NIFA AFFORDABLE HOUSING INNOVATION MARKETPLACE BIG PLANS FOR SMALL COMMUNITIES

1. NIFA AFFORDABLE HOUSING INNOVATION MARKETPLACE BIG PLANS FOR SMALL COMMUNITIES USDA RURAL DEVELOPMENT Section 538 Guaranteed Rural Rental Housing Program

2. Section 538 Guaranteed Rural Rental Housing Program (GRRHP) What is it?

3. Section 538 Guaranteed Rural Rental Housing Program (GRRHP) • Rural rental housing • Increase supply of affordable housing in rural areas • Low to moderate income tenants • Loan guarantee program • Foster risk sharing partnership with public and private lenders

4. Section 538 Compared to Section 515

5. Target Audience: Affordable housing lenders and developers 515 developers Section 538 GRRHP

6. Section 538 GRRHPDiscussion Topics • Creating Affordability • Developer Benefits • Risk Sharing with Lenders • Revitalization of 515 portfolio

7. The Section 538Program Creating Affordability

8. Creating Affordability • Market Driven – Developer and lender determine affordable housing need – no designated place list • Works well with tax credits, HOME funds, grants, bonds, and other sources of financing • Guaranteed Loan Amount is Unlimited

9. Section 538 Guaranteed Rural Rental Housing Program (GRRHP) Typical Transaction Financing Structure $1,200,000 Section 538 Loan Guarantee, 40 Year Loan Term $4,400,000 9% Tax Credits, HOME Funds, Bonds, etc. _______________________________________________________________________________________________ $5,600,000Total Development Cost

10. Section 538 Guaranteed Rural Rental Housing Program (GRRHP) Program Requirements- Tenant Income & Unit rents • Available to families or persons whose incomes at time of initial occupancy do not exceed 115% of area median income • Rent (including tenant-paid utilities) for any unit at initial occupancy cannot exceed 30% of 115% of area median income, adjusted for family size • Average rent (including tenant-paid utilities) for all units in a project cannot exceed 30% of 100% of area median income

11. Section 538 Guaranteed Rural Rental Housing Program (GRRHP) Program Requirements • Interest rate must be fixed for the life of the loan • USDA’s lien must be in first position • Minimum of 25 years affordability • Minimum loan term is 25 years (40 years max)

12. For profit owners, corporations, partnerships, LLCs Ownership Structures • Non-profit owners, Housing Finance Authorities, State and Local Agencies and Indian tribes

13. Section 538 Guaranteed Rural Rental Housing Program (GRRHP) What is in it for Developers? • Up to 90% LTV for for-profit entities • Up to 97% LTV for non-profit entities • Housing type flexibility - Housing types vary from apartments to single family – must consist of at least 5 dwelling units • Qualified Allocation Plan (QAP) preference

14. Section 538 Guaranteed Rural Rental Housing Program (GRRHP) What is in it for Developers? • No restriction on return • Construction loan guaranteed • Guarantee on permanent loan • No Davis Bacon requirement • Uses include soft costs (loan fees, market study, professional services, developer fees and construction interest)

15. Types of Loans Guaranteed Risk Sharing With Lenders New Construction • Construction / Permanent : Limited duration guarantee during construction until construction completed and guarantee for permanent loan upon conditions being met • Continuous Construction loan and permanent loan guarantee (final rule January 3, 2011) • Permanent loan only guarantee

16. Types of Loans Guaranteed with Acquisition • Substantial – minimum of $6,500 in hard construction costs per unit • Funds can be used for acquisition costs, including professional services and financing costs Substantial Rehabilitation

17. Section 538 GRRHP Using the Section 538 for Revitalization with 515

18. Sec. 515 Portfolio Issues • Prepay – Owners want out! • Aging of physical asset • Section 504 compliance issues • Lack of affordable capital resources • Lack of affordable debt for • acquisition with rehabilitation

19. 515 Revitalization – How Can the 538 Help? • Provide affordable debt to: • Transfer or acquire ownership of • property • Revitalize existing property • Must need at least $6,500/unit rehab.

20. Section 538 Guaranteed Rural Rental Housing Program (GRRHP) Process: • Availability for GRRHP funding made public through NOFA • Contact Approved Lender - submit summary of proposed • projects for scoring and ranking • Selected applications issued Notice to Proceed – lender • originate & underwrite application • USDA obligates funds & issues Conditional Commitment

21. Lender Features Approved lenders make and service loans guaranteed by RD Best Negotiated Interest Rate 90% RD Guarantee Lender’s Underwriting standards 100% of Loan can be sold CRA credits Sell or Hold servicing

22. The Section 538 Program Fees

23. Guarantee Fees • GRRH Application Fee:NONE + • GRRH Initial Fee:NONE + • GRRH Annual renewal fee:NONE = FREE Guarantee • NOTE: LENDER fees will apply

24. Section 538 Guaranteed Rural Rental Housing Program (GRRHP) Questions? USDA is an equal opportunity provider, employer, and lender. To file a complaint of discrimination write USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C., 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD).

25. Mike Buethe 402-437-5574 Office mike.buethe@ne.usda.gov Linda Anders 402-437-5734 Linda.anders@ne.usda.gov NEBRASKA WEBSITE: www.rurdev.usda.gov/ne/ USDA is an equal opportunity provider, employer, and lender. To file a complaint of discrimination write USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C., 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD).