Franconia Associates v. United States, 536 U.S. 129, 6 (2002)

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Opinion of the Court



Under 515 and 521 of the Housing Act of 1949, 76 Stat. 671, 82 Stat. 551, as amended, 42 U. S. C. 1485, 1490a, the FmHA makes direct loans to private, nonprofit entities to develop or construct rural housing designed to serve the elderly and low- or middle-income individuals and families.1 Section 515 loans require the borrower, inter alia, to execute various loan documents, including a loan agreement, a promissory note, and a real estate mortgage.

Before December 21, 1979, each petitioner entered into a loan agreement with the FmHA under 515 and 521 "to provide rental housing and related facilities for eligible occupants . . . in rural areas." App. to Pet. for Cert. A165. In the loan agreements, each petitioner certified that it was unable to obtain a comparable loan in the commercial market. See id., at A177. The loan agreements contained various provisions designed to ensure that the projects were affordable for people with low incomes. Those provisions included restrictions as to eligible tenants, the rents petitioners could charge, and the rate of return petitioners could realize, as well as requirements regarding the maintenance and financial operations of each project. See id., at A170-A174. Each loan agreement also specified the length of the loan, ordinarily 40 or 50 years.

The promissory notes executed by petitioners required payment of the principal on each mortgage in scheduled installments, plus interest. See id., at A176-A177. The

1 Since 1994, the program has been entrusted to the Rural Housing Service, known between 1994 and 1996 as Rural Housing and Community Development Services. That agency was created by the Secretary of Agriculture under authority provided by the Department of Agriculture Reorganization Act of 1994, 108 Stat. 3219, as amended, 110 Stat. 1128, 1131. See also 7 CFR 2003.18 (2002) (functional organization of Rural Housing Service). Our references to the FmHA should be understood to include these successor agencies.

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