As many of the Section 236 mortgages in HUD’s portfolio reach maturity within the next few years, the agency has begun reaching out to owners to try to discourage them from opting out of the program at the mortgage maturity date. HUD believes that opting out of the program would entice owners to significantly raise rents at these 236 properties, impacting many low-income tenants who currently reside there. A recent Notice released by the Office of Multifamily Housing encourages 236 owners to voluntarily provide tenants with a minimum of 270 days (but no more than one-year’s advance notice) of the property’s mortgage maturity date, notwithstanding the owner’s intentions to either terminate the mortgage or preserve the long-term affordability of the property.

The Notice also reminds owners that, in some cases, prepayment of a 236 mortgage may be subject to tenant notification requirements. This includes Section 236 mortgages subject to regulations under Section 250 of the National Housing Act (NHA), which requires at least 150 days but no more than 270 days advance notice of mortgage prepayment or Section 219 of the Department of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act of 1999, which requires 150-day notice.

Finally, the Notice reminds owners who intend to prepay their mortgages that they no longer need to submit applications to the Multifamily Hub or Program Center under the new centralized processing model, but rather should submit requests for approval of related prepayment transactions (e.g. IRP Decoupling, Flex Sub deferral, etc.) directly to OAHP. The centralized model is designed to streamline how Section 236 prepayment applications and related requests are processed, and to dedicated HUD staff specifically to oversee the complex work involved in these transactions. The Office of Affordable Housing Preservation (OAHP) will coordinate this work with the local Multifamily Hubs and Program Centers, recognizing that field offices have established relationships with industry members.

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