usc 12 § 1715z–11
Sale to cooperatives of multifamily housing projects acquired by Secretary; acceptance of purchase money mortgage for sale or insurance of mortgage; principal amount of mortgage; expenditures for repairs, etc., prior to sale (BANKS AND BANKING (12 U.S.C.))
Operative Text
In any case which the Secretary sells a multifamily housing project acquired as the result of a default on a mortgage which was insured under this chapter to a cooperative which will operate it on a nonprofit basis and restrict permanent occupancy of its dwellings to members, or to a nonprofit corporation which operates as a consumer cooperative as defined by the Secretary, the Secretary may accept a purchase money mortgage, or upon application of the mortgagee, insure a mortgage under this section upon such terms and conditions as the Secretary determines are reasonable and appropriate, in a principal amount equal to the value of the property at the time of purchase, which value shall be based upon a mortgage amount on which the debt service can be met from the income of property when operated on a nonprofit basis after payment of all operating expenses, taxes, and required reserves; except that the Secretary may add to the mortgage amount an amount not greater than the amount of prepaid expenses and costs involved in achieving cooperative ownership, or make such other provisions for payment of such expenses and costs as the Secretary deems reasonable and appropriate. Prior to such disposition of a project, funds may be expended by the Secretary for necessary repairs and improvements.
Under 12 U.S.C. § 1715z–11, when the federal government (through the Secretary of HUD) has taken over a multifamily housing project after a mortgage default, it may sell that project to a qualifying cooperative or nonprofit consumer cooperative at a price tied to the property's income-based value rather than a conventional market appraisal. The purchase can be financed through a government-accepted purchase money mortgage or a federally insured mortgage, with the principal sized so that debt service can realistically be covered by the property's nonprofit operating income after expenses, taxes, and reserves. The Secretary may also allow the mortgage amount to include certain cooperative conversion costs, and may fund necessary repairs before the sale takes place.
Plain English — not legal advice.
Operators and developers pursuing acquisition of a HUD-held multifamily property under 12 U.S.C. § 1715z–11 should understand that eligibility turns on organizational structure — the acquiring entity must be a cooperative restricting permanent occupancy to members, or a qualifying nonprofit consumer cooperative as defined by the Secretary. A compliant transaction typically involves documenting the property's projected nonprofit operating income, since that income stream drives the allowable mortgage principal rather than a standard appraisal. Operators generally account for prepaid expenses and cooperative conversion costs early in the process, as those costs may be incorporated into the mortgage amount at the Secretary's discretion.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
Residents living in a multifamily project that HUD has acquired and is considering selling under 12 U.S.C. § 1715z–11 may have an interest in whether the purchasing entity qualifies as a bona fide cooperative or nonprofit consumer cooperative, since the statute ties occupancy rights to membership in such an organization. Tenants who believe a sale or conversion is not proceeding in accordance with this provision can raise concerns with their local HUD field office or a tenant-rights organization familiar with federally assisted housing. General enforcement paths include filing inquiries or complaints with HUD directly, or consulting a housing advocacy organization to understand how the provision's requirements interact with any existing occupancy rights.
General guidance for tenants — not legal advice for your specific situation. Consult a tenant-rights organization or attorney for advice on your case.
Generated September 13, 2026 — auto-generated, not yet human-reviewed. See /transparency for methodology.
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