WASHINGTON -- The Department of Housing and Urban Development is planning to allow state and local governments to buy some of the billions of dollars of nonperforming multifamily housing loans in its portfolio, a top HUD official said this week.

"I would hope you will be knocking on our door," Nicolas Retsinas, the commissioner of the Federal Housing Administration, told members of the Association of Local Housing Finance Agencies during their fall educational conference in New York on Tuesday.

Originally, HUD planned to sell the loans in pools to Wall Street investors. But state and local housing officials prevailed on HUD to give them a crack at purchasing individual loans, so that the housing officials could refurbish deteriorated apartments built with the loans.

Much of the rehabilitation would be financed with tax-exempt multifamily housing bonds or 501(c)(3) bonds, the housing officials said. They have estimated that upwards of $11 billion in loans could eventually be sold.

Robin Salomon, a lobbyist with the 1300 Group in Washington, told the housing association that HUD "has expressed a real willingness to go ahead, move forward, and negotiate with you, one-on-one, not in a pool."

Salomon said state and local housing officials who want to buy a non-performing loan from HUD should begin now to find the projects in their jurisdictions financed with those loans. He advised the officials to make a Freedom of Information Act request to HUD seeking "all the insured deals in your jurisdiction, current or defaulted, subsidized or not, name and address."

The loans HUD intends to sell were insured by the agency and assigned to HUD when borrowers defaulted. 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.

Before beginning the loan sale process, HUD is waiting for Congress to pass legislation that the agency proposed to ease the subsidy requirement by allowing HUD to use other methods to guarantee that the projects remain low-income. The Senate Banking Committee passed the bill last month, and the House Banking Committee passed a slightly narrower version last week.

A Senate housing aide said he hopes Congress can take final action on the legislation before adjourning for the year. Adjournment is expected late this week or early next week.

Retsinas also told the housing association he hopes to reinvigorate the Federal Housing Administration through both the loan sales and a new insurance program the department plans to propose in the near future. Under the program, state and local housing agencies would share the insurance risk on housing loans backed by the federal government.

"I want you to know that I did not come to Washington, D.C., to preside over the demise of the Federal Housing Administration," Retsinas said.

When he arrived at HUD earlier this year, Retsinas said he instigated a thorough accounting of the FHA's housing insurance programs, and was concerned by what he found. One of the startling discoveries was that 27% -- that is, nearly $12 billion -- of the FHA's insurance in force at the time was at risk," Retsinas said.

"We are on the precipice of a major crisis for the American taxpayer, and more importantly for the mission that [state and local housing officials] undertake," he said. "If we don't take care of business and deal with these issues, then we're not going to be trusted to develop and design new housing programs."

In his former position as executive director of the Rhode Island Housing and Mortgage Finance Corp., Retsinas lobbied Congress to permanently extend the low-income housing tax credit and the tax exemption for mortgage revenue bonds. Legislation was enacted in August to make the two tax breaks permanent.

Retsinas told the housing association that given ever tightening federal budget constraints, it was a stroke of luck that the housing community won the permanent extensions in 1993.

"If we hadn't made it under the window [this yearl, I'm not sure the window would have opened again," Retsinas said. "It is a very, very, very. difficult budget environment. I'm not sure the window will open again for that kind of program."

Retsinas said he has "seen some of the early numbers on the fiscal year 1995 budget, and they're pretty frightening." He did not elaborate.

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