The Department of Housing and Urban Development yesterday abruptly canceled plans to sell more than 100 mortgages it holds on housing for the elderly and handicapped.
The plan had provoked fears among advocates of the elderly that the department was seeking to "liquidate its stock of stock of senior citizen housing."
Fourteen members of Congress, including the chairmen and ranking minority members of the House Banking Committee, the Select Committee on Aging and two housing-related subcommittees, wrote HUD Secretary Samuel R. Pierce Jr. requesting delay of the sale pending congressional review.
The sale involved projects in the Section 202 program, under which HUD makes below-market, 40-year loans to private, nonprofit sponsors to provide housing for the elderly or handicapped.
Many of the residents of these projects receive rent subsidies under the Section 8 program. Building owners who participate in Section 8 contract with HUD to remain in the program for at least 20 years.
Organizations representing the elderly were concerned that, when Section 8 contracts expired, HUD would not be there to protect low-income tenants if building owners chose to sell to for-profit individuals or companies, which could pay off the Section 202 loan. Once such loans are paid off, owners are free to do with their projects as they please.
These groups have been suspicious of HUD since the department allowed a California sponsor to prepay a mortgage without obtaining solid protections for the tenants. That case is now in court.
The sale plans became known May 5, when HUD published a newspaper advertisement soliciting bids. The deadline was to have been next Wednesday.
Because the mortgages are below market--generally around 9 percent, according to HUD General Deputy Assistant Secretary W. Calvert Brand--the department would have to sell them at a discount. HUD had not specified a minimum that it would accept; congressional sources said that, in some cases, the department would have to accept 70 cents on the dollar to bring the notes' yield up to current market levels of between 11 and 12 percent.