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092408 1 (1972-03-17)

handle is hein.gao/gaobacwhq0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 CIVIL DIVISION 7 1972 LM092408 Dear Mr. Hyde: Our survey of rehabilitation loan activities carried out under section 312 of the Housing Act of 1964, as amended, has shown that the Department of Housing and Urban Development (HUD) generally makes such loans for the maximum 20-year period allowable to borrowers who apparently could repay their loans over considerably shorter periods. We believe that there is a need for HUD to establish guidelines providing fcai shorter loan repayment periods than the statutorily authorized 20-year maximum where the borroiers are financially able to repay the loans in less time. Our survey was made at the HUD Central Office, the Chicago Regional Office, and the Los Angeles Area Office. At the Chicago and Los Angeles offices, we reviewed 65 loans to individuals in projccts uisisteea udy 16o iuuci public agencies. The section 312 rehabilitation loan program was established to help property owners finance repairs and improvements to their prop-. erties. A rehabilitation loan may be made to an owner of property located in an area which is receiving Federal financial assistance under programs such as urban renewal, neighborhood development, and code enforcement. A loan made to an owner-occupant of a structure containing one to four dwelling units may include an amount necessary to refinance existing indebtedness secured by the structure if 20 percent of the owner-occupant's average monthly income would not be sufficient to make monthly payments on both the (1) rehabilitation loan needed to rehabilitate the property and (2) other indebtedness secured by the property. A loan may be made in an amount up to $12,000 per dwelling unit-- $17,400 in high-cost areas. Fhe loan shall bear interest at a rate not to exceed 3 percent per annum. The term of a loan may not exceed 20 years or three fourths of the remaining economic life of the structure after rehabilitation, whichever is less. Neither the legisiation nor HUD regulations provide guidance as to whether, or under what conditions, HUD officials should consider making loans with repayment periods of less than 20 years. Consequently,

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