San Francisco Multifamily Hub Industry Meeting

January 19, 2012
Agenda

The remaining Industry Meetings for 2012 are: April 19th, July 19th and October 18th.

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SUMMARY OF TOPICS

1. 2012 Multifamily Overview

• The San Francisco Hub has revised its Annual Report for Fiscal Year 2011 to include statistics and updates on Hub progress and initiatives for the previous fiscal year.
• The San Francisco Hub is promoting several initiatives in 2012 to further our strategies for preserving our existing stock of affordable housing. These include:
  • Continuing to promote 20-year HAP contracts for eligible projects;
  • Streamlined prepayment guidance and processing for projects with certain maturing FHA Loans (Section 236, 221(d)(3) Below Market Interest Rate (BMIR))) and/or expiring Title II and VI Preservation Use Agreements; and
  • Streamlined processing for Section 202 projects to complete Capital Repairs and Green Improvements.
• Update on the status of the Performance-Based Contract Administrator (PBCA) notice of funding availability (NOFA).

2. Recent Guidance on Allowable Uses of Residual Receipts

• On November 22, 2011, Janet Golrick, Assistant Deputy Secretary for Multifamily Housing Programs issued a letter to the Industry. A subsequent follow up letter was issued on December 5, 2011.
• Provided information on the impact of the Fiscal Year budget of 2012, and to inform about policy changes in the upcoming Housing Notice. The letter further outlines the following:
  • Residual Receipts: fund currently held in project residual receipts will be used to reduce assistance payments. Applies to those properties with Section 8 contracts under the "New Regulation. Contracts under 24 Code of Federal Regulations (CFR) 880.205(e), 881.205(e) and 883.306(e), whose contracts were effective after 11/05/1979.
    • 880 - Section 8 Housing Assistance Payments Program for New Construction.
    • 881 - Section 8 Housing Assistance Payments Program for Substantial Rehabilitation
    • 883 - Section 8 Housing Assistance Payment Program - State Housing Agencies
• All Option 4 renewals and annual rent adjustments will be limited to OCAF increases if proposed rents exceed the market. Policy was announced and part of the revision of the Section 8 Renewal Guide.
• All rent comparability studies will be required to justify proposed rents that exceed 110% of Small Area Fair Market Rents.

3. Performance-Based Contract Administrator (PBCA) Update

• Effective October 1, 2011, HUD executed an Amended Annual Contribution Contract (ACC) with existing PBCA's for the administration of project-based section 8 Housing Assistance Payments (HAP) contracts.
• Under the terms of the amended ACC, the PBCA will only perform a certain subset of tasks that were completed under the previous ACC.

4. Non-Profit Sales Proceeds and Subordination of 202 Loans

1. Policy for Treatment of Proceeds Resulting from the Sale of FHA-insured or Secretary-held formerly insured Multifamily Projects by Nonprofit Owners (HUD Notice H 2011-31)
   • HUD issued Notice on November 10, 2011 to clarify when Non-Profit (NP) owners may retain proceeds from sale of projects; as part of HUD's continuing effort to preserve affordable housing.
   • Applies to sale of NP projects w/insured or Secretary-held mortgages. Does not apply to Section 202 Direct Loans.
   • Supersedes requirements in Chapter 13 of HUD 4350.1, Multifamily Project Servicing.
   • NP owner must meet six requirements:
     • execute/record Section 250 Use Agreement (UA) extending affordability for at least 20 years;
     • execute 20-year HAP Contract at or before closing;
     • rent increase allowed at HAP Renewal, depends on renewal option but never to exceed market comparables (cannot renew under Option 4);
     • purchaser must provide Capital Needs Assessment (including plan w/ time table for repairs & funding to meet needs over term of new Use Agreement (UA) or HAP whichever is longer);
     • provide financing plan demonstrating feasibility over term of UA or HAP, whichever is longer;
     • project must be sold to experienced owner (NP or for-profit) of affordable housing.
   • This notice can be found online.
      
2. Extension of Housing Notice H 2010-26, Subordination of Section 202 Direct Loans (HUD Notice H 2011-34)

• HUD issued Notice on December 8, 2011 to extend Notice H 2010-26 for one year to December 31, 2012.
• H 2010-26 provided policy/procedures for requests to subordinate 202 direct loans only when refinancing under Notice H 04-21 (post-1974 202 projects) is not feasible.
• Targets 202 direct loan projects w/ immediate need to rehabilitate, w/significant emergency repairs, but cannot be refinanced using 202 refinance procedures.
• Existing 202 debt is subordinated to a new mortgage.
• Subordination is necessary for long-term preservation.
• In addition to other program requirements, owner must execute/record a Use Agreement extending long-term affordability.
• This notice can be found online.
• The original notice discussed and extended therein can be found online.

5. General Multifamily and Rental House Integrity Improvement Project (RHIIP) Updates

1. Implementation of Tenant Participation Requirements in accordance with 24 CFR 245 Subpart B and HUD Handbook 4381.5 REV-2 "The Management Agent Handbook" (HUD Notice H 2011-29)
   • HUD issued Notice on October 13, 2011 to emphasize commitment to tenant participation
   • Applies to insured, Secretary-held , formerly HUD-owned projects including but not limited to Sections 236, 221(d)(3) BMIR, Rent Supplement, Loan Management Set-Aside (LMSA), State or local housing financing agency projects, 202 Direct Loans, & 811's.
   • Does not apply to Cooperative mortgagors.
   • Defines rights of tenants.
   • Describes impediments to residents/ associations.
   • Describes enforcement options if Owner/Agent (O/A) violates any provision of 24 CFR 245.10(a)(1).
   • This notice can be found online.
2. Use of Reserve for Replacement Accounts in Restructured Mark-to-Market (M2M) Properties (HUD Notice H 2011-30)
   • HUD issued Notice on October 19, 2011 to provide special requirements for using Reserve for Replacement (R4R) account in M2M restructuring of project's debt and rents.
   • M2M restructured projects must utilize R4R as primary funding source for capitalized improvements/replacement items.
   • Underwriting a M2M project includes 20-year needs assessment, analyzing R4R account, calculating annual deposits so ending balance in year 20 is sufficient.
   • Guidance for insured properties not subject to M2M will be issued separately.
   • This notice can be found online.
3. RHIIP #262: New Tenant Resource Network Program (TRN) for Section 8 Preservation
   • In October, HUD announced its plans to publish a Notice of Funding Availability (NOFA) for the Tenant Resource Network Program (TRN), a new program to assist with the preservation of projects with Section 8 Project-Based Rental Assistance at-risk of loss due to loan maturity, owner opt-out, prepayment or low Real Estate Assessment Center (REAC) score.
   • The program will assist owners and HUD in identifying potential preservation strategies or, if preservation is not feasible, ensuring that tenants are fully informed regarding available protections such as the provision of tenant protection Housing Choice Vouchers.
   • The NOFA will be published online (www.grants.gov). A webcast training session will be held following publication and online.
4. RHIIP #263: Social Security Administration press release about 2012 Cost of Living Adjustment
   • In October, 2011, the Social Security Administration announced a 3.6 Percent Benefit Increase for 2012 Cost-of-Living Adjustment for more than 60 million Americans in 2012.
   • The 3.6 percent cost-of-living adjustment (COLA) will begin with benefits that nearly 55 million Social Security beneficiaries receive in January 2012. Increased payments to more than 8 million SSI beneficiaries will begin on December 30, 2011.
   • The Social Security Act provides for how the COLA is calculated. To read more, please visit the website (www.socialsecurity.gov/col).
5. RHIIP #264 and 266: 2012 Operating Cost Adjustment Factors (OCAFs) Published & Updated in the Integrated Real Estate Management System (iREMS)
   • The Operating Cost Adjustment Factors (OCAF) for 2012 were published in the October 26, 2011 Federal Register and were updated in the Integrated Real Estate Management System (iREMS) on November 3, 2011. The factors are effective February 11, 2012.
   • These factors are used for adjusting or establishing Section 8 rents under the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA), as amended, for projects assisted with Section 8 Housing Assistance Payments.
   • The factors can be found online (www.gpo.gov/fdsys/pkg/FR-2011-10-26/pdf/2011-27816.pdf).

6. Legislative Updates

• "HUD's Fiscal Year (FY) 2012 budget is at $37.3B, a cut of $3.8B from FY2011 funding levels. Renewals for project based Section 8 and tenant based vouchers were fully funded at $9.3B and $18.9B respectively. [ . . . ]
• The bill provides funding for the Rental Assistance Demonstration program (RAD). This demo, which is limited to 60,000 units, will provide public housing and Section 8 Mod Rehab (Mod Rehab) properties with project-based rental assistance, which can be used to leverage private sector resources, including tax-exempt bonds and low-income housing tax credits, to rehabilitate existing housing properties. [ . . . ]
• The bill also contains several provisions addressing the maturity of Rental Assistance Payments contracts (RAP), Rent Supplement contracts (Rent Supp), and Mod Rehab contracts."

7. Flexible Subsidy and Service Coordinator Update

1. Flexible Subsidy Update
   • Heads up on a new policy coming from HUD Headquarters Regarding Repayment of Flexible Subsidy Loans.
   • This new policy is in addition to existing policy to defer repayment covered in Notice H 2011-05, "Policies and Procedures for Deferred Repayment of Flexible Subsidy Loans".
   • HUD will not forgive a Flexible Subsidy Loan.
   • Flexible Subsidy Loans plus interest are payable to the U.S. Department of Housing and Urban Development through http://pay.gov/paygov/.
   • Regulations found at 24 CFR 219.220(b) require repayment at:
     1. Expiration of the term of the mortgage;
     2. Termination of mortgage insurance;
     3. Prepayment of the mortgage;
     4. Sale of the project
   • If your mortgage has already matured, repayment of these funds is due immediately. Please contact your HUD Project Manager to discuss.
   • If the mortgage on your project will mature within the next two years, please contact your HUD Project Manager as soon as possible regarding your repayment options.
2. Service Coordinator Update
   • SERVICE COORDINATOR UPDATES AND NEW PROCEDURES
   • Residual Receipts
   • Recapture of Service Coordinator Funds
   • Grant Extension and Voucher Submission
   • Semi-Annual Reports and Quality Assurance

8. Active Partners Performance System (APPS) and Enterprise Income Verification (EIV)

1. APPS Update
   • A newsletter sent out by a private consultant (Denise Murphy of Murphy Consulting) states that the Baseline set-up wizard in APPS is broken and that this prevents users from establishing a baseline. The consultant advised users to perform the following three steps:
     1. When creating a baseline, after completing the "Edit Organization Structure" step, select "Save and Exit."
     2. From the APPS home page add previous participation by using the "Edit Previous Participation" function.
     3. Send the submission ID of your baseline to steve.h.pham@hud.gov and to kristen.e.messina@hud.gov and ask them to establish your baseline in APPS.
2. RHIIP #265: What's New in the EIV System 9.2.1 Release
   • Dual entitlement income will not be displayed in EIV if you access income data through the "By Head of Household" option. To display dual entitlement income you must access income data "By Contract Number" or "By Project Number".
3. RHIIP #267: EIV Existing Tenant Search Clarification
   • If you determine that an applicant is ineligible for occupancy, you do not need to perform the EIV Existing Tenant Search.

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