[Link to
GCH-0009](http://www.hud.gov/offices/adm/hudclips/lops/GCH-0009LOPS.doc)

[Link to
GCH-0075](http://www.hud.gov/offices/adm/hudclips/lops/GCH-0075LOPS.doc)

[Link to
GCH-0087](http://www.hud.gov/offices/adm/hudclips/lops/GCH-0087LOPS.doc)

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

[Link to
GCH-0098](http://www.hud.gov/offices/adm/hudclips/lops/GCH-0098LOPS.doc)

Legal Opinion: GCH-0068

Index: 2.800

Subject: Conversion or Termination of Sec. 202 Fund Reservations

July 29, 1992

MEMORANDUM FOR: Robert W. Wilden, Director, Assisted

Elderly and Handicapped Housing Division, HMEE

FROM: Robert S. Kenison, Associate General Counsel

Office of Assisted Housing and Community Development, GC

SUBJECT: Use of Funds Obtained from Conversion or Subsequent

Termination of Section 202 Fund Reservations

This responds to your June 26, 1992, memorandum requesting a

legal opinion as to the availability of funds generated by (1)

the conversion of Section 202/8 projects to Section 202 or

Section 811 capital advance projects and (2) by subsequent

cancellation of capital advance and project rental assistance

funds reservations for such converted projects. We view these as

two separate and independent actions.

Sections 801 and 811 of the National Affordable Housing Act

(NAHA) and the Fiscal Year 1991 HUD Appropriations Act authorized

sponsors of projects for which loans had not been executed and

recorded (i.e., initially closed) to elect to convert these

projects to funding under the respective capital advance

programs. The Fiscal Year 1992 HUD Appropriations Act (1992 Act)

required HUD to convert all previously reserved Section 202

projects to capital advance projects if the loan had not been

executed and recorded and if the project was making satisfactory

progress, not earlier than January 1, 1992 and no later than

April 1, 1992. Upon such conversion the loan reservation was

required to be terminated.

The 1992 Act further required HUD to convert each funding

reservation made under Section 8 of the United States Housing Act

(USH Act) or Section 202(h) of the Housing Act of 1959 to a

commitment for project rental assistance under such Section 202

as amended by Section 801 of NAHA or Section 811 of NAHA for

projects converted to capital advance projects. We understand

that all projects in the Section 202 pipeline, totalling

approximately 500 projects with 15,000 units, were converted to

capital advance projects, commencing in January 1992.

The 1992 Act appropriated \"\$1,750,000,000 of section 8 funds

arising from the conversion to the new capital advance program of

projects previously reserved under section 202 of the Housing Act

of 1959 as it existed before enactment of the Cranston-Gonzalez

National Affordable Housing Act\" for assistance under the USH

Act. This appropriation was designated in the Conference Report

table of Annual Contributions for FY 1992\--Budgetary Resources as

\"Sec. 8 Recaptures from Sec. 202 Conversions\" (H.R. Rep. 102-226,

p\. 18). The availability of this funding was explained as

follows in the Senate Report: \"These funds are no longer needed

for the 202 program because of the conversion of projects to the

new elderly and handicapped program which is funded through

capital grants rather than as a direct loan program\"

(S. Rep. 102-107, p. 43). An estimated \$1,200,000,000 of

Section 8 budget authority has become available as the result of

conversions of direct loan projects to capital advance projects,

and is thus well within the amount appropriated by the 1992 Act.

We view the Section 8 budget authority made available as the

result of such conversions as being merged in the general annual

contributions authority. Its availability would not be affected

by subsequent cancellation of the project rental assistance funds

reservation for the converted project.

The second question raised is, in a case where a project is

converted and subsequently cancelled during Fiscal Year 1992,

whether the capital advance authority and rental assistance

budget authority remains available for reuse. We are of the

opinion that the converted projects, by virtue of the provisions

for conversion in the 1992 Act, should be viewed as new

reservations, even though the source of the funding is the funds

originally reserved under the superseded program. The

Section 202 loan authority would have lapsed and the

Section 8 budget and contract authority would have been

recaptured had the original reservations for these projects been

cancelled since the reservations were made in a prior Fiscal

Year. However, the converted projects\--by virtue of the

statutorily mandated conversion to a new status\--are not subject

to the same constraints. The reservations of capital advance and

project rental assistance authority made during the current

Fiscal Year for the converted projects have the same status as

the new projects for which capital advance and project rental

assistance reservations were made during March, 1992.

A total of 19 projects with 999 units having originally had

Fiscal Year 1987 or earlier fund reservations became subject to

cancellation on June 30, 1992. Interim Notice H 92-7 I

instructed Field Offices to proceed with cancellations (except

for two projects in litigation) of projects \"which are not making

reasonable progress in closing by June 30, 1992.\" Several of

these projects are expected to be able to establish good cause

for delay and the ability to close before the final deadline of

September 30, 1992. Approximately 94 projects funded in FY 1988

will not be eligible for amendment funds after September 30, 1992

and thus will be cancelled after that date if they need amendment

funds.

We are of the opinion that contract and budget authority

becoming available as the result of cancellation of converted

projects during the remainder of Fiscal Year 1992 would be

available for reuse until September 30, 1992 and thereafter would

be subject to the provisions governing recaptures contained in

the Fiscal Year 1993 Appropriations Act.