19 th Annual Western HUD Lenders’ Conference

1. Highlights from the West Region 19th Annual Western HUD Lenders’ Conference September 19th, 2018 Tom Azumbrado, Regional Director Multifamily West Region Angela Corcoran, Production Division Director Multifamily West Region

2. Multifamily West Region Management

3. Multifamily West Production Division

4. Multifamily West Region Staffing Note: Original Transformation staffing plan allotted 180 FTEs

5. Multifamily West Region Vacancies PRODUCTION: 3 Underwriters 2 Appraisers 1 Construction Analysts 2 Program Assistants 2 Closing Coordinators ASSET MANAGEMENT: 2 Branch Chiefs 11 Account Executives 2 Resolution Specialists 3 Program Assistants OPERATIONS: 3 Program Analysts On Board Staff = 132 Vacant Positions = 31 Total FTE = 163 Original FTE for Transformation = 180 (due to budget adjustments, current staffing level has been adjusted to 163, 17 less than originally planned) Recent hiring approvals to be onboarded = 10 1 Appraiser, 1 Production Program Assistant, 2 Closing Coordinators, 3 AM Program Assistants, 3 Account Executives

6. Presidentially Declared Disasters - PDD • Major disaster or emergency declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act • Declaration is published by FEMA (FEMA.gov) • Disaster Declaration • Major Disaster Declaration • Emergency Declaration • Fire Management Assistance Declaration • Fire Suppression Authorization • Major Disaster Declaration • Individual Assistance • HUD Multifamily Disaster Guidance • HUD Handbook 4350.1 – Chapter 38

7. Multifamily Asset Management and Project Servicing (4350.1) • Chapter 38 – Multifamily Emergency Disaster Guidance • Applicable • Insured • Assisted • Use Agreement • Layout • Pre-disaster Planning • The Presidentially Declared Disaster (PDD) • Program and Disaster Relief Options During a PDD • Responsibilities – Appendix A-8

8. Phases Assessment Recovery Restoration Plan Sources/Uses of Funds Detailed Repair Listing Estimated Completion Dates Contractor Information Displaced Resident Tracking Tracking Return to Normal Operations/Close Out (Appendix A-7) • Preliminary • Preliminary Disaster Assessment (Appendix A-3) • Vacancy Utilization/Displaced Resident Report (Appendix A-4) • Damage Code • Onsite • Final Disaster Assessment (Appendix A-5)

9. Current Disasters as of 9/10/18

10. Active disturbances/storms:

11. Multifamily West Region Asset Management

12. Closings this Fiscal Year 223(f) Properties: 76 Amount: $1,034,226,100 New Construction Properties: 39 Amount: $781,415,700 223(a)(7) Properties: 14 Amount: $209,628,400 FY 2018 YTD Total Properties: 129 Mortgage Amount: $2,123,345,200 Mortgage Amount: $2,410,082,300 Mortgage Amount: $1,480,123,000 FY 2017 FY 2016

13. LIHTC’s FY 2018 Closings FY 2017 : 34 projects 3,805 units $419,640,400

14. FY18 Closings by State 12 2 7 1 14 1 3 1 0 1 8 19 10 5 11 37 7 22 4 1 New Construction Deals Shown in Red (39) Totals in Black Include New Construction (129) 1 1

15. FY18 Closings by Lender

16. 142 Firms Issued FY18 223(f) Firms Issued 101 Average Staff Processing 48 Days / 89 Days Rejected Applications 11 223(a)(7) Firms Issued 15 Average Staff Processing 43 Days / 59 Days Rejected Applications 1 221(d)(4) Firms Issued 26 Average Staff Processing 45 Days / 95 Days Rejected Applications 1

17. FY18 Application Submissions 184 Total Applications Submitted FY 18 YTD

18. Current Portfolio In Processing 223(f) 10 Risk Share 7 Applications in Active Processing Total 58 221(d)(4) 41

19. Challenges FY 18 • Hiring/Staffing • CNA e-Tool • HERO System/Environmental Submissions • Third Parties Access to HEROS • Complete Environmental Information at PreApp • Technology, Systems and Data Integrity • Electronic Submissions of Application • Systems Update is a DAS Priority • Data Integrity Problem • Large Number of Concept Meetings • 160 Concept Meetings this year • Complex Deals

20. Priorities Meeting Timeframes • Streamlined, Risk Based Processing • Strategic Travel Planning • Workload Sharing • Getting peripheral work away from UW’s • New Intake Procedures • Upfront Detailed Review by Director or Branch Chiefs • Delay in accepting applications with major deficiencies • Avoid Last Minute Surprises

21. Priorities Consistency Between Offices • Weekly Branch Chief Meetings • Sharing Staff • Waiver Discussions • Regional Loan Committee • Participation in National Loan Committee • Both offices host trainings for the entire region

22. Priorities • Hire New Staff • Continue to Improve Timeframes • 223(f) Repair Escrow Releases • Production will likely start processing 223f repair escrow releases • Periodic Checks by Lenders during Repair Period • Streamline Construction Administration • Monitoring Soft Markets

23. Soft Markets in West Region • Northern Colorado and Boise due to pipeline concerns • Energy Markets, Area of Dakota’s and Wyoming • City of Denver, unless affordable • Phoenix and Las Vegas markets are balanced but we’re monitoring conditions especially in areas of significant development of high-end luxury, apartment projects • Market conditions are softening in Chandler/Gilbert, North Scottsdale, South Tempe and Central Phoenix North. • Market conditions are soft and vacancy rates are high in Northeast Phoenix, Central Phoenix South, and North Tempe. • Downtown submarkets in Portland and Seattle are experiencing a slight uptick in vacancy rates and decline in rent growth. May move from balanced to slightly soft by the end of the year.

24. Underwriting Issues that Delay Acceptance/Processing Undisclosed/Unaddressed Environmental Issues • Noise concerns, Phase I/ Phase II issues, SHPO, THPO, or Fish and Wildlife Issues Incomplete 3rd Party Reports • Intrusive Testing and/or WDO Report as a repair item • Missing Completed Intrusive Testing reports • Not extrapolating Life Safety Repairs Developer’s Like-Kind Experience for d4’s • For mortgages over $25,000,000, Lenders must demonstrate that Large Loan borrowers have substantial prior experience developing, constructing and owning multifamily projects that are similar in size and scope to what is proposed

25. Issues that Delay Processing/Closings: Secondary Financing • No monetary liens ahead of HUD’s Loan • Affordability Restrictions can be in 1st position, if: • Resident and Affordability Restrictions do not conflict with HUD’s requirements, and • Government entity made or will make a financial contribution to the property. • No post foreclosure requirements of notifications or monitoring HOA Fees and Restrictions • Cannot conflict with HUD’s regulations or provide a risk because of unpredictable increases in fees Attorneys and/or Title Companies unfamiliar with HUD’s Requirements Undisclosed Title Concerns • Previously existing restrictive covenants, development agreements, water rights, unusual easements, etc.

26. Asset Management Updates • RAD for PRACs.  We are expecting a Notice out in late fall that will detail how 202 PRACs can utilize the RAD platform. 202 PRACs receive rental subsidies that are similar to Section 8,but the regulations don’t allow 202 PRACS to take on debt. • Prepayment Approvals We are expecting a Mortgagee letter to be issued about updates to the HUD Form 9807 prepayment process.  Not significant changes but areas where we are trying to make the process more streamlined (faster). • Rent Comp Studies HQ is also looking at ways to streamline the Rent Comp Study (RCS) process.  However, HUD allows the use of a lender ordered MAP appraisal to serve as a substitute for the HUD required RCS if certain conditions are met as outlined in Chapter 9 of the Section 8 renewal guide. • Assigned Account Executives As always, servicing questions can be answered by Account Executives, (AE).  These can change so we encourage folks to check our property listings : https://www.hud.gov/states/shared/working/west/mf   If you are working on refinancing an existing HUD property, we strongly encourage you to have a conversation with your AE.  • Asset Management Processing Servicing items can be sent to our centralized mailboxes:  SF.Incoming@hud.gov and Den.Incoming@hud.gov

27. New Closing Checklists • Published May 2018 https://www.hud.gov/OGC_Multifamily_Closing_Documents_Checklist

28. Questions or Comments?