§4105 Federal Cost Limits and Limitations on Plans of Action

Summary

The Secretary must check each eligible low-income housing project to see if the project’s total preservation rents are higher than federal cost limits. First, the Secretary multiplies 120 percent of the fair market rent for the market area by the number of units (counting unit sizes). If the total is higher than that, the Secretary then compares the total to 120 percent of the prevailing rents in a smaller, local rental area (also multiplied by the number of units). The project is treated as exceeding the federal cost limits only if the total is above both of those amounts. If the project does not exceed the federal cost limit, the owner cannot prepay the mortgage or end the mortgage insurance except as allowed under section 4114; the owner may instead file a plan to get incentives under section 4109 or file a second notice to transfer under section 4110. If the project does exceed the federal cost limit, the owner may file for incentives limited to the federal cost limit, agree to transfer the housing at a price not above that limit, or give a second notice to prepay or end insurance but be subject to mandatory sale rules under section 4111.