18.4.5 Section 202 Mortgage Refinancing

A. Section 202 projects that are refinanced with an FHA-insured loan are exempt from Section 514(g) of MAHRA under Section 514(h)(2) of that Act, for as long as the first FHA refinance loan is outstanding. If that FHA loan is subsequently again refinanced (using Section 223(a)(7) for example), that Section 514(h)(2) exemption is no longer applicable. Thus, if the Section 8 rents were above market, a reduction of rents to market at the expiration of the Contract term is required, and the underwriting of the new loan must reflect rent levels which change from currently allowed rents to market rate rents in accordance with the expiration of the Contract. Such projects must be sent to the Office of Recapitalization for processing the rent reduction under the Mark-to-Market program.

B. Example of Underwriting a Section 202 Project Exempt Under MAHRA’s Mark-to-Market Provisions