state that it was designed to permit Southford Park Realty

Co. to prepay the HUD insured mortgage twenty years after final

endorsement. You further indicate that you are appealing the

decision by the Hartford Office to reject the NOI because of \"the

extenuating circumstances as described in the footnote.\" The

Footnote states as follows:

\"(A) The Commissioner will consider a request from the

owner for permission to cease operation under

Section 221(d)(3) of the National Housing Act. Under

certain circumstances such permission will not be

unreasonably withheld.\"

While the Footnote permits prepayment of the mortgage note,

Southford Park would still, pursuant to Paragraph 2 of the Use

Agreement, be subject to a low and moderate income use

restriction in effect until the maturity date of the mortgage

which makes it ineligible for LIHPRHA under Section 248.101.

Paragraph 2 of the Use Agreement contains the use restriction and

reads as follows:

\"2. In the event that certain Regulatory Agreement

dated 5/69 between the Housing Owner and the

Commissioner is terminated by prepayment in full of the

insured or HUD-held mortgage loan, the Housing Owner

covenants and agrees that it will continue to operate

the project in accordance with Section 221(d)(3) of the

National Housing Act, or any successor legislation, and

the regulations thereunder until\*\* \[maturity date of

the mortgage note\]. . . .\"

Accordingly, Southford Park is not eligible for assistance

under Handbook 4350.6 and Section 248.101 of the regulations.

Both the Handbook provision and Section 248.101, however, may be

waived since the condition that a project is not \"eligible low

income housing\" if it has a low and moderate income use

restriction in effect until the maturity date of the mortgage is

not statutory. See 12 U.S.C. Section 229(1). The Handbook

provision may be waived since it is an administrative

requirement. Section 248.101 may be waived pursuant to Section

248.7 of the regulations which provides:

\"Upon making a determination and finding of good

cause, the Commissioner may waive any provision of this

part, subject to statutory limitations. Each waiver

shall be in writing and shall be supported by

documentation of the facts and reasons which form the

basis for the waiver.\" 24 C.F.R. Section 248.7.

Since the conditions set forth in 24 C.F.R. Section 248.101 and

Paragraph 2-4 of Handbook 4350.6 may be waived, we contacted the

Office of Housing for a determination regarding whether the

Commissioner would waive the requirements of these provisions.

The Office of Housing has decided that good cause does not exist

to waive Section 248.101 of the regulations and Paragraph 2-4 of

Handbook 4350.6. Therefore, Southford Park is not eligible for

assistance under LIHPRHA.

Since Southford Park is not eligible for assistance under

LIHPRHA, you may continue to operate the project under the Use

Agreement currently in effect. In the alternative, you may

request permission to prepay the mortgage note under Footnote (A)

of the Use Agreement. If you make a request to prepay the

mortgage note, you will be required to continue to operate the

project in accordance with Section 221(d)(3) of the National

Housing Act and the regulations thereunder as required in

Paragraph 2 of the Use Agreement. In light of the termination of

the Regulatory Agreement as part of the prepayment, the

Department may require the execution of an additional document to

establish requirements in accordance with the Use Agreement

executed by you in connection with the flexible subsidy loan on

Southford Park.

I hope this response fully answers all of your concerns.

Sincerely,

Nelson A. Díaz

General Counsel