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

Heading: Schroeder’s Property and Loans

Text: Schroeder currently owns and operates a six-unit lowincome housing project located in Heppner, Oregon, known as the Willow View Apartments. Schroeder’s predecessor, the Midas Company, purchased the property in 1975 using a forty-year, $170,300 loan from the FmHA (the 1975 Loan), the terms of which were evidenced by a promissory note and mortgage on the property. Schroeder purchased the Willow View Apartments in August 1984, approximately three years before ELIHPA became law. With the government’s consent, Schroeder assumed the 1975 Loan and executed another promissory note, a deed of trust, and a loan agreement as part of a fiftyyear, $3500 Housing Act loan (the 1984 Loan). Accordingly, 7400 SCHROEDER v. UNITED STATES Schroeder became liable for two loans on the property (collectively, the Loans), which respectively became due in 2015 and 2034. Both promissory notes gave Schroeder the unconditional right to prepay in full the principal sums due thereon at any time. However, the deed of trust associated with the 1984 Loan included a provision requiring Schroeder to use the property only for low-income housing for a twenty-year period, beginning in August 1984 (the Loan Covenant). In addition, the 1984 loan agreement (which referenced both of the Loans) included a provision further restricting the use of the property by stating that, “[s]o long as the loan obligations remain unsatisfied, the Borrower shall not use the house for any purpose other than as rental housing and related facilities for eligible [i.e., elderly and low-income] occupants.” Schroeder operated the property for the next twenty years, making regular payments on the Loans. The Loan Covenant expired on September 1, 2004. That same day, Schroeder attempted to tender the full amount outstanding on both Loans. In her payment request, Schroeder stated that she had difficulty managing the property due to her advanced age and that the property’s rental income was insufficient to permit her to hire a manager. In March 2006, the government sent Schroeder an incentive offer to continue operating the property as low-income housing. In April 2006, Schroeder tendered full payment on both Loans, but her tender was rejected by RHS. Schroeder, in turn, rejected RHS’s incentive offer and attempted to sell the property to a local housing authority at a substantially higher price than RHS’s appraisal value. RHS continued to refuse to allow Schroeder to prepay the remaining debt owed on the Loans, maintaining that ELIHPA prohibits prepayment unless a property owner specifically complies with the Act’s procedural requirements.