515 Portfolio AT RISK

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515 PortfolioAT RISK!
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New Construction VS Rehabilitation

• According to the Comprehensive Physical
  Assessment report submitted by a private
  contractor We believe that the 515 portfolio
  generally exhibits attributes of preservation
  worthiness.

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Multi-Family Housing Preservation and
Revitalization Program (MPR)

• Purpose
• MPR Tools
• Eligibility
• Processing
• Pre-application
• Scoring
• Ranking
• Final Applications
• Underwriting
• Final Approval

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Purpose

• Aging properties and ownership
• Irreplaceable rural rental housing option
• Revitalization is to extend and enhance the use
  of each MFH property that continues to serve the
  affordable housing needs in its community
• Reserve requirements have not kept up with
  rehabilitation, replacement, and updating needs

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MPR

• Only owners or purchasers of existing Rural
  Development (FmHA) financed properties can apply
• Section 515 (direct Rural Rental Housing)
• Section 514/516 (direct Labor Housing Loan/Grant)

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MPRTransaction Types

• Simple No changes in ownership
• Complex Property transfers (in accordance with
  7 CFR 3560.406) or transactions with
  subordinations to 3rd party financers
• Portfolio Sale Multiple project sales that will
  be closed with a common purchaser within 1 state
• Note MPR Transfers must meet 7 CFR 3560.406

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MPR TOOLS

• Primary Tool
• Debt Deferral
• - 514 or 515 loans obligated prior to 10-1-91
• - balloon payment of P I due at end of the
  deferral
• period
• - Interest accrues at Note rate
• - Subsidy applied per Interest Credit Agreement
• - No interest charged on deferred interest

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Other MPR Tools

• Revitalization Grant
• - NP applicants only
• - Only for costs to correct health and safety
  violations - Administered per 7 CFR part 3015
• Revitalization Loan
• - 0 loan
• - 30-year amortization

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Other MPR Tools (Continued)

• Soft Second (Bullet) Loan
• - 1 loan
• - Balloon of deferred PI
• - Due when the latest maturing 514 or 515 loan
• is due

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Other MPR Tools (Continued)

• Traditional Section 515 Loan
• 1 Loan w/Interest Credit
• Up to 50-year amortization
• Traditional Section 514 Loan
• 1 loan
• Up to 33-year amortization
• Grants limited to 90 of total costs

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Other MPR Tools (Continued)

• Existing Regulatory Approvals
• Transfers
• Subordinations
• Consolidations
• Re-amortizations
• Debt Forgiveness
• Debt Write-Down

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Funding Opportunities Conditions

• Provide affordable, decent, sanitary housing for
  at least 20 years
• No rent increases except for normal OM costs
• Execute a Conditional Commitment
• Execute a Restrictive Use Covenant

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Eligibility

• Applicant eligibility
• 7 CFR part 3560.55 Section 515
• 7 CFR part 3560.555 Section 514/516
• Section 515 only (Avg. 12 mos.)
• - Vacancy NTE 10 (16 units)
• - Vacancy NTE 15 (lt16 units)
• Section 514 only
• Positive Cash flow 3 years
• (Exception Market Survey showing overwhelming
  demand)

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Eligibility (Continued)

• Ability to own and operate after MPR (Transferee
  applicant)
• Demonstrate CNA and restructuring financially
  feasible and necessary

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ProcessingPre-application Submission

• MPR Pre-application (NOFA Attachment)
• http//www.rurdev.usda.gov/rd/nofas/index.html
• MPR Electronic Pre-application
• http//www.rurdev.usda.gov/rhs/mfh/MPR/MPRhome.ht
  m
• .pdf format
• fillable
• SEND IT e-mails it to ORHP
• Receipt date and time
• Breaks scoring ties
• Hard copy 500 p.m. ET
• Electronic actual time

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ProcessingPre-application Submission (Continued)

• Attach Purchase Agreement or Market Survey
• Acknowledgement of Receipt
• Due date is specified in the Notice of Funding
  Availability published in the Federal Register

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ProcessingPre-application Submission (Continued)

• - Hard copy to
• Office of Rental Housing Preservation-STOP 0782
  (Room 1263-S)
• U. S. Department of Agriculture
• Rural Housing Service
• 1400 Independence Avenue, SW
• Washington, DC 20250-0781

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ProcessingScoring

• Points based on
• Pre-application data
• MFIS data
• Documented written evidence of commitments
• Verify accuracy of data
• Borrower ID
• Project ID
• Operational date
• Classification
• Units

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ProcessingScoring (Continued)

• 1. Contribution of other funds
• 3,000 to 5,000/unit/property 15 pts. or
• 5,000/unit/property 20 pts.
• Total Possible Points 20
• 2. Owner contribution 5,000/project for TR
  costs 5 pts.

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ProcessingScoring (Continued)

• 3. Age of Project
• Operational date
• Prior to 12-21-79 25 points
• After 12-21-79 before 12-15-89 20 points
• On or after 12-15-89 before 10-1-91 15 points
• Total possible points 25

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ProcessingScoring (Continued)

• 4. Troubled Project
• Classification B (Stay-in Owners) 25 pts.
• Classification C or D 24 or more months 20
  pts.
• Classification C or D lt 24 months 15 pts.
• Total Possible Points 25

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Processing Scoring (Continued)

• Comprehensive Needs Assessment to determine
  needs, timing and funding
• 5. Prior Agency Approvals
• CNA approved
• After 10-1-06 prior to 10-1-07 10 pts.
• After 10-1-07 but before 4-1-08 20 pts.
• Total Possible Points 20

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ProcessingScoring (Continued)

• 6. Energy Generation
• Installation of energy generation systems funded
  by 3rd party 5 pts.
• 7. Energy Conservation
• Rehab earning ENERGY STAR label 5 pts.

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ProcessingScoring (Continued)

• 8. Tenant Service Provision
• New tenant services provided by NP or Government
  Agency at no cost to tenants 5 pts.

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ProcessingRanking

• ORHP receives MPR Pre-applications
• Score
• Rank
• By State
• By total score
• By category
• Portfolio sale (Avg. score of projects)
• Complex
• Simple

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ProcessingRanking

• States
• confirm eligibility
• 2 highest-ranked portfolio sale transactions
• 4 highest-ranked complex transactions
• 10 highest-ranked simple transactions
• 16 Total Pre-applications
• return incomplete preaps
• send rejection w/appeals
• National Office
• Re-scores
• Selects portfolio sales NTE 150,000,000 in
  deferral

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ProcessingFinal Applications

• States obtain
• SF 424 applications
• 1 portfolio sale
• 2 complex
• simple transactions NTE a total of 5
• CNA
• appraisal, if applicable
• additional information per MPR Application
  Requirements Checklist
• Deadline 45 days or by 9-1-08

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ProcessingFinal Applications (Continued)

• CNA Guidance
• http//www.rurdev.usda.gov/rhs/mfh/MPR/MPRHome.htm
  
• Forms
• http//forms.sc.egov.usda.gov/eforms/mainservlet

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ProcessingUnderwriting

• State Underwriters
• determine eligibility
• determine financial feasibility
• identify needed resources
• replace ineligible, infeasible, withdrawals

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ProcessingUnderwriting Guidelines

• Purpose
• Minimize cost to the Government
• Help assure a balanced utilization of tools
• Assure the long-term economic viability of
  revitalized projects

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Underwriting Guidelines (Continued)

• Soft Second Loan NTE 5,000/unit
• Revitalization Grant NTE 5,000/unit
• Total Revitalization Grant, 0 Loan, Soft Second
  Loan NTE 10,000/unit
• 515 Loan NTE 20,000/unit
• 514 Loan NTE 20,000/unit

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Underwriting Guidelines(Continued)

• Generally, tax credit properties will only
  receive debt deferral
• Properties assisted with deep tenant subsidy (75
  ) will receive rehab and Section 514 or 515
  loans before grant and soft second loans
• Necessary rent increases NTE 10 per year
• Budgeted increases to reserve NTE 3 per year

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Underwriting Guidelines(Continued)

• Full RTO must be budgeted
• Sufficient project revenue must cover a 10 OM
  increase in the 2nd year after restructuring
• Reserve balance at 20 years should be 2 X avg.
  annual needs (including inflation)

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ProcessingFinal Approval

• Final funding recommendations by Loan Committee
• Obligation 1st come, 1st served within each of
  the 3 funding queues and to result in
  approximately the following ratios
• - 30 portfolio sales
• - 50 complex
• - 20 simple

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ProcessingFinal Approval (Continued)

• States issue MPR Conditional Commitment
  (restructuring offer) for applicant
  signature/acceptance.
• Offers expire after 15 days.
• At closing, the applicant must execute a
  Restrictive Use Covenant
• RD and 3rd party lenders subordination to RUC

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ProcessingFinal Approval (Continued)

• Term of Restriction Existing loan(s) term, term
  of existing restrictions, or 20 years, whichever
  is longer.
• All adverse determinations regarding applicant
  eligibility and awarding of points are
  appealable.
• Approval by September 15, 2008
• Obligation by September 22, 2008

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Voluntary Community Market Rent Demonstration

• Rents set above basic (non-RA units)
• Eligible tenants pay lt 30 of income
• Tenants do not pay overage
• Owner can get 50 difference between basic and
  new community market rent
• Example Basic 350
  Community Market Rent 410
• Difference 60
• Owner Retains 30
• Project Retains 30

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Questions