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Transfer and Assumption. Basic Revitalization Concepts. 3560 regulations, subpart I Section 3560.406 MFH ownership transfers or sales Section 3560.409 and 3560.410 Servicing Handbook #3, Chapter 7. Guiding Principles. The community needs the housing

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basic revitalization concepts
Basic Revitalization Concepts
  • 3560 regulations, subpart I
  • Section 3560.406 MFH ownership transfers or sales
  • Section 3560.409 and 3560.410
  • Servicing Handbook #3, Chapter 7
guiding principles
Guiding Principles
  • The community needs the housing
  • The property in the Hands of eligible owners
  • The transaction addresses physical needs
  • Post transaction rents don’t exceed market rents
  • Equity identified by a market value appraisal
  • Minimize tenant displacement
  • MPDL reviews transfers with equity payouts and new Return on Investment


  • 1 Single Application
  • CNA required for all transfers
  • Added discussion on Tenant Protections, when they apply and sample language
  • Debt service on new financing included in total financing, not project operations
  • Rent change for new debt service, implement when rehab done

New ROI earned when rehab complete

  • Using tax credits, w/o 100% RA, allow tiered rents
  • 3rd Party loans cannot have balloon payments unless balloon after RD loan matures1) fully amortizing; or 2) Balloon after RD loan matures; or

3) Lender agrees to extend at rates and terms that keep rents within CRCU



4) When calculating equity payout: - Rents at/below CRCU

- Budget reasonable vacancy & bad debt

- Budget reasonable O&M expenses - Resize the reserve deposit to meet 20 year inflated needs of the property

Equity, rehab, Agency & non Agency debt service, reserve deposits, operating costs & return to owner cannot exceed CRCU


Transfer Chapter/Rules apply :

  • When title to property is transferred to a new owner regardless if the tax ID number changes (should be published shortly)
  • Transfer Chapter does not apply when changes or substitution in member interests occur even if 100% membership change within 12 month period of time
single transfer application attachment 7 b 1
Single Transfer Application – Attachment 7-B-1
  • Allows applicant more time to complete application, firm up funding, knowing RD has processing timeframes to meet
  • To shorten Agency processing time
  • Standard List of Transfer Application Requirements
  • Require only items needed to make informed decision

Agency ProcessingTimeframes

  • Agency Timeframes: 45 days - 1 property

 90 days - 2 to 10 properties

 120 days - 11 or more properties

  • If complete, “clock” starts
  • During review, if clarifications are needed, notify applicant & give time to submit, “clock” stops
  • Understand criteria of all lenders
  • Ask if there are restrictions, i.e.

income, rent, DCR, reserves

  • If different criteria, underwrite to most stringent, i.e. DCR, reserve deposit
  • Share RD underwriting with lenders
  • Underwrite with most current information, application, S&U, funding sources
transfer application
Transfer Application
  • Executive Summary -- NEW- Prepared by Applicant - Sufficient detail for the Loan Servicer to understand proposal- Information provided in narrative is supported by other documentation provided
processing steps
Processing Steps
  • Exhibit 7-1
  • Preliminary Assessment‘Meeting of all parties’

Buyer provides overview, deadlines to meet, concessions by RD, funding sources, proposed equity, etc.

processing steps1
Processing Steps
  • RD provides overview of RD requirements

CRCU, CNA requirements, appraisal requirements, RD requirements for subordination, equity, application requirements, processing guidelines & timeframes

capital needs assessment
Capital Needs Assessment
  • ‘As Is’ CNA on all transfers
  • Rehab proposed, RD & applicant develop scope of work using CNA
  • Applicant provides Scope of Work to Provider and asks for post rehab CNA for sizing reserve
  • Goal – 1 report with multiple values
  • Best scenario – all required information is available, if not????
  • Current Value of Property (eligible for prepayment)

appraiser completes value using data for conventional properties, vacancy rates, etc.

  • For new/existing loans (prospective value), RD should provide appraiser with:

–Historical O&M expenses for property

–annual deposit to replacement reserve (ADRR)

• Don’t know ADRR???

–Use estimate based on similar properties in your area.

–MPR transactions, recent transfers with or w/o rehab

limitation on equity
Limitation on Equity
  • No limitation on equity payment if:1) All Transfer Principles met2) All equity paid with soft funds

(no expectation of repayment)

3) No 3rd party debt included with transaction

4) UWT (Transfer Analysis) will highlight this issue in red

limitation on equity2
Limitation on Equity
  • Receive Error Message

STOP. Cash to seller >max equity allowed

  • OK IF there is no new hard debt and all transfer principles met
  • IF new hard debt, contact your Team Leader
return on investment roi
Return on Investment (ROI)
  • Agency may revise ROI
  • RTO based on 8% of 5% of structure tax credits – NOT CORRECT!
  • If ROI revised, Agency conditions approval on applicant agreeing to subsidize non RA tenants
  • Based on equity used for payment of “hard” costs
  • Template will calculate maximum
  • MPDL concurs in maximum
return on investment roi1
Return on Investment (ROI)
  • Template uses data on following sheetsTransaction Variables D216, Rehab CostsTransfer Input C249, Rehab CostsTransfer S&U C16-19 (equity for rehab)
  • 1st Rehab funded with equity
  • 2nd Comparable rents
  • 3rd Transferee Entity type
  • Template available on RD website
  • Template completed by RD
  • Final underwriting shared with customers
  • Underwriting complete, create .pdf file for customer

For Transfer, hide all sheets except:Deal Summary, Rents & Rent Loss, Inc & Exp, Cap Needs (include all 4 M&C Sheets), Transaction Variables, Transfer Input, Transfer S&U, Transfer Analysis

  • To hide sheets, highlight sheets, right click, click on hide
  • To create. pdf file, click on print, click on adobe, click on Save
  • Attach .pdf to LOC and Loan Agreement