Project Overview
Assignment of MTM Debt to a Qualified Nonprofit Facilitates Revitalization of Toledo, Ohio Properties
Hilltop Village, Hampton Court, and Northtowne Village are three 100% project-based Section 8 subsidized projects in Toledo, Ohio with a total of 208 units. All three projects previously had debt restructured through HUD’s MTM program, with senior FHA insured financing and subordinate MTM debt held by HUD payable out of surplus cash.
More than 35 years old and with the compounding effects of years of deferred maintenance, these properties needed significant renovation to ensure they would remain high-quality affordable housing for the long-term.
HAO worked with Integra and HUD to obtain the necessary approvals to waive the due on sale provisions in the MTM loans, pay off the then-existing FHA debt and a portion of the MTM debt, assign the remaining MTM debt to a Qualified Nonprofit, extend the MTM Use Agreements from 30 to 50 years, subordinate the assigned MTM debt to the new FHA financing, and renew the Housing Assistance Payments (HAP) Contracts at each project for 20-year terms.
Applicable HUD Programs
- Project-Based Section 8
- HAP Renewal
- Mark-to-Market and Due on Sale Waiver with Debt Assignment to a Qualified Nonprofit
- 223(f) FHA Insured Loan
Project Details
A Comprehensive Recapitalization of Mark-to-Market Properties
By assigning the Mark-to-Market (MTM) debt to Foundation for Affordable Housing as a Qualified Nonprofit and paying down a portion of the HUD-held debt in connection with HAP Contract renewals, HAO helped Integra reach its goals.
Waiver of MTM Due on Sale Provisions
HUD-held MTM Notes contain provisions requiring prepayment when a property is sold or refinanced. HUD will waive this provision to facilitate a significant preservation transaction. HAO obtained HUD approvals for this waiver for the three properties with a 20 year extension of the original 30 year affordability period.
MTM Debt Assignment to a QNP
HUD-held MTM Notes contain provisions requiring prepayment when a property is sold or refinanced. HUD will assign these MTM Notes to a Qualified Nonprofit to facilitate a significant preservation transaction. HAO obtained HUD approvals for this debt assignment.
20-Year HAP Renewal
To support the financing required for the rehabilitation, HAO obtained HUD approvals to renew each HAP contract for a 20-year term under Option 3 as required for projects with MTM Use Agreements.
FHA and LIHTC Transaction
The transaction was financed with a cash-collateralized single short-term bond issue with FHA 223f loan proceeds used as cash collateral for the Ohio Housing Finance Agency bond issue. The bonds were repaid with the cash collateral following the rehabilitation, leaving the FHA 223f loans in place.
4% Low-Income Housing Tax Credits
With the issuance of the bonds, the three projects also benefited from the equity generated by the sale of 4% low income housing tax credits. HAO worked with Integra and HUD to obtain approvals to subordinate the assigned MTM debt to the new 223f loans.
Project Outcomes
Preservation Transaction Ensures Long-Term Affordability of High Quality Subsidized Properties
The waiver of the due on sale provisions of the MTM Notes and MTM debt assignment to a Qualified Nonprofit with 20-year HAP Contract renewals facilitated the significant rehabilitation of three properties totaling 208 units of family housing and long-term HUD affordability restrictions extended from 30 to 50 years.
View Examples of Our Other Work
Our partnership with Integra Property Group, LLC shows how HAO guides clients through complex, multi-phase projects. See other examples of our work by viewing our project portfolio.
