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VOL. 131 | NO. 104 | Wednesday, May 25, 2016

THDA Resumes Inspections of HUD-Subsidized Apartments

By Bill Dries

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The Tennessee Housing Development Agency plans to inspect at least a dozen apartment complexes in Memphis where federal subsidies pay tenants’ rent.


THDA executive director Ralph Perrey said the agency’s authority to make the inspections resumes in July. And the agency isn’t saying which properties will be visited “so as not to ruin the surprise,” Perrey said Wednesday, May 25, as he announced the resumption of the inspections.

He added the inspections and monitoring of the 49 federally subsidized properties in Memphis will be THDA’s “top priority.”

“It’s a bad idea to leave these properties uninspected for years at a time, as we’ve seen right here in Memphis,” Perrey said. “There is no substitute for having compliance officers on the ground, physically looking through the files and seeing property conditions with their own eyes.”

Perrey added that most property owners in the Performance Based Contract Administration program are “conscientious and diligent in meeting their obligations.”

“A handful, however, have failed to do so – some rather spectacularly,” he said. “The sort of egregious violations many of you have found at some Memphis properties clearly did not arise overnight. They festered over time, and were allowed to fester because no one was coming around to make sure those building owners were living up to their obligations.”

The U.S. Department of Housing and Urban Development suspended inspections of HUD-funded complexes in 2011 because of a lawsuit over who got the contracts to make the inspections.

That suspension is over and THDA is hiring inspectors.

The inspections resume as residents of two Memphis apartment complexes owned by Global Ministries Foundation are in the midst of moving out after HUD cut off rent subsidies to GMF earlier this year.

The cutoff followed HUD inspections of the Warren and Tulane apartments in which both properties failed to meet the minimum score for housing conditions for a second time in less than a year.

GMF is also in General Sessions Environmental Court on local code violations.

Meanwhile, a federal court receiver has been appointed to oversee the sale of both complexes. The Bank of New York sought the receiver as part of a larger lawsuit over the financing of GMF’s purchase of both apartment communities.

The bank’s filings in the case allege “the appearance of fraud” in the proceeds from the bonds used to finance Global Ministries’ purchase of Warren and Tulane. The bonds were issued by the Shelby County Health, Educational and Housing Facility Board, and Bank of New York is the trustee for the bond holders.

GMF bond ratings for those and other HUD subsidized complexes owned by the Memphis foundation have been downgraded twice by S&P Global based on a belief that the problems and conditions at Warren and Tulane will likely become factors for the other GMF Memphis properties.

THDA de-authorized the Memphis Health and Ed Board from issuing affordable housing bonds for two weeks in April until a new interim director was appointed for the board.

At the time, Perrey said he was concerned about the status of the GMF bonds issued by the board and publicity about the bond financing.

PROPERTY SALES 36 154 6,546
MORTGAGES 34 94 4,129
BUILDING PERMITS 201 554 15,915
BANKRUPTCIES 43 126 3,396