The consolidated discussion for the appropriation "Salaries and Expenses, HUD" is shown in Part 3 of the Justifications. All data are presented on a comparable basis for the 3 fiscal years: 1999, 2000, and 2001.

SUMMARY OF BUDGET REQUEST

For fiscal year 2001, the Salaries and Expenses (S&E) Budget for the Office of Multifamily Housing Assistance Restructuring (OMHAR) is for $1,240 thousand in travel funds and $2,470 thousand in contract funds. These are increases in the funding levels over fiscal year 2000 of $843 thousand and $1,958 thousand in travel and contracts respectively and represent the funding needed to support the increased activity planned for fiscal year 2001.

SCOPE OF ACTIVITY

OMHAR was established by the Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act of 1998 to administer the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA). In administering MAHRA, the Director of OMHAR will report to the Secretary of the Department of Housing and Urban Development. In addition, the statute also provides for the Director to file an independent report to Congress.

MAHRA is intended to provide a long-term solution to a rapidly growing cost to the Federal Government of assisting affordable rental housing. Approximately 14,000 multifamily projects have been financed with FHA-insured mortgages and approximately 8,500 of these are supported by project-based Section 8 housing assistance payment (HAP) contracts. In many cases, these HAP contracts currently provide for rents for assisted units that substantially exceed the rents for comparable unassisted units in the local market. The purpose of this program is to preserve low-income housing affordability while addressing the long-term costs of Federal rental assistance, including project-based assistance, and minimizing the adverse effect on the FHA insurance fund. These competing goals will be accomplished by: (1) reducing project rents to no more than comparable market rents for all projects except those that fall in the exception category; (2) restructuring the HUD-insured or HUD-held financing so that the monthly payments on the first mortgage can be paid from the reduced rental levels; (3) addressing needed rehabilitation of the project, and (4) reviewing the management of the project. All restructured projects will be subject to a long-term use affordability restriction.

WORKLOAD

OMHAR established four regional offices in areas with the largest concentration of potentially eligible Mark-to-Market (M2M) properties. The regional offices are located in New York, Chicago, San Francisco, and Washington, DC.

1. HEADQUARTERS

   OMHAR Headquarters Office is responsible for the development of regulations, program policies and procedures; the selection and oversight of Participating Administrative Entities (PAEs); the assignment of assets to PAEs; and the oversight of the OMHAR field offices; as well as for staffing and personnel issues; training and technical assistance briefings for OMHAR staff, PAEs, and other program stakeholders; contract administration; budget issues; program evaluation and oversight; claims; Section 8 coordination; administering the Outreach and Training Assistance Grants/Intermediary Technical Assistance Grants (OTAG/ITAG); and, program public relations.

2. PARTICIPATING ADMINISTRATIVE ENTITIES

   The hands-on restructuring responsibility will be delegated by OMHAR to qualified public and non-public PAEs, who are approved and supervised by OMHAR. Under a Project Restructuring Agreement (PRA) signed with OMHAR, the PAE will have the following responsibilities:

   • review owner eligibility;
   • collect and verify data;
   • determine type of Section 8 renewals (project-based or tenant-based assistance);
   • evaluate rehabilitation needs;
   • determine size/structure of new or modified mortgage;
   • negotiate restructuring with owner;
   • obtain public comments from tenants and community groups;
   • prepare a draft restructuring plan;
   • help owners obtain loan/funding approval;
   • work with owners on closing;
   • oversee reserves for rehabilitation and administer any rehabilitation escrow;
   • distribute closing documents; and
   • when applicable, facilitate sale or transfer of projects.

   In addition, the PAE can be selected to service the second mortgage, administer Section 8 contracts and monitor compliance with Use Agreements.

3. HEADQUARTERS AND FIELD

   The OMHAR Headquarters Office and field offices will be responsible for reviewing and approving the draft restructuring plans submitted by PAEs, conducting loan committee reviews for non-conforming cases, and reviewing any Section 223(a)(7) FHA loan application that is proposed as part of the restructuring plan. In addition, OMHAR Headquarters and field offices will be responsible for periodically performing on-site monitoring reviews of the PAEs; reviewing and approving invoices submitted by the PAE for payment of fees and reimbursable expenses; and, acting as a liaison between the PAE and HUD Multifamily Processing Center with jurisdiction.

TRAVEL

The table below identifies travel requirements unique to this activity.

The travel requirement for fiscal year 2001 is increased by $843 thousand over fiscal year 2000, reflecting the higher staffing level planned for fiscal year 2001. The funding level requested will allow OMHAR Headquarters to participate in OMHAR field office loan committee reviews of non-conforming cases; will allow both OMHAR Headquarters and field office staff to perform on-site monitoring reviews of PAEs; conduct on-site reviews of specific projects (if deemed necessary); participate in industry meetings; and conduct/attend OMHAR technical assistance briefings and various other training sessions.

CONTRACTS

The only Salaries and Expenses contract category for OMHAR is technical services. The following table identifies the estimated costs.

Technical Services. Examples of types of contractual services follows.

Transitional Professional Support. These funds are requested to provide a means to obtain transitional professional (temporary) support. This transitional support will consist of temporary contract professionals and quality control analysts.

Contract Administration and Disposition. These funds are requested for organizational sunset activities to ensure the orderly termination of OMHAR and for closing out the ITAG/OTAG grants.

Annual Financial and Performance Support. These funds are requested for an internal audit of OMHAR headquarters and field offices on the implementation of the OMHAR activities.

Technology Integration, Technical Assistance and Other Support. These funds are requested for technical assistance on the development of strategies that integrate technology into the implementation of OMHAR programs and other support as needed.

Employee Benefits. These funds are requested to manage the employee benefits plan for OMHAR staff in accordance with statutory compensation system, and

Document Retention System. These funds are requested to develop, implement and manage a document retention storage system policy for the program, legal and business documents of cases restructured under MAHRA.