1 / 23

HUD/FHA Financing Options for Affordable Housing

HUD/FHA Financing Options for Affordable Housing. Background. Financial Downturn of 2007 FHA role as counter-cyclical source of financing Risk Mitigation, Notice H 2010-11 More stringent underwriting criteria for market rate FHA role to create & preserve affordable housing

otylia
Download Presentation

HUD/FHA Financing Options for Affordable Housing

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. HUD/FHA Financing Options for Affordable Housing

  2. Background Financial Downturn of 2007 FHA role as counter-cyclical source of financing Risk Mitigation, Notice H 2010-11 More stringent underwriting criteria for market rate FHA role to create & preserve affordable housing Minimal underwriting changes for affordable housing

  3. Risk Mitigation Notice definition of Affordable Housing Is considered affordable if: A recorded regulatory agreement in effect for at least 15 years The project meets at least the minimum LIHTC restrictions of 20% of units at 50% of AMI, or 40% of units at 60% AMI, with portion of rent paid by tenants no greater than LIHTC rents Mixed income projects if minimum low income unit rent and occupancy restrictions, and regulatory agreement meet the above criteria

  4. Risk Mitigation Notice (continued) Under the Risk Mitigation Notice, the following projects may submit Section 223(d)(4) applications directly for Firm Commitment: Projects with 90% or more of units having project-based rental assistance Affordable Properties as defined by the Notice Note: The Risk Mitigation Notice has expired; however, the provisions of the notice have been incorporated into the current revision of the MAP Guide.

  5. Streamlined Processing of LIHTC applications Adopted in July 2008 under ML 2008-19, and applicable to LIHTC applications under the 221(d)(4) program. Includes four changes to the MAP Program which increase flexibility. Modification of cash escrow requirement for LIHTC syndication proceeds Submission of final drawings and specifications may be deferred until initial endorsement Commitments may be conditioned upon HUD-2530 approval Each HUD Hub and Program Center has a designated LIHTC Coordinator

  6. FHA Mortgage Insurance Premium changes Changes in MIP will affect HUD Multifamily Programs for transactions with Firm Commitments issued after October 1, 2012, with exception of Firm Commitment applications submitted prior to June 1, 2012. The MIP requirement for Affordable Housing transactions is unchanged at 45 basis points for the 2013 fiscal year.

  7. FHA Low Income Housing Tax Credit Pilot Program Launched by Notice H 2012-1 issued February 3, 2012 Began with only 4 Hubs (Boston, Chicago, Detroit, LA) We anticipate the Pilot Program will be extended to other Hubs (including Atlanta Hub) in the near future.

  8. LIHTC Pilot - Program Objectives & Outcome • Increase FHA’s production of affordable housing • Implement HERA’s Pilot Program mandate through accelerated processing compatible with Tax Credit Program requirements • Outcome: Complete FHA Loan processing in 120 days, from application to closing

  9. LIHTC Pilot - Eligible Projects • All have Tax Credit or Bond Cap Allocations (either 4% or 9% credits accepted) • All are comparatively low risk projects, meeting sustaining occupancy requirements • Tenants remain in place except for temporary relocation (now up to 30 days)

  10. LIHTC Pilot - Eligible Projects (continued) • All Are Eligible for 223(f) Loan Program, With Certain Adaptations for The Pilot Program: • 1) Rehab Expenditures of up to $40,000/unit (unadjusted for locality) will be allowed • 2) For Mod Rehabs, 221(d)(4) Substantial Rehab controls will be adopted • 3) Standard 223(f) 12 month repair period can be extended

  11. LIHTC Pilot - Process Changes • Uses MAP Lenders With Tax Credit Experience • Uses Senior Staff Only (supervisors) as Designated Underwriters at Each of the Pilot Hubs • Revises Process – Not Linear with Multiple Experts, but all Review done by Designated Underwriter • Limited to Only one FHA Program adapted for use with Tax Credits: 223(f)

  12. LIHTC Pilot - Process Changes (continued) • Hold Optional Concept Meeting (Lender/Owner and Designated Underwriter) Prior to Application, to Confirm Project’s Pilot Suitability or Refer it to Another MAP Program • Designates HQ Asset Management Point of Contact to: • HAP Contract Renewals • Section 8 Rent Increases • First Mortgage Prepayments • Special Approvals and Waivers (e.g. Flex Sub)

  13. LIHTC Pilot - Process Changes (continued) • Allows Owner to Defer Submission of Plans and Specs Until Just Prior to Closing • Requires Fewer Application Exhibits and Requirements • Uses One-Stage, ‘Direct-to-Firm’ Commitment Applications • Provides HQ Staff in MF Production to Track and Monitor Pilot Projects and Provide Ongoing Guidance

  14. LIHTC Pilot - Transaction Types 1. Acquisition and/or Refinancing with Moderate Rehabilitation for Developments with Project based Rental Assistance Covering at Least 90% of Units • Owner must ask Asset Management for any desired rent increase prior to the submission of the application for processing under the Pilot • Owner must agree to enter into a new 20 year HAP Contract

  15. LIHTC Pilot - Transaction Types (continued) 2. Permanent Financing of Stabilized but Newly Built or Substantially Rehabilitated Projects • Projects Require a Waiver of the 3 Year Rule (Property must meet requirements of ML 2011-13, except owners will not have to show evidence that they have not been able to obtain alternative financing) • Projects must have achieved stabilized occupancy

  16. LIHTC Pilot - Transaction Types (continued) 3. Permanent Financing And Moderate Rehabilitation of Stabilized Tax Credit Projects Being Resyndicated with New Tax Credits • Projects must have stable occupancy with a history of at least 85% or greater occupancy for previous 12 months.

  17. LIHTC Pilot - Repair Period Escrow Releases Pilot Requires Many Controls of 221(d)(4) Sub Rehab Program • Architect will oversee repair work and may require a General Contractor to perform repairs if more than $15,000 in rehab • On projects with an architect representing the borrower, a general contractor or an independent inspection firm hired by the syndicator • Lender obtains written certification from any/all of the above that work has been completed as shown on the Escrow Release (HUD 92464) • Certifications should contain language found on signature page of Contractor’s Requisition (form HUD 92448). • Lender obtains date down endorsement to title policy to ensure no liens have been filed against property

  18. LIHTC Pilot - Repair Period Escrow Releases • Lender disburses upon receipt of acceptable certifications • Lender sends fully executed copies of the above to HUD Mortgage Credit and A/E for their records • HUD will inspect project at normal 223(f) intervals (35%, 65% and 100% completion). Lender will continue to approve and disburse withdrawal requests without HUD’s approval unless notified by HUD of issues with the project • HUD inspection and signoff required before final disbursement

  19. Wrapping it up • Combining of LIHTC and FHA insurance is currently available under MAP Streamlined Processing for Section 221(d)(4) New Construction or Substantial Rehabilitation. • We anticipate expansion of the LIHTC Pilot Program to Atlanta Hub (and therefore to Louisville Program Center) in the near future.

  20. Wrapping it up • The Louisville Program Center welcomes the opportunity to discuss new projects with developers prior to selection of a MAP lender. • Once a MAP lender is selected, the MAP lender is the client and point of contact for the Program Center.

  21. References • Streamlined Processing of LIHTC Applications • ML 2008-19 - Streamlined Processing of Multifamily Mortgage Insurance Applications Involving Low Income Housing Tax Credits: http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee/2008ml • Notice H 2010-16 - Further Policy Guidance to Defer Submission of Final Architectural Plans and Specifications Introduced by Mortgagee Letter 2008-19, Streamlined Processing of Multifamily Mortgage Insurance Applications Involving Low Income Housing Tax Credits: • http://www.hud.gov/offices/adm/hudclips/notices/hsg/10hsgnotices.cfm

  22. References (cont) • Notice H 2010 – 11- HUD Risk Mitigation – http://portal.hud.gov/hudportal/documents/huddoc?id=10-11hsgn.pdf • MAP Guide Chapter 14 - http://portal.hud.gov/hudportal/documents/huddoc?id=4430GHSGG-bm.pdf • FHA LIHTC Pilot Program • Notice 2012-01 – Multifamily Low Income Housing Tax Credit Program: http://portal.hud.gov/hudportal/documents/huddoc?id=12-01hsgn.pdf

  23. Contact Information Louisville Multifamily Program Center John B. Hamm Supervisory Project Manager, Asset Development john.b.hamm@hud.gov 502-618-8124 Heather Hairgrove Project Manager, LIHTC Coordinator heather.m.hairgrove@hud.gov 502-618-8147 Katherine Calloway Project Manager katherine.calloway@hud.gov 502-618-8109

More Related