[Federal Register Volume 61, Number 222 (Friday, November 15, 1996)]
[Notices]
[Pages 58585-58587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29385]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-4168-N-01]


Notice of Sale of HUD-Held Multifamily Mortgage Loans

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Notice of Midwest sale of multifamily unsubsidized mortgage 
Loans.

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SUMMARY: This notice announces the Department's intention to sell 
unsubsidized mortgage loans (Mortgage Loans), without Federal Housing 
Administration (FHA) insurance. The majority of the Mortgage Loans are 
secured by properties located throughout the Midwest region of the 
United States, with an additional significant concentration located in 
the New York-New Jersey area. The Mortgage Loans will be offered for 
sale on a whole loan basis, in a competitive auction. This notice 
describes the bidding process for these Mortgage Loans. The Mortgage 
Loans will be offered for sale only to qualified bidders.

DATES: Bidders' Information Packages will be available in late October, 
1996 to qualified bidders. Bidding is expected to take place on 
December 12-13, 1996, and closing is expected to take place from late-
December, 1996 to mid-February, 1997.

ADDRESSES AND CONTACTS: Bidders' Information Packages will be available 
from FHA's Financial Advisor, Cushman & Wakefield. Bidders' Information 
Packages and information about individual Mortgage Loans (Bid 
Materials) will be made available only to parties who complete a 
Confidentiality Agreement and Bidder Qualification Statement and are 
deemed qualified bidders. To obtain a Confidentiality Agreement and 
Bidder Qualification Statement contact John Howley at Cushman & 
Wakefield, at 202-467-0600. Bidders' Information Packages will be 
forwarded by regular mail unless a party makes special arrangements to 
receive the information through expedited delivery.
    Asset Review Files for all the Mortgage Loans are expected to be 
available for review by qualified bidders at the due diligence facility 
located at 1800 M Street, N.W., Suite 300-South, Washington, D.C. 
20036, beginning October 28, 1996. The facility will close on or about 
December 11, 1996. The facility will be open to qualified bidders 
between the hours of 9:00 a.m. and 6:00 p.m., Eastern Time, Monday 
through Friday. Access to the facility can be arranged by contacting 
Rick Copeland, at Tradewinds International, Inc., HUD's due diligence 
contractor, at (202) 530-0841 Ext. 29. Asset review files may also be 
ordered from Tradewinds International, Inc. and sent to qualified 
bidders in the manner described in the Bidders' Information Package.

FOR FURTHER INFORMATION CONTACT: Audrey Hinton, Associate Director for 
Program Operations, Office of Multifamily Asset Management and 
Disposition, Room 6160, Department of Housing and Urban Development, 
451 Seventh Street, S.W., Washington, DC 20410; telephone (202) 708-
3730 Ext. 2691. Hearing or speech impaired individuals may call (202) 
708-4594 (TTY). These are not toll-free numbers.

SUPPLEMENTARY INFORMATION:

Status of Mortgage Loans

    The Mortgage Loans encumber properties located in 25 states, with a 
significant number of such properties concentrated in the midwest 
region of the United States, particularly Illinois and Michigan. A 
listing of the specific properties involved in the Sale will be 
included in the Bidders' Information Package.
    The Mortgage Loans have experienced varying levels of delinquency. 
As of September 1, 1996, most of the Mortgage Loans were classified as 
nonperforming or subperforming because they had been delinquent at 
least once within the past 12 months. Several of the Mortgage Loans, 
however, are performing, i.e., they have been current in their monthly 
payments for the last 12 consecutive months. Mortgage Loans included in 
this Sale that are now current may become in default on or before the 
date that title is transferred to the successful bidder, while Mortgage 
Loans included in this Sale that are now in default may become current 
on or before such date.
    Certain Mortgage Loans are subject to provisional workout 
agreements.

The Bidding Process

General

    The Department will offer qualified bidders an opportunity to bid 
competitively on the Mortgage Loans. Bids may be offered for one or all 
of the Mortgage Loans, as well as for any combination of the Mortgage 
Loans. More particularly, a bidder may bid on as many individual 
Mortgage Loans as the bidder chooses. However, no bidder may bid on 
more than 20 pools of Mortgage Loans (i.e., combinations of two (2) or 
more Mortgage Loans). Further, a bidder may condition acceptance of its 
bids upon its being the successful bidder of Mortgage Loans with either 
(or both) a minimum or a maximum aggregate unpaid principal balance. 
The Department will accept those conforming bids that optimize the 
gross proceeds from the Sale.

Bidders' Information Package

    The Bidders' Information Package describes in detail the procedures 
for participating in the Sale and includes bid forms, a loan sale 
agreement (Loan Sale Agreement), and certain

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information concerning each of the Mortgage Loans, such as the unpaid 
principal balance and interest rate. Also included in the Bidders' 
Information Package is a computer diskette with general portfolio 
information and selected data fields related to each Mortgage Loan.
    The Department will distribute the Bidders' Information Packages 
for a period of approximately 6 weeks prior to the date that bids are 
due (Bid Date). We expect Bidders' Information Packages to be available 
on October 23, 1996. The Bidders' Information Package may be 
supplemented from time to time prior to the Bid Date. Interested 
parties may request a Bidders' Information Package as described above.

Bid Dates

    We expect the bidding to take place on December 12-13, 1996. 
Deposits. Bidders must include a 5 percent Initial Deposit with their 
bids. If a bidder submits multiple bids, the Initial Deposit will be 
limited to 5 percent of the bidder's single largest bid amount. The 
Initial Deposit for a bidder who has created a pool or a number of 
pools (but not more than 20 pools as provided above) is limited to 5 
percent of the single largest bid amount of the bidder's pool bids. 
Except as set forth in the Loan Sale Agreement, the successful bidders 
will be notified within three business days after the Bid Date (Award 
Date). An additional deposit (Final Deposit) will be required from each 
successful bidder within 2 business days after the Award Date. The 
Final Deposit when added to the Initial Deposit must total 10 percent 
of the bidder's successful bids. More specifically, if a bidder submits 
multiple individual bids, the Final Deposit when added to the Initial 
Deposit must total 10 percent of the aggregate unpaid principal of all 
of the bidder's successful bids. Similarly, if a bidder submits a pool 
bid or multiple pool bids, the Final Deposit must total 10 percent of 
the aggregate unpaid principal of all of the bidder's successful pool 
bids.

Timeliness and Conformity of Bids and Deposits

    Each bidder assumes all risks of loss relating to its own bidding 
mistakes and its failure to deliver, or cause to be delivered, on a 
timely basis and in the manner specified by the department, each bid 
form, deposit and loan sale agreement required to be submitted by the 
bidder.

Ties for High Bidder

    In the event there is a tie for a high bid, the Department, through 
its Financial Advisor, will contact the parties with the tie bid and 
afford each of them an opportunity to offer a best and final bid. The 
successful bidder will be the one with the highest bid. If a tie 
continues after the best and final offers are submitted or the bidders 
do not respond, or do not respond within the time period established by 
the Department, the successful bidder will be determined by lottery. 
Notwithstanding the above, the Department reserves the right to 
withdraw any Mortgage Loan(s) subject to a tie bid.

Closing

    The Department will assign its interest in a Mortgage Loan to a 
successful bidder at the closing, which is expected to occur no later 
than February 15, 1996. If the successful bidder fails to abide by the 
terms of the Loan Sale Agreement, including paying the Department any 
remaining sums due pursuant to the Loan Sale Agreement and closing on 
an agreed upon date within the time period provided by the Loan Sale 
Agreement, the Department shall retain as liquidated damages the 
Initial and Final Deposit (plus accrued interest) from the successful 
bidder.

    Note. These are expected to be the essential terms of the Sale, 
but are subject to change. Information regarding any such changes 
along with any other supplements to the Bidders' Information Package 
will be made available to parties who request and obtain a Bidders' 
Information Package. The Loan Sale Agreement, which is included in 
the Bidders' Information Package, provides additional details. To 
ensure a competitive bidding process, the terms of sale are not 
subject to negotiation.

Qualification of Bidders/Ineligible Bidders

    Qualified bidders, who are interested parties who have such 
knowledge and experience in financial and business matters so as to be 
capable of evaluating the merits and risks of acquiring the Mortgage 
Loans, and who are not otherwise ineligible to bid (as described 
below), may bid on the Mortgage Loans.
    The following individuals and entities (either alone or in 
combination with others) are ineligible to bid on any one or 
combination of the Mortgage Loans included in the Sale:
    (1) Any individual or entity debarred from doing business with the 
Department pursuant to 24 CFR part 24;
    (2) Any employee of the Department, any member of any such 
employee's household, and any entity controlled by any such employee or 
member of such an employee's household;
    (3) Any person or entity that employs or uses the services of an 
employee of the Department (other than in such employee's official 
capacity) either: (a) who is involved in the Sale, or (b) to assist in 
the preparation of a bid for the Mortgage Loans;
    (4) Any contractor, subcontractor, advisor or consultant (including 
any agent of the foregoing) who performed services for or on behalf of 
the Department in connection with the Sale, or any affiliate of any 
such contractor, subcontractor, advisor, consultant or agent;
    (5) Any individual that was a principal or employee of any entity 
or individual described in paragraph (4) above at any time during which 
the entity or individual performed services for or on behalf of the 
Department in connection with the Sale;
    (6) Any individual or entity that uses the services of any person 
described in paragraph (5) above in preparing its bid on any Mortgage 
Loan(s).
    Furthermore, any entity or individual that served as a loan 
servicer or performed other services for or on behalf of the Department 
at any time during the 2-year period prior to December 12, 1996 with 
respect to any Mortgage Loan included in the Sale is ineligible to bid 
on such Mortgage Loan. The following also are ineligible to bid on such 
Mortgage Loan: (a) any affiliate or principal of such entity or 
individual described in the sentence above, (b) any employee or 
subcontractor of such entity or individual during that 2-year period, 
or (c) any entity or individual that employs or uses the services of 
any other entity or individual described in this paragraph in preparing 
its bid on such Mortgage Loan.

Due Diligence Facility

    During the 6-week period prior to the Bid Date, the due diligence 
facility will be open to prospective qualified bidders, at which the 
Department will provide information such as environmental and title 
reports and market data. The address of the facility is specified 
above. The Department reserves the right to charge a reasonable fee to 
recover its costs in duplicating and forwarding any information 
requested by an interested party, as well as an access fee to the due 
diligence facility, which will be credited to the purchase of any Asset 
Review Files.

Application of Replacement Reserve and Certain Escrows

    If a Mortgage Loan is delinquent at the time of the Sale, to the 
extent the

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Department determines it is permissible, the Department will apply 
funds in the replacement reserve and miscellaneous escrow accounts to 
the amount due to the Department under the Mortgage Loan. Any remaining 
balances in the replacement reserve and any escrow accounts will be 
transferred to the new mortgagee. If a Mortgage Loan is current at the 
time of closing, the funds in the replacement reserve account will be 
returned to the mortgagor in accordance with such terms and conditions 
as may be established by the Department.

FHA Reservation of Rights

    The Department reserves the right to withdraw Mortgage Loans from 
the Sale and to terminate the Sale at any time, for any reason, and 
without liability, prior to the Award Date, without prejudice to its 
right to include any withdrawn Mortgage Loan in a future sale.
    The Department also reserves the right to reject any and all bids, 
in its sole discretion, for any reason, and without liability.
    The Department reserves the right to include in the Sale additional 
Mortgage Loans.

Mortgage Loan Sale Policy

    Almost all of the Mortgage Loans are nonperforming or 
subperforming. All of the Mortgage Loans are unsubsidized, and there is 
no project-based Section 8 assistance on any of the projects. 
Therefore, the Department has determined, pursuant to regulations 
governing FHA mortgage loan sales, published at 24 CFR part 290, 
Subpart B (Mortgage Sale Regulations), that the Mortgage Loans will be 
sold without FHA insurance. The Mortgage Sale Regulations provide for 
the exclusion of delinquent unsubsidized mortgages from sales where it 
appears that (1) foreclosure appears unavoidable, and (2) the project 
is occupied by very low-income tenants who are not receiving housing 
assistance and would be likely to pay rent in excess of 30 percent of 
their adjusted monthly income if the mortgage were to be sold and 
foreclosed (24 CFR 290.35(b)). The Department's interpretation of this 
provision is set forth in the preamble to the February 6, 1996 interim 
rule (61 FR 4580-81). The Department has made an administrative 
determination that the Mortgage Loans do not meet the criteria for 
exclusion. If the Department determines that any Mortgage Loans meet 
such criteria, they will be removed from this Sale.
    The Department selected a competitive auction as the method to sell 
the Mortgage Loans in accordance with the requirements of the Mortgage 
Sale Regulations (e.g., 24 CFR 290.30). This method of sale optimizes 
the Department's return on the sale of these Mortgage Loans, affords 
the greatest opportunity for all qualified bidders to bid on the 
Mortgage Loans, and provides the quickest and most efficient vehicle 
for the Department to dispose of the Mortgage Loans.
    At one time, the Department considered and discussed with industry 
participants a loan sale procedure that afforded the borrowers the 
opportunity to acquire their Mortgage Loans on a noncompetitive basis 
prior to the Department's offering the Mortgage Loans for sale to 
others (Borrower Settlement Option). For the reasons set forth above, 
however, the Department decided to dispose of these Mortgage Loans 
through a competitive auction.

Freedom of Information Requests

    The Department has approved a policy for responding to Freedom of 
Information Act requests for information on the Department's 
multifamily mortgage loan sales. The purpose of this policy is to 
clarify for the public and potential purchasers the types of sales 
information that will be disclosed in connection with the Department's 
multifamily mortgage sales program. The policy strikes a balance 
between the Department's policy of disclosing as much information as 
possible to the public and its interest in minimizing the harm 
premature release of this information will have upon bidders, and the 
harm that release of sensitive and confidential financial information 
would have on the effectiveness of HUD's loan sale programs, and thus, 
on the American taxpayer.
    Given the forgoing, the Department's policy with respect to Freedom 
of Information Act requests is summarized as follows:
    (i) The Department has determined that after the Award Date it will 
disclose the aggregate number of bidders and the aggregate proceeds the 
Department expects from the Sale, as well as the bid information 
materials that the Department provided to the bidders (provided they 
are not subject to a privacy or confidentiality exemption).
    (ii) After all sales are closed the Department will release: (a) a 
list of all who received bid materials, (b) a list of all bidders, (c) 
a list of all winning bidders, and (d) the aggregate amount paid for 
each successful bid on multiple mortgage loans (whether bid as a pool 
or otherwise).
    (iii) No earlier than one year after all of the sales are closed, 
the Department will disclose individual winning mortgage loan bid 
prices.

Scope of Notice

    This notice applies to the Midwest Sale of Multifamily Unsubsidized 
Mortgage Loans, and does not establish the Department's policy for the 
sale of any other mortgage loans.

    Dated: November 8, 1996.
Stephanie A. Smith,
General Deputy Assistant Secretary for Housing, Federal Housing 
Commissioner.
[FR Doc. 96-29385 Filed 11-14-96; 8:45 am]
BILLING CODE 4210-27-P