www.hudclips.org 


U. S. Department of Housing and Urban Development
Washington, D.C. 20410-8000

 
May 17, 1995
 
OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 95-22
 
TO:  ALL HUD-APPROVED MULTIFAMILY MORTGAGEES
 
SUBJECT:  SECTION 221 (g) (4) PROJECT MORTGAGE AUCTION
 
     On June 28, 1995, the Department of Housing and Urban
Development will conduct its fifth auction of project mortgages
insured under Section 221 of the National Housing Act (here in
and after "Act").  The auction is authorized by Section 336 of
the National Affordable Housing Act of 1990.
 
     Only HUD-approved mortgages are eligible to participate in
the auction.  Eighty-one mortgages with mortgage balances
totalling approximately $135 million will be offered for sale in
the auction.  This auction does not include mortgages secured by
projects with project-based Section 8 contracts.  The
Administration has proposed that, as Section 8 contracts expire,
project rents will be "marked to market," and the mortgages
restructured to reflect the lower debt service requirements.  The
Department will arrange for the auction of mortgages with project
based Section 8 after Congress has responded to the Department's
legislative initiative.
 
     Section 221(g)(4) of the Act permits mortgagees to assign
current project mortgages to HUD in their twenty-first year.  To
reduce Section 221(g)(4) mortgage insurance claims, Congress
authorized HUD to auction mortgages that would otherwise be
assigned to HUD and to pay an interest subsidy to the purchaser.
Paid monthly, the subsidy will be equal to the difference between
the note rate on the mortgage and the lowest bid accepted in the
auction, and applied to the unpaid principal balance.
 
     The auction will be conducted by telephone.  Bidders will
telephone bids between 10:00 am and 12 Noon on June 28, 1995.
Bids will be expressed in basis points over the 10-year Treasury
note yield.  Winners will be notified before 10:00 am on the day
after the auction.  The 10-year Treasury note yield will be
determined at 11:00 am on the day after the auction.
 
     Announcements containing the rules for the auction and a
list of the mortgages offered for sale will be mailed to HUD-approved
multifamily mortgagees by May 30, 1995.  For further
information call 202-708-0614 xt 2667.
 
Sincerely yours,
 

Nicolas P. Retsinas
Assistant Secretary for Housing
Federal Housing Commissioner
                      *U.S. Government Printing Office: 1995 -- 387-734/20093