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Agenda

Applying for AHP Competitive Funds Federal Home Loan Bank of Atlanta June 19, 2013 Joel Brockmann Rental Production Manager Community Investment Services. Agenda. What is the AHP Competitive Program? Focus statement What makes AHP different than other funders? Uses of AHP funds

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Agenda

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  1. Applying for AHP Competitive FundsFederal Home Loan Bank of AtlantaJune 19, 2013Joel BrockmannRental Production ManagerCommunity Investment Services

  2. Agenda • What is the AHP Competitive Program? • Focus statement • What makes AHP different than other funders? • Uses of AHP funds • Eligible project types • Why apply for AHP funds? • Sponsor • Member • How does the AHP Competitive Program work? • Application Criteria • Threshold • Scoring • Underwriting • Compliance / Risk Management • Questions 2

  3. Focus Statement The primary focus of the Bank’s AHP is to support the community investment finance needs of our members. The Bank’s AHP Competitive and AHP Set-aside programs further the Bank’s Strategic Plan by delivering timely gap funds that enable our members to better manage transactional credit risk and enhance their extension of credit to ready and viable affordable housing finance opportunities. The AHP Competitive program scoring guidelines and the AHP Set-aside program product requirements herein further the Bank’s AHP focus statement and promote the current priorities: very-low income, increased supportive housing, and AHP leveraging. 3

  4. What makes AHP different than other sources of funds? • Equity-like funding • No interest accrues • No expectation of repayment • Secured with a note and security instrument to ensure compliance through the affordability period • 5 years for ownership • 15 years for rental • Maximum 80% of AMI • Subsidized advances are also available 4

  5. Uses of AHP funds • Acquisition, rehabilitation, or construction of eligible housing • Residential only (not commercial) • AHP cannot be used for capitalized reserves, furnishings, or to provide support services 5

  6. Eligible project types • Rental or ownership • Rental projects: 20% of the units must be for Very Low Income households (50% of AMI or below) • New construction or rehabilitation • Single family or multifamily • Owner-occupied rehabilitation • Downpayment assistance 6

  7. Agenda • What is the AHP Competitive Program? • Focus statement • What makes AHP different than other funders? • Uses of AHP funds • Eligible project types • Why apply for AHP funds? • Sponsor • Member • How does the AHP Competitive Program work? • Application Criteria • Threshold • Scoring • Underwriting • Compliance / Risk Management • Questions 7

  8. Why apply for AHP funds? • Sponsors • Enables the extension of credit • Reduces loan risk • Compatible with public or private debt and equity • Provides equity for difficult to develop / critical need projects • Magnet to create new relationships 8

  9. Why apply for AHP funds? • Members • Enables member to achieve their business objectives • Business opportunities • Commercial / construction loans • First mortgage originations • Reduces loan risk • Public perception / public relations • CRA and compliance friendly • Stimulates real estate activity and economic development 9

  10. Agenda • What is the AHP Competitive Program? • Focus statement • What makes AHP different than other funders? • Uses of AHP funds • Eligible project types • Why apply for AHP funds? • Sponsor • Member • How does the AHP Competitive Program work? • Application Criteria • Threshold • Scoring • Underwriting • Compliance / Risk Management • Questions 10

  11. How does the AHP Competitive Program work? • Overview • One round per year • Opening approximately 30 days prior to the application deadline • Submitted through AHP Online, the web-based application intake, underwriting, and scoring system accessed through the FHLBank Atlanta website • All applications are submitted at the same time • Scored competitively on a 100 point scale • All applications include a Sponsor and a Member 11

  12. How does the AHP Competitive Program work? • Schedule • Underwriting: 3-4 months • Upon board of directors approval, awards are announced and applicants are notified • Milestone dates: • 6 months – zoning documentation • 12 months – other funding commitments • 18 months – start construction / take down AHP funds* • 36 months – complete the project • * Sponsors have 36 months to take down AHP funds for ownership projects that are funded at homebuyer closing 12

  13. Agenda • What is the AHP Competitive Program? • Focus statement • What makes AHP different than other funders? • Uses of AHP funds • Eligible project types • Why apply for AHP funds? • Sponsor • Member • How does the AHP Competitive Program work? • Application Criteria • Threshold • Scoring • Underwriting • Compliance / Risk Management • Questions 13

  14. Application Criteria2013 • Threshold Criteria • Application Certification • Include signatures, disclosures, and history / experience • Sponsor Qualified and Able • Nobody on the development team is on the AHP suspension list • Site control • By the sponsor or the project owner • Sponsor must have an ownership interest in the project throughout the compliance period • Except for owner-occupied rehabilitation, downpayment assistance, and foreclosure recovery projects 14

  15. Application Criteria2013 • Threshold Criteria (cont.) • 20% of funding sources must be committed by an unrelated third party • Permanent debt • Construction debt • First mortgage loan • Line of Credit • Equity commitments • LIHTC allocation • Bond inducement • Capital campaigns • Outstanding debt 15

  16. Application Criteria2013 • Threshold Criteria (cont.) • Committed funding does not include: • AHP subsidies • Deferred developer fee • Sponsor equity • Sponsor loans, including sponsor-provided first mortgages • Construction cost form completed • Physical Needs Assessment (PNA) information • Construction type, scope, quality and location • Replacement reserves analysis 16

  17. Application Criteria2013 • Threshold Criteria (cont.) • Changes of location are generally not allowed • Changes of sponsor are generally not allowed • Organizations or individuals that have received FHLBank Atlanta sponsorships or charitable contributions within the past 12 months are not eligible to receive AHP funds 17

  18. Application Criteria2013 • Scoring Criteria: Donated Government Owned or Other Property • 5 points / variable • Government property sold for a project, or • Property donated by a private party at a nominal price • At least 25% of the units, land, or land lots • Owner projects: • 5 points x % of donated lots • Rental Projects • 5 points x % of donated units or 5 points x % of total land donated 18

  19. Application Criteria2013 • Scoring Criteria: Non-profit or Government Sponsor • 5 points / variable • Rental Projects • 1 point when the non-profit sponsor has an ownership interest through the retention period • 4 additional points when the non-profit sponsor has a controlling interest through the retention period 19

  20. Application Criteria2013 • Scoring Criteria: Non-profit or Government Sponsor (cont.) • 5 points / variable • Ownership projects – 1 point each for a maximum of 5 points • Marketing and Outreach • Property acquisition • Pre-development • Construction / rehabilitation • Qualifying borrowers for home mortgages • Providing or arranging permanent mortgage financing 20

  21. Application Criteria2013 • Scoring Criteria: Targeting • 20 points / variable • Weighted average • Cannot be self-scored • Rental compared to rental, ownership compared to ownership • Income categories: • Moderate: >65%-80% of AMI • Low: >50%-65% • Very Low: 50% or less of AMI Targeting Points 21

  22. Application Criteria2013 • Scoring Criteria: Housing for Homeless Households • 5 points / fixed • 20% of the units are reserved for minimum of six month occupancy • HUD definition of “homeless households” 22

  23. Application Criteria2013 • Scoring Criteria: Empowerment Activities • 5 points / variable 23

  24. Application Criteria2013 • Scoring Criteria: Member Financial Participation • 15 points / fixed • Minimum 5% of total development costs • Permanent or construction financing • Debt or equity • Credit must be extended / closed 24

  25. Application Criteria2013 • Scoring Criteria: Project Readiness • 10 points / fixed • Rental (non-LIHTC) • 100% of non-AHP permanent sources committed • Rental (9% LIHTC or 4% LIHTC without bonds) • Tax credits awarded by state allocating agency • Rental (4% LIHTC with or without bonds) • Bond inducement resolution or equivalent • Ownership (new construction / rehabilitation with sale) • 75% of units presold; for DPA 100% of the homebuyers identified and income qualified • Owner-Occupied Rehabilitation (with no sale) • 75% of the units identified, including cost specifications / cost breakdown / owners income eligible 25

  26. Application Criteria2013 • Scoring Criteria: Supportive Housing / Special Needs • 5 points / fixed • 50% increase in supply and 100% of units reserved for special needs populations • Mentally or physically disabled, persons recovering from physical or substance abuse, people with AIDS 26

  27. Application Criteria2013 • Scoring Criteria: Foreclosure Recovery • 5 points / fixed • 75% of the units in the project are foreclosed • Not application to non-residential properties • Site control not required at applicable for ownership projects only 27

  28. Application Criteria2013 • Scoring Criteria: Leveraging • 10 points / fixed • Projects in which AHP funds are less than or equal to 10% or less of total permanent sources 28

  29. Application Criteria2013 • Scoring Criteria: Subsidy per Unit • 10 points / variable • Weighted average • Cannot be self-scored • >=$30,000 per unit = 0 points Subsidy Per Unit Points 29

  30. Application Criteria2013 • Scoring Criteria: Community Stability • 5 points / variable • 2 points for the rehabilitation of vacant or abandoned properties • Minimum 60% of units are vacant or abandoned • 2 points x % of vacant or abandoned units • Does not include vacant land • 2 points for projects located in a neighborhood targeted for stabilization • Neighborhood stabilization plan approved by a unit of state or local government • Targeted for receipt of state or local government funding or support services 30

  31. Application Criteria2013 • Scoring Criteria: Community Stability (cont.) • 1 point for projects that do not displace existing low- to moderate-income households • Displacement may be allowed if the sponsor has a relocation plan for the residents • Does not apply to new construction projects on previously undeveloped properties 31

  32. Application Criteria2013 • Underwriting • Reasonable Cost • Based on Marshall & Swift, RS Means or other industry construction cost data • Including remaining useful life / replacement reserves analysis • Developer Fee • Max. 15% of total development cost net of: • Acquisition costs • Capitalized reserves • Developer fee • Includes fees paid to consultants for activities normally done by the developer • No fees allowed if no transfer of ownership • AHP cannot replace owner equity or deferred developer fee if construction financing has closed 32

  33. Application Criteria2013 • Underwriting (cont.) • Builder overhead, profit and general requirement • Maximum 16% of hard cost, net of builder overhead, profit and general requirements • Capitalized Reserves • Maximum 9 months operating expenses (net of reserves in operating expenses) plus 9 months of hard debt service • Not allowed unless lender or LIHTC investor required • Can defer to published guidelines for projects using state administered funding • Soft Costs • Maximum 28% for rental projects, 25% for ownership projects, 20% for owner-occupied rehabilitation 33

  34. Application Criteria2013 • Underwriting (cont.) • Debt coverage ratio • 1.15 - 1.45 • Alternate need for subsidy test for projects with no hard debt or outside these parameters • Net cash flow • Max. 15% • Management Fees • 5% - 9% of gross revenue • Replacement Reserves • $200-$350 per unit per year • Not allowed unless lender or LIHTC investor required 34

  35. Application Criteria2013 • Underwriting (cont.) • Market feasibility • Defer to market feasibility approved by the state if using state-administered funding 35

  36. Agenda • What is the AHP Competitive Program? • Focus statement • What makes AHP different than other funders? • Uses of AHP funds • Eligible project types • Why apply for AHP funds? • Sponsor • Member • How does the AHP Competitive Program work? • How do I apply for AHP funds? • Threshold criteria • Scoring • Underwriting • Compliance / Risk Management • Questions 36

  37. Compliance / Risk Management 37

  38. Compliance/ Risk Management • Members must know the borrower (sponsor / homeowner / homebuyer) and must conduct their own due diligence • Members and Project Sponsors shall establish and maintain adequate and efficient internal controls, policies and procedures, to assure an effective system for the prevention, detection and reporting of fraud or abuse in connection with any element of the AHP Competitive transaction including but not limited to the appropriate countersignatures and notarization of documents. • Members and Project Sponsors shall notify the Bank promptly after discovery or notice of any material change, either positive or negative, in the financial condition, operations, properties or prospects of any material party associated with the transaction (including whether any material party to the unit has lost their requisite license or been suspended by any applicable government agency, or has otherwise been barred from participation in any affordable housing program), or any event which has or may have a material impact on the transaction.

  39. Compliance/ Risk Management • Members and Project Sponsors represent and warrant that all documents and other information delivered to the Bank are and will be true, complete and correct in all material respects at the time of delivery to the Bank, and such documentation is materially consistent with corresponding documentation and information provided to other funding sources.

  40. Compliance/ Risk Management Non-compliance to program requirements results may lead to: • Placement on FHLBank Atlanta’s Watch List • Restrictions on future applications • Recapture of AHP Competitive funds • Suspension from FHLBank Atlanta’s community investment programs

  41. 2014 AHP Competitive Round • Look for an announcement for the 2014 AHP Competitive Round shortly after the conclusion of the 2013 round • Schedule • Any scoring or underwriting updates • Please provide a business card if you want to be on the announcement mailing list

  42. Helpful Resources FHLBank Atlanta website: www.fhlbatl.com Affordable Housing Program Implementation Plan www.fhlbatl.com/docs/cis/ahp-implementationplan.pdf Project Sponsor Registration Instructions www.fhlbatl.com/docs/cis/ahp-sponsor-registration.pdf Affordable Housing Program Retention Agreement Rider and Instructions www.fhlbatl.com/docs/cis/ahp-retention.pdf 42

  43. Questions? ? ? ? 43

  44. What Can We Do to Help Advance Your Success Story? 44

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