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Box 5, Folder 1, Document 55
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Appendix "D"
NON-PROFIT SPONSORED NEW HOUSING UNDER 221(d)(3)
This program was authorized by section’ 22i(d)(3) of the Housing
Act of 1961.
It was intended to produce housing for those who are too poor
to rent or buy standard housing but not poor enough to be admitted to
public housing.
The non-profit sponsor of a 221(d)(3) project obtains FHA
approval of the project,
including a land appraisal and approval of the
uilding plans. The FHA
oC
agrees to insure the construction advance at
100 percent of value for
non-profit associations.
The sponsor obtains a commitment from the Governmental National
Mortgag
e Association (GNMA) to provide permanent mortgage financing for
12 com
pleted project.
The sponsor pays a one percent fee to GNMA for this
commitment.
The sponsor borrows money. from-a private financial institution
to pay for the construction of the project.
The construction loan is
short-term and bears interest at the market rate.
When construction is completed, GNMA pays off the construction
loan of the private lender and issues a mortgage to the sponsor with a
term up to forty years and an interest rate of 3 percent.
The sponsor makes
mortgage payments directly to GNMA.
"This interest subsidy cuts the costs of mortgage debt service by
approximately 40 percent, and permits rent reduction of about 25 percent."
Program Requirements:
Upper income limits for cligibility are set by HUD and depend
upon family size and geographic area. Usually the upper limit is set at
the median income level of families in the area.
221¢d)(3) projects must be located in communities which tive
workable programs.
Results:
"By July, 1967, FHA had given commitments to proceed with a
total of 73,000 units in 569 projects." 33,300 or 46 percent of the units
were under the sponsorship of Limited-dividend corporations.
A. Lack of technical experience and know-how on part of
non-profit sponsors.
B. Complexities and bottlenecks in processing applications
by FHA. Processing time to start of construction’
estimated at 376 working days.
C. Upper income eligibility limits claimed to be too restrictive.
Administration:
Most of the program administration is handled by the local FHA
Insuring Office. The Regional Offices of HUD play a minimal role in
this program. At.the HUD National level, program responsibility is with the
Assistant Secretary for Mortgage Credit, Federal Housing Commissioner.
Responsibility is further delegated to the Assistant Commissioner of
Multifamily Housing of FHA.
The 221(4)(3) program is currently being phased out’ and brought
under section 236 of the Housing and Urban Development Act of 1968. The
program remains basically the same with the primary difference being that
the Bpttets atid mortgage is held by the private lender and mortgage subsidy
payments are wade to the financial institution by the Federal government.
Under 221(d)(3), the mortgage is held by GNMA and mortgage payments are
made directly to GNMA.
NON-PROFIT SPONSORED NEW HOUSING UNDER 221(d)(3)
This program was authorized by section’ 22i(d)(3) of the Housing
Act of 1961.
It was intended to produce housing for those who are too poor
to rent or buy standard housing but not poor enough to be admitted to
public housing.
The non-profit sponsor of a 221(d)(3) project obtains FHA
approval of the project,
including a land appraisal and approval of the
uilding plans. The FHA
oC
agrees to insure the construction advance at
100 percent of value for
non-profit associations.
The sponsor obtains a commitment from the Governmental National
Mortgag
e Association (GNMA) to provide permanent mortgage financing for
12 com
pleted project.
The sponsor pays a one percent fee to GNMA for this
commitment.
The sponsor borrows money. from-a private financial institution
to pay for the construction of the project.
The construction loan is
short-term and bears interest at the market rate.
When construction is completed, GNMA pays off the construction
loan of the private lender and issues a mortgage to the sponsor with a
term up to forty years and an interest rate of 3 percent.
The sponsor makes
mortgage payments directly to GNMA.
"This interest subsidy cuts the costs of mortgage debt service by
approximately 40 percent, and permits rent reduction of about 25 percent."
Program Requirements:
Upper income limits for cligibility are set by HUD and depend
upon family size and geographic area. Usually the upper limit is set at
the median income level of families in the area.
221¢d)(3) projects must be located in communities which tive
workable programs.
Results:
"By July, 1967, FHA had given commitments to proceed with a
total of 73,000 units in 569 projects." 33,300 or 46 percent of the units
were under the sponsorship of Limited-dividend corporations.
A. Lack of technical experience and know-how on part of
non-profit sponsors.
B. Complexities and bottlenecks in processing applications
by FHA. Processing time to start of construction’
estimated at 376 working days.
C. Upper income eligibility limits claimed to be too restrictive.
Administration:
Most of the program administration is handled by the local FHA
Insuring Office. The Regional Offices of HUD play a minimal role in
this program. At.the HUD National level, program responsibility is with the
Assistant Secretary for Mortgage Credit, Federal Housing Commissioner.
Responsibility is further delegated to the Assistant Commissioner of
Multifamily Housing of FHA.
The 221(4)(3) program is currently being phased out’ and brought
under section 236 of the Housing and Urban Development Act of 1968. The
program remains basically the same with the primary difference being that
the Bpttets atid mortgage is held by the private lender and mortgage subsidy
payments are wade to the financial institution by the Federal government.
Under 221(d)(3), the mortgage is held by GNMA and mortgage payments are
made directly to GNMA.
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