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**U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT**

WASHINGTON, D. C. 20410-8000

April 9, 1991

OFFICE OF THE ASSISTANT SECRETARY FOR

HOUSING-FEDERAL HOUSING COMMISSIONER

**Mortgagee Letter 91 - 19**

TO: ALL HUD-APPROVED MORTGAGEES

**SUBJECT:** Auction of Section 221(g)(4) Multifamily Mortgages

Section 221(g)(4) of the National Housing Act provided

mortgagees with mortgages insured under Section 221 prior to

November 30, 1983, the option to assign to HUD any such mortgage

not in default at the end of twenty years from the date of final

endorsement. Section 2201 of the Omnibus Budget Reconciliation

Act of 1990 and Section 336 of the National Affordable Housing

Act of 1990 provide that, when a mortgagee elects to assign a

mortgage to HUD under Section 221(g)(4), the Secretary shall, in

lieu of accepting the assignment, arrange an auction sale of the

mortgage and pay the purchaser monthly interest enhancement

payments sufficient to provide the purchaser with the interest

amount bid at the auction.

The Department has implemented Section 336 as of

December 5, 1990. However, for those notices of election to

assign that were dated on or before December 5, and for which no

assignment of mortgage has been recorded, the mortgagee may

request the Department to (1) continue processing the claim or

\(2\) cease the assignment process and include the mortgage in the

first auction. Any and all notices of election dated after

December 5, 1990, shall be subject to Section 336. Your written

request for HUD to continue processing the claim or to include

the mortgage in the first auction must be submitted to the

attention of William Hill, Director, Operations Division, Room

6170; Office of Multifamily Housing Management, at the address

below:

U.S. Dept. Housing and Urban Development

451 - Seventh Street, SW

Washington, DC 20410

A copy of your request should also be sent to Harold Levy, Chief

Attorney, Room 9234, Office of General Counsel; and to Gary

Zimmerman, Chief, Multifamily Claims Branch, Room 6234, Office of

Mortgage Insurance Accounting and Servicing.

To be eligible to assign a mortgage under Section 221(g)(4),

the mortgagee must make an election to assign anytime after the

20th anniversary of final endorsement through the 21st

anniversary of final endorsement, provided the mortgage is not in

default.

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2

In accordance with the Paperwork Reduction Act of 1980, we

have developed the OMB paperwork submission covering the

requirements for Section 221(g)(4) mortgages subject to the

provisions of Section 336. The paperwork requirements must

receive the approval of the Office of Management and Budget

(OMB). Until we receive OMB approval, we are unable to request

project information and other pertinent data from the mortgagee

necessary to conduct the auction. In the interim period,

however, all rights and privileges of the mortgagee of record are

recognized and protected under Section 336.

Until the sale of the mortgage has been completed, you, as

the mortgagee of record, will continue to be responsible for

protecting the Secretary\'s interest in the mortgage. The

mortgagee must continue to maintain all escrow accounts, pay

taxes and insurance, and bill for, and accept, all payments from

the mortgagor.

Very sincerely yours,

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Arthur J. Hill

Acting Assistant Secretary for

Housing-Federal Housing Commissioner