Dan Puccetti - HOME Presentation - MFA - Housing New Mexico

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Dan Puccetti - HOME Presentation - MFA - Housing New Mexico Powered By Docstoc
					THE HOME INVESTMENT
PARTNERSHIP PROGRAM

 The ABCs of Affordable
  Housing Development

   November 3, 2010


                          1
     What is the HOME Program?

§ Created by the National Affordable Housing
  Act of 1990 (NAHA) & amended several times
§ HUD grants to states & municipalities for
  acquisition, rehabilitation or new construction
  of rental or homeownership units and tenant
  based rental assistance
§ About $2 billion annually with about 60% of
  HOME funds to localities & 40% to states



                                                2
    What is the HOME Program?

§ National allocations based on population,
  poverty and housing stock
§ Funds may be used as grants, loans, equity,
  loan guarantees & interest rate write downs
§ Substantial discretion on use by the
  Participating Jurisdiction (PJ)
§ Three PJs in New Mexico: Albuquerque, Las
  Cruces and MFA


                                                3
    What is the HOME Program?

§ Targeted to low income but may be used in
  mixed income & mixed use projects
§ Low Income = families earning 80% or less of
  area median income (AMI)
§ Community Housing Development
  Organizations (CHDOs) receive priority (15%
  minimum for capital projects)
§ CHDOs may also apply for operating funds


                                                 4
        HOME Program Rules

§ Minimum funds per unit - $1,000
§ Maximum funds per unit determined by
  HUD’s 221(d)3 limits
§ Requires 25% match with non-federal sources
§ States distribute HOME funds per their
  approved Consolidated Plans




                                            5
         HOME Program Rules

§ PJ must commit funds within 24 months
§ New Construction/Rehab – projects must
  begin within 12 months of commitment
§ Acquisition of property must occur with 6
  months of commitment
§ Funds must be spent within 5 years




                                              6
         HOME Program Rules

§ PJ may commit up to 25% of next year’s
  HOME allocation
§ See HUD’s below website for more
  information
§ http://www.hud.gov/offices/cpd/affordablehous
  ing/programs/home/index.cfm
§ PJs have leeway on how to administer their
  HOME funds


                                              7
    MFA’s HOME Program Rules

§ Used throughout New Mexico (except
  Albuquerque & Las Cruces)
§ MFA receives about $8 million annually &
  allocates to different internal departments
§ The Housing Development Department (HD)
  allocates funds for capital projects
§ Awards made throughout the year, on a first
  come, first served basis


                                                8
      MFA’s HOME Program Rules

         Eligible Applicants
Private for-profit developers, nonprofit
organizations, housing authorities, units of local
government, tribal agencies, Community
Housing Development Organizations (CHDO’s)
and individuals.




                                                     9
       Eligible Uses of HOME Funds

• Land acquisition
• Site improvement, utility hook-up, on-site
  infrastructure
• Soft costs related to development (i.e. architect,
  engineering, legal, etc.)
• New construction & Rehab of existing housing
• Financing costs



                                                       10
         Eligible Uses of HOME Funds

•   Relocation (i.e. for rehabs)
•   Short term rent up reserves (max 18 months)
•   Developer Fee
•   Demolition
•   Loan closing costs
•   Environmental review




                                                  11
      Ineligible Uses of HOME Funds

• Public housing projects
• Delinquent taxes, fees or charges on property
• Projects previously receiving HOME funds
  (unless within 1 year of completion)
• Long term reserves
• Purchase property from a PJ
• Pre-pay federal low-income housing mortgage



                                                  12
       MFA’s HOME Rental Program

• HOME units must be occupied by low-income
  families earning at or below 60% AMI
• What is a HOME unit? A unit that may be fixed
  or floating and is set aside for HOME qualifying
  families
• Minimum one year lease unless otherwise
  agreed with tenant
• Annual tenant income documentation


                                                     13
      MFA’s HOME Rental Program

• Restricted rents, published annually by HUD
• Two HOME rent limits:
   (1) HIGH HOME = lesser of fair market
      or 30% of 65% AMI
   (2) Low HOME = lesser of fair market
       or 30% of 50% of AMI
• If 5 plus HOME units, 20% must be LOW HOME


                                            14
         MFA’s HOME Rental Program

See attached “2010 HOME Income Limits and Maximum Rents” also at
  http://www.housingnm.org/home-rental-loan-program)
• Albuquerque MSA income is $21,150 for one
  person earning 50% of AMI.
• 30% of this amount is $6,345 (max annual rent)
• Divide by 12 for max monthly rent of $528 to
  obtain LOW HOME rent
• Rents are reduced by Utility Allowances


                                                              15
      MFA’s HOME Rental Program

• How are HOME units calculated?
  – Generally, the pro-rata portion of financing
    provided by HOME funds
  – For example: a 100 unit project where HOME
    is 10% of total development costs will require
    10 units (8 HIGH HOME & 2 LOW HOME)




                                                 16
         Affordability Requirements

Minimum Per Unit HOME Affordability
      $1 - $14,999                       5 Years
      $15,000 - $40,000                  10 Years
      $40,000 +                          15 Years
  Refinance of rental rehab project      15 Years
  New Construction of rental housing
  or acquisition of new rental housing   20 Years


                                                    17
       MFA’s HOME Rental Program
§ Designed to provide below “gap” financing to
  enhance affordability of rental developments
§ MFA limits are more restrictive than HUD to
  better allocate a scarce resource
§ Most HOME awards are structured as long term
  low-interest rate loans but may be forgivable
  loans if 30% AMI families are being served




                                              18
       MFA’s HOME Rental Program

§ MFA maximum loan awards
§ HOME/9% Low Income Housing Tax Credits
  (LIHTC) - $20K per unit up to $600K
§ Other HOME (includes 4% LIHTC) - $40K per
  unit up to $800K but not to exceed not exceed
  80% of total development cost
§ Forgivable loans - $600K (only if serving 30%
  AMI families and subject to above limitations)


                                                   19
    MFA HOME Rental Award Process

§ Application - accepted in annual LIHTC round
  and ongoing for other projects. Applications on
  MFA website @ http://www.housingnm.org/developers
§ Review - MFA reviews application for
  completeness, feasibility and need. Verify site
  control and issue local support letter
§ Approval - After Development Department
  review, requests are submitted to the Policy
  Committee, Board Committee and to the Board
  for final approval. Generally 30 to 90 days


                                                      20
    MFA HOME Rental Award Process

§ Commitment - when approved, MFA will issue
  an Award Letter outlining terms and conditions.
§ HUD Environmental Assessment - must be
  approved before property can be purchased
  (if not yet owned) or construction starts
  (CHECK WITH MFA ENVIRONMENTAL OFFICER)
§ Closing - a checklist will be provided listing
  items required for closing. Allow time for loan
  doc review, third party reports, etc.



                                                    21
       Eligible Uses of HOME Funds

• Disbursement - Upon execution of loan
  documentation and completion of checklist
  items, funds will be disbursed in three draws
  against expenses incurred:
  - Closing, 50% completion & completion
• Typical loans docs: Loan Agreement, Note,
  Mortgage and Land Use Restriction Agreement



                                                  22
      MFA’s HOME Rental Standards
§ MFA underwriting determines repayment, term,
  amortization, and interest rate based on what
  the project can support, and what other Federal
  sources are involved.
§ Terms - 15-40 years, generally amortizing
§ Interest - 0% to 4% per annum
§ Debt Service Coverage Ratio (DSCR) between
  1:15 to 1 and 1.30 to 1



                                                    23
       MFA’s HOME Rental Standards

§ Financial Health – Audit and interim financials
  must demonstrate that the applicant is financially
  sound
§ Experience – Applicants must demonstrate the
  experience & capacity to successfully complete
  & operate the proposed project
§ Projects must meet MFA rental design standards
  See http://www.housingnm.org/home-rental-loan-program




                                                          24
        MFA’s HOME Rental Standards

§ Legal - “Certificate of Good Standing” from the
  NM Public Regulations Commission
§ Market Analysis – Show a demonstrated need
  for the project & that the right market is targeted
§ Development budget – Must be realistic and
  within MFA’s guidelines
  For example, developer fee/contractor profit not
  excessive. See LIHTC QAP standards at
  http://www.housingnm.org/low-income-housing-tax-credits-lihtc-allocations)




                                                                           25
      MFA’s HOME Rental Standards

§ Rents – Must be within program requirements.
  Most restrictive program governs. Set-aside
  requirements can be “nested”. Adjust for
  vacancy factor (greater of market or 7%)
§ Operating budget – Must be realistic & within
  guidelines (e.g. management fees max 6% for
  underwriting, cost per unit, etc.)




                                                  26
      MFA’s HOME Rental Standards

§ Projections must be feasible & support debt
  service. Excess cash flow may indicate too
  much subsidy. Insufficient cash flow may
  indicate need for more subsidy, restructuring, or
  infeasible project
§ Gap analysis – HOME fills a demonstrated “gap”
  in sources after first mortgage debt is maxed out
§ HOME is used to enhance affordability


                                                  27
      MFA’s HOME Rental Standards

§ MFA must perform a “Subsidy Analysis” to
  ensure funds are properly used to enhance
  affordability and comply with all requirements
  (e.g. pro-rata HOME units, HIGH or LOW
  HOME units, within 221d3 limits, etc.)




                                                   28
         HOME Rental Regulations

• Developers must comply with all relevant federal
  state and local laws such as:
• Section 3 - Jobs for Residents
• Section 504 (disabled persons)
• Davis Bacon wage rates (12 or more units)
• Fair Housing & Equal Opportunity
• Affirmative marketing



                                                 29
    HOME Rental Pre & Post Construction

•   Minority and Women’s Business Enterprise
•   Lead Based Paint
•   Relocation – Uniform Relocation Act
•   HUD Environmental Assessments
• See the following website for more info:
    http://www.housingnm.org/relevant-federal-regulations




                                                            30
       MFA HOME Rental Monitoring

§ Post completion MFA’s Asset Management
  Department (AM) will monitor for:
  ü Tenant income verification
  ü Housing standards compliance
  ü Record keeping

§ Visit their Thursday session: “Changes and
  Challenges: Tax Credit Regulations”

  And you thought this was going to be
   easy…….GOOD LUCK!

                                               31
         Equity and Debt Financing Sources
                 for Rental Housing
          Seed money/ Predevelopment Loan             *Primero Loan or Grant Programs
Debt                                                  üOther Nonprofit Lenders (Local Initiatives Support Corp.,
                                                      Enterprise, etc.)
          Stand Alone Interim/ Construction           üConventional Construction Loan
          Financing                                   *Build-It Loan Guaranty, *NM Housing Trust Fund
          Combined Construction and Permanent         Tax Exempt Bond Proceeds, *HOME/Rental, *542c Insured
          Financing                                   Loan or *538 Guaranteed Rural Rental Housing Program,
                                                      *Energy$avers, *Land Title Trust Fund, *NM Housing Trust
                                                      Fund
          Permanent Financing                         *542c Insured Loan or 538 Guaranteed Rural Rental Housing
                                                      Program, *HOME/Rental, *Tax Exempt Bond Proceeds
                                                      üConventional Permanent Loan
                                                      *Energy Savers, *Land Title Trust Fund, *Housing Trust Fund


Equity    *Low Income Housing Tax Credits, Syndication Proceeds, *State Affordable Housing Tax Credit
          üOther Grants and Organizational Funds (FHLB, Foundations)
          üDeveloper Funds, Deferred Developer Fees




                   *MFA Provided
                                                                                                             32
     MFA’s HOME Single Family (SF)

§ HOME/SF provides interim and/or permanent,
  below market rate “gap” financing in the form of
  junior mortgages for development of SF owner
  occupied homes. Typically used in conjunction
  with MFA Mortgage$aver or bank equivalent
  first mortgage loan
§ Must serve 80% AMI or below families




                                                     33
             MFA’s HOME SF
§ If HOME funds are used for land acquisition
  and/or construction, loan documents are
  between MFA and the developer
§ MFA limit is $40K per unit
§ Up to 90% of the awarded amount can be
  disbursed monthly prior to completion
§ Remaining 10% disbursed at completion upon
  submission of a final HOME Program
  Completion Report.


                                                34
              MFA’s HOME SF

§ Developer repays the loan upon sale of homes
§ Generally 0% interest rate
§ Up to $14,999 may be passed through to an
  80% AMI homebuyer or $20,000 to a 60% AMI
  or below homebuyer




                                                 35
                MFA’s HOME SF

• Loans to the homebuyer will be recourse, junior
  mortgages, at 0% interest, with no interim
  payments, due upon ineligible sale, refinance or
  transfer.
• Loans will be forgiven (20% per annum) after the
  expiration of the initial affordability period of 5
  years to 80% AMI and 10 years for 60% AMI




                                                   36
               MFA’s HOME SF

§ When funds are not used for interim financing,
  MFA & Developer will enter into a contract
  stating the terms under which funds will be
  disbursed at homebuyer closing. Both contracts
  and construction loans will be structured with 12
  month terms, in which the houses are to be
  completed and transferred to the homebuyer.




                                                  37
               MFA,s HOME SF
§ Units financed with HOME funds must be
  affordable to households earning 80% or less of
  AMI per HUD regulations
§ HOME funds will be awarded only where they
  will produce a demonstrable increase in
  affordability, measured as a lower AMI for the
  target homebuyers.
• Housing Development HOME funds cannot be
  combined with MFA’s Payment$aver Program.


                                                38
                 MFA’s HOME SF

§ Maximum Property Value. Home values may
  not exceed 95% of the median price for that type
  of single-family housing in the area. Per HUD
  guidance MFA uses HUD’s “Value Limits”
  worksheet, effective as of April 15, 2010, which
  can be found at:
§ http://www.hud.gov/offices/cpd/affordablehousing/progra
  ms/home/limits/maxprice.cfm



                                                        39
              MFA’s HOME SF

• Developers must have the financial depth,
  personnel and experience to qualify for HOME
  construction funds
• Pre-sales may be required
• HOME loans are typically in 2nd lien behind a
  bank loan




                                                  40
      Equity and Debt Financing Sources for SF
               Housing Development
Debt – Developer     Seed Money/ Predevelopment         *Primero Loan Program, *Housing Trust Fund
                     Loan                               üOther Nonprofit Lenders (Local Initiatives
                                                        Support Corporation, Enterprise, etc.)
                     Interim/ Construction Financing    üConventional Construction Loan
                                                        *Housing Trust Fund *Build-it Loan Guaranty,
                                                        *HOME/Single Family, *Energy$avers, *Land
                                                        Title Trust Fund
Debt - Homebuyer     Permanent                          *First Mortgages: Mortgage $aver, Building
                                                        Trust, Partners
                                                        *Second Mortgages (downpayment and closing
                                                        cost assistance): Payment $aver, HELP, HERO,
                                                        Mortgage Booster


Equity – Developer   üOther Grants and Organizational Funds (Federal Home Loan Bank, Foundations)
                     üDonated materials, labor and services
                     *State Affordable Housing Tax Credit
Equity – Homebuyer   üHomebuyer funds
                     üSweat equity




                     *MFA Provided                                                                     41
      For more information:
Ø Visit MFA’s website at:
  www.housingnm.org/developers
Contact Housing Development Staff:
  – Daniel Puccetti, (505) 767-2251 or
    dpuccetti@housingnm.org
  – Felipe Rael, (505)767-2249 or
    frael@housingnm.org



                                         42

				
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