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Housing Notice 2020-02

Thursday, July 01, 2021

On June 30, 2021, HUD released Housing Notice 2020-02: Guidelines for Certain HUD Approvals Regarding Properties Encumbered by HUD-Held Mark-to-Market Program Debt and Portfolio Reengineering Demonstration Program Debt.

Effective Date

This Notice is effective immediately for all Requests or applicable transactions initiated after June 30, 2021.


  1. This Notice replaces Housing Notice 2012-10, "Guidelines for Assumptions, Subordination, or Assignment of Mark-to-Market (M2M) Loans in Transfer of Physical Assets (TPA) and Refinance Transactions" in its entirety and provides new instructions for the acquisition and/or refinancing of projects which have been through a M2M debt restructuring or a Demo Program restructuring (collectively, "Post M2M") and are encumbered by HUD-held debt.
  2. Section 3 of this Notice replaces Appendix C of the Market-to-Market Operating Procedures Guide regarding transfers of assets to qualified nonprofits.
  3. This Notice does not apply to transactions where the Post M2M debt will be repaid in full, although other HUD requirements.

Except as otherwise specified, for the remainder of this Notice, the term "M2M" shall be used to mean either M2M or the Demo Program, and the term "Note" shall be used to mean an MRN, CRN, or Demo Note.

Organization and Explanation of Major Provisions

This Notice includes the following sections:

Section 1: Provides definition for terms used in this Notice.

Section 2: Describes the processing requirements applicable to the activities covered by this Notice and governs ant request to assume and/or subordinate M2M debt and to waive the due on sale or refinance clause contained in the loan documents that evidence and secure M2M debt.

Section 3: Governs any request made by a "Qualified Purchaser" (defined below) to receive certain types of debt relief with respect to an MRN or CRN. Section 3 does not apply to Demo Notes.

Section 4: Governs certain requests for a term extension of a Note.

Section 5: Governs any request for approval of a proposal under Section 8(bb)(1) of the United States Housing Act of 1937 for HUD to transfer the budget authority remaining on a project-based Section 8 Housing Assistance Payments (HAP) contract at the time of its termination to another HAP contract in cases where either the project from which budget authority is transferred (Project A) or the project to which it is transferred (Project B) is subject to a Full M2M Renewal Contract (defined below).

This Notice streamlines and revises pre-existing guidance related to the refinance, assumption, subordination, assignment, forgiveness, or modification of Notes. This Notice reduces processing requirements not warranted by the benefits and provides transparency regarding processing of requests not addressed in the prior guidance. Among the key provisions and changes are to:

Streamline HUD review of the first mortgage debt to focus on maximizing project cash flow, protecting long-term viability of the project, and evaluating the impact on future valuation of the project for the remaining term of the M2M Use Agreement.

Emphasize preservation of the affordable housing resource as a core criterion for granting waivers of the due on sale or refinance clause.

Replace the emphasis on "Strategic Communities" with an emphasis on preservation of affordable housing, as documented by meeting projected capital needs, as the basis for granting incentives within the Notice.

Consolidate in this Notice the subjects covered in the Appendix C of the Mark-to-Market.

Operating Procedures Guide and provide more detailed guidance regarding review of proposed Qualified Nonprofit Purchasers.

Establish guidance on processing Notes that are in default to maximize coordination among HUD offices.

Establish guidance on processing a request for approval of a proposal under Section 8(bb)(1) of United States Housing Act of 1937 for HUD to transfer the budget authority remaining on a project-based Section 8 HAP Contract at Project A at the time of its termination to another contract (i.e, at Project B) when either project is subject to a Full M2M Renewal Contract.

Contact Information

If you have questions regarding this Notice, please contact Kara Williams-Kief by email at PM2M@hud.gov, or contact the Account Executive assigned to the Project at the Multifamily Regional Center.

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