§ 248.101 Definitions. *Acquisition Loan.* A loan or advance of credit made to a qualified purchaser of eligible low income housing and insured by the Commissioner under part 241, subpart E of this chapter.
*Adjusted Income.* Annual income, as specified in part 5 of this title, less allowances specified in the definition of “Adjusted Income” in part 5 of this title.
*Aggregate Preservation Rent.* The extension preservation rent or transfer preservation rent, as defined under this section.
*Annual Authorized Return.* That amount an owner of an eligible low income housing project may receive in distributions from the project each year, plus debt service payments payable each year attributable to the equity take-out portion of any loan approved under the plan of action, expressed as a percentage of the project's extension preservation equity.
*Bona Fide Offer.* A certain and unambiguous offer to purchase an eligible low income housing project pursuant to subpart B of this part made in good faith by a qualified purchaser with the intent that such offer result in the execution of an enforceable, valid and binding contract. A bona fide offer shall include, for purposes of subpart B of this part, a contract of sale and an earnest money deposit, as set forth in § 248.157(g). For mandatory sales under § 248.161, the offer must include a contract of sale, an earnest money deposit and also be for a purchase price which equals the transfer preservation value.
*Capital Improvement Loan.* A direct loan originated by the Commissioner under part 219, subpart C of this chapter.
*Community-Based Nonprofit Organization.* A private nonprofit organization that— ( 1 ) Is organized under State or local laws;
( 2 ) Has no part of its net earnings inuring to the benefit of any member, founder, contributor, or individual;
( 3 ) Is neither controlled by, nor under the direction of, individuals or entities seeking to derive profit or gain from the organization.
( 4 ) Has applied for, or has a tax exemption ruling from the Internal Revenue Service under section 501(c) of the Internal Revenue Code of 1986;
( 5 ) Does not include a public body (including the participating jurisdiction) or an instrumentality of a public body. An organization that is State or locally chartered may qualify as a community-based nonprofit organization; however, the State or local government may not have the right to appoint more than one-third of the membership of the organization's governing body and no more than one-third of the board members can be public officials;
( 6 ) Has standards of financial accountability that conform to 2 CFR 200.302 and 200.303;
( 7 ) Has among its purposes the provision of decent housing that is affordable to low-income and moderate-income persons, as evidenced in its charter, articles of incorporation, resolutions or by-laws;
( 8 ) Maintains accountability to low income community residents by— ( i ) Maintaining at least one-third of its governing board's membership for low-income neighborhood residents, other low-income community residents, or elected representatives of low-income neighborhood organizations. For urban areas, “community” may be a neighborhood or neighborhoods, city, county, or metropolitan area; for rural areas, “community” may be a neighborhood or neighborhoods, town, village, county, or multi-county area (but not the entire State); and
( ii ) Providing a formal process for low-income, program beneficiaries to advise the organization on its decisions regarding the acquisition, rehabilitation and management of affordable housing.
*Default.* For purposes of § 248.105(a), the failure of the owner to make any payment due under the mortgage (including the full amount of the debt if the mortgagee has accelerated the debt on the basis of a non-monetary default) within 30 days after such payment becomes due.
*Eligible Low Income Housing.* 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, and that is financed by a loan or mortgage— ( 1 ) That is— ( i ) Insured or held by the Commissioner under section 221(d)(3) of the National Housing Act and assisted under part 886, subpart A of this title because of a conversion from assistance under 215 of this chapter;
( ii ) Insured or held by the Commissioner under part 221 of this chapter and bearing a below market interest rate as provided under § 221.518(b) of this chapter;
( iii ) Insured, assisted, or held by the Commissioner or a State or State agency under part 236 of this chapter; or
( iv ) A purchase money mortgage held by the Commissioner with respect to a project which, immediately prior to HUD's acquisition, would have been classified under paragraphs (1)(i), (ii), or (iii) of this definition; and
( 2 ) That, under regulation or contract in effect before February 5, 1988, is or will within 24 months become eligible for prepayment without prior approval of the Commissioner.
*Equity Loan.* A loan or advance of credit to the owner of eligible low income housing and insured by the Commissioner under part 241, subpart E of this chapter.
*Extension Preservation Equity.* The extension preservation equity of a project is: ( 1 ) The extension preservation value of the project determined under § 248.111; less
( 2 ) The outstanding balance of any debt secured by the property.
*Extension Preservation Rent.* The extension preservation rent is the gross potential income for the project that would be required to support: ( 1 ) The annual authorized return;
( 2 ) Debt service on any rehabilitation loan for the project;
( 3 ) Debt service on the federally-assisted mortgage(s) for the project;
( 4 ) Project operating expenses; and
( 5 ) Adequate reserves.
*Extension Preservation Value.* The fair market value of the project based on the highest and best use of the project as multifamily market-rate rental housing.
*Fair market rent.* The section 8 existing fair market rent published for effect and as defined under § 982.4 of this title, applicable to the jurisdiction in which the project is located, with adjustments, where appropriate, for projects in which tenants pay their own utilities. (No utility adjustments will be made to the fair market rent for purposes of determining the Federal cost limit.)
*Federal Cost Limit.* The greater of 120 percent of the section 8 existing fair market rent for the market area in which the project is located or 120 percent of the prevailing rents in the relevant local market area in which the project is located.
*Federally-assisted Mortgage.* Any mortgage as defined in this section, any insured operating loss loan secured by the project and any loan insured by the Commissioner under part 241 of this chapter.
*Good Cause.* With respect to displacement, the temporary or permanent uninhabitability of the project justifying relocation of all or some of the project's tenants (except where such uninhabitability is caused by the actions or inaction of the owner), or actions of the tenant that, under the terms of the tenant's lease and applicable regulations, constitute a basis for eviction.
*HOME Investment Trust Fund.* A public fund established in the general local or State government in which a project is located pursuant to title II of the Cranston-Gonzalez National Affordable Housing Act.
*Homeownership Program.* A program developed by a resident council for the sale of an eligible low income housing project to the tenants in accordance with the standards in § 248.173 or § 248.175.
*Interest Reduction Payments.* Payments made by the Commissioner pursuant to a contract to reduce the interest costs on a mortgage insured under part 236 of this chapter, as provided under subpart C of part 236 of this chapter.
*Limited Equity Cooperative.* A tenant cooperative corporation which, in a manner acceptable to the Secretary, restricts the initial and resale price of the shares of stock in the cooperative corporation so that the shares remain affordable to low income families and moderate income families.
*Low Income Affordability Restrictions.* Limits imposed by regulation or regulatory agreement on tenant rents, rent contributions, or income eligibility with respect to eligible low income housing.
*Low Income Families.* Families or persons whose incomes do not exceed the levels established for low income families under part 5 of this title.
*Low Vacancy Area.* A market area in which the current supply of decent, safe and sanitary, vacant, available rental units, as a proportion of the total overall rental inventory in the area is not sufficient to allow for normal growth and mobility, taking into account the need for vacancies resulting from turnover and to meet growth in renter households. The determination of a low vacancy area, as set forth in § 248.165(h), will be made by the Commissioner, utilizing the most recent available data for the market area on the rental inventory, renter households, rental vacancy rates and other factors as appropriate.
*Moderate Income Families.* Families or persons whose incomes are between 80 percent and 95 percent of median area income, as determined by the Commissioner, with adjustments for smaller and larger families.
*Mortgage.* The mortgage or deed of trust insured or held by the Commissioner or a State or State agency under parts 221 or 236 of this title or the purchase money mortgage taken back by the Commissioner in connection with the sale of a HUD-owned project and held by the Commissioner, where such mortgage, deed or trust or purchase money mortgage is secured by eligible low income housing.
*Nonprofit Organization.* Any private, nonprofit organization or association that— ( 1 ) Is incorporated under State or local law;
( 2 ) Has no part of its net earnings inuring to the benefit of any member, founder, contributor, or individual;
( 3 ) Complies with standards of financial accountability acceptable to the Commissioner; and
( 4 ) Has among its principal purposes significant activities related to the provision of decent housing that is affordable to very low, low, and moderate income families.
*Notice of Intent.* An owner's notification to the Commissioner of its intention to terminate the low income affordability restrictions on the project through prepayment of the mortgage or voluntary termination of the insurance contract, to extend the low income affordability restrictions on the project, or to transfer the project to a qualified purchaser.
*Owner.* The mortgagor or trustor under the mortgage secured by eligible low income housing.
*Participating Jurisdiction.* For purposes of the resident homeownership program established in § 248.173, any State or unit of general local government that has been so designated in accordance with section 216 of the Cranston-Gonzalez National Affordable Housing Act of 1990 (42 U.S.C. 12746).
*Plan of Action.* A plan providing for the termination of the low income affordability restrictions on the project through prepayment of the mortgage or voluntary termination of the insurance contract, for extension of the low income affordability restrictions on the project, or for the transfer of the project to a qualified purchaser. A homeownership program constitutes a plan of action for purposes of subpart B of this part.
*Prepayment.* Prepayment in full of a mortgage, or a partial prepayment or series of partial prepayments that reduces the mortgage term by a least six months, except where the prepayment in full or partial prepayment results from the application of condemnation proceeds.
*Preservation Equity.* The extension preservation equity or transfer preservation equity, as defined under this section.
*Preservation Value.* The extension preservation value or transfer preservation value, as defined under this section.
*Priority Purchaser.* Any entity that is not a related party to the owner and that is either— ( 1 ) A resident council organized to acquire the project in accordance with a resident homeownership program that meets the requirements of subpart B of this part; or
( 2 ) Any nonprofit organization or State or local agency that agrees to maintain low income affordability restrictions for the remaining useful life of the project. A nonprofit organization or State or local agency that is affiliated with a for-profit entity for purposes of purchasing a project under subpart B of this part shall not be considered a priority purchaser.
*Project oversight costs.* Reasonable expenses incurred by a priority purchaser in carrying out its ongoing ownership responsibilities under an approved plan of action. Project oversight costs must be directly related to educating the priority purchaser's board of directors or otherwise supporting the board in its decision making. Project oversight costs may include staff, overhead, or third-party contract costs for: ( 1 ) Ensuring adequate and responsible participation by the board of directors and the membership of the priority purchaser in ownership decisions, including ensuring resident input in these decisions;
( 2 ) Facilitating long-range planning by the board of directors to ensure the physical, financial and social viability of the project for the entire time the project is maintained as low income housing; and
( 3 ) Assisting the ownership in complying with regulatory, use, loan and grant agreements.
*Proprietary information.* That information which cannot be released to the public because it consists of trade secrets, confidential financial information, audits, personal financial information about partners in the ownership entity, or income data on project tenants. Where proprietary information cannot be separated from the rest of a document, the entire document shall be deemed “proprietary information” and shall not be releasable to the public. Where proprietary information can be reasonably segregated from the rest of the document, the proprietary information shall be deleted and the remainder of the document shall be releasable to the public.
*Public Housing Agency.* A public housing agency, as defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)).
*Qualified Purchaser.* Any entity that is not a related party to the owner and that agrees to maintain low income affordability restrictions for the remaining useful life of the project, and includes for-profit entities and priority purchasers.
*Regulatory Agreement.* The agreement executed by the owner and the Commissioner or a State agency providing for the regulation of the operation of the project.
*Related Party.* An entity that, either directly or indirectly, is wholly or partially owned or controlled by the owner of the project being transferred under subpart B of this part, is under whole or partial common control with such owner, or has any financial interest in such owner or in which such owner has any financial interest. However, this shall not prohibit a nonprofit organization from buying out the interest of its limited dividend or for-profit partners in connection with the sale of eligible low income housing under subpart B of this part, as long as the sale is made on an arm's length basis and the partners who sell their interest completely divest themselves of any input in the continued operation of the project. The purchaser and the owner shall not be deemed related parties on the basis that financing is provided to the purchaser by the seller, or a management company affiliated with the seller, as long as: ( 1 ) Only a loan, and not a grant, is provided;
( 2 ) The financing is provided for the acquisition of the project, the rehabilitation of the project, or both;
( 3 ) In the case of financing for the acquisition of the project, the sum of the principal amount of the loan, plus the amount of the acquisition loan under section 241(f) of the National Housing Act (12 U.S.C. 1715z-6(f)), and any Federal grant to cover acquisition of the project, does not exceed the sum of the sales price and the expenses associated with the acquisition, loan closing and implementation of the plan of action; and in the case of financing for the rehabilitation of the project, the principal amount of the loan does not exceed the equity requirements applicable to the rehabilitation loan or capital improvement loan obtained by the purchaser under part 241 or part 219 of this chapter;
( 4 ) The loan is not a condition of accepting a bona fide offer or entering into a sales contract;
( 5 ) The seller has no input in the continued operation of the project as a result of the loan; and
( 6 ) In the case of a loan provided by a management company that is affiliated with the seller, the execution of a management contract between the purchaser and the management company is not a condition of the loan. This rule does not bar an owner, or former owner, from membership on a nonprofit organization's board of directors, as long as the owner, or former owner, participates only in his or her personal capacity, without compensation, and holds a nonvoting membership. The purchaser and the owner shall not be deemed related parties solely by reason of the purchaser's retention of a property management entity of a company that is owned or controlled by the owner or a principal thereof, if retention of the management company is neither a condition of sale nor part of consideration paid for the project and the property management contract is negotiated by the qualified purchaser on an arm's length basis.
*Relevant Local Market.* An area geographically smaller than the market area established by the Commissioner for purposes of determining the section 8 existing fair market rent, that is identifiable as a distinct rental market area in which similar projects and units would effectively compete with the subject project, for potential tenants.
*Relocation Expenses.* Relocation expenses shall consist of payment for— ( 1 ) Advisory services, including timely information, counseling (including the provision of information on a resident's rights under the Fair Housing Act (42 U.S.C. 3601-3619)), and referrals to suitable, affordable, decent, safe and sanitary alternative housing; and
( 2 ) Payment for actual, reasonable moving expenses.
*Remaining Useful Life.* With respect to eligible low income housing, the period during which the physical characteristics of the project remain in a condition suitable for occupancy, assuming normal maintenance and repairs are made and major systems and capital components are replaced as becomes necessary.
*Reserve for Replacements.* The escrow fund established under the regulatory agreement for the purpose of ensuring the availability of funds for needed repair and replacement costs.
*Resident Council.* Any incorporated nonprofit organization or association in which membership is available to all the tenants, and only the tenants, of a particular project and— ( 1 ) Is representative of the residents of the project;
( 2 ) Adopts written procedures providing for the election of officers on a regular basis; and
( 3 ) Has a democratically elected governing board, elected by the residents of the project.
*Residual Receipt Fund.* The fund established under the regulatory agreement for holding cash remaining after deducting from the surplus cash, as defined by the regulatory agreement, the amount of all allowable distributions.
*Return on Investment.* The amount of allowable distributions that a purchaser of a project may receive under a plan of action under § 248.157 or § 248.161.
*Section 8 Assistance.* Assistance provided under parts 880 through 887 and 982 and 983 of this title.
*Special Needs Tenants.* Those “elderly persons,” 62 years of age or older, “elderly families,” or families that include “disabled persons,” as such terms are defined in part 5 of this title, or large families of five or more persons and requiring units with three or more bedrooms.
*State assisted or subsidized mortgage.* A mortgage which is assisted or subsidized by an agency of a State government without any Federal mortgage subsidy.
*Tenant Representative.* A designated officer of an organization of the project's tenants, a tenant who has been elected to represent the tenants of the project with respect to subpart B of this part, or a person or organization that has been formally designated or retained by an organization of the project's tenants to represent the tenants with respect to subpart B of this part.
*Termination of Low Income Affordability Restrictions.* The elimination of low income affordability restrictions under the regulatory agreement through termination of mortgage insurance or prepayment of the mortgage.
*Transfer Preservation Equity.* The transfer preservation equity of a project is: ( 1 ) The transfer preservation value of the project determined under § 248.111; less
( 2 ) The outstanding balance of the federally-assisted mortgage(s) for the project.
*Transfer Preservation Rent.* For purposes of receiving incentives pursuant to a sale of the project, transfer preservation rent shall be the gross income for the project that would be required to support: ( 1 ) Debt service on the loan for acquisition of the project;
( 2 ) Debt service on any rehabilitation loan for the project;
( 3 ) Debt service on the federally-assisted mortgage(s) for the housing;
( 4 ) Project operating expenses; and
( 5 ) Adequate reserves.
*Transfer Preservation Value.* The fair market value of the project based on its highest and best use.
*Very Low Income Families.* Families or persons whose incomes do not exceed the level established for very low income families under part 5 of this title.
*Voluntary Termination of Mortgage Insurance.* The termination of all rights under the mortgage insurance contract and of all obligations to pay future insurance premiums.
[57 FR 12041, Apr. 8, 1992, as amended at 57 FR 57314, Dec. 3, 1992; 58 FR 37814, July 13, 1993; 59 FR 14369, Mar. 28, 1994; 64 FR 26639, May 14, 1999; 80 FR 75936, Dec. 7, 2015]