Opinion ID: 209417
Heading Depth: 3
Heading Rank: 1

Heading: Mullica and Park Terrace Loans

Text: Sections 515 and 521 of the Housing Act of 1949 [1] provide for loans from the Farmers Home Administration of the United States Department of Agriculture (FmHA) to further the government's interest in providing rental housing for low and moderate income persons. See Franconia Assocs. v. United States, 536 U.S. 129, 134, 122 S.Ct. 1993, 153 L.Ed.2d 132 (2002). The loans have favorable interest rates and payment terms. Under the terms of the loans, borrowers agree to preserve the property developed with the FmHA funds for the use and occupancy of low to moderate income tenants so long as the loan obligations remain unsatisfied. Id. The promissory notes associated with the loans contain provisions, however, allowing borrowers to prepay the loans at any time, after which they are free to charge market rate rents. On May 31, 1977, and on November 30, 1977, Appellant Mullica [2] entered into FmHA loan contracts totaling over $3 million. The loans have a forty-year maturity period, and are due in 2017. The loan contracts contain the commitment to preserve the property developed with the FmHA funds for the use and occupancy of low and moderate income tenants for the life of the loan but permit Mullica to prepay the loans at any time at the option of Borrower. On July 28, 1978, Appellant Park Terrace [3] entered into loan contracts with FmHA, which permitted Park Terrace to take out two loans in the amounts of $850,000 and $125,000. Final payments on the loans are due on July 28, 2028. The contracts contain a commitment by Park Terrace to restrict use of the rental property and related facilities for eligible occupants for the life of the loan but expressly permit Park Terrace to prepay the loan at any time at the option of the Borrower.