WASHINGTON -- The Department of Housing and Urban Development has postponed indefinitely a Sept. 23 auction that was supposed to launch a series of sales of federaly insured 40-year multifamily housing loans to the private sector, a HUD official said yesterday.
The loan sales are being delayed because "we need to talk about it some more and iron out some concerns," a HUD official said. The official refused to say what problems have arisen that triggered the delay. The postponement also means a brochure detailing the auction process, which HUD expected to release by mid-September, is also on hold.
The auctions had been planned by HUD to carry out a law enacted last year. Before that statute was passed, lenders of the multifamily loans had been scheduled to start exercising put options and turn the loans back to HUD. The new law allows HUD to sell the loans to the private sector, so the department can keep the loans off its books.
Some of the loans were financed using tax-exempt multifamily housing bonds, about $1 billion of which were insured by Municipal Bond Investors Assurance Corp. The bonds carry maturities that coincide with the timing of the put option, and MBIA officials have said the loan sales may offer a slightly less risky way of paying off the bonds than would be the case with the put option.
The loans to be auctioned were originated between the late 1960s and 1983 under Section 221 of the Housing Code to provide low-income multifamily housing units. HUD offered the option to put the loans back to the agency after 20 years, because it was having difficulty encouraging lenders to make loans with 40-year maturities.
As the 20th anniversary for many of the loans approached last year, HUD became concerned about the expense of taking back the loans. Congress answered that concern by passing the legislation permitting the auctions to take place.
HUD was already several months behind schedule when it announced the Sept. 23 auction date. The agency originally had planned to hold the first loan sale sometime during the first half of 1991. Yesterday, the HUD official said the department wants to get the auction process going well before the end of the year, but could not be more specific.