PCNA Training

1. PCNA Training PCNA Training

2. PCNA Training Trainers Sheri Cruise Davis, Deputy Chief UW, Highland Commercial Mtg. Larry Ferguson, Sr. Construction Analyst, HUD Atlanta Rob Hazelton, President, Dominion Due Diligence (D3G) Arlan Schulze, Sr. Construction Analyst, HUD Jacksonville Krag Smith, Principal, Comprehensive Building Analysis, Inc. (CBA) Phil Smith, President, JPS & Associates, Inc. Zach Smith, Vice President, JPS & Associates, Inc. Bob Warren, Chief Underwriter - Wells Fargo Multifamily Capital

3. PCNA Training Overview of PCNA Training

4. PCNA Training What we hope to accomplish today includes: • Provide guidance on how to perform those roles and responsibilities • Provide HUD with more complete reports from the third parties and analysis from the lenders • Manage expectations for all parties • Clear up any misconceptions • Share ideas

5. PCNA Training References for information in the training includes: • MAP Guide • Mortgagee Letter 2012-25 • Housing Notice 2012-27 • FAQ Dated 2-5-13 • Fair Housing Act • Section 504 of the Rehabilitation Act of 1973 • Americans with Disabilities Act of 1990 • Many Years’ Experience • Common Sense

6. PCNA Training Deal Engagement to PCNA Preparing for the Review – Lender Sheri Cruise Davis, Deputy Chief UW, Highland Commercial Mtg. Bob Warren, Chief Underwriter - Wells Fargo Multifamily Capital

7. PCNA Training When screening a potential deal, a lender is looking at: • Age of the property • Photos of the property (provided by borrower or found online) • Aerial Map (Bing, Google, Mapquest) • Information provided by the borrower (List of repairs done or to be done) • Information gathered from online searches • Type of Property • Garden, mid-rise, high-rise, brownstone • Market or Affordable After Engagement, information obtained from these items will help determine the scope of work for engagement of the report

8. PCNA Training Hot Button Items • Scope of Work - Standard or Intrusive • Age • Exteriors • Type of Construction • Size of Property (# of units and/or Acres) • Timing • Borrower’s expectations • Our Expectations • 3rd Party Expectations

9. PCNA Training Hot Button Items • IDRR or ADRR • How does either affect the potential DSC Loan Amount? • Does the borrower want one or both high or low? • Type of Construction • Size of Property (# of units and/or Acres) • Timing/Price • Borrower’s expectations • Our Expectations • 3rd Party Expectations • What are you getting for the price?

10. PCNA Training Hot Button Items • Qualifications of 3rd Party Reviewer – What to look for • Staffing – contract or actual staff • Get sample of work to review • List of other lenders and HUD offices • Communication • How much and what type? • Who is your contact from the 3rd party? • Getting everyone on the same page

11. PCNA Training Deal Engagement to PCNA Preparing for the Review – 3rd Party Rob Hazelton, President, Dominion Due Diligence (D3G) Zach Smith, Vice President, JPS & Associates, Inc.

12. PCNA Training - Technical Scope of Work • Specifying the assessment protocols • Loan Program (223f, 221d4, A(7), etc.) • Current insured status (if Yes, what current program?) • Is there federal assistance outside of mortgage insurance? • Intrusive or Seismic Zone considerations? • Environmental, and if so what out of scope services do you need? • Acquisition vs refinance. • If so, does purchaser/borrower expect reliance on our reporting? • Property Details • Size of asset (land size, building size, GSF, # units) • Detailed description (residential and non-residential) • Date of Construction (If built in phases, more info needed!) • If >~30 years old, if rehab has been done what level of rehab? • SO MANY QUESTIONS, SO LITTLE ANSWERS

13. PCNA Training Timing - You want it when? • 3-legged stool concept - You can pick two, but not all three! • What is acceptable time to get a study completed? 21-25 business days from engagement is industry standard, but you can pay for speed…. • iii. Having the correct contact person to site up the site visit is critical; this can be done through the lender, owner or on-site management. • IS QUALITY REALLY AN OPTION WITH HUD-FHA?

14. PCNA Training Pricing the Study • What goes into the price? • Size of asset, type of asset, # units, # buildings • Transaction Protocols (refinance, acquisition, LIHTC, Green, RAD, etc.) • Turnaround time • Location (travel expenses, lodging expenses, etc.) • Are plans available and if so, this can create efficiencies • If UFAS; or post-1991 more advanced accessibility studies are required • Borrower experience with FHA financing • Intrusive Study requirements; “All-in” now, or a staged or phased approach to potential future inspections? • Scheduling the “right person” for the “right job” • WHICH DO YOU WANT? A DEFINED SCOPE OF • WORK, OR A PRESUMMED SCOPE OF WORK?

15. PCNA Training Managing Client Expectations • Single point of contact for both lender and assessor • Establish a “Path to Success!” • Lender should define expectations of timing • Lender should provide a verified single point of site contact • Lender should define communication process • It would be nice to know up-front a borrower’s expectations as far as what the originator promised (e.g. C, NC, R4R, IDRR, ADRR) • Some lenders want to control the process, others want to step back and just give the needs assessor the “keys to the car” - What is your style? What is the best style? • PROVIDE A TARGET!

16. Communication – Who’s on First? • A SPOC is key, otherwise the message gets lost • Kick-off calls are recommended, especially for sensitive projects • The Lender’s individual communication style needs to be communicated • Importance of Owner/User/Borrower questionnaire - too often these are not completed putting needs assessors “in the dark” • Replacement history is so very important • Cost of typical replacement items can also be very important • Please provide requested documents up front, not after draft!

17. PCNA Training Pre-Site Visit Krag Smith, Principal, Comprehensive Building Analysis, Inc. (CBA) Phil Smith, President, JPS & Associates, Inc.

18. PCNA Training • Obtaining Information from: • The Lender • The Sponsor • Other Sources

19. PCNA Training • Recent HUD Changes • ML-2012-25 • Appendix 6 • HN 2012-27 (Handouts)

20. PCNA Training • Form HUD 92329 • New Format Per FAQ 2/25/13 (Handout)

21. PCNA Training • Form HUD 92264 • Engineer’s Portion (Handout)

22. PCNA Training • ASTM E2018-08 • Is This The Gold Standard? • Why Is This Required?

23. PCNA Training • Checklist / Questionnaire • Is This Really Necessary? • If So, Why?

24. PCNA Training • ALTA / ACSM Land Title Survey • Why Is That Guy’s Fence On My Property?

25. PCNA Training • Title Search / Commitment / Policy • Importance For Engineering • M & B – Legal Description

26. PCNA Training • Tax Assessor’s Information • What Might This Offer Us?

27. PCNA Training • Touch Base With The Appraiser • The Earlier The Better • Who’s On First With NRSF And GBA • What The Heck Does Paint to Paint Mean, Anyway? (Handout)

28. PCNA Training • Building Code • What Do You Mean I Have To Clear My 551 Violations Prior To Closing? (Office Nuances)

29. PCNA Training • Fire • So, Do Expired Extinguishers Really Matter, and • Why Does It Take 60 Days?

30. PCNA Training • Zoning Code • What Do You Mean I Can Only Rebuild 8 Of My 15 Stories?

31. PCNA Training • FEMA • Why Are My Ferragamos Wet and Who The Heck Is This Pushy USACOE?

32. PCNA Training • SHPO • What Do You Mean I Can’t Paint My Windows?

33. PCNA Training • Noise • But It Only Goes 15 MPH • I Think That Airport Is Closed Now

34. PCNA Training • Seismic • No Longer Your Father’s PML • ASCE-31 & 41

35. PCNA Training • Property Contacts • No, The Janitor Can’t Do It All

36. PCNA Training • Equipment Needed • Standard • Intrusive

37. PCNA Training • Should Lender Rep And / Or Appraiser Come On The Same Day as Needs Assessor? • Why the Engineer Takes Days and the Appraiser Takes Hours

38. PCNA Training BREAK! Sponsored by HFC Funding Siebold Group Consulting Please be back in 13.56 Minutes.

39. PCNA Training Site Visit Phil, Krag

40. PCNA Training • Arrival: (Arrive early to drive the site and get familiar) • Allows for quick study of “lay of the land” and to identify any discrepancies from the pre-site information • General understanding of site … layout and size • General understanding of site features and “unusual” site features • Note any concerns based on drive through and photograph

41. PCNA Training • Meeting with Property Management: • Prefer manager and maintenance staff be present • Introductions and explanation of PCNA • Discuss Purpose and Methodology • Review the existing Reserves and maintenance/operation expenses • Carpet/paint at unit turn vs. inclusion in RUL • Verify unit keys are pulled and staff is available to accompany you • Check staff schedules – lunch, breaks, etc. and affect on timing • Check on status of Property Questionnaire and review if needed • Check on extent and condition of existing drawings to be provided • This tells you what and how to quantify information in field

42. PCNA Training • Walking the Property – Site and Grounds: • Walk site for visual inspection (use of site map or Google Earth image) • Note general site elements and condition • Take general site photographs and repair photographs • Generate site questions list for review with manager/maintenance • Check for accessibility requirements on site • Points of access and accessible entries • Accessible routes • Accessible parking • Check for site elements and special features on site • Utilities, retaining walls, fencing, paths, amenities, etc. • Site measurements, quantities and area take-offs

43. PCNA Training • Walking the Property – Building Exteriors: • Walk each building for visual inspection (use of site map) • Note general building elements, condition and repairs • Note repairs and photo locations on site maps or input through the use of iPad/Tablet technology • Take building photographs and repair photographs • Generate repair list and identify any potential for intrusive tests • Access to roofs - ladders • Take-offs and measurements for any/all needed quantities • On site field measurements may depend on plans available

44. PCNA Training • Walking the Property – Common Areas and Service Areas: • Walk each building for visual inspection (use of site map) • Stairs, breezeways, exterior walkways, interior common corridors • Community spaces, activity spaces and offices areas • Input information into Common Room Schedule • Attics, basements, crawl spaces, storage areas (if access provided) • Note repairs and photo locations on site/building maps or input through the use of iPad/Tablet technology • Take building photographs and repair photographs • Generate repair list and identify any potential for intrusive tests • Take-offs and measurements for any/all needed quantities • On site field measurements may depend on plans available

45. PCNA Training • Walking the Property – Mechanical Equipment Areas: • Note general/specific equipment elements, condition and repairs • Note repairs and photo locations on maps/plans or input through the use of iPad/Tablet technology • Note make/model, capacity, age and condition • Take building photographs and repair photographs • Generate repair list and identify any potential for intrusive tests • Discuss maintenance/replacement history with staff and check inspection records and maintenance contracts for all equipment

46. PCNA Training • Walking the Property – Dwelling Units: • Typically inspect 25% or more units to get good representation of the dwelling unit conditions (pick random sample including vacant units) • Walk through may dictate the need to see additional units • Typically start unit inspections after 10:00am for various reasons • Use of Unit Forms to note general/specific elements, condition and repairs (walk each unit in same manner) • “Typical” unit forms and paint to paint measurements • Talk briefly with tenants for general/specific concerns (work orders) • Note repairs and photo locations on unit forms and unit plans or input through the use of iPad/Tablet technology • Check unit form for completeness before moving to next unit • Review work orders, common repair items with maintenance

47. PCNA Training • Verify Complete and Accurate Information: • Verify all paperwork and forms are complete and verify repairs • What did we see, where is it and is it quantified? • What does the condition/repair mean ? • Intrusive testing – is there reason for testing? • Any water, mold, pests, housekeeping concerns? • What are probable costs? • Review general observations, repair items and concerns with manager and maintenance staff prior to leaving • Identify and discuss any areas of concern for intrusive testing needs that would require an additional visit to the site

48. PCNA Training Post-Site Visit Rob, Zach

49. PCNA Training Field Info Review and Verification • Field Notes – Should include the inspectors remaining useful life of each replacement item, not just the RUL based on the component’s age • Photographs: What should be captured to paint the picture? • Property Specific Exhibits • Repair/capital expenditure records • Trades and Specialty Contractor reports (e.g. Elevator, FP, pest, etc.) • Construction Documents (if available) • If past rehab – need schedule or work completed • Other studies (e.g. environmental and haz mat can be very important) • Other Potential Submittals / Discoverables? • Municipal Exhibits • Fire Letter • Building Code Compliance • Zoning • Other (e.g. health department with septic or grease trap)

50. PCNA Training Field Notes Best Practices • Field Note collection Best Practices: • Reproducible record of inspection • Photographic evidence (logical order, chronological order) consist with note collection. • Collection of actual measurements for Accessibility Compliance • Collection of energy consumption data for Green/Energy Audit studies • Environmental Notes? • Notes in Clear, Reproducible Condition (proverbial hit by the bus scenario) • Various methods of data collection: Pros and Cons • Pen and Paper • Digital • Notes should facility a timely data validation inspection, as well as report writing by persons other than inspector