[Federal Register Volume 62, Number 129 (Monday, July 7, 1997)]
[Notices]
[Pages 36298-36301]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17673]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4255-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 Sale of Health Care Mortgage Notes.

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SUMMARY: This notice announces the Department's intention to sell 
approximately 32 health care related unsubsidized mortgage loans 
(Mortgage Loans), without Federal Housing Administration (FHA) 
insurance. The loans are located throughout the United States and have 
an aggregate unpaid principal balance exceeding $123 million. The 
majority of the mortgages are classified as subperforming or 
nonperforming. There are no subsidized mortgages in this sale. The 
Mortgage Loans will be offered for sale on a whole loan basis, in a 
competitive sealed bid auction (the ``Sale''). FHA will assign its 
interest in each mortgage loan to the successful bidder unless the 
successful bidder is the mortgagor and requests FHA to release the 
mortgage loan rather than assign its interest. This notice describes 
the bidding process for these Mortgage Loans. The Mortgage Loans will 
be offered for sale only to qualified bidders.


[[Page 36299]]


DATES: Bidders' Information Packages (``BIP'') have been available to 
qualified bidders since May 29, 1997. Bidding is expected to take place 
on July 8-9, 1997, and closing is expected to take place from July 21, 
1997 to August 29, 1997.

ADDRESSES AND CONTACTS: Bidders' Information Packages have been 
available from FHA's Financial Advisor, Cushman & Wakefield on or about 
May 29, 1997. Bidders' Information Packages and information about 
individual Mortgage Loans (Bid Materials) will be made available only 
to parties who complete a Confidentiality Agreement, Bidder 
Qualification Statement, BIP Order Form, and are deemed qualified 
bidders. To obtain a Bidders' Information Package, contact John G. 
Howley at Cushman & Wakefield, 1875 Eye Street, NW, Suite 700, 
Washington, DC 20006, Telephone Number 202-467-0600/Fax Number, 202-
293-9049. Bidders' Information Packages will be forwarded by regular 
mail to bidders determined to be qualified unless a party makes special 
arrangements to receive the information through one day delivery by 
specifying such on the BIP Order Form.
    Asset Review Files for all the Mortgage Loans have been available 
for review by qualified bidders since June 2, 1997 at the due diligence 
facility with HUD's due diligence contractor, Gardiner, Kamya & 
Associates. The facility is located at 1500 K Street NW., Suite 225, 
Washington, DC 20005. The facility will close on or about July 7, 1997. 
The facility will be open to qualified bidders between the hours of 
9:00 a.m. and 6:00 p.m., EDT, Monday through Friday. Access to the 
facility can be arranged by contacting Wayne Thornton, at Gardiner, 
Kamya & Associates, at (202) 783-2383. Asset review files may also be 
ordered from Gardiner, Kamya & Associates and sent to qualified bidders 
in the manner described in the Bidders' Information Package. No effort 
has been made to verify the accuracy or completeness of any information 
or items that might be found in such documents. HUD, FHA, its 
employees, its financial advisor and subcontractors make no 
representation or warranties as to the accuracy or completeness of such 
information. Bidders are strongly advised to conduct their own due 
diligence.

FOR FURTHER INFORMATION CONTACT: James Mitchell, Acting Director, 
Special Projects Division, Office of Multifamily Asset Management and 
Disposition, Room 6160, Department of Housing and Urban Development, 
451 Seventh Street SW., 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

    FHA is selling approximately 32 health care related mortgage loans 
with an aggregate unpaid principal balance (UPB) exceeding $123 
million. The Mortgage Loans encumber properties located in 17 states 
throughout the United States, which include: Alabama, Arizona, 
California, Illinois, Indiana, Massachusetts, Maryland, Michigan, North 
Carolina, New Jersey, New York, Oklahoma, Pennsylvania, Rhode Island, 
Tennessee, Texas and Wisconsin. A listing of the specific properties 
involved in the Sale will be included in the Bidders' Information 
Package.
    The majority of the Mortgage Loans are classified as subperforming 
or nonperforming because they had been delinquent at least once within 
the 12 months preceding May 1, 1997. Certain Mortgage Loans are subject 
to provisional workout agreements. The collateral securing these loans 
is composed of nursing homes facilities, congregate care retirement 
facilities and a rehabilitation and specialty care facility.

The Bidding Process

General

    The Department will offer qualified bidders an opportunity to bid 
competitively on the Mortgage Loans. The bidding will be done through a 
sealed bid auction process. Bidders will be afforded the opportunity to 
bid on one or all of the Mortgage Loans as well as on any combination 
of Mortgage Loans, i.e., bidders may create their own pools by 
combining 2 or more Mortgage Loans and submit bids on such basis. Each 
bidder shall be permitted to submit multiple bids. However, bidders may 
bid on no more than 20 pools of Mortgage Loans. In addition, a bidder 
will be permitted to establish a floor for the minimum aggregate Unpaid 
Principal Balance of individual mortgages that it is willing to 
purchase and/or to establish a ceiling by limiting the multiple bids 
which may be accepted by HUD to a specific aggregate dollar amount. 
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). The winning bids will be determined through the use of an 
optimization model, created by Lucent Technologies, which evaluates 
conforming bids and selects those bids which maximize the gross loan 
sales proceeds to FHA. FHA reserves the right to accept or reject any 
or all bids, or withdraw any or all assets from the offering at its 
sole and absolute discretion.

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, and certain 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). The Bidders' Information Packages have been available 
since May 29, 1997. 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 July 8-9, 1997.

Deposits

    Bidders must include a 5 percent Initial Deposit, to be submitted 
in accordance with instructions in the Bidders Information Package. If 
a bidder submits multiple bids, the Initial Deposit will be limited to 
5 percent of the bidder's single largest bid amount. 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,

[[Page 36300]]

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 August 29, 1997. 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 Title 24 of the Code of Federal Regulations, 
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 individual 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 May 31, 1997 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 5-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 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.

[[Page 36301]]

    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.

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 foregoing, 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 Sale of Health Care Mortgage Notes, and 
does not establish the Department's policy for the sale of any other 
mortgage loans.

    Dated: July 1, 1997.
Stephanie A. Smith,
General Deputy Assistant Secretary for Housing-Federal Housing 
Commissioner,
[FR Doc. 97-17673 Filed 7-1-97; 4:29 pm]
BILLING CODE 4210-27-P