Title 12, Banks and BankingRelease 119-110

§4114 Permissible Prepayment or Voluntary Termination and Modification of Commitments

Title 12 › CHAPTER 42 — LOW-INCOME HOUSING PRESERVATION AND RESIDENT HOMEOWNERSHIP › SUBCHAPTER I — PREPAYMENT OF MORTGAGES INSURED UNDER NATIONAL HOUSING ACT › § 4114

Last updated Sep 22, 2026|Official source

Summary

Owners may stop the low-income rules on their housing by prepaying the mortgage or voluntarily ending them if certain things happen. This can happen when HUD approved a plan to help the property but did not give the promised help within set deadlines: 15 months in one case, or in other cases before the earlier of either 2 months after the next fiscal year starts or 6 months (or 9 months for some properties) after approval. It also applies when an owner tried to sell to a qualified buyer under the law, followed the sale rules, and got no real offers in the allowed time. If a buyer cannot finish the purchase for reasons other than HUD failing to provide incentives, the owner may also end the restrictions under the sale rules. When rental help under federal housing law is involved, HUD can make a contract to extend that help while money is being sought. That contract must say that if HUD cannot extend the rental help or can’t offer similar incentives, then at the owner’s request HUD will change any promises tied to that rental help or let the owner prepay the mortgage and end the plan and use restrictions, but the owner must agree in writing to follow the required rules. An owner must tell HUD at least 30 days before asking for this, and HUD has 90 days after that notice to try to extend the rental help and keep its commitments.

Full Legal Text

Title 12, §4114

Banks and Banking, Source: USLM XML via OLRC

(a)In general

Notwithstanding any limitations on prepayment or voluntary termination under this subchapter, an owner may terminate the low-income affordability restrictions through prepayment or voluntary termination, subject to compliance with the provisions of section 4113 of this title, under one of the following circumstances:

(1)(A)The Secretary approves a plan of action under section 4109(a) of this title, but does not provide the assistance approved in such plan during the 15-month period beginning on the date of approval.

(B)After the date that the housing would have been eligible for prepayment pursuant to the terms of the mortgage (notwithstanding this subchapter), the Secretary approves a plan of action under section 4110 or 4111 of this title, but does not provide the assistance approved in such plan before the earlier of (i) the expiration of the 2-month period beginning on the commencement of the 1st fiscal year beginning after such approval, or (ii) the expiration of the 6-month period beginning on the date of approval.

(C)The Secretary approves a plan of action under section 4110 or 4111 of this title for any eligible low-income housing not covered by subparagraph (B), but does not provide the assistance approved in such plan before the earlier of (i) the expiration of the 2-month period beginning on the commencement of the 1st fiscal year beginning after such approval, or (ii) the expiration of the 9-month period beginning on the date of approval.

(2)An owner who intended to transfer the housing to a qualified purchaser under section 4110 or 4111 of this title, and fully complied with the provisions of such section, did not receive any bona fide offers from any qualified purchasers within the applicable time periods.

In the event that the purchaser under the plan of action is unable to consummate the purchase for reasons other than the failure of the Secretary to provide incentives, an owner may terminate the low-income affordability restrictions through prepayment or voluntary termination subject to the provisions of section 4110 and 4111 of this title.

(b)section 1437f rental assistance

When providing rental assistance under section 1437f of title 42, the Secretary may enter into a contract with an owner, contingent upon the future availability of appropriations for the purpose of renewing expiring contracts for rental assistance as provided in appropriations Acts, to extend the term of such rental assistance for such additional period or periods necessary to carry out an approved plan of action. The contract and the approved plan of action shall provide that, if the Secretary is unable to extend the term of such rental assistance or is unable to develop a revised package of incentives providing benefits to the owner comparable to those received under the original approved plan of action, the Secretary, upon the request of the owner, shall take the following actions (subject to the limitations under the following paragraphs): (1) Modification of commitments

(2)Termination of plan of action

Permit the owner to prepay the mortgage and terminate the plan of action and any implementing use agreements or restrictions, but only if the owner agrees in writing to comply with provisions of section 4113 of this title.

At least 30 days before making a request under this subsection, an owner shall notify the Secretary of the owner’s intention to submit the request. The Secretary shall have a period of 90 days following receipt of such notice to take action to extend the rental assistance contract and to continue the binding commitments under section 4112(a)(2) of this title.

Reference

Citations & Metadata

Citation

12 U.S.C. § 4114

Title 12, Banks and Banking

Last Updated

Sep 22, 2026

Release point: 119-110