Rental Housing:

Implementing the New Federal Incentives to Deter Prepayments of HUD Mortgages

PEMD-91-2: Published: Apr 30, 1991. Publicly Released: May 30, 1991.

Additional Materials:

Contact:

Robert L. York
(202) 275-5885
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO provided information about the likelihood that owners of low- and moderate-income rental housing stock will seek prepayments of mortgages insured under the National Housing Act.

GAO found that: (1) the precise number of properties eligible for prepayment was uncertain, ranging from a low of 334,000 family units to a high of 367,000; (2) the four studies it reviewed regarding the number of eligible properties did not use the same procedures in reaching their estimates, and Department of Housing and Urban Development (HUD) databases had data errors that made it difficult to identify the units eligible for prepayment; (3) owners in low-supply, high-demand rental housing markets wanted to prepay their HUD-insured mortgages when they became eligible because of the increase in property values, the limited return on investment, and the uncertain legislative environment; (4) none of the owners in the high-supply, low-demand markets intended to prepay and convert their properties to market-rate rentals because of stagnant or decreasing property values, high vacancy rates, and guaranteed rents; and (5) the lack of field personnel financial expertise and HUD headquarters guidance caused delays in processing applications for prepayments and could allow owners to prepay if HUD can not provide incentives within 15 months after approving a plan of action.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HUD has agreed to use its market economists, as GAO recommended.

    Recommendation: The Secretary of Housing and Urban Development should ensure that its regional and field office market economists participate in delimiting the relevant local markets, as defined in section 215(a)(2) of the Low-Income Housing Preservation and Resident Homeownership Act of 1990, for the federal cost limits test and in determining whether there is an inadequate supply of decent, affordable housing for the windfall profits test.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: HUD held training sessions in August and September 1991 and more are scheduled.

    Recommendation: The Secretary of Housing and Urban Development should enhance HUD staff expertise in real estate finance through hiring, training, and contracting in order to ensure better and more timely negotiation of incentives.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Implemented

    Comments: HUD issued a field handbook for title II on April 9, 1991, and one for title VI will be issued in March 1992.

    Recommendation: The Secretary of Housing and Urban Development should review current guidance being provided on negotiating incentive packages in light of the 1990 legislation, providing better guidance where necessary.

    Agency Affected: Department of Housing and Urban Development

 

Explore the full database of GAO's Open Recommendations »

Jul 13, 2016

Jun 8, 2016

May 31, 2016

May 2, 2016

Jan 8, 2016

Sep 15, 2015

Jul 23, 2015

Jul 10, 2015

Jul 6, 2015

May 19, 2015

Looking for more? Browse all our products here