HUD Update Multifamily Production Presented by Chris Nielsen

HUD Update Multifamily Production Presented by Chris Nielsen, Underwriter Branch Chief Detroit Satellite Office

Overview Multifamily Production - what do we do at HUD? Why HUD Programs? Production Process Typical Application Issues Program Updates Equity Bridge Loans CNA-e. Tool 221(d)(4) Questions LIHTC Pilot

Midwest Region Leadership Multifamily Production Leadership Steve Ott, Acting Production Division Director - Chicago Stephen. P. Ott@hud. gov (312) 913 -8164 Branch Chief Teams in the Detroit Satellite Office Underwriter Branch Christopher Nielsen, Branch Chief Christopher. M. Nielsen@hud. gov (313) 234 -7511 Technical Specialist Eric Golicz, Branch Chief Eric. J. Golicz@hud. gov (313) 234 -7496

Multifamily Production - what do we do? The Office of Multifamily Housing Production provides direction and oversight for FHA mortgage insurance loan origination including the implementation of the Multifamily Accelerated Processing (MAP). The processing of our housing programs is done within our Multifamily Regional Centers and Satellite Offices.

Why HUD Programs? Better terms than conventional financing Provides mortgage insurance Non-recourse Two loans Primary HUD Programs: 221(d)(4) 223(f)

FHA Programs for Affordable Housing Projects: Section 221 d(4) New Construction or Substantial Rehabilitation 40 -year amortizing term 90 % Loan to Replacement Cost (90% rental assistance) 87% LTC (affordable) 83. 3% LTC (market rate) Intended for major repairs (over $40 k/unit or when more than 50% of two or more major building system components will be replaced)

FHA Programs for Affordable Housing Projects: Section 223(f) < 35 -year term 87% LTV (90% or greater rental assistance) 85 % LTV (affordable) 83. 3% LTV (market rate) Acquisition of existing property Refinance of existing property Minor repairs

Production Process Concept meetings scheduled within 10 business days of your request for a meeting Concept Meeting Close within 30 -90 days Close within 60 days Application Stage Pre-Application: Recommended for market rate 221(d)(4)s. Optional for 223(f)s or 223(a)(7)s Initial Closing Construction Firm App Review: 30 – 60 days depending on SOA Final Closing Hand-off to Asset Management

Typical Application Issues Application Deficiencies Ex. Missing or incomplete information Conflicting information between the lender narrative and the rest of the application Incomplete 2530’s Equity or secondary financing cannot be verified or is not in place Change in the Development Team, Principals or the Organizational Structure of the Single Asset Entity Borrower Delayed approvals from outside agencies ex. site plans Environmental Issues

Program Update – Equity Bridge Loans HUD will now allow the general partnership of the ownership entity in an FHA LIHTC transaction to pledge its interest as security for an equity bridge loan. Reason: The 2016 MAP Guide was silent on whether the general partner (or the managing member for a limited liability company) of the property ownership entity may pledge it interest as security for the equity bridge loan. https: //www. hud. gov/sites/dfiles/Housing/documents/EBL_Mem o_030818. pdf

Program Update – CNA e. Tool The CNA e. Tool now required as part of all new application submissions. This became mandatory starting November 1, 2017 for FHA multifamily mortgage insurance applications. Purpose: Streamline the review process Create a standardized electronic format Facilitate more accurate review of capital needs assessments across all of Multifamily Production Aggregate CNA results within a database to support a better framework for user feedback and consistent application of policy. Additional information can be found at: https: //www. hud. gov/program_offices/housing/mfh/CNA

Program Update – 221(d)(4) LIHTC Pilot Expedited Processing for Affordable 221(d)(4) Sub-rehabs and New Construction proposals with LIHTC and a 20 -year Section 8 HAP. Emphasis and reliance is on the lender’s underwriting and upfront due diligence to adhere to the MAP Guide requirements. Pilot Program Notice is anticipated in 2018 – pending review and approval with the Paperwork Reduction Act and the Office of Management and Budget.

Program Update – 221(d)(4) LIHTC Pilot Goal: Streamlined processing under 2 Processing Tracks with a Direct-To-Firm application submission Concept meeting is key: Lender, Borrower/Developer Team, HUD MF Production and Asset Management will meet to discuss the process to firm up the proposal and verify a clean, straight forward deal. Legal Documents – Begin the process early, HUD Office of General Counsel to coordinate with Lender/Borrower Counsel. If 9% LIHTC; then max LTC is 65% If 4% or 9% LIHTC w/ Section 8; max LTC is 75% Track 1. Expedited Processing 30 days or Less for review and firm commitment. Track 2. Standard Processing Timeframe of 60 days to firm commitment.

Program Update - 221(d)(4) LIHTC Pilot Eligibility Criteria - Low Risk Transactions Only 200 units or less Satisfy the min requirements for a 221(d)(4) Over $40, 000/unit in proposed repairs or Replacement of 2 or more building system components exceed 50% replacement measured by cost MUST No have HUD Experienced Development Team environmental issues – clean site Construction plans and specifications must be 100% complete at firm commitment application.

Program Update - 221(d)(4) LIHTC Pilot Eligibility Criteria – Continued 2530 clearance issues satisfied prior to firm application 20% of the LIHTC equity cannot be bridged at the time of initial closing. All other equity bridge loan requirements remain the same. Section 8 HAP contract with a 20 -year term is in place at application submission. Equity pay in schedules, Sources and Uses, underwriting and due diligence must be available and complete at the time of submission which should include the proposed tax credit structure of the Limited Partners and General Partner with the required HUD single asset entity borrower entity.

Questions