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DAS Memo – Issued January 30, 2015 “Affordable Housing Clarifications”

Affordable Housing & the 223(f) Low-Income Housing Tax Credit (LIHTC) Pilot Program Recent Updates and Highlights Prepared by Laura Stutzman, Senior Underwriter Office of Multifamily Production – Denver Hub. DAS Memo – Issued January 30, 2015 “Affordable Housing Clarifications”.

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DAS Memo – Issued January 30, 2015 “Affordable Housing Clarifications”

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  1. Affordable Housing & the 223(f) Low-Income Housing Tax Credit (LIHTC) Pilot Program Recent Updates and HighlightsPrepared by Laura Stutzman, Senior Underwriter Office of Multifamily Production – Denver Hub

  2. DAS Memo – Issued January 30, 2015“Affordable Housing Clarifications” • Organizational changes to support Underwriting of Affordable Housing • Single Underwriter Model across the FHA platform • Dedicated RAD Teams in (4) Hubs - Atlanta, Chicago, Fort Worth, and Seattle • Expansion of the TC Pilot to Include 221(d)(4) projects

  3. DAS Memo – Issued January 30, 2015“Affordable Housing Clarifications” • Tax Credit Related changes to Policy • Tax Credit Equity Pay-In Schedule • Temporary Bridge Loans can be used to Fund Equity • Borrower cannot be the FHA Loan’s Single Asset Mortgagor • Loan cannot be Secured with the Project • Term limited to (1) year following issuance of Form 8609 • Lenders approved by HQ to hold Equity Interest > 25% in Projects for which they are FHA Lender • Increased Projects allowed from (5) deals per year to (10) deals per year.

  4. DAS Memo – Issued January 30, 2015“Affordable Housing Clarifications” • Tax Credit Related changes to Policy (Continued) • Subordinate Debt in amounts up to 100% of Total Project Cost can be used and secured by TC Projects • HUD’s standard form of Subordination Agreement must be in place • Payments only from available Surplus Cash • Payments from all Secondary Debt combined not to exceed 75% of Surplus Cash • Must be documented w/ signed Promissory Note • Simple Interest used • Compound interest could be allowed via a HUD waiver with consideration

  5. DAS Memo – Issued January 30, 2015“Affordable Housing Clarifications” • Tax Credit Related changes to Policy (Continued) • Minimum Vacancy/Collection Loss Rate *Underwritten Vacancy will be at the greater of the minimums below and actual levels

  6. DAS Memo – Issued January 30, 2015“Affordable Housing Clarifications” • Tax Credit Related changes to Policy (Continued) • Broadened Underwriting of Developer Fees • We will now underwrite any developer fees up to 15% of Total Development Costs that comply w/ IRS Regulations for the LIHTC Program and the prevailing Qualified Allocation Plan (QAP) for any project not claiming BSPRA or SPRA. • The Developer Fee now may also be treated as a MortgageableCost. (Note – Waivers of the MAP Guide will be required to implement these changes until published in the New MAP Guide.)

  7. 223(f) LIHTC Pilot Program • FHA Insured LIHTC Projects more than doubled from 2013 to 2014 • Roughly $0.9 to $1.8 billion in mortgages • Very Low TC Pilot Processing Times • Less than (100 ) days from Firm Application to Closing • Denver Hub – 223(f) Pilot Projects • Increase in requests for Concept Meetings • Increase in 3-Year Rule Waiver Projects

  8. 223(f) LIHTC Pilot Program • Pilot Hub Jurisdictions

  9. 223(f) LIHTC Pilot ProgramAvoid Processing Delays/Possible Application Rejection • Total Construction Costs cannot exceed $40,000/Unit • Includes any Contingency amounts utilized • Project-Based Section 8 (PBS8) HAP Contract • Submit 20-Year PBS8 HAP Renewal Requests, Rent Increase Requests, and Prepayment Requests (if applicable) a minimum of 60 days prior to submitting your TC Pilot Application • M2M Waiver Requests • Initiate well in advance of your TC Pilot Application

  10. 223(f) LIHTC Pilot ProgramAvoid Processing Delays/Possible Application Rejection • Fixed LIHTC Equity Pay-In Schedule

  11. 223(f) LIHTC Pilot ProgramAvoid Processing Delays /Possible Application Rejection • 3-Year Rule Waivers • Include all Supporting Documentation • Must meet required Occupancy Standards • Always discuss nuances and potential waivers before or at the “Most Essential” Concept Meeting

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