West Region WMAC LIHTC FHA Mortgage Insurance for

West Region WMAC LIHTC + FHA Mortgage Insurance for Affordable Housing a public/private partnership September 20, 2018 San Francisco, CA Erica Kodiyan, Underwriting Branch Chief, LIHTC Lead, West Region

LIHTC – FHA Interest in LIHTC via FHA is growing 9/20/18 PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

We have been changing…. . Pre-2012 • • • Post-2012 • • 2016 • • Post-2016 • 9/20/18 Piloted 223 f LIHTC program FHA’s market share was small From 2000 to 2011, only 60 LIHTC endorsements per year 2012 to 2016, over 150 LIHTC endorsements per year Continued piloting of the 223 f LIHTC program ➢ Streamline the review process of LIHTC refinance deals (with or without Section 8) via Single Underwriter Model ➢ Allow for moderate rehabilitation of LIHTC deals (up to $40, 000/unit) ➢ Allow the refinance of LIHTC projects with less than 3 years of operating history 2016 to present, over 300 LIHTC endorsements per year 223(f) LIHTC processing incorporated into 2016 MAP Guide ✓ Chapter 14 and Appendices Two new pilots for 221 d 4 LIHTC programs, are forthcoming, Ch 14. 20 ✓ Expedited processing ✓ Standard processing PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

Committed to Affordable, Committed to LIHTC • Lower MIP Rates • Higher LTC/LTV Ratios • Lower Vacancy Rates • No Cost Certification if < 80% LTC / LTV • Mortgageable Developer Fees • 20% Equity Pay-In Requirement (see Map Guide Appendix. 2) 9/20/18 • Equity Installments thru Construction Period • No tax credit escrowing requirements • Straight-to-Firm • Streamlined A&E/Cost Review • No Subsidy Layering Review PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

Committed to Affordable, Committed to LIHTC • 10% Assur. Of Completion • Single Underwriter Model • EBLs for up to 80% of Equity Requirements • Lax RLC/NLC review requirements (> $20 million) • LLCI/Passive Investor Certification only, no credit review for Investor • (i. e. 99% LP and 0. 01%GP) 9/20/18 • Developer Fee + Builder/GC Profit is o. k. (Developer Fee + BSPRA NOT OK) • Private debt may be secured w/project (up to 100% of Total Project Costs) • Concept Meeting optional • TC Investor required reserves can be credited towards HUD’s required Amounts. • (IOD and Working Capital) PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

• • OGC DBLS EMAD CPD FHA Processing HUD’s Internal Partners • AM • AFHMP 9/20/18 Closing reviews, legal compliance, etc. Labor wage determinations Market analysis Environmental compliance via HERO, permanent relocation reviews Section 8 contract renewals, rent increases, preservation exhibits, R 4 R compliance and review, etc Review and compliance thru FHEO PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

West Region HUD LIHTC UW’s • Laura Stutzman- Denver • Heather Shea – Denver • Danny Gallant- San Francisco • Julie Carter-San Francisco • Tiger Hudson- San Francisco- In Training ____________________ Expanding our LIHTC team is a priority 9/20/18 PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

HUD/MBA LIHTC Initiatives: Working together Income Averaging GP’s Pledge of Ownership Interest/ EBLs New LIHTC Pilots 221 d 4 Revisions and Updates to Chapter 14 MAP Guide New LIHTC Wheelbarrow 2. 0 Equity Bridge Loan Repayment Terms/ Pay In Schedule Waiver for Latent Defects on LIHTC Heavy 223 f’s Training 9/20/18 PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

Getting Ready: Section 221(d)(4)/220 LIHTC Pilot Programs 9/20/18 PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL This Photo by Unknown Author is licensed under CC BY-NC-ND

D 4 Pilot Processing Expectations Goals: Faster processing • • Streamline and maintain current MF policies, authority or requirements Promote LIHTC affordable housing nationally, thru D 4’s Increase FHA LIHTC D 4 construction activity Codify lessons learned into next MAP Guide and HUD insurance programs. How: Rely on lenders more • • Reduce administrative requirements. Maintain a conservative risk position. When: Pilot will run for 3 years Implementation: Two Tracks • • 9/20/18 Expedited Approval- 30 day. Standard Pilot Approval processing – 60 day. PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

Eligibility Requirements for Both Tracks 9/20/18 Experienced Borrower Teams Clear 2530 s in APPS Limited environmental risk factors $25 million is Maximum Loan Amount Pose limited risk Fast turn-around (low Loan to Cost, few environmental issues) (excludes complex deals such as RAD) PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL Evidence of LIHTC commitment Subject to concept meeting & loan committee reviews

Expedited Pilot Approval Processing Highlights Eligible Deal Types: • 9% LIHTC New Construction at 65% Loan To Cost Max. w/ rents 10% below market • 4% or 9% LIHTC Sub Rehab. w/ Sec. 8 at 75% Loan To Cost Max. Lender Role: Loan underwriting and conclusions, construction monitoring, release of escrow funds will be performed by the lender 9/20/18 Goal: Close within 90 calendar days (30 day review + 60 days to close) Limited HUD Review: HUD will perform a limited review of the lender’s underwriting and will enforce statutory and regulatory requirements (i. e. environmental reviews, 2530 s, Fair Housing Act compliance). PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

Standard Pilot Approval Highlights Eligible Deal Type: 4% or 9% re-syndication LIHTC sub. rehab. without Section 8 at 75% maximum Loan to Cost w/ rents 10% below market Lender Role: HUD will review and approve the Lender’s underwriting conclusions & ensure compliance with statutory and regulatory requirements 9/20/18 Goal: Close within 120 calendar days (60 day review + 60 days to close) Limited HUD Review: Lender will be allowed additional authority during the construction phase (approve most change orders and escrow releases) PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

221 d 4 LIHTC Pilot More Upfront, Earlier Mitigated HERO’s with Environmental Assessments • Written scope of work • Approved rent increases • Mitigated secondary financing and instruments • Approved waiver(s) • Approved 2530 via APPS (not paper) • • • URA review & relocation plan Mitigated CNA e-tool submissions 9/20/18 PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

HUD Resources www. HUD. gov ❑ ❑ ❑ ❑ ❑ 9/20/18 2016 MAP Guide 2015 Closing Guide 07/05/16 MAP Guide 2016 Implementation & Clarifications Memo MAP Guide 2016 - Q&A 2016 MAP Guide- FAQs on Affordable Transactions CFR/Vol. 81, No. 62/Thurs. March 31, 2016 Notice 2016 -15, dated 10/20/16, Processing Guide for Prev. Partic. Rev. RAD Notice 2012 -20 EBL Memo PRE-DECISIONAL, PROPRIETARY, and CONFIDENTIAL

HUD Active Links ❑ ❑ ❑ https: //www. hud. gov/program_offices/housing/mfh/maphome/taxcredit https: //www. hud. gov/program_offices/housing/mfh https: //www. hud. gov/sites/documents/APRVLEND. PDF https: //www. hud. gov/program_offices/housing/mfh/hsgmfbus/abouthubspcs https: //www. hud. gov/program_offices/housing/mfh/progdesc