Abate & Terminate
Several buildings in Ohio have received their third, and in some cases, a fourth below-60 REAC score. With respect to these struggling yet preservation-worthy buildings, we’ve heard from our HUD field office that they are likely to “abate and terminate” the HAP contracts. More often than not, this is going to lead to a net loss in affordable units. Are others hearing this mantra of “abate and terminate” from your field offices and if so, what preservation solutions are you pursuing?
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Replies to This Discussion
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Permalink Reply by Vince O'Donnell on -
HUD's Office of Multifamily Housing has been hearing from many of us about specifics like this, and about the need to change policy to support more incremental approaches in general. In the meantime, it has occasionally been possible to "abate the abatement" by obtaining a loan that funds the most critical repairs. But that's possible only in very limited circumstances: a short list of exigent health & safety items on the REAC score, a cooperative owner (hopefully willing to sell to a preservation owner with capacity), the possibility of an immediate new property manager, some 2530 protection for a new manager, a credible path from distress to initial stabilization to an ultimate recapitalization, and some kind of collateral for a loan. If all of that is possible, HUD may be willing to enter into a Compliance, Enforcement and Disposition Plan that halts enforcement under a set of project-specirfic conditions.
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Permalink Reply by Stacie Young on -
Far be it for me to go beyond Vince's wise counsel, but one additional (or complementary) strategy we've used here in Chicago is working with HUD and the City - in cases of the worst conditions - to get a receiver appointed as a temporary measure, and then HUD helped insert language into the court order to transfer the HUD contract to the receiver. These payments then enabled some improvements issues to be addressed. In one case here the bank still has the property in its REO portfolio, but the receiver made improvements and continues taking good care of it. In another case the Community Investment Corporation, one of
our wonderful preservation lending partners, purchased the note, foreclosed on the existing owner and just sold to some great preservation owners. We'd be happy to talk more about how it happened here or have our HUD guys talk to your HUD guys. -
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Permalink Reply by Spencer Wells on -
Stacie this would be interesting to us in Ohio. Our HUD Hub is relying on a OGC ruling that says the HUD is not obligated to work with a court appointed receiver. How does it work in Chicago? We'd like to know more. If you don't want to post a bunch of material, please contact Kelan or me directly by email.
kelancraig@cohhio.org or spencerwells@cohhio.org
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