House leaves HUD hanging without means to sell defaulted loans.

WASHINGTON - Congress completed virtually all its business yesterday without removing statutory roadblocks that are preventing HUD from selling billions of dollars in nonperforming multifamily housing loans, congressional aides said.

Housing lobbyists complained that the delay will increase the already burgeoning cost of the loans to the Department of Housing and Urban Development and, in turn, to the taxpayer. More than $11 billion in defaulted loans have been assigned to the agency by lenders over the past several years.

Congress' failure to pass the legislation is "very unfortunate" because "the bill is increasing daily" on the loans, said John T. McEvoy, the executive director of the National Council of State Housing Agencies.

The legislation is needed "to stop the hemorrhage of money flowing out of HUD just to maintain this existing inventory of properties, a task for which HUD is ill-equipped," said John Murphy, the executive director of the Association of Local Housing Finance Agencies.

"If this problem isn't dealt with, it's going to impinge on available funding for other priority HUD programs," Murphy said.

The bill was approved by the Senate but stalled in the House, apparently because lawmakers were distracted by other issues, housing lobbyists said. Senate aides made a last-ditch effort in the final days of the congressional session to persuade House lawmakers to take action, but to no avail, according to a congressional aide.

Congress is on the verge of adjourning, but late yesterday Senate leaders announced that the Senate would return next week to debate the so-called Brady handgun bill. The Senate is not expected to take up any other legislative business. The House technically will stay in session until the Senate finishes its business, but no legislative business is scheduled there.

The aide also said that Senate lawmakers will be pushing for early enactment of the legislation next year. The congressional housing committees are expected to spend most of 1994 drafting an omnibus bill to reauthorize the federal housing programs, but Senate lawmakers would prefer not to wrap the HUD measure into that package. Such a move would further delay its enactment, the aide said.

"We would like very much to get it dealt with early" and "outside the reauthorization process," the aide said.

The HUD bill would be significant for the municipal market because earlier this month, a top HUD official said the agency wants state and local governments to buy some of the loans. State and local housing officials have said they expect that tax-exempt multifamily bonds or 501(c)(3) bonds would be issued to rehabilitate the apartments that were built with the loans.

HUD has been unable to sell the loans because of a 1987 law that requires the department to offer subsidies to buyers of the loans under Section 8 of the housing code to ensure that the properties are preserved for low-income tenants. Although it passed the requirement, Congress never appropriated the needed Section 8 funds.

The bill passed by the Senate would ease the subsidy requirement by permitting HUD to use other methods to make sure the projects remain low-income.

The Senate bill also contains a number of other housing provisions, including one that would provide more federal money to state and local governments under the HOME program for the construction of multifamily units.

The provision would end the HOME program's bias toward the rehabilitation of existing housing units and rental assistance. Under current law, states and localities must contribute $1 for every $3 of federal funds received for new construction. But they are required to contribute only $1 for every $4 of federal funds received for rehabilitation or rental assistance.

The Senate bill would bring the matching requirement for new construction in line with the other two categories.

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