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HUD Archives: News Releases

HUD No. 99-252
Further Information:For Release
In the Washington, DC area: 202/708-0685Thursday
Or contact your local HUD officeDecember 2, 1999


WASHINGTON - The Department of Housing and Urban Development today announced that it has created a new, two-tiered fee structure for housing finance agencies that process "lite" transactions as part of the Department's Mark-to-Market program.

Lite transactions reduce above-market Section 8 contract rents to levels that are more in line with prevailing market rents without restructuring the outstanding debt on the mortgages.

HUD's Office of Multifamily Housing Assistance Restructuring (OMHAR) said that under the new structure it will increase compensation to Participating Administrative Entities (PAEs) when financial data or other information calls for a more thorough review of a property's expenses when determining if a transaction qualifies as a lite.

The base compensation for Tier 1 transactions - those that qualify as lites after a basic review of financial, physical and managerial soundness - will continue to be $8,750, as currently provided in OMHAR's portfolio restructuring agreements. Compensation for Tier 2 transactions, which require additional analysis, will be $12,000 - the $8,750 base, plus an additional $3,250.

OMHAR Director Ira Peppercorn said the new fee structure was created in response to concerns raised by housing finance agencies about the compensation for lites that require more financial analysis, and is the result of extensive review and analysis.

"Being responsive to the interests and needs of our partners is essential to ensuring the success of Mark-to-Market," Peppercorn said. "The new Tier 2 designation establishes a fairer and more equitable way to compensate agencies that perform additional tasks when processing certain lite transactions."

In addition to establishing a new system that pays PAEs a higher fee for transactions that require more analysis, the new fee structure will help improve the operation of the Mark-to-Market program, clarify what agencies are responsible for when performing lites, and advance the Department's goal of preserving and improving affordable housing.

HUD estimates that Mark-to-Market will produce substantial savings in the project-based Section 8 rental assistance program over the next five years, and more in years to come, while preserving affordable housing for 850,000 people. Families in HUD's Section 8 rental assistance program pay 30 percent of their income toward rent, with HUD subsidies making up the difference.

To date, OMHAR has entered into restructuring agreements with 37 state or local housing finance agencies, and assigned more than 600 assets to these agencies for restructuring.

Under mortgage restructuring, owners of subsidized properties refinance part of their mortgage balance at lower interest rates and with deferred payments. This will enable owners to continue providing affordable housing even after HUD's Section 8 subsidies are reduced.

For specific information about OMHAR's new fee structure for lites, and the criteria used to determine Tier 1 and Tier 2 transactions, call (202) 708-0001, or log on to OMHAR's Web site www.hud.gov/omhar.


Content Archived: January 20, 2009

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