Compliance Gold in the Wild Wild West! Round 2-Compliance Manuals Thursday April 23rd 1:45-3:15pm What are Compliance Manuals Also Known As – Deal Books – Project Manuals – Taking those messy, old closing documents and making sense of them Why create one for my properties? – The effort up front will save you time overall. – Organization keeps you on top of deadlines and compliance requirements – Transparency, easy to train new staff – Easy answers, spending more time analyzing, less time digging around – A great starting point to communicate with your development team – Succession plan How Do I get started? New Project? Meet with your development team throughout the entire development phase. Old Project? Hunt down your closing books- this is the collection of documents that was pulled together at the closing table. Table of Contents Create a format to fit your needs – Property Summary – Reporting Schedule – Financing Structure – Financial Summary – What are those items that you wish you had organized and ready-to-go that would make your life easier? Sample 1. Property Summary 2. Prevailing Lender Requirements 3. Reporting Schedule- Property Specific 4. Financing Structure 5. Financing Summaries 1. Community Investment Corporation 2. City DOH HOME Funds 3. IHDA Trust Fund Loan 4. Federal Home Loan Bank Affordable Housing Program (LaSalle) 5. IHDA Trust Fund Grant 6. CIC/LaSalle 7. Chicago Low-Income Housing Trust Fund 8. Tax Exemption From the closing books, pull out all relevant info – Regulatory Agreements – Partnership Agreements – Marketing Plan – Tenant Selection Plan – Management Plan and Agreement – Mortgage Notes – Loan Agreements – Purchase/Sale Agreement – Social Service Agreements Start Reading! Other relevant information you’ll need – 8609s – Underwriting/Proforma – Warranties – In-place Contracts (laundry, trash, exterminator, cable, phone) – What else? Property Summary Name Ownership Entity Address Contact Info FEIN PIN BIN # of Units and Type Utilities-who pays for what Accessible Units- any adaptable? Property Summary Cont… Square Footage-Unit and Total Other Notes Acquisition Date Date of Closing Date of Rehab/Constriction Began: Date Rehab/Construction Completed Date Lease Up Completed Acquisition/Construction Information Project Summary (marketing purposes) What else would be helpful to have at your fingertips? Property Summary Cont… Ownership Structure Diagram 1218 West Highland Avenue, LLC Highland MM, LLC NEF (Managing Member) Investor 0.01% Member 99.99% Guest House Heartland Housing Highland, LLC Highland, LLC (Member) (Member/Manager) 30% 70% The Guest House Heartland Housing, of Milwaukee, Inc. Inc. (Sole (Sole Member/Owner) Member/Owner) 100% 100% Organize documents by each “piece” of financing: – Tax Credits – Grants – Subsidy – Equity – Loans – How many different pieces of financing did your development team pull together to make this project work? Lasagna Financing! Financing Structure Look back at your “lasagna financing”, what are the different layers? Do you have – Tax Credits? – Grants? – Operating Subsidies? – Tax Exemptions/Deductions? – Loans? – Equity? – Contributions from your organization? – Tax Increment Financing Financing Structure For each piece of financing – Determine how much money it brought to the table – Is it development money or operating funds? – Is their any compliance related to taking that money (a simple yes or no, we’ll get to the details later) – Determine if the funds apply to all units or only a portion In the end your Financing Structure should just look like this: Financing Summaries For each piece of financing your will create a Financing Summary. Some properties may only have 1-2 pieces, others may have over 10. (13 is my personal record!) When you bought your house you had two pieces- Debt (your mortgage) and Equity (your down payment). Affordable Housing is much more complex and takes many more layers to get the job done. Financing Summaries For each piece, you will want to record: – Source – Type – Contact Info – Initial Funding Date – Term – Maturity or End Date – Interest Rate – Variable Rate – Monthly Payment – Deferred Payment – Balloon Payment and Amount – Extension Option Financing Summaries cont… Project Numbers Maximum Entry Income Eligibility Limits Maximum Recertification Income Levels Maximum Rent Levels Maximum Rent Increase Minimum Lease Term Operating Reserves Replacement Reserves Special Socio-Economic Conditions for Applicants (formerly homeless, grand family, etc) Insurance Coverage Other comments that help the special nature of a property In the end your Financing Summary should look like this: Prevailing Lender Requirements Get out your Financing Summaries For each requirement, determine which piece has the most RESTRICTIVE requirement Report on only the MOST STRICT requirement. – For example, if Lender A says all units must be 50% AMI, and Lender B says 20 units are 50% AMI and 20 units are 80% AMI, you only care about Lender A Prevailing Lender Requirements When would you use this document? – Who can we lease to? Who can’t we lease to? – How much can I increase rent this year and who do I notify? – What happens if a tenant goes over income? – How much do I have to budget this year for reserves? – Tax Credit rules say one thing, but my HOME requirements say another. Which one do I follow? This is where you interpret all the rules and regulations of your property. Prevailing Lender Requirements Requirement Controlling Requirement Program/ Source Maximum Rent Levels 1) City DOH HOME Loan 1)Rent for all units shall not exceed the lesser of 1) FMR or 2) 30% of adjusted income of a family whose gross income equals 65% of AMI. Minimum Lease Term 1)IHDA Trust Fund Loan and 1) Must follow rent schedule or Grant request a change. 2) City DOH HOME Funds 2) Needs to be pre-approved by DOH. Reviewed annually. Must give residents a 30 day notice Prevailing Lender Requirements Requirement Controlling Requirement Program/ Source Maximum Income Limit 1) IHDA Trust Fund and Grant 1) 50% AMI for all 71 units (entry) 2) CLIHTF 2) 30% AMI on 6 units (Inspiration Corporation will monitor this). Maximum Income Limit 1)City DOH HOME Loan 1) If a resident’s income goes (recert) over income limit after the initial move-in and all vacancies are filled with low income residents, we remain in compliance. Tenants who no longer qualify as low income (80% AMI) shall pay as rent the lesser of 1) 30% of income 2) amount payable by state/ local law. Prevailing Lender Requirements Other Items to Include: – Minimum Lease Term – Operating Reserves Requirements – Replacement Reserves Requirements – Any other requirements for applicants? (formerly homeless, single mother, grandfamily etc). How to verify? – Insurance Coverage – Eviction Conditions – Security Deposit Limits – Blue Moon situations, keep notes here In the end your Prevailing Lender Requirements should look like this: Reporting Schedule Review all reporting requirements of your monitoring agencies, syndicators, governmental agencies, banks What is needed? Audit, Tax Return, Weekly Report, Monthly Rent Roll, Quarterly Finances? Excel is the easiest way to track this Possibly add to Outlook Reporting Schedule Cont… Suggested Start Date Due Date What other departments are involved? Finance? Development? Social Services? Report Name (“monthly report”) Data Needed (“rent roll and operating statement”) Source document (“audit, monthly financials, resident file”) Frequency Your Reporting Schedule could look something like this: Review 1. Property Summary 2. Prevailing Lender Requirements 3. Reporting Schedule- Property Specific 4. Financing Structure 5. Financing Summaries 1. Community Investment Corporation 2. City DOH HOME Funds 3. IHDA Trust Fund Loan 4. Federal Home Loan Bank Affordable Housing Program (LaSalle) 5. IHDA Trust Fund Grant 6. CIC/LaSalle 7. Chicago Low-Income Housing Trust Fund 8. Tax Exemption Other Issues Electronic VS Hard copy Training current and new staff Keeping it updated annually with income limits, FMRs, etc. If you keep it generic, you won’t have to. For example, state “50% AMI”, instead of “50% AMI=$26,400”. Sample is included on your thumb drive from Neighborworks Contact me with any questions you have after you get back to your desk: Erica Champer , CHAM ® Director of Quality and Compliance Heartland Housing, Inc. A partner of Heartland Alliance 312.660.1338 208 S LaSalle Suite 1818 Chicago, Il 60604 firstname.lastname@example.org Thank You and Enjoy Your Day!
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