24 CFR Part 290

SUBCHAPTER I—HUD-OWNED PROPERTIES
PART 290—DISPOSITION OF MULTIFAMILY PROJECTS AND SALE OF
HUD-HELD MULTIFAMILY MORTGAGES
Subpart A—Disposition of Multifamily
Projects
Sec.
290.1 Applicability.
290.3 Definitions.
290.7 Occupancy requirements.
290.9 Setting rental rates.
290.11 Notification requirements.
290.13 Negotiated sales.
290.15 Disposition plan.
290.17 Displacement of tenants and relocation assistance.
290.18 Restrictions on sale to former mortgagors.
290.19 Restrictions
concerning
nondiscrimination against Section 8 certificate holders and voucher holders.
290.21 Computing annual number of units
eligible for substitution of tenant-based
assistance or alternative uses.
290.23 Rebuilding.
290.25 Determination not to preserve a
project or a part of a project.
290.27 Up-front grants and loans.

Subpart B—Sale of HUD-Held Multifamily
Mortgages
290.30 General.
290.31 Sale of current mortgages securing
subsidized projects.
290.33 Sale of delinquent mortgages securing subsidized projects.
290.35 Sale of HUD-held mortgages securing
unsubsidized projects.
290.37 Requirements for continuing Federal
rental subsidy contracts.
290.39 Nondiscrimination in admitting certificate and voucher holders.
AUTHORITY: 12 U.S.C. 1701z–11, 1701z–12, 1713,
1715b, 1715z–1b, 1715z–11a; 42 U.S.C. 3535(d) and
3535(i).
SOURCE: 61 FR 11685, Mar. 21, 1996, unless
otherwise noted.

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Subpart A—Disposition of
Multifamily Projects
§ 290.1 Applicability.
The requirements of this part supplement the requirements of 12 U.S.C.
1701z–11 for the management and disposition
of
multifamily
housing

projects and the sale of HUD-held multifamily mortgages. The goals and objectives of this part are the same as the
goals and objectives of 12 U.S.C. 1701z–
11, which shall be referred to in this
part as ‘‘the Statute.’’ With respect to
the disposition of multifamily projects
under subpart A, HUD may follow any
other method of disposition, as determined by the Secretary.
[64 FR 72412, Dec. 27, 1999]

§ 290.3

Definitions.

The terms Department and URA are
defined in 24 CFR part 5. The following
definitions apply to this part:
Cooperative means a nonprofit, limited equity, or consumer cooperative as
defined under 24 CFR part 213. It may
include mutual housing associations.
HUD-owned project means a multifamily project that has been acquired
by HUD.
Market area means the area from
which a multifamily housing project
may reasonably be expected to draw a
substantial number of its tenants, as
determined by HUD, taking into consideration the knowledge of the HUD
office with jurisdiction over the project
of the local real estate market and
HUD’s project underwriting experience.
Submarkets may be used in large, complex metropolitan areas.
Multifamily housing project means a
multifamily project that is or was insured under sections 207, 213, 220,
221(d)(3), 221(d)(4), 223(f), 231, 236, or 608
of the National Housing Act (12 U.S.C.
1713, 1715e, 1715k, 1715l, 1715n, 1715v,
1715z–1, or 1742–1746); or is or was subject to a loan under section 202 of the
Housing Act of 1959 (12 U.S.C. 1701q); or
was a Real Estate Owned (REO) multifamily project transferred by the Government National Mortgage Association to the Department. Multifamily
housing project does not include
projects consisting of one to eleven
units insured under section 220(d)(3)(A)
of the National Housing Act (12 U.S.C.
1715l); or mobile home parks under section 207(m) of that Act (12 U.S.C. 1713);
or vacant land; or property covered by
a homeownership program approved

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§ 290.3

24 CFR Ch. II (4–1–10 Edition)

under the Homeownership and Opportunity
for
People
Everywhere
(‘‘HOPE’’) program.
Multifamily project means a project
consisting of five or more units that
has or had a mortgage (even if subordinate to other mortgages) insured under
the National Housing Act or is or was
subject to a loan under section 202 of
the Housing Act of 1959, or a hospital,
intermediate care facility, nursing
home, group practice facility, or board
and care facility that has or had a
mortgage insured, or is or was subject
to a loan under, these authorities. Multifamily project does not include
projects consisting of one to eleven
units insured under section 220(d)(3)(A)
of the National Housing Act (12 U.S.C.
1715k), which are classified as single
family homes.
Nonprofit organization means a corporation or association organized for
purposes other than making a profit or
gain for itself. Stockholders or trustees
do not share in profits or losses. Profits
are used to accomplish the charitable,
humanitarian, or educational purposes
of the corporation.
Preexisting tenant means a family
that resides in a unit in a multifamily
housing project immediately before the
project is acquired under this part by a
purchaser other than the Department.
Subsidized project means a multifamily housing project that is receiving, or immediately before its mortgage was foreclosed by HUD or the
project was acquired by HUD, pursuant
to this regulation, was receiving any of
the following types of assistance:
(1) Below market interest rate mortgage insurance under the proviso of
section 221(d)(5) of the National Housing Act (12 U.S.C. 1715l) (hereinafter, a
BMIR project);
(2) Interest reduction payments made
in connection with mortgages insured
under section 236 of the National Housing Act (hereinafter, a 236 project);
(3) Direct loans made under section
202 of the Housing Act of 1959 (hereinafter, a 202 project);
(4) Assistance, to more than 50 percent of the units in the project, in the
form of:
(i) Rent supplement payments under
section 101 of the Housing and Urban

Development Act of 1965 (12 U.S.C.
1701s) (hereinafter, Rent Supp);
(ii) Additional assistance payments
under section 236(f)(2) of the National
Housing Act (hereinafter, RAP);
(iii) Housing assistance payments
under section 23 of the United States
Housing Act of 1937 (42 U.S.C. 1437 note)
(as in effect before January 1, 1975)
(hereinafter, Sec. 23); or
(iv) Housing assistance payments
under Section 8 of the United States
Housing Act of 1937 (42 U.S.C. 1437f) (excluding payments of tenant-based Section 8 assistance) (hereinafter, projectbased Section 8 assistance).
Sufficient habitable, affordable, rental
housing is available means that the HUD
office with jurisdiction determines
that there is an adequate supply of
habitable, affordable housing for lowand very low-income families available
in the market area. Submarkets, consisting of portions of units of general
local government, may be used in
large, complex metropolitan areas.
Local housing markets having an adequate supply of standard-quality rental
housing would include housing markets
in which the supply of rental housing
available and in production is adequate
to meet the anticipated demand (e.g.,
the housing market is balanced), as
well as those in which there is an excess supply of rental housing (e.g., the
housing market is soft). Rental markets that do not have an adequate supply (e.g., tight markets) are characterized by low rental vacancy rates, low
levels of production and turnover of
rental housing, and, usually, by high
levels of rent inflation. HUD will make
the determination of whether sufficient
habitable, affordable, rental housing is
available using established market
analysis techniques, and will consider
information that demonstrates:
(1) The rental housing vacancy rate
is at a low level relative to the rate required for a balanced market, typically
a four percent vacancy rate; except
that a rate lower than four percent
may be considered in unusual circumstances if it can be demonstrated
that there is an adequate supply of affordable housing for low-income families;
(2) The number of rental housing
units being produced on an annual

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Office of Assistant Secretary for Housing, HUD
basis is not large enough to satisfy demand arising from the increase in
households, or, in markets where there
is little or no growth, evidence that the
number of additional rental units being
supplied is not sufficient to meet the
demand arising from net losses to the
available inventory and the inadequate
supply of rental housing has inhibited
growth;
(3) The shortage of housing is resulting in rent increases that exceed normal increases commensurate with the
costs of operating rental housing;
(4) A significant number, or proportion, of the households holding Section
8 certificates or rental vouchers are unable to find adequate housing because
of the shortage of rental housing, including PHA data showing a lower than
average percentage of units under lease
and a longer than average time required to find units.
Unsubsidized project means a multifamily housing project that is not a
subsidized project.
Useful life means, generally, twenty
years, but it may be more or less, as
determined by the Department.

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§ 290.7

Occupancy requirements.

(a) Multifamily housing project that is
HUD-owned or for which HUD is mortgagee-in-possession. Occupancy in a
multifamily housing project that is
HUD-owned or for which HUD is mortgagee-in-possession shall be available
on a basis that is comparable to the occupancy requirements that applied to
the project immediately before HUD
acquired the project or became mortgagee-in-possession, except that preference shall be given to tenants of
other HUD-owned multifamily housing
projects who are eligible for assistance
in accordance with the displacement
and relocation provisions at § 290.17.
(b) Evictions. Eviction from a HUDowned multifamily housing project is
governed by 24 CFR part 247, subpart B.
(c) Threat to health and safety. Whenever HUD determines that there is an
immediate threat to the health and
safety of the tenants, HUD may require
the tenants to vacate the premises and
shall provide temporary relocation
benefits as provided in § 290.17 to tenants required to vacate the premises.

§ 290.9

§ 290.9 Setting rental rates.
Because of the subsidies involved in
making multifamily housing projects
affordable, the setting of rents involves
two steps: first, establishing the rent
on a unit that will be paid to the
owner, and second, determining the
rent that the tenant pays (with the difference made up by a subsidy), using a
number of procedures to obtain income
verification and notify tenants of
changes in rent. These procedures for a
property owned by HUD or where HUD
is mortgagee-in-possession are explained below.
(a) Setting unit rents. Except as modified by this section, for a property
where HUD is mortgagee-in-possession
(MIP), HUD will set unit rents in accordance with the rent setting requirements of the project’s mortgage insurance or direct loan program; or for a
property owned by HUD, rents will be
set in accordance with the rent setting
requirements of the project’s mortgage
insurance or direct loan program in effect immediately before HUD became
the owner of the project.
(b) Setting rents payable by tenants—(1)
Tenant rent. The rent the tenant pays
will be based on the income certification and the rent payment requirements of the project’s mortgage insurance or direct loan program in effect
while HUD is MIP or immediately before HUD became the owner of the
project, as affected by any of the factors in paragraphs (b)(2) through (b)(4)
of this section. However, if a tenant
does not certify income as required by
this section, the tenant must pay the
unit rent as determined under the rent
setting requirements in paragraph (a)
of this section.
(2) Utility allowance. For a tenant
whose rent is based on a percentage of
adjusted income (except for rental
voucher or rental certificate holders),
if the cost of utilities (except telephone) and other housing services for
the unit is the responsibility of the
tenant to pay directly to the provider
of the utility or service, HUD will deduct from the rent to be paid by the
tenant to HUD a utility allowance,
which is an amount equal to HUD’s estimate of the monthly costs of a reasonable consumption of the utilities
and other services for the unit for an

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§ 290.11

24 CFR Ch. II (4–1–10 Edition)

energy-conservative household of modest circumstances consistent with the
requirement of a safe, sanitary, and
healthful living environment. If the
utility allowance exceeds the percentage of the tenant’s adjusted income
payable as rent, HUD will pay the difference between the amount payable as
rent and the utility allowance to the
tenant or, with the consent of the tenant and the utility company, either
jointly to the tenant and the utility
company or directly to the utility company.
(3) Rent adjustments for project viability. For a HUD-owned project, HUD
may adjust the rent provided for in
paragraphs (b)(1) or (b)(2) of this section if necessary or desirable to maintain the existing economic mix in the
project, prevent undesirable turnover,
or increase occupancy.
(4) Tenants who are rental voucher or
rental certificate holders. Tenants assisted with rental vouchers or certificates certify their income to the public
housing agency (PHA) administering
the assistance, and pay rent pursuant
to the policies and procedures governing such assistance.
(c) Income verification and rent notification procedures—(1) Income certification by tenants—(i) In subsidized
projects. (A) For families residing in
subsidized projects, when HUD becomes
MIP or owner, HUD will request an income certification from each family as
soon as practicable after HUD initially
assumes management, unless the family’s income has been examined by the
owner or by HUD not more than four
months before HUD’s assumption of
management.
(B) For each family applying for admission to subsidized projects, HUD
will request an income certification to
determine the family’s eligibility for a
subsidized rent, and (if the rent is
based on a percentage of adjusted income) the family’s subsidized rent, in
accordance with part 813 of this title.
(ii) In unsubsidized projects. (A) For
tenants in occupancy when HUD becomes
mortgagee-in-possession
or
owner of an unsubsidized project, HUD
may request an income certification
from families who are not paying a
subsidized rent.

(B) For families applying for admission to such projects, HUD will request
sufficient information for income
verification to determine the family’s
ability to pay the unit rent.
(2) Notice of increases in the amount of
rent payable. Whenever HUD proposes
an increase in rents in a HUD-owned
multifamily project or a project where
HUD is mortgagee-in-possession, HUD
will provide tenants 30 days notice of
the proposed changes and an opportunity to review and comment on the
new rent and supporting documentation. After HUD considers the tenants’
comments and has made a decision
with respect to its proposed rent
change, HUD shall notify the tenants
of its decision, with the reasons for the
decision. A tenant in occupancy before
the effective date of any revised rental
rate must be given 30 days notice of the
revised rate, and any change in the
tenant’s rent is subject to the terms of
an existing lease. Notices to each tenant must be personally delivered or
sent by first class mail. General notices of rent increases to all tenants
must be posted in the project office and
in appropriate conspicuous and accessible locations around the project.
(3) Disclosure and verification of Social
Security numbers. Any certifications or
reexaminations of the income of tenants or prospective tenants in connection with tenancy under this section
are subject to the requirements for the
disclosure and verification of Social
Security Numbers, as provided by part
200, subpart T, of this title.
(4) Signing of consent forms for income
verification. Any certifications or reexaminations of the income of tenants or
prospective tenants in connection with
tenancy under this section are subject
to the requirements for the signing and
submitting of consent forms for the obtaining of wage and claim information
from State Wage Information Collection Agencies, as provided by part 200,
subpart V, of this title.
(Approved by the Office of Management and
Budget under control number 2502–0204)

§ 290.11 Notification requirements.
(a) In general. HUD may combine two
or more of the required notifications,
as appropriate, to simplify the disposition process.

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Office of Assistant Secretary for Housing, HUD
(b) Timing of notifications. Disposition-related notifications (i.e., preforeclosure notification to tenants and
units of general local government; predisposition community and tenant
input notification; state and local government right of first refusal notification) will be made, as appropriate:
(1) 60 or more days before HUD forecloses on a project; or
(2) Before, or not more than 30 days
after, HUD acquires a project.
(c) Methods of notification—(1) To tenants. Pre-disposition notification will
be delivered to each unit in the project,
or sent to each unit by first class mail.
Where HUD is mortgagee-in-possession
or owner of a project, the notice will
also be posted in the project office and
in appropriate conspicuous and accessible locations around the project.
(2) To units of general local government. Pre-disposition notification to a
unit of general local government will
be sent to the chief executive officer of
the unit of general local government
by first class mail. For purposes of receiving or sending any notices or information under this part, the unit of general local government is its chief executive officer, or the person designated
by the chief executive officer to receive
or send the notice or information.
(3) To the community or any other
party. HUD will consult with tenants
and their organizations, officials of
units of general local government, and
other entities as HUD determines to be
appropriate, to identify community recipients of any required notification.
Any notice required to be made to any
party other than a tenant or a unit of
general local government will be sent
by first class mail.
(d) Content of notifications. Notifications will, as appropriate, identify the
project acquired or to be foreclosed by
HUD; provide the general terms and
conditions concerning the sale, future
use, and operation of the project as
proposed by HUD; indicate the time by
which any offers must be made or any
comments must be submitted; and
state that the full disposition recommendation and analysis and other
supporting information will be available for inspection and copying at the
HUD Field Office.

§ 290.15

§ 290.13 Negotiated sales.
When HUD conducts a negotiated
sale involving the disposition of a
project to a person or entity without a
public offering, the following provisions apply:
(a) HUD may negotiate the sale of
any project to an agency of the federal,
State, or local government.
(b) When HUD determines that a purchaser can demonstrate the capacity to
own and operate a project in accordance with standards set by HUD, and/or
a competitive offering will not generate offers of equal merit from qualified purchasers, HUD may approve a
negotiated sale of a subsidized project
to:
(1) A resident organization wishing to
convert the project to a nonprofit or
limited equity cooperative;
(2) A cooperative (e.g., nonprofit limited equity, consumer cooperative, mutual housing organization) with demonstrated experience in the operation
of nonprofit (and preferably low-income) housing;
(3) A nonprofit entity that will continue to operate the project as low-income housing and whose governing
board is composed of project residents;
(4) A State or local governmental entity with the demonstrated capacity to
acquire, manage, and maintain the
project as housing available to and affordable by low-income residents;
(5) A State or local governmental or
nonprofit entity with the demonstrated
capacity to acquire, manage, and maintain the project as a shelter for the
homeless or other public purpose, generally when the project is vacant or
has minimal occupancy and is not
needed in the area for continued use as
rental housing for the elderly or families; or
(6) Other nonprofit organizations.
§ 290.15 Disposition plan.
(a) In general. Before disposing of a
HUD-owned
multifamily
housing
project, HUD will develop an initial
and a final disposition plan for the
project that specifies the minimum
terms and conditions for the disposition of the project, the sales price that
is acceptable to HUD, and the assistance that HUD plans to make available
to a prospective purchaser.

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§ 290.17

24 CFR Ch. II (4–1–10 Edition)

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(b) Environmental requirements. HUD
will perform, and include in the final
disposition plan, the environmental reviews required by 24 CFR part 50.
§ 290.17 Displacement of tenants and
relocation assistance.
(a) Scope of section. This section applies to all HUD-owned multifamily
housing projects and all multifamily
housing projects subject to HUD-held
mortgages. When HUD is not the mortgagee-in-possession or owner, the
owner of the project shall comply with
this section, if HUD has authorized the
demolition of, repairs to, or conversion
of the use of the multifamily housing
project.
(b) Minimizing displacement. Consistent with the other goals and objectives of this part, all reasonable steps
shall be taken to minimize the displacement of persons (families, individuals, businesses, and nonprofit organizations) from a project covered by this
part. If displacement or temporary relocation will occur in connection with
the disposition of a project, HUD may
require the purchaser of the project to
provide assistance in accordance with
this section.
(c) Relocation assistance at non-URA
levels. Whenever the displacement of a
residential tenant (family or individual) occurs in connection with the
management or disposition of a multifamily housing project, but is not subject to paragraph (d) of this section
(e.g., occurs as a direct result of HUD
repair or demolition of all or a part of
a HUD-owned multifamily housing
project or as a direct result of the foreclosure of a HUD-held mortgage on a
multifamily housing project or sale of
a HUD-owned project without federal
financial assistance), the displaced tenant shall be eligible for the following
relocation assistance:
(1) Advance written notice of the expected displacement shall be provided
at least 60 days before displacement,
describe the assistance and the procedures for obtaining the assistance, and
contain the name, address and phone
number of an official responsible for
providing the assistance;
(2) Other advisory services, as appropriate, including counseling, referrals
to suitable (and where appropriate, ac-

cessible), decent, safe, and sanitary replacement housing, and fair housingrelated advisory services;
(3) Payment for actual reasonable
moving expenses, as determined by
HUD; and
(4) Such other federal, State or local
assistance as may be available.
(d) Relocation assistance at URA levels—(1) General. The requirements of
this paragraph apply to any displacement that results whenever assistance
under 24 CFR part 886, subpart C, (or
other federal financial assistance, as
defined in 49 CFR 24.2(j)) is provided in
connection with the purchase, demolition, or rehabilitation of a multifamily
property by a third party. A displaced
person (defined in paragraph (d)(3) of
this section) must be provided relocation assistance at the levels described
in, and in accordance with the requirements of, the URA, implementing regulations at 49 CFR part 24, and this section.
(2) Definition of ‘‘initiation of negotiations’’. Under the URA, for purposes of
determining the method for computing
the replacement housing assistance to
be provided to a residential tenant displaced as a direct result of privately
undertaken rehabilitation, demolition,
or acquisition of the real property, the
term ‘‘initiation of negotiations’’
means the transfer of title to the purchaser.
(3) Definition of displaced person. The
term ‘‘displaced person’’ means any
person (family, individual, business, or
nonprofit organization) that moves
from the real property, or moves personal property from the real property,
permanently, as a direct result of acquisition, rehabilitation or demolition
for a federally assisted project. However, a person does not qualify as a
‘‘displaced person’’ if:
(i) The person is excluded under 49
CFR 24.2(g)(2);
(ii) The person has been evicted for a
serious or repeated violation of the
terms and conditions of the lease or occupancy agreement, violation of applicable federal, State, or local law, or
other good cause, and HUD determines
that the eviction was not undertaken
for the purpose of evading the obligation to provide relocation assistance;

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(iii) The person moves into the property after transfer of title to the purchaser; or
(iv) HUD determines that the person
was not displaced as a direct result of
acquisition, rehabilitation, or demolition for an assisted project.
(e) Temporary relocation (URA and
non-URA relocation assistance). Residential tenants, who will not be required
to move permanently, but who must
relocate temporarily (e.g., to permit
property repairs), shall be provided:
(1) Reimbursement for all reasonable
out-of-pocket expenses incurred in connection with the temporary relocation,
including the cost of moving to and
from the temporary housing and any
increase in monthly rent or utility
costs. The party responsible for this requirement may, at its option, perform
the services involved in temporarily relocating the tenants or pay for such
services directly; and
(2) Appropriate advisory services, including reasonable advance written notice of the date and approximate duration of the temporary relocation; the
suitable (and where appropriate, accessible), decent, safe, and sanitary housing to be made available for the temporary period; the terms and conditions under which the tenant may lease
and occupy a suitable, decent, safe, and
sanitary dwelling in the building/complex following completion of the repairs; and the right to financial assistance provided under paragraph (e)(1) of
this section.
(f) Appeals. If a person disagrees with
the purchaser’s determination concerning the person’s eligibility for relocation assistance or the amount of the
assistance for which the person is eligible, the person may file a written appeal of that determination with the
owner or purchaser. A person who is
dissatisfied with the purchaser’s determination on his or her appeal may submit a written request for review of that
decision to the HUD Field Office responsible for administering the URA in
the area.
§ 290.18 Restrictions on sale to former
mortgagors.
The defaulting mortgagor, or any
principal, successor, affiliate, or assignee thereof, on the mortgage on the

§ 290.21

property at the time of the default resulting in acquisition of the property
by HUD shall not be eligible to purchase the property. A ‘‘principal’’ and
an ‘‘affiliate’’ are defined as provided
at 24 CFR 24.105.
[66 FR 35847, July 9, 2001]

§ 290.19 Restrictions concerning nondiscrimination against Section 8
certificate holders and voucher
holders.
The purchaser of any multifamily
housing project shall not refuse unreasonably to lease a dwelling unit offered
for rent, offer to sell cooperative stock,
or otherwise discriminate in the terms
of tenancy or cooperative purchase and
sale because any tenant or purchaser is
the holder of a Certificate of Family
Participation or a Voucher under Section 8 of the United States Housing Act
of 1937 (42 U.S.C. 1437f), or any successor legislation. This provision is
limited in its application, for tenants
or applicants with Section 8 Certificates or their equivalent (other than
Vouchers), to those units which rent
for an amount not greater than the
Section 8 Fair Market Rent, as determined by HUD. The purchaser’s agreement to this condition must be contained in any contract of sale and also
may be contained in any regulatory
agreement, use agreement, or deed entered into in connection with the disposition.
§ 290.21 Computing annual number of
units eligible for substitution of
tenant-based assistance or alternative uses.
(a) Substitution of tenant-based Section
8 assistance to low-income families instead
of project-based assistance to units. The
number of units eligible, as permitted
by the Statute, for this form of substitution within the 10 percent limit will
be estimated at the beginning of each
fiscal year, taking into consideration
the aggregate number of subsidized
project units disposed of by HUD in the
immediately preceding fiscal year and
the disposition activity planned for the
current fiscal year.
(b) Alternate uses. The number of
units eligible for alternate uses in any

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§ 290.23

24 CFR Ch. II (4–1–10 Edition)

fiscal year, as permitted by the Statute, will be determined at the beginning of the fiscal year as the applicable
percentages (i.e., either 10 percent or 5
percent) of the estimated total number
of units to be disposed of in the fiscal
year, taking into consideration the
total number of units in multifamily
housing projects disposed of by the Department in the immediately preceding
fiscal year, and the extent of the disposition activity planned in the current fiscal year.

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§ 290.23 Rebuilding.
HUD may provide project-based assistance to support the rebuilding of a
HUD-owned
multifamily
housing
project only. The required determination that rebuilding the project would
be less expensive than substantial rehabilitation means that the costs to
HUD for rebuilding are such that the
monthly debt service needed to amortize the cost of relocating tenants,
demolition, site preparation, rebuilding, operating expenses, and a reasonable return to the purchaser cannot be
provided with rents that are within 120
percent of the most recently published
Section 8 Fair Market Rents for Existing Housing (24 CFR part 888, subpart
A), and would be less expensive than
rehabilitation.
§ 290.25 Determination not to preserve
a project or a part of a project.
HUD may determine to demolish, or
otherwise dispose of, a HUD-owned
multifamily housing project, or any
portion of such a project, or to foreclose a HUD-held mortgage on a multifamily housing project, without ensuring its continued availability as affordable rental or cooperative housing for
low- and very low-income families
under appropriate circumstances which
may include one or more those listed in
paragraphs (a) through (g) of this section. If HUD decides not to preserve an
occupied multifamily housing project
at a foreclosure sale or sale of a HUDowned project, tenants must be provided relocation assistance as described in § 290.17.
(a) The costs to HUD of rehabilitation are such that the monthly debt
service needed to amortize the cost of
rehabilitation, operating expenses, and

a reasonable return to the purchaser
cannot be provided with rents that are,
for subsidized and formerly subsidized
projects, within 120 percent of the most
recently published Section 8 Fair Market Rents for Existing Housing (24 CFR
part 888, subpart A) or, for unsubsidized
and formerly unsubsidized projects,
within rents obtainable in the market.
(b) Construction is substantially incomplete.
(c) Preservation is not feasible because of environmental factors that
cannot be mitigated by HUD or the
purchaser. For example, when the
project is located on a site that cannot
be made to comply with the Section 8
Site and Neighborhood standards in 24
CFR 886.307(k) because of factors that
adversely affect the health, safety and
general welfare of residents such as air
pollution; smoke; mud slides; fire or
explosion hazards. Preservation may
also be infeasible because of significantly deteriorated surrounding neighborhood conditions with inadequate police or fire protection; high crime
rates; drug infestation; or lack of public community services needed to support a safe and healthy living environment for residents.
(d) HUD determines the project is
unfit for rehabilitation.
(e) Rehabilitation would cost more
than constructing comparable new
housing.
(f) A reduction in the number of units
in the project will enhance long-term
project viability, for example, demolition of a building to provide space for
a playground, open space, or combining
one-bedroom units to create larger
units for families.
(g) Continued preservation of the
project as rental or cooperative housing is not compatible with State or
local land use plans for the area in
which the project is located.
§ 290.27

Up-front grants and loans.

(a) General. HUD may provide upfront grants and loans for rehabilitation, demolition, rebuilding and other
related development costs as part of
the disposition of a multifamily housing project that is HUD-owned, upon
making a determination that such a
grant or loan, plus any additional

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Office of Assistant Secretary for Housing, HUD
project-based assistance made available, would be more cost-effective than
the use of the maximum permissible
project-based rental assistance alone.
(b) Eligible projects. An up-front grant
or loan can be made available in the
sale of a HUD-owned multifamily housing project that meets all of the following requirements:
(1) Has more than 50% of the units in
the project occupied by very low-income residents at the time a disposition plan is approved by HUD, or that
HUD determines is essential, as affordable housing, to the revitalization of
its community;
(2) Is located in a housing market or
submarket in which there is not sufficient habitable, affordable, rental
housing, as defined in § 290.3;
(3) Will generate, after rehabilitation
or rebuilding, sufficient rental income
in a competitive market to cover all
operating expenses, meet after sale
debt service requirements, fund required reserves and throw off positive
cash flow;
(4) Will provide affordable housing
for at least 20 years or the term of the
loan, whichever is shorter, after the rehabilitation and/or rebuilding is completed; and
(5) Meets such other requirements,
including deed restrictions, loan provisions, and monetary penalties for nonperformance, as HUD may determine
are appropriate on a case-by-case basis.
(c) Eligible sales and purchasers—(1)
Negotiated sales to governmental entities.
A negotiated sale of a project with an
up-front grant or loan can only be
made to the unit of general local government, which includes public housing
agencies, in the area in which the
project is located; or a State agency
designated by the chief executive officer of the State in which the project is
located; or an agency of the Federal
government. The governmental entity
in such a sale must take title to the
project.
(2) Other sales and purchasers. All
sales which provide up-front grants or
loans to entities other than those described in paragraph (c)(1) of this section must be conducted through a competitive selection process. All general
and limited partnerships or their nominees, joint ventures or other entities

§ 290.31

assembled for purposes of purchasing
the project and which have a governmental entity as a partner or other
participant are considered profit motivated purchasers and not governmental
entities, whether or not there is a nonprofit, public, corporate or individual
general partner.
(d) Up-front grant or loan amount. The
maximum that HUD will fund per
project in an up-front grant or loan is
50 percent of total development cost
(TDC), or $40,000 per affordable, finished unit, whichever amount is less.
TDC covers demolition, environmental
hazard remediation, construction materials, artisan services, professional
services, developers services, and overhead, relocation and operating losses
that are incurred to plan, perform and
complete repairs or rebuilding.
[64 FR 72412, Dec. 27, 1999]

Subpart B—Sale of HUD-Held
Multifamily Mortgages
§ 290.30 General.
(a) Except as otherwise provided in
§ 290.31(a)(2), HUD will sell HUD-held
multifamily mortgages on a competitive basis. HUD retains full discretion
to offer any qualifying mortgage for
sale and to withhold or withdraw any
offered mortgage from sale. However,
when a qualifying mortgage is offered
for sale, the procedures set out in this
subpart will govern the sale.
(b) References in subpart B of this
part to mortgages securing subsidized
projects include HUD-held purchase
money
mortgages
on
subsidized
projects.
[61 FR 11685, Mar. 21, 1996, as amended at 61
FR 32265, June 21, 1996]

§ 290.31 Sale of current mortgages securing subsidized projects.
HUD will sell current mortgages securing subsidized projects, as follows:
(a) Current mortgages with FHA mortgage insurance will be sold either:
(1) On a competitive basis to FHA-approved mortgagees; or
(2) On a negotiated basis, to State or
local governments, or to a group of investors that includes an agency of a
State or local government if, in addition to meeting the requirements of

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§ 290.33

24 CFR Ch. II (4–1–10 Edition)

the Statute, the sales price is the best
price that HUD can obtain from an
agency of a State or local government
while maintaining occupancy for the
tenant group originally intended to be
served by the subsidized housing program.
(b) Current mortgages without FHA
mortgage insurance will be sold if HUD
can offer protections equivalent to
those listed for an insured sale in paragraph (a) of this section.
§ 290.33 Sale of delinquent mortgages
securing subsidized projects.
Delinquent mortgages securing subsidized projects will be sold only if, as
part of the sales transaction:
(a) The mortgages are restructured;
and
(b) Either FHA mortgage insurance
or equivalent protections are provided.

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§ 290.35 Sale of HUD-held mortgages
securing unsubsidized projects.
HUD’s policy for selling HUD-held
mortgages
securing
unsubsidized
projects is as follows:
(a) Current mortgages may be sold
with or without FHA mortgage insurance.
(b) Delinquent mortgages may be sold
without FHA mortgage insurance.
However, delinquent mortgages will
not be sold if:
(1) HUD believes that foreclosure is
unavoidable; and
(2) The project securing the mortgage
is occupied by very low-income tenants
who are not receiving housing assistance and would be likely to pay rent in
excess of 30 percent of their adjusted
monthly income if HUD sold the mortgage.
§ 290.37 Requirements for continuing
Federal rental subsidy contracts.
For any mortgage that, at the time
HUD offers the mortgage for sale without FHA mortgage insurance, is delinquent and secures a subsidized project
or unsubsidized project that receives
any of the forms of assistance enumerated in paragraphs (4)(i) to (4)(iv) of the
‘‘subsidized project’’ definition in
§ 290.3:
(a) The mortgage purchaser and its
successors and assigns shall require the
mortgagor to record a covenant run-

ning with the land as part of any loan
restructuring or of a final compromise
of the mortgage debt and shall include
a covenant in any foreclosure deed executed in connection with the mortgage.
The covenant shall continue in effect
until the last federal project-based
rental assistance contract expires by
its own terms. The covenant shall provide that, except where otherwise approved by HUD, a project purchaser
shall agree to assume the obligations
of any outstanding:
(1) Project-based federal rental subsidy contract; and
(2) Tenant-based Section 8 housing
assistance payments contract with a
public housing agency and the related
lease.
(b) In the event of foreclosure of the
mortgage sold by HUD, the mortgage
purchaser and its successors and assigns:
(1) Shall foreclose in a manner that
does not interfere with any lease related to federal project-based assistance or any lease related to tenantbased, Section 8 housing assistance
payments; and
(2) Shall foreclose in manner that ensures that the right of possession of the
purchaser at a foreclosure sale shall be
subject to the terms of any residential
lease not subject to paragraph (b)(1) of
this section for the remaining term of
the lease or for one year, whichever period is shorter.
[61 FR 11685, Mar. 21, 1996, as amended at 61
FR 32265, June 21, 1996]

§ 290.39 Nondiscrimination in admitting certificate and voucher holders.
(a) Nondiscrimination requirement. For
any mortgage described in paragraphs
(c) or (d) of this section that HUD sells
without FHA mortgage insurance, the
project owner shall not unreasonably
refuse to lease a dwelling unit offered
for rent, offer to sell cooperative stock,
or otherwise discriminate in the terms
of tenancy or cooperative purchase and
sale because any tenant or purchaser is
a certificate or voucher holder under 24
CFR part 982.
(b) Inapplicability to current mortgages
securing unsubsidized projects that receive no project based-assistance. The
nondiscrimination requirements of this

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Office of Assistant Secretary for Housing, HUD

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section do not apply to any mortgage
that is current under the terms of the
mortgage at the time HUD offers it for
sale, if the mortgage secures an unsubsidized project that does not receive
any of the forms of project-based assistance enumerated in paragraphs
(4)(i) to (4)(iv) of the ‘‘subsidized
project’’ definition in § 290.3.
(c) Applicability to mortgages securing
unsubsidized projects receiving projectbased
assistance
(partially-assisted
projects) or securing subsidized projects.
(1) The nondiscrimination requirement
in paragraph (a) of this section applies
to the project owner upon the sale of a
mortgage without FHA mortgage insurance if, at the time HUD offers it
for sale, the mortgage secures:
(i) An unsubsidized project that receives any of the forms of assistance
enumerated in paragraphs (4)(i) to
(4)(iv) of the ‘‘subsidized project’’ definition in § 290.5; or
(ii) A subsidized project, as defined in
§ 290.3.
(2) This requirement shall continue
in effect until the mortgage debt is satisfied.
(d) Covenant requirement for all delinquent mortgages sold without FHA mortgage insurance. This paragraph (d) applies to the sale of any mortgage that
is delinquent at the time HUD offers it
for sale without FHA mortgage insurance, without regard to the subsidy
status of the project. The mortgage
purchaser and its successors and assigns shall require the mortgagor to
record a covenant running with the
land as part of any loan restructuring
or final compromise of the mortgage
debt and shall include a covenant in
any foreclosure deed executed in connection with the mortgage. The covenant shall set forth the nondiscrimination requirement in paragraph (a) of this section. The covenant
shall continue in effect until a date
that is the same as the maturity date
of the mortgage sold by HUD.
[61 FR 11685, Mar. 21, 1996; 61 FR 19188, May
1, 1996, as amended at 61 FR 32265, June 21,
1996]

Pt. 291

PART 291—DISPOSITION OF HUDACQUIRED
SINGLE
FAMILY
PROPERTY
Subpart A—General Provisions
Sec.
291.1 Purpose and general requirements.
291.5 Definitions.
291.10 General policy regarding rental of acquired property.

Subpart B—Disposition by Sale
291.90 Sales methods.
291.100 General policy.

Subpart C—Sales Procedures
291.200 Future REO acquisition method.
291.205 Competitive sales of individual properties.
291.210 Direct sales procedures.

Subpart D—Sale of HUD-Held Single Family
Mortgage Loans
291.301 Definitions.
291.302 Purpose and general policy.
291.303 Eligible bidders.
291.304 Bidding process.
291.305 Selection of bids and execution of
Loan Sale Agreement.
291.306 Closing requirements.
291.307 Servicing requirements.

Subpart E—Lease and Sale of HUD-Acquired Single Family Properties for the
Homeless
291.400 Purpose and scope.
291.405 Definitions.
291.415 Lease with option to purchase properties for use by the homeless.
291.430 Elimination of lead-based paint hazards.
291.435 Applicability of other Federal requirements.
291.440 Recordkeeping requirements.

Subpart F—Good Neighbor Next Door
Sales Program
291.500 Purpose.
291.505 Definition of ‘‘unit of general local
government.’’
291.510 Overview of the GNND Sales Program.
291.515 Purchaser qualifications.
291.520 Eligible law enforcement officers.
291.525 Eligible teachers.
291.530 Eligible firefighter/emergency medical technicians.
291.535 Earnest money deposit.
291.540 Owner-occupancy term.
291.545 Financing purchase of the home.
291.550 Second mortgage.

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