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New Developments in Multifamily Finance at NALHFA Annual Conference

Learn about the latest developments in multifamily finance, including HUD/FHA activities, insured programs, recent national initiatives, and more at the NALHFA Annual Conference in San Francisco, CA.

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New Developments in Multifamily Finance at NALHFA Annual Conference

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  1. NALHFA Annual Conference San Francisco, CA May 20, 2011 New Developments in Multifamily Finance HUD/FHA Activities

  2. Topics • Multifamily Insured Programs • Endorsements FY2000 to 2010 • Endorsements FY11 to date • Recent National Initiatives/changes • Targeted National Initiatives/changes • San Fran MF Hub Initiatives/activities • Going forward with FHA Multifamily

  3. HUD Production Overview Production includes: 1. Insured Production • Insuring mortgages for construction, purchase, refinance, and rehabilitation of multifamily properties • Financing affordable housing in conjunction with the low-income housing tax credit program 2. 202/811 Capital Advances • Providing Capital Advances (conditional grants) for the construction or rehabilitation of housing for low-income seniors and people with disabilities along with project rental assistance subsidies to keep the housing affordable. This presentation will focus on insured production, although many 202/811s are now using LIHTCs and mixed financing.

  4. HUD Multifamily provides loan guarantees to lenders. • HUD insures loans and pays the lender in the event of a default. • Insurance provided for both subsidized and market-rate rental housing. • Program benefits include: • Favorable loan-to-value ratios. • Longer-than-conventional mortgage terms. • Favorable fixed interest rates resulting from FHA credit enhancement. • Non-recourse mortgages (i.e. only the assets of the project secure the loan, not individual assets of the project owners or investors). • No need for separate construction loan. • Equity takeout allowed for refis when LTV < 80% value FHA Multifamily Mortgage Insurance 4

  5. Primary FHA Programs Section 223f- refi and purchase of existing “minor” repairs Section 223a7- refi of existing FHA insured Section 221d4- new and sub rehab Section 231- NC/SR of elderly (= >62 yrs) Section 232- Health Care (B&C, ALF, SNF) Section 242c- Risk sharing w/ HFAs

  6. FHA (Basic and Risk Sharing) Endorsements 2000-2010

  7. FHA (Basic and RS) endorsements FY2011 compared to FY2010 FY2010 = 10/1/09 - 9/30/10 FY2011 = 10/1/10 – 4/30/11 (year to date) 58% of yr FY # loans #units/beds $ (billion) ‘10 1,343 208,429 $13.877 ‘11YRTD 961 140,828 $9.062 FYYTD as % of prior FYTD 132.7% 125.9% 124.3% FYTD as a % of all prior FY 71.6% 67.6% 65.3%

  8. Some Recent Underwriting Changes Establish Hub and National Loan Committee (Notice H 2010-13, 7/19/10) Streamline LIHTC processing (*ML 2009-18, ML 2010-26 re: AE docs) 3 year waiver rule on 223f (ML 2010-30, ML 2011-13) Risk Mitigation (Notice H 2010-11, ML 2010-21) *ML= Mortgagee Letter

  9. Mortgagee Letter 2010-21Risk Mitigation • Changes in underwriting requirements • Changes in DSCR/LTV/LTC Examples: 221d4 past: 1.11 DSCR, 90%LTC now: 1.11 to 1.20 DSCR, 90% to 83% LTC 223f past: 1.11 to 1.176 DSCR, 90% to 85% LTV now: 1.11 to 1.20 DSCR, 90% to 83.3% LTV Still allows equity take out at 80% LTV

  10. ML 2010-21, some underwriting changes Expand mortgage credit reviews Evaluate total REO Reduce max. occupancy (ex: 93% vs. 95%) exceptions for affordable properties Market study independent of appraisal Underwriter site inspection required 2-stage processing, split application fee Absorption period reduced to 18 months (vs. 24) Change in construction contract retention (reduce and earlier release) Change in working capital escrow (4%) Change in sub rehab contingency (15% vs. 10%)

  11. The San Francisco Multifamily Hub covers territory in four states, encompassing more than 300,000 square miles, and serving a population of more than 24 million people.* San Francisco MF Hub • Our jurisdiction includes Northern California, Arizona, Nevada and Hawaii. In addition to the San Francisco Hub office, there are Program Centers in Phoenix and Honolulu, and additional staff in Las Vegas and Sacramento. 11 * From 2010 U.S. Census www.census.gov

  12. San Fran Multifamily Portfolio Overview* “Production Pipeline” refers to all projects that have not yet reached final closing/ endorsement *All data from HUD MPRD REMS_DMART database 09.30.2010 **Total units represents all units in a subsidized building, including assisted and non-assisted units *** Dollar Amount represents original loan or grant amounts. 12

  13. San Fran Hub Initiative: Preservation • 33 percent of those contracts are also HUD-insured, representingapproximately $200,000,000 in outstanding mortgage insurance, greatly reducing the likelihood of financial defaults. • This long-termaffordability strategy maintains affordability of property. Banneker Homes, San Francisco, CA Sponsored by Hampstead Development Group, Inc. Family community of 108 units built in 1967. $11 million renovation complete in 2007. Since Jan. 1, 2008, the Hub has increased the total number of 20-year HAP contracts in our Project-Based Section 8 portfolio from 151 to 295, a 95% increase.

  14. FHA Multifamily Mortgage Insurance: Creating Jobs and Affordable Housing in Arizona • The Ridge at Clear Creek, Flagstaff, Arizona • HUD 221 project – New Construction mortgage • insured for $35,660,000 • 21 buildings comprising 306 Units – 245 market • rate and 61 affordable units (tenants earn up • to 80% of area median income) The Ridge at Clear Creek, FHA-Insured by RED Mortgage Capital, LLC, under construction May 2010 (Jake Bacon/Arizona Daily Sun) • Creating Local Jobs: • One of the largest construction projects in northern Arizona • Employs hundreds of construction workers from a dozen different • construction companies • 83 percent of the labor pool is from northern Arizona, with most of the • subcontractors from Flagstaff. • From “Good Jobs, Affordable Rents,” Arizona Daily Sun, May 16, 2010.

  15. Financing the Rehabilitation of Affordable Housing with Low-Income Housing Tax Credits • Crescent Manor, • San Francisco, CA • Historic 94-room San Francisco property built in • 1913, occupied by low-income tenants • No tenant pays more than 30% of their income • and most residents are retired seniors • Upgrades will be completed in such a way that • tenants will not need to move out of the building Historic Hotel Senate (aka Crescent Manor), Tenderloin Neighborhood, San Francisco, CA • Working with Tax Credits to Preserve Historic Buildings and Improve Neighborhoods • $15 million purchase and renovation financed with a combination of low-income • housing tax credits and HUD financing • The property is located in a historically troubled neighborhood, facing issues with • homelessness, crime and poverty. • From “Historic Hotel Senate will be Renovated,” San Francisco Chronicle, December 13, 2010

  16. Building Energy-Efficient, Green Multifamily Properties in Arizona • Energy-Saving Amenities Include: • Energy Star Appliances • Gray Bottom Solar Heated Pool • Photovoltaic Community Solar Panels • Electric Car Charger • Low-E Energy Saving Windows and Velux Sun Tunnels • Water-saving features, such as High Efficiency Water Heater, Low Flow Fixtures, • Low Water Use Plants and Rain Water Harvesting Tanque Verde Valley Casitas Tucson, AZ Tanque Verde Valley Casitas Tucson, AZ 221(d)(4)-Insured new development built in 2010 with many green and energy-saving amenities

  17. Some Recent San Fran Activity Arc-Light, 221d4, in construction 94 units, $33MM, new construction inside historical shell, SOMA 333 Harrison, 221d4, firm issued 326 units, $70MM, market with affordable, adjacent to Bay Bridge and One Rincon Unity Homes, 221d4 Sub rehab, firm issued 94 units, $14.4MM, existing S8, limited equity co-op, Bayview/Hunters’ Pt. 227 Golden Gate, 221d4, prelim 88 units, $13.4MM 10th & Market, 221d4, prelim 754 units, $213MM, market with affordable, near City Hall

  18. Using HUD/FHA mortgage insurance To review program requirements Google: “HUD MAP Guide” “HUD Multifamily Programs” Anticipate new Guide to be issued 6/11 To find a lender Google: “HUD MAP lenders” “HUD multifamily data” (includes lender activity) HUD’s website: www.hud.gov

  19. 18 MF Hubs nationwideGoogle “HUD Multifamily Hubs” to find contact info

  20. For More Information Questions? Please Contact: Tom Azumbrado Director, San Francisco Multifamily Hub (415) 489-6604 thomas.w.azumbrado@hud.gov

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