HUD Section 236 Loans
HUD Section 236 Loans
1. HUD Section 236 loans
2. The Department of Housing and Urban Development (HUD), a department of the U. S. Government, provides these loans. The idea of HUD arose largely out of the U. S. Housing Act of 1937 and, nearly 30 years later, in 1965, was recognized as a Cabinet-level governmental agency. HUD's main aim is to increase homeownership, support community development and increase access to affordable housing without discrimination.
A brief look at HUD's history provides backup of this important mission. In the last 41 years, HUD has created many initiatives similar to Section 236 loans with the primary goal of increasing American homeownership and affordability. A few of these initiatives include: Ginnie Mae, Indian Housing Act, Community Development Block Grant (CDBG), Mark-to-Market Program, Fair Housing Initiatives Program and Home Equity Conversion Mortgage (HECM) Program.
3. Section 236 loans were created to help aid multi-family housing projects by lowering mortgage payments. Section 236, initiated in 1968 by the US Government in cooperation with HUD, provides applicable housing projects (multi-family buildings) a subsidy to help participants unable to afford typical mortgage payments of monthly principal, interest and mortgage insurance, if any. The maximum discount was set at the difference between the total monthly mortgage debt (listed above) on the outstanding balance at the market rate vs. The monthly mortgage payment needed under an interest rate of 1 percent.
Every tenant in the building is required to pay the basic rental charge (amount necessary to cover operating expenses plus debt servicing using the 1 percent interest rate) of their unit or 30 percent of monthly income, whichever is higher. All applicable contracts on or before January 1973 may still be amended using this criteria. People that need this product are ones that have fallen behind on mortgage obligations and/or their monthly interest or principal payments have increased to unpayable levels. For folks that qualify (generally lower-income larger families and extended families), this assistance could mean the difference between keeping their home and foreclosure or even from being counted among the growing number of homeless individuals in America.
4. In terms of HUD's point of view, it should be willing to participate if funds abound in order to maintain many of it's clean neighborhood and fair and affordable housing initiatives, which are all part of it's greater mission: to make homeownership affordable for all Americans.