HUD

This article is reprinted with the permission of Nixon Peabody LLP

Over the past year the White House has sought to align federal rental policy. Sometimes called “Harmonization,” these efforts have focused on several areas where federal programs work in tandem among the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Treasury (essentially the Internal Revenue Service’s Low-Income Housing Tax Credit Program), and the U.S. Department of Agriculture (USDA) (mainly Rural Housing Services’ multifamily programs operated through Rural Development). The White House has convened several working group meetings culminating in a roll out meeting this past July 27. The Administration published its report called Federal Rental Alignment Opportunities—Conceptual Proposals, and sought comments over the summer. The report is broken out by its 11 subject areas: physical inspections, income reporting and definitions, subsidy layering reviews, reduction in state-to-state variability for income definition, financial reporting, common energy efficiency requirements, appraisal primer, market study standards, capital needs assessment, improve sharing of data on owner defaults, and compliance (fair housing MOUs).

The Administration is now starting implementation through pilot programs for physical inspections and subsidy layering reviews. The physical inspection pilot will involve limited numbers of properties in Michigan, Minnesota, Ohio, Oregon, Washington State, and Wisconsin. The subsidy layering pilot will be implemented in certain transactions in North Carolina, South Carolina, Michigan, and Nevada.

The physical inspection pilots have started their roll outs in the past two weeks in different states. Each pilot is focused on executing Memoranda of Understanding (“MOU”) in each pilot state between HUD, USDA, and the state Housing Finance Agency. Indications are that the Uniform Physical Condition Standard or UPCS would become the common inspection standard.

Similarly, the subsidy layering pilot will be implemented by state-specific MOUs between HUD, RD, and the state Housing Finance Agency.


The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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This article is reprinted with the permission of Nixon Peabody LLP

Today, HUD issued a long-awaited clarification of its policy allowing non-profit owners to retain sales proceeds in certain circumstances. The Notice, signed by Carol Galante, Acting Assistant Secretary for Housing – Federal Housing Commissioner, clearly signals that if a non-profit owner sells a property to a purchaser who will preserve the project as affordable housing for the long-term, the seller will be free to use its equity in the project as permitted by its charter and state law.  The Notice does not address sales that have already occurred and that are subject to trust agreements concerning the use of proceeds.  The Notice is not applicable to 202s.

The Notice sets forth six major requirements to obtain HUD’s approval for a non-profit owner to receive sale proceeds, which are summarized as follows:

  1. Execution and Recordation of a New Use Agreement
    a. Must extend 20 years beyond the original maturity date
    b. Must be recorded ahead of new financing
    c. Legal opinion that it is in a first lien position
  2. Renewal and Assignment of Project-Based Section 8 Housing Assistance Payments (HAP) Contracts
    a. Minimum 20-year HAP contract
    b. Existing HAP may be terminated for this purpose
  3. Rent-Setting and HAP Contracts
    a. Section 8 rules govern assisted units
    b. Chapter 15 increases to post-rehab rents capped at market allowed
    c. No option 4 exception renewals permitted
    d. 10% cap on increase for unassisted low – and moderate- income tenants
  4. Physical Improvements
    a. Perform a Capital Needs Assessment
    b. Provide repair plan as necessary
    c. Meet 250(a), decoupling, or TPA requirements as necessary
  5. Financing Plan:  HUD will review new financing to determine long-term feasibility
  6. Purchaser Capacity:  New owner and management must demonstrate experience and capacity to address the project’s physical and financial needs

The Notice is a positive step to address an issue that has prevented the long-term preservation of numerous subsidized properties where HUD’s unwritten policy of disallowing non-profit sales proceeds in transactions involving pre-payments had arisen.  Particularly when the capital markets were strongest, many non-profit owners simply were deciding to wait for the project restrictions to expire so that they would be able to obtain the benefit of their long-term ownership.  The Notice correctly points out that the policy has existed for a long time with respect to sales by non-profit owners involving the assumption of a HUD-insured or HUD-held mortgage, i.e., TPA transactions.


The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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Another housing scorecard… another month of “market fragility”:

September Scorecard

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HUD announced the awarding of $8.8 million in funding through it’s Housing Opportunities for Persons with AIDS (HOPWA) Program to seven organizations. The organizations, locations and funding amounts are listed below:

 

State

HOPWA Grantee Name

Area of Service

Grant Award

California

Los Angeles County Commission on HIV

Los Angeles

$1,375,000

Florida

River Region Human Services, Inc.

Jacksonville

$1,353,743

Massachusetts

Justice Resource Institute, Inc.

Boston

$1,223,377

Maine

Frannie Peabody Center

Statewide

$930,909

New York

Corporation for AIDS Research Education and Services Inc.

Albany and Rochester

$1,344,375

Oregon

City of Portland

Portland

$1,365,900

Texas

City of Dallas

Dallas

$1,287,500

TOTAL: $8,880,804

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HUD awarded the $52.6 million in funds for housing and economic development through the Indian Community Development Block Grant (ICDBG) Program. Below is a press release with more details:

 

HUD No. 11-197
Elena Gaona
(202)-708-0685
FOR RELEASE
Tuesday
September 06, 2011

 

HUD AWARDS $52.6 MILLION TO NATIVE AMERICAN COMMUNITIES FOR HOUSING AND ECONOMIC DEVELOPMENT FOR LOW-INCOME FAMILIES
Grants provided by HUD’s Indian Community Development Block Grant Program

WASHINGTON – Today, the U.S. Department of Housing and Urban Development awarded more than $52 million in grants to tribal communities in 21 states to improve or create housing and economic development opportunities for low- to moderate-income families. The competitive grants are provided through HUD’s Indian Community Development Block Grant (ICDBG) Program to support a wide variety of community development and affordable housing activities.

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It’s been a busy week for the Department of Housing and Urban Development. Following my favorite bit of news this week (the announcement that a housing and transportation affordability index is in the works), the Department announced the awarding of two different grants.  Most of the $1.75 billion comes in the form of $1.63 billion, ” to support nearly 7,000 existing homeless assistance programs currently operating and create additional new homeless assistance programs with the Continuum of Care (CoC) Homeless Assistance Program Notice of Funding Availability (NOFA).” The second, smaller but perhaps more interesting bit of funding new, comes through the announcement of of the first-ever Choice Neighborhoods Implementation Grants:

$122 million to redevelop distressed housing and bring comprehensive neighborhood revitalization to blighted areas. Chicago, Boston, New Orleans, San Francisco and Seattle will receive the first-ever Implementation Grants awarded under HUD’s Choice Neighborhoods Initiative, a new strategy and tools to support local leaders in transforming high-poverty, distressed neighborhoods into neighborhoods with healthy, affordable housing, safe streets, and access to quality educational opportunities.

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An exciting bit of news today from HUD, particularly if you’re thinking about moving, the department announced it has awarded $3.2 million contract to create a national Housing and Transportation Affordability Index to The Manhattan Strategies Group, LLC.  Below is the press release:

 

HUD No. 11-180
George Gonzalez
(202)-402-6054
FOR RELEASE
Tuesday
August 30, 2011

HUD LAUNCHES DEVELOPMENT OF A NATIONAL HOUSING AND
TRANSPORTATION AFFORDABILITY INDEX

New tool will provide homebuyers with a more accurate estimate of living costs

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) today announced it has awarded The Manhattan Strategies Group, LLC and its subcontractor the Center for Neighborhood Technology (CNT) a $3.2 million contract to create a national Housing and Transportation Affordability Index. The groundbreaking index will provide potential homebuyers with a true estimate of both housing and transportation costs that can in turn help them make a more educated decision.

“Affordability is much more than just paying the mortgage, it involves other costs like transportation, gas, and utilities. The availability of a national affordability index will provide consumers better information about the true costs of a home by accounting for that housing’s proximity to jobs, schools and other services. Our goal with the creation of this housing and transportation index is to provide American families with a tool that can help them save money and have a better understanding of their expenses and household budget,” said Shaun Donovan, Secretary of U.S. Department of Housing and Urban Development.

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Today’s federal register contains a notice from HUD announcing a proposed rule that would suspend the FHA’s mortgage insurance program for military impacted areas under section 238(c) of the National Housing Act (Act). According to the Department the program, designed,  “to insure mortgages executed in connection with the construction, repair, rehabilitation, or purchase of property located near any installation of the Armed Forces of the United States in federally impacted areas” has been underutilized in recent years. Additionally, the Department noted that the program is redundant, and that those applicants who qualify under section 238(c) are often equally covered by  the section 203(b) mortgage insurance program.

Comment due date:

October 31, 2011

Submit comments by:

Mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street, SW., Room 10276, Washington, DC 20410-0001.

Electronically through the Federal eRulemaking Portal at http://www.regulations.gov.

For further info contact:

Karin Hill, Director, Office of Single Family Program Development, Office of Housing, Department of Housing and Urban Development, 451 7th Street, SW., Room 9278, Washington, DC 20410-8000; telephone number 202-708-2121 (this is not a toll-free number). Persons with hearing or speech impairments may access this number via TTY by calling the Federal Relay Service at 1-800-877-8339.

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Today, HUD and NeighborWorks® America announced the reopening of the application process for the Emergency Homeowners’ Loan Program (EHLP) in 27 states and Puerto Rico. HUD will accept applications submitted through September 15, 2011. Below is the press release:

HUD No. 11-175
HUD Public Affairs
(202) 708-0980
NeighborWorks Media Relations
mediarelations@nw.org
FOR RELEASE
Monday
August 29, 2011

HUD AND NEIGHBORWORKS®AMERICA ACCEPTING ADDITIONAL APPLICATIONS
FOR EMERGENCY HOMEOWNERS’ LOAN PROGRAM
Homeowners in 27 States & Puerto Rico Will Have Until September 15 to Apply for EHLP Funding

WASHINGTON – The U.S. Department of Housing and Urban Development and NeighborWorks® America today reopened the application process for the Emergency Homeowners’ Loan Program (EHLP) in 27 states and Puerto Rico to give homeowners at risk of foreclosure more time to apply for the program. While the original application deadline was July 27, HUD estimates that resources will be available to reach more struggling homeowners and will accept applications submitted through September 15, 2011.

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According to a release issued today, the Federal Housing Administration (FHA) has endorsed nearly 1,100 multifamily loans, more than seven times the number of loans endorsed three years ago. Below is the press release with more information:

HUD No. 11-172
Brian Sullivan
(202) 402-7527
FOR RELEASE
Monday
August 22, 2011

FHA MULTIFAMILY LOAN VOLUME SETS NEW RECORD
New guidance issued to help speed loan processing and keep pace with demand

WASHINGTON – Never in the history of the Federal Housing Administration has there been such demand for FHA-insured financing to build, rehabilitate or refinance multifamily apartment properties. FHA today announced that it has endorsed $10.5 billion in multifamily rental housing loans since last October, with another month-and-a-half remaining in the fiscal year.

So far this fiscal year, FHA has endorsed nearly 1,100 multifamily loans, more than seven times the number of loans the agency endorsed just three years ago. This historic loan activity also breaks the $10 billion threshold for only the second time in FHA’s history of endorsing multifamily loans. To help meet this growing demand, FHA today published updated underwriting and program guidance to help accelerate and coordinate the processing of new loan applications.

“FHA has never been more relevant in making sure the multifamily apartment marketplace continues to function even during these tough economic times,” said Carol Galante, FHA’s acting commissioner. “While we’re seeing record volume, we also recognize we have to accelerate the time it takes us to process these applications so we continue to meet this demand at the very time the market needs us the most.”

Meanwhile, FHA today published its revised Multifamily Accelerated Processing (MAP) Guide which is intended to cut the time required to approve loan applications and to assure consistent application of program requirements and credit standards across all HUD processing offices. FHA’s new MAP Guide delegates more underwriting responsibility to approved “MAP lenders” and includes all relevant guidance published by FHA since the MAP Guide was last updated in 2002. This new Guide consolidates all necessary underwriting and program requirements in one document and addresses concerns raised by those seeking updated standards.

Earlier this year, FHA issued new multifamily loan closing documents which had not been updated in 40 years. The loan documents required updating to ensure that they would be consistent with modern real estate and lending practices. The new MAP Guide is fully coordinated with the new loan closing documents.

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