PREPAYMENTS

1. PREPAYMENTS 2014 ARHC-AHMA Convention Yakima, WA _____________________________________________________________________________

2. PREPAYMENT – What is it? • What is prepayment? • When a borrower (owner) pays off their USDA Rural Development loan early • To protect the supply of affordable housing and ensure that tenants do not suffer from rent overburden or the loss of their unit, borrowers (owners) need USDA approval before prepaying • USDA may offer incentives to the borrower to encourage them not to pay off early _____________________________________________________________________________

3. PREPAYMENT – Who can Prepay? • Borrowers with loans approved prior to December 15, 1989 may be eligible to prepay • Loans approved on/after December 15, 1989 are not eligible to prepay. • Incentives to avert prepayment have been on hold since August 2012 pending re-write of the prepayment procedure • EXCEPTION: Borrowers who provide a written statement that they wish to prepay without any incentives _____________________________________________________________________________

4. PREPAYMENT - Application • Application to prepay • Description of loan and statement of compliance with federal, State and local laws related to prepayment • Documentation that requirements of RCW 59.28 have been met – more on this later • Lease language to be used during prepayment to notify tenants certified by attorney–HB 3, Ch. 15 Attachment 15-G • Authorization to release information signed by Borrower • Certifications related to notification of other government entities, continuation of other government subsidies, and that project will continue to be available to eligible tenants during prepayment process • Proposed use of property after prepayment and proposed rents • Copy of project waiting list • Documentation of ability to prepay - cash, loan, or sale _____________________________________________________________________________

5. PREPAYMENT – RCW 59.28 • Send a notice by certified & regular mail at least 12 months before prepayment to: • Each tenant • City Clerk (or County Clerk if unincorporated area) • Local Housing Authority • WA State Dept. of Commerce (the successor agency to the Dept. of Community Trade and Economic Development) • Give a copy of the notice to new tenants who move in after original notice was given • Post notice in a conspicuous place on site _____________________________________________________________________________

6. PREPAYMENTS – Lease Addendum • Sample Lease Addendum language can be found in HB 3, Ch. 15, Attachment 15-G • Because the lease addendum modifies the lease, it must be certified by Borrower’s attorney [3560.156(a) ] • Existing Tenants sign the addendum • New tenants sign when they move in • Keep a copy in tenant file _____________________________________________________________________________

7. PREPAYMENTS – USDA Tenant Notice • Within 30 days of receipt of application, USDA sends a notice to each tenant with copy to borrower/management • Notice is also sent to other interested parties such as non-profits, public bodies and congressional representatives • Borrower/Management must post copy of USDA letter in public area of project until the next prepayment notice letter is sent • Borrower/Management must provide copy of USDA letter to new tenants who move in after initial letter was sent • Additional USDA notices are sent to keep tenants informed of progress. Borrower/management must post subsequent USDA notices in public area of project & provide copy to new tenants _____________________________________________________________________________

8. PREPAYMENTS – Tenant Meeting • 60 Days before prepayment, USDA sends a notice to tenants • A tenant meeting is held to explain tenant options • A unit by unit inspection is performed (required for vouchers) _____________________________________________________________________________

9. PREPAYMENTS – Tenant Options • Letter of Priority Entitlement (LOPE) Letter • Will move tenant to top of waiting list at another Rural Development financed property. • Tenants have up to one year from the date of prepayment to request a LOPE letter. • USDA Rural Development Vouchers • Everyone living in the property on day of prepayment is eligible for a voucher if • 1) income is at or below 80% of median household income and • 2) tenant is a US citizen or legally admitted alien • Tenants have up to 10 months from the date of prepayment to request an RD Voucher _____________________________________________________________________________

10. PREPAYMENTS - Vouchers • A bit about Vouchers • Issued to tenants (not the project) • Portable – tenant can move & take voucher with them • Can be used anywhere as long as the owner is willing to accept the Voucher except at HUD Section 8 and RD rental assistance units (because these units already have subsidy) • The amount of the RD Voucher is calculated as: Market Rate Rent at Prepayment Less Tenant’s Rent at Prepayment Equals Voucher Amount • There is no 30% of income requirement • The amount of Voucher cannot exceed Rent at approved apt. . _____________________________________________________________________________