[CIM-0104](http://www.hud.gov/offices/adm/hudclips/lops/CIM-0104LOPS.doc)

HOPE 2\--Implementation Grants

Legal Opinion: GHM-0084

Index: 3.600

Subject: HOPE 2\--Implementation Grants

April 19, 1993

MEMORANDUM FOR: Margaret Milner, Director

Office of Resident Initiatives, HMR

FROM: Donald A. Franck, Chief Attorney, Loan Management and

Property Disposition Section, GHM

SUBJECT: HOPE 2 Implementation Grant Issues (L-1458)

This responds to your electronic mail message dated

January 26, 1993 to David Cooper, Monica Jordan and myself

regarding the following issues.

The first issue concerns a planning grant recipient which

plans to acquire the property from the RTC prior to applying for

an implementation grant with the belief that it will still be

eligible to apply for the implementation grant to pay off the

bridge loan and fund the homeownership program. You believe that

an argument could be made that the original property eligibility

status under the planning grant could confer permanent eligibility

which would apply to the implementation grant.

The HOPE 2 statute establishes two distinctly separate

application processes for the planning and implementation grants.

For each grant application, the applicant must identify and

describe the property. (See, sections 422(c)(2)(C) and

423(d)(2)(E) of the National Affordable Housing Act). It is our

opinion that the reason the requirements for both the planning and

the implementation grants specify that the property be identified

and described is to enable HUD to determine the eligibility of the

property at the time the particular type of application is being

submitted. We do not believe the statutory language would support

the extension to the implementation grant application of an

eligibility determination made at the planning grant stage.

The second question is whether property which is financed by

a Federal, state or local agency could be considered to be property

\"held\" by that agency in the same manner as section 202 properties

are \"HUD-held.\"

Section 426(3) of the HOPE 2 statute defines \"eligible

property.\" Included among eligible properties are those which are

\"(A) owned or held by the Secretary\" and \"(B) financed by a loan

or mortgage held by the Secretary \....\" Some time ago, the HOPE

2 working group discussed the confusion caused by the phrase \"owned

or held\" because of the different meanings in Departmental parlance

attributed to each word. That is, the word \"owned\" traditionally

is used in connection with the holding of title to property and the

word \"held\" traditionally is used in connection with the holding

of a mortgage as security for debt on the property. The group

consensus was that the term \"owned or held\" as it appears in

subsections (A) and (D) would be read as \"owned\" only. We believe

such an interpretation is warranted given the distinctions between

subsections (A) and (B). That is, if subsection (A) were intended

to cover not only property owned by the Secretary but also

mortgages held by the Secretary, there would be no need for

subsection (B). Therefore, when the RTC holds a mortgage on

property, it may be considered a mortgage \"held\" in the same way

that section 202 mortgages are \"held\" by the Secretary. However,

under this interpretation, property that is subject to a mortgage

held by the RTC is not eligible property.

The third issue concerns whether section 202 housing could be

eligible property under the HOPE 2 program if it is developed only

as a cooperative. Since your questions relate to restrictions and

permissible actions under the Section 202 program, we defer to

either Michael Reardon or Betty Park, program counsel for the

section 202 program.