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Appendi x 11 D11 I f NON - PROFI T SPOjSORED NEW HOUSING UNDER 221( d )(3) Thi s pr ogram was auth or i zed by s e ction· 221(d)(3) of the Housing Act of 1961 . I t ·was i ntended t o produc e hou s i ng f or those who are too poor t o ren t or buy s t andard h ou s ing but n ot p oor enough to be admitted to publi c h ou s i ng . The n on - pr ofi t sponsor of a 22 l(d)(3) proj e ct obtains FHA app r ov al of the pr oj e c t, inc lud i ng a l and a pprais a l and approval of the build i ng plans . The FHA agree s to i nsure the construction advance at 100 perc ent of value for n on ~profit asso c ia t i on s . The sp onsor ob t ain s a commitment fr om t h e Government a l National Mortgage Asso c ia tion (GNMA ) to pr ovide permanent mort ga ge financing for the cowpleted pr o ject. The sponsor pays a one percent fe e to GNMA f or t h is c ommitment . The sponsor borrows money from -a pr iva t e financial institution t o pay f or the constru cti on of the pr oject. Th e construction loa n is short- t erm and bears interest at the market rate. When constr u ction is completed, GNMA pays off t he cons truct ion loan of t he private lender and issues a mortgage t o the sponsor wi th a term up to forty years and an interest rate of 3 per c ent. The s ponsor makes mortgage paymen ts directly to GNMA . 11 This interest subsidy cuts the costs of mortgage debt service by appr ox imately 40 percent, and permits rent reduction of about 25 per.cent. 11 �I - 2 - . Pt ogr am Requirements : Upp er inc ome l i mi t s f or elig i bi l ity are s e t by HUD a n d ~ e pe nd upon fami l y size and geographi c area . Us ua lly t he upper limit is set at t h -2 med i an in c ome leve l of fami l ie s i n t he a r ea . 221 ( d )( 3 ) projects must be l oca t e d in communities which h ave worka b l e progr ams . Resu l t s : "By July, 196 7, FHA ha d given commitments to proceed with a t ot 1 of 73 , 000 u i t i n 569 pr oj e ts . 11 33 , 300 or 46 per cent of t he units were und er the spons orship of limited-dividend cor porat i ons. Pr oblems : A. La ck of t e chni ca l experien c e and kn ow- h ow on p art of non - pr ofit spons ors . B. Comp lexiti e s and bottl ene ck s in proce ss i ng ap plica tion s by FHA . Pro c e s s ing time to start of construction· e stimated a t 376 working da ys. C. Upper inc ome e li g ibility limit s cl a ime d to be too r estric tiv e . Adm i nistra t i on : Most of the progr am administra ti on i s h and l e d by t h e l ocal FHA Insu r i ng Offi ce. t h i s pr ogram . The Re g ion al Off i ces of HUD p l ay a minima l r ole in At the HUD Na t i onal l e vel, pr ogram res p onsib ility is with t he As sis tant Se cr etary f or Mor t ga ge Credit, Federa l Hou sing Commissioner. Re sp on s ibil i ty is fu r t h er de le gated to t h e Assis t ant Commissioner of ~u lti=amily Hou sing of FHA . �- 3 - The 221 ( d ) ( 3 ) pr~gram i s curren ::ly b e in g phased o.u t and brou ght . under sect ion 236 of t he : ous i ng and Ur ban Dev e lopment Act of 1968. The . program r ema in s basi ca ll y the same with th e prima ry ~ ifference bein g that t he permanen t mor t gage is held by t h e pr iva t ~ lender and mort gage subsidy p~y..1cn t s arc mad e t o t he fi nanci a l i n stitution by the Federal government. Unde r 221(d)(3), the mortgage is held by GNMA and mortgage payments are ma de dir e ctly to Gl\1MA . ·' . �