In a Section 236(e)(2) Decoupling the mortgage is prepaid but the IRP survives, and the price is a Use Agreement recorded in FIRST position running to mortgage maturity plus five years

s236.affordability_period.decoupling_use_agreement_runs_five_years_past_the_irp · v1.0.0

Decoupling is HUD's word for a transaction in which the Section 236 mortgage is prepaid while the interest reduction payment stream survives and is applied to debt service on a new loan - the IRP is severed, or 'decoupled', from the original mortgage. The authority is section 236(e)(2), which provides that a refinanced project keeps its IRP only if the owner enters binding commitments, applicable to every subsequent owner, to keep operating under all low-income affordability restrictions for the term of the IRP plus five years. HUD implements that through a recorded Use Agreement with four features an operator must plan around. It runs until the MATURITY DATE OF THE EXISTING SECTION 236 MORTGAGE PLUS FIVE YEARS - or five years past the termination of the IRP where a lower monthly IRP stretches the subsidy over a longer term. It must be RECORDED IN FIRST SECURITY POSITION, which constrains the new financing. It requires the project to maintain any use restrictions imposed by other Federal assistance - LIHTC, HOME, CDBG - for at least as long as the Decoupling Use Agreement, so a layered property's shortest restriction is pulled up to HUD's. And it requires the owner to accept otherwise-eligible prospective tenants holding tenant-based Section 8 vouchers. Where the project has project-based Section 8, the Use Agreement further requires acceptance of that assistance for as long as HUD offers it during the term, and requires the project to stay low-income housing under the Agreement for IRP if the project-based assistance is terminated or not renewed.

Confidence

high

Effective from

1999-10-20

Consequence model

contract remedy

Last reviewed

2026-08-22