OPTION 3: REFERRAL TO RECAP
This option is for projects that believe their Section 8 contract rents are above the comparable market rents in the area and who have an FHA insured mortgage or a Secretary-held mortgage. Owners can select between the following two sub-options:
· Option 3A (Lite) – A Renewal of the Contract without Debt Restructuring with the Rents Reduced to Comparable Market Rents
· Option 3B (Full) – A Debt Restructuring and Contract Renewal with the Rents Reduced to Comparable Market Rents
The following projects are eligible for renewal under Option 3:
Projects that have an FHA insured mortgage or a Secretary-held mortgage with above market rents.
Once Eligible, Always Eligible - FHA-insured projects or projects with Secretary-held mortgages that had above-market rents at the time of initial renewal under Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA) (on or after October 1, 1998), are eligible for referral to OAHP and the Owner may request debt restructuring even though the rents were reduced earlier.
Projects Previously Renewed under Section 524: FHA-insured projects and projects subject to Secretary-held mortgages previously renewed under Section 524 which did not have rents above market at the time of renewal, but which now have above market rents, are eligible for debt restructuring.
“Preservation Projects”: Preservation projects with approved Plans of Action (POA) under the Emergency Low Income Housing Preservation Act of 1987 or the Low-Income Housing Preservation and Resident Homeownership Act of 1990, are eligible for OAHP restructuring, but only if the property is being transferred or sold.
For complete guidance and information regarding Option Three please read Chapter 5 of the Section 8 Renewal Policy guidebook. You can also visit the Office of Recapitalization (RECAP) to read more about the Mark to Market program.