Opinion ID: 3064793
Heading Depth: 2
Heading Rank: 1

Heading: The Housing Act of 1949 and the Emergency Low

Text: Income Housing Preservation Act of 1987 Congress passed the Housing Act of 1949, 42 U.S.C. §§ 1441-1490, to encourage private investment in housing for elderly and low-income rural residents. Section 515 of Title V of the Housing Act authorized the Department of Agriculture Farmers Home Administration (FmHA) (which was later incorporated into the Rural Housing Service (RHS)) to make direct loans to borrowers seeking to finance affordable housing (RHS loans or § 515 loans). See 42 U.S.C. § 1485. Involved property owners, in exchange for reduced interest rates and other subsidies, agreed to rent their covered properties only to qualified elderly and low-income tenants at affordable rates until the owners had fully repaid their RHS loans. 42 U.S.C. § 1490a. Initially, loans made under this program provided borrowers with an unrestricted right to repay their loans at any time. Franconia Assocs. v. United States, 536 U.S. 129, 135 (2002). In 1987, responding to fears that the supply of affordable rural housing was dwindling because borrowers were prepaying their RHS loans, Congress enacted ELIHPA, 42 U.S.C. 7398 SCHROEDER v. UNITED STATES § 1472(c).1 Under ELIHPA, RHS may accept “prepayments” on covered loans only if the property owner first complies with ELIHPA’s “elaborate requirements” designed to preserve low-income housing. DBSI/TRI IV Ltd. P’ship v. United States, 465 F.3d 1031, 1035-36 & n.2 (9th Cir. 2006) (describing prepayment procedures under 42 U.S.C. § 1472(c)); see also Kimberly Assocs. v. United States, 261 F.3d 864, 867 (9th Cir. 2001). Under these procedures, the owner must first give notice of intent to prepay. 42 U.S.C. § 1472(c)(3). Then, the government must offer the owner a financial incentive to remain in the program. Id. § 1472(c)(4)(A). If the owner still wishes to prepay, the owner must offer to sell the property to any qualified nonprofit organization or public agency at fair market value. Id. § 1472(c)(5)(A)(i). If the property is not sold within 180 days, RHS may then accept the prepayment from the owner. Id. § 1472(c)(5)(A)(ii); DBSI/TRI, 465 F.3d at 1035. In 2002, in response to property owners’ legal challenges to ELIHPA, the Supreme Court held that the Act “effected a repudiation of” the existing loan contracts. Franconia, 536 U.S. at 143. On remand, the Court of Federal Claims clarified the property owners’ rights and recourse: “The promissory notes at issue could not be much clearer in allowing plaintiffs to prepay at any time, indicating unambiguously that ‘[p]repayments of scheduled installments, or any portion thereof, may be made at any time at the option of the Borrower.’ ” Franconia Assocs. v. United States, 61 Fed. Cl. 718, 730 (2004) (alteration in original). The government, therefore, has 1 ELIHPA originally applied only to loans entered into with RHS before December 21, 1979. See Franconia, 536 U.S. at 136. In 1992, Congress extended the Act’s restrictions to include loans made between December 21, 1979 and December 15, 1989, exclusive. Id. at 137 n.3 (citing 42 U.S.C. § 1472). . SCHROEDER v. UNITED STATES 7399 a “concomitant obligation” to accept the prepayment, and ELIHPA repudiated the property owners’ rights. Id. at 73033. As a result, a property owner whose contracts have been adversely affected by ELIHPA may bring a claim for damages against the government. Franconia, 536 U.S. at 143. Because the United States was not acting in its capacity as sovereign in enacting ELIHPA, the government may not assert a sovereign immunity defense in such an action. Id. at 141 (“‘When the United States enters into contract relations, its rights and duties therein are governed generally by the law applicable to contracts between private individuals.’ ” (quoting Mobil Oil Exploration & Producing Se., Inc. v. United States, 530 U.S. 604, 607 (2000))); see also Kimberly, 261 F.3d at 867-70. But the United States is not “free to disobey” ELIHPA; it may accept a borrower’s prepayment only after following the procedures described in ELIHPA. DBSI/TRI, 465 F.3d at 1041. Therefore, borrowers who wish to prepay must either comply with ELIHPA’s procedures or seek damages under the Tucker Act in the Court of Federal Claims. See Franconia, 536 U.S. at 138; DBSI/TRI, 465 F.3d at 1041.