[Federal Register: April 30, 2007 (Volume 72, Number 82)]
[Notices]
[Page 21211-21216]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ap07-38]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
Notice of Funding Availability: Section 515 Multi-Family Housing
Preservation and Revitalization Restructuring Program (MPR) for Fiscal
Year 2007
AGENCY: Rural Housing Service, USDA.
ACTION: Notice.
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Announcement Type: Inviting applications from eligible applicants
for Fiscal Year 2007 funding.
Catalog of Federal Domestic Assistance Number (CFDA): 10.447.
SUMMARY: USDA Rural Development administers the programs of Rural
Housing Service (RHS) announces the availability of funds and the
timeframe to submit applications to participate in a demonstration
program to preserve and revitalize existing rural rental housing
projects financed by Rural Development under Section 515 of the Housing
Act of 1949. The intended effect is to restructure selected existing
Section 515 loans expressly for the purpose of ensuring that sufficient
resources are available to preserve the rental project for the purpose
of providing safe and affordable housing for very low-, low-, or
moderate-income residents. Expectations are that properties
participating in this program will be revitalized and affordable use
extended without displacing tenants because of increased rents. No
additional Rural Development rental assistance units will be made
available under this program.
DATES: The deadline for receipt of all pre-applications in response to
this Notice of Funding Availability (NOFA) is 5 p.m., Eastern Time, May
30, 2007. The pre-application closing deadline is firm as to date and
hour. The Agency will not consider any pre-application that is received
after the closing deadline. Applicants intending to mail pre-
applications must allow sufficient time to permit delivery on or before
the closing deadline. Acceptance by a post office or private mailer
does not constitute delivery. Facsimile (FAX) and postage-due pre-
applications will not be accepted.
FOR FURTHER INFORMATION CONTACT: Carlton Jarratt,
carlton.jarratt@wdc.usda.gov, (804) 561-0665; Sherry Engel,
sherry.engel@wi.usda.gov (715) 345-7677; or Sandra Mercier, sandra.mercier@wdc.usda.gov (202) 720-1617, Senior Loan Specialists,
Multi-Family Housing Office of Rental Housing Preservation, STOP 0782,
(Room 1263-S), U.S. Department of Agriculture, Rural Housing Service,
1400 Independence Avenue, SW., Washington, DC 20250-0782. (Please note
these phone numbers are not toll free numbers.)
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The information collection requirements contained in this Notice
have received approval from the Office of Management and Budget (OMB)
under Control Number 0570-0190.
Overview
The Agriculture, Rural Development, Food and Drug Administration,
and Related Agencies Appropriations Act, 2007 (Pub. L. 110-5), February
15, 2007, provides funding for and authorizes Rural Development to
conduct a demonstration program for the preservation and revitalization
of the Section 515 multi-family housing portfolio. The Section 515
multi-family housing program is authorized by Section 515 of the
Housing Act of 1949 (42 U.S.C. 1485) and provides Rural Development the
authority to make loans for low-income multi-family housing and related
facilities.
Program Administration
I. Funding Opportunities Description
This NOFA solicits pre-applications from eligible borrowers/
applicants to restructure existing multi-family housing within the
Agency's Section 515 multi-family housing portfolio for the purpose of
revitalization and preservation. The demonstration program shall be
referred to in this notice as the Multi-Family Housing Preservation and
Revitalization Restructuring Demonstration (MPR) program. Agency
regulations for the Section 515 multi-family housing program are
published at 7 CFR part 3560. The MPR is intended to assure that
existing rental projects will continue to deliver decent, safe, and
sanitary affordable rental housing for the lesser of the remaining term
of the loan or 20 years from the date of the MPR transaction closing.
Once an applicant has been confirmed eligible and the project has been
selected by the Agency in the process described in this notice, and the
applicant agrees to participate in the MPR demonstration by written
notification to the Agency, an
[[Page 21212]]
independent third party capital needs assessment (CNA) will be
conducted to provide a fair and objective review of projected capital
needs. The Agency shall implement this NOFA through an MPR Conditional
Commitment (MPRCC) with the eligible borrower, which will include all
the terms and conditions under this NOFA, including the MPR Debt
Deferral Agreement.
The primary restructuring tool to be used in this program is debt
deferral up to 20 years of the existing 1% Section 515 loans obligated
prior to October 1, 1991. The cash flow from the deferred payment will
be deposited to the reserve account to help meet the future physical
needs of the property. If the resulting cash flow is not adequate to
address the long-term needs of the project, the Agency may use the
following sources of funds:
(1) Other Agency restructuring tools as discussed below;
(2) Section 515 Rehabilitation loan funds; and
(3) Third party funds in the form of grants, tax credits, tax
exempt financing, owner-provided rehabilitation funds, Rural
Development Section 538 Guaranteed Rural Rental Housing Program
financing, and financing from loan funds established through the Rural
Development Section 515 Multi-Family Housing Preservation Revolving
Loan Fund Demonstration Program.
For the purposes of the MPR, the restructuring transactions will be
identified in three categories:
(1) Simple transactions involve no change in ownership.
(2) Complex transactions will consist of a property transfer to new
ownership processed in accordance with 7 CFR 3560.406, or transactions
requiring a subordination agreement as a result of third party funds.
(3) Portfolio Sale transactions that are defined as multiple
project sale transactions with a common purchaser all within one state
closed no earlier than September 30, 2006.
Each category may utilize any or all restructuring tools.
Restructuring tools that may be available to address capital needs
during the MPR demonstration based on the capital needs assessment
process and the underwriting feasibility determination. Restructuring
tools include:
(1) Debt Deferral: A deferral of the existing Agency debt for the
lesser of the remaining term of the loan or 20 years. All terms and
conditions of the deferral will be described in the MPR Debt Deferral
Agreement. A balloon payment of accrued principal and interest will be
due at the end of the deferral period. Interest will accrue at the
promissory note rate and subsidy will be applied as set out in the
Agency's Interest Credit Agreement. Interest will not be charged on the
deferred interest.
(2) Revitalization Grant: A revitalization grant (for non-profit
applicants/borrowers only), is limited to the cost of correcting health
and safety violations as identified by the CNA. The grant
administration will be in accordance with 7 CFR part 3015.
(3) Rehabilitation Loan: A rehabilitation loan at zero percent
interest that will be amortized over 30 years.
(4) Bullet Loan: A loan with a one percent interest rate that will
have its interest and principal deferred, to a balloon payment, due at
the time the latest maturing Section 515 loan becomes due.
(5) Additional Section 515 Loan: A Section 515 rehabilitation loan
at traditional rates and terms.
(6) Regulatory Approvals: Transfers, subordinations, and
consolidations may be approved as part of a MPR transaction in
accordance with existing servicing authorities of the Agency as
available in 7 CFR part 3560.
While all non-deferred Agency debt, either in first lien position
or a subordinated lien position, must be secured within market value,
deferred debt may exceed market value of the security. Payment of the
deferred debt will not be required from normal project operation
income, but from excess cash from project operations and the value of
the property after all other secured debts are satisfied.
(1) Pre-application: Applicants must submit a pre-application
described in Section VI. This pre-application process is designed to
lessen the cost burden on applicants who may not be eligible or whose
proposals may not be feasible.
(2) Eligible Properties: Using criteria described below in Section
III, USDA will conduct an initial screening for eligibility. As
described in Section VIII, USDA will conduct additional eligibility
screening later in the process.
(3) Scoring and Ranking: All eligible, complete and timely-filed
pre-applications will be scored, ranked and put in funding queues as
discussed in Sections VI and VII.
(4) Formal Application: Top ranked pre-applicants will be invited
to submit a formal application. As discussed in Section VIII paragraph
(2) of this notice, USDA will require the owner to provide a Capital
Needs Assessment (CNA) in order to determine the mix of tools to be
offered to the applicant, perform additional eligibility review, and
underwrite the proposal to determine financial feasibility. Where
proposals are found to be ineligible or financially infeasible, owners
will be informed and proposals lower in the queue will be considered.
(5) Financial Feasibility: Using the results of the CNA to help
identify the need for resources and applicant provided information
regarding anticipated or available third party financing, the Agency
will determine the financial feasibility of each potential transaction,
using restructuring tools available either through existing regulatory
authorities or specifically authorized through this demonstration
program.
Project financial feasibility is determined when a property can
provide affordable, safe, decent, and sanitary housing for 20 years or
the remaining term of the loan whichever is less, by using the
authorities of this program while minimizing the cost to the Agency and
without increasing rents for tenants, except when necessary to meet
normal and necessary operating expenses. If the transaction is
determined financially feasible by the Agency, the borrower will be
offered a restructuring proposal, which will include the requirement
that the borrower will execute, for recordation, a restrictive use
covenant consistent with 7 CFR 3560.662. The restructuring proposal
will be established in the form of the MPR Conditional Commitment
(MPRCC).
MPR Agreements: If accepted by the borrower, the Agency and
applicant will enter into a MPRCC. The applicant must also agree to
restrict the property use pursuant to 7 CFR 3560.662 when the MPR
transaction is closed. Any third party lender will be required to
subordinate to the Agency's restrictive use covenant unless the Agency
determines on a case-by-case basis that the lender refuses to
subordinate and such refusal will not compromise the purpose of the
MPR. The Agency may also request that the applicant sign an agreement
that would require the owner to escrow reserve, tax, and insurance
payments in accordance with all pertinent current and future Agency
regulations.
General Requirements: The MPR transactions may be conducted with a
stay-in owner (simple) or may involve a change in ownership (complex or
portfolio sale). Any housing or related facilities that are constructed
or repaired must meet the Agency design and construction standards and
the development standards contained in 7 CFR part 1924, subparts A and
C, respectively. Once constructed, Section 515 multi-family housing
must be managed in accordance with 7 CFR part
[[Page 21213]]
3560. Tenant eligibility will be limited to persons who qualify as a
very low- or low-income household under Agency regulations or who are
eligible under the requirements established to qualify for housing
benefits provided by sources other than the Agency, such as U.S.
Department of Housing and Urban Development Section 8 assistance or Low
Income Housing Tax Credit Assistance, when a tenant receives such
housing benefits. Additional tenant eligibility requirements are
contained in 7 CFR 3560.152.
Voluntary Community Market Rent Demonstration: In conjunction with
this demonstration, Rural Development also announces the opportunity
for all successful applicants to participate on a voluntary basis in a
viability test of a 30 percent limitation on tenant rents, as proposed
in Section 544(b)(7) of Saving America's Rural Housing Act of 2006,
H.R. 5039, for post-restructured properties. Owners of properties in
the Section 515 restructuring program may elect to participate in the
``community market rent'' demonstration which will allow an owner to
set a rent above the approved basic rent for any unit not currently
occupied by a tenant receiving Rural Development rental assistance.
Eligible tenants for these units must have adjusted annual incomes
sufficient to allow them to pay the community market rent using less
than 30 percent of their adjusted income. Tenants would be allowed to
occupy without paying overage, additional sums that would otherwise be
required to bring their rent payment up to 30 percent of income. With
Rural Development's consent, up to 50 percent of the difference between
the basic rent and the new ``community market rent'' could be retained
by the owner as an increased return.
For example, if the basic rent is $350, the owner could create a
community market rent at, say, $410, and market the unit to tenants who
could pay that rent at less than 30 percent of adjusted income. A
percentage of the difference, $60.00 could be retained by the owner, as
negotiated with Rural Development, up to $30.00.
Prior to implementation of the community market rent demonstration,
Rural Development will issue guidance to successful applicants who have
indicated an interest in participating in the demonstration providing
further details with respect to the program.
II. Award Information
Public Law 110-5 makes funding available to the Secretary of
Agriculture for Rural Development to provide the restructuring tools of
the MPR demonstration. Approximately $8,900,000 in budget authority
will be available during FY 2007. Additionally, up to $70,000,000 in
Section 515 funding may be made available for properties selected to
participate in the MPR. Based on an identical level of budget authority
made available for the MPR last fiscal year, the Agency 2006 funded
approximately $47,795,000 in deferred debt, $210,000 in grants,
$280,000 in zero percent loans, $4,473,000 in bullet loans. The Agency
anticipates the ability to revitalize approximately 200 properties
(5,500 units) with the funds available during FY 2007. Once the funding
levels for this program are determined, a subsequent notice will be
published in the Federal Register announcing them. Funding levels may
differ from above when necessary to assure that the Agency maximizes
the value of the funds available and that all funds are used.
All funding must be approved no later than September 24, 2007 and
obligated by the Agency not later than September 28, 2007. If funds
available for the MPR are fully used before all properties approved
under this NOFA are funded, the unfunded approved properties may
receive priority for funding from future resources available for MFH
revitalization if additional funds become available and the selected
properties/owners meet any future eligibility criteria.
III. Eligibility Information
Applicants (and the principals associated with each applicant) must
meet the following requirements:
(1) Eligibility under 7 CFR 3560.55; however, the requirements
described in 7 CFR 3560.55(a)(5) pertaining to required borrower
contributions and CFR 3560.55(a)(6) pertaining to required
contributions of initial operating capital are waived for MPR
proposals.
(2) That the project is needed in the market as evidenced by an
average physical vacancy rate over the twelve months preceding the
filing of the pre-application of no more than 10 percent for projects
of 16 units or more and 15 percent for projects under 16 units. The
Agency may consider and accept documentation submitted by the applicant
that demonstrates the occupancy standard will be met once a
restructuring is performed. The documentation must include a copy of a
market study performed according to 7 CFR 3560.56(d)(2) and the
guidance provided in HB-1-3560, Attachment 4-F. The cost of the market
study will NOT be considered a part of the project expense.
(3) Ownership of and ability to operate the facility after the
transaction is completed. (In the event of a transfer, the proposed
transferee with an executed purchase agreement or other evidence of
site control will be the applicant.)
(4) Compliance with any commitment to contribute funds to pay
transaction costs as represented at the time of application for the MPR
program.
(5) A CNA and Agency financial evaluation must demonstrate that
utilization of the restructuring tools of the MPR program is
financially feasible and necessary for the revitalization and
preservation of the property for affordable housing. Eligibility for
processing will be determined as of the date of the pre-application
filing deadline. The Agency reserves the right to discontinue
processing in the event that material changes in the applicant's status
occurs any time after the initial determination.
IV. Equal Opportunity and Nondiscrimination Requirements
(1) Borrowers and applicants will comply with the provisions of 7
CFR 3560.2.
(2) All housing must meet the accessibility requirements found at 7
CFR 3560.60(d).
(3) All MPR participants must have on file a valid Form RD 400-1,
``Equal Opportunity Agreement'' and Form RD 400-4, ``Assurance
Agreement.''
V. Authorities Available for MPR
MPR tools will be used in accordance with 7 CFR part 3560 and its
associated handbooks (available in any Rural Development office). The
program will be administered within the resources made available to the
Agency through Pub. L. 110-5 for the preservation and revitalization of
Section 515 financed properties. In the event that provisions of 7 CFR
part 3560 conflict with this demonstration program, the provisions of
the MPR will take precedence.
VI. Application and Submission Information
(1) The application submission and scoring process will be
completed in two phases in order to avoid unnecessary effort and
expense on the part of interested borrowers/applicants and to allow
additional points to be added to applications that propose a transfer
of a troubled project to an eligible owner.
The first phase is the pre-application process. The applicant must
submit a complete pre-application by the deadline date under the
``DATES'' section of this Notice. The applicant's
[[Page 21214]]
submission will be classified complete when a ``pre-application'' is
received by MFH for each MPR proposal the applicant wishes to be
considered in the demonstration. In the event the MPR proposal involves
either a project consolidation completed in accordance with 7 CFR
3560.410 or a portfolio sale only one pre-application for the proposal
will be required so long as the proposal lists all the properties to be
consolidated or purchased as a portfolio. The form to be used for the
pre-application is ``MPR Pre-application'' and is attached at the end
of this Notice. An electronic version of this form may be found on the
internet at http://www.rurdev.usda.gov/rd/nofas/index.html.
Information must be provided, as indicated on the MPR pre-
application, showing the breakdown of funding sources, type and
probability of third party money, borrower names and identification
numbers, project names and numbers, and property locations of all
properties being consolidated and included in the transaction.
Additional information that must be provided with the pre-
application, when applicable, includes:
(i) A copy of a Purchase agreement or other evidence of site
control if a transfer is being considered.
(ii) Evidence of need for property if occupancy standards are not
met, which could include a copy of a market study.
The second phase of the application process will be completed by
the Agency based on Agency records and the pre-application information.
Points as set forth below will only be assigned to eligible pre-
applications. Additional points will be assigned when the proposal
involves a transfer to a new eligible owner and the property is
currently classified by the Agency as a troubled property; or to an
eligible ``stay-in owner'' when the property is classified by the
Agency as a troubled property AND there is an approved workout plan in
place that was approved prior to January 1, 2007.
All eligible, complete, and timely-filed pre-applications will then
be scored and ranked based on points received during this two-phase
application process.
Further, the Agency will categorize each MPR proposal as being
potentially Simple, Complex, or Portfolio Sale based on the information
submitted on the pre-application and in accordance with the category
description provided in Section I of this Notice.
(2) Pre-applications can be submitted either electronically or in
hard copy. The Agency will record pre-applications received
electronically by the actual date and time received in the website mail
box. Hard copy pre-applications received on the deadline date will
receive the close of business time of the day received as the receipt
time. Assistance for filing electronic and hard copy pre-applications
can be obtained from any Rural Development State Office.
The pre-application is stored in the form of a .pdf format and may
be completed as a fillable form. The form contains a button labeled
``Submit by Email''. Clicking on the button will result in an e-mail
containing a completed pre-application being sent to the Office of
Rental Housing Preservation in Washington, DC for consideration.
Pre-application forms may be downloaded from the site given in
Section VI, paragraph (1) above or obtained by contacting the State
Office in the state the project is located. Hard copy pre-applications
and electronic submittals should be submitted to the attention of
Sandra L. Mercier, Senior Loan Specialist, Multi-Family Housing Office
of Rental Housing Preservation-STOP 0782 (Room 1263-S), or Ed Duval,
Chief, Operations Research and Systems Development Branch-STOP 0782
(Room 1263-S), U.S. Department of Agriculture, Rural Housing Service,
1400 Independence Avenue, SW., Washington, DC 20250-0781
Note: All documents must be received on or before the pre-
application closing deadline to be considered complete and timely
filed. Pre-applications that are incomplete as of the closing
deadline will not be considered and will be returned to the
applicant with no appeal rights.
VII. Selection Process
Pre-application ranking points will be based on information
provided during the submission process and in Agency records. Points
will be awarded as follows:
(1) Contribution of third party funds. Third party funds are those
discussed in the second paragraph of Section I ``Funding Opportunities
Description''. Points awarded are to be based on documented written
evidence that the third party funds are available or they will be
available by October 1, 2008 or closing, whichever is first. The
maximum points awarded for this criterion is 25 points. These points
will be awarded in the following manner:
(i) Owner contribution (these funds cannot be from project reserve
or operating funds) sufficient to pay transaction costs. Transaction
costs are defined as those soft costs required to complete the
transaction and include, but are not limited to, the CNA, legal and
closing costs, appraisal costs and filing/recording fees. The minimum
contribution required to receive these points is $5,000 and will be
required to be deposited in the property reserve account prior to
closing--5 points, and
(ii) Evidence of intent that meets the approval of the Agency to
obtain a commitment greater than $5,000 per unit from other sources--10
points . (An example of evidence to obtain a commitment might be an
application for the Low Income Housing Tax Credit Program), or
(iii) A commitment of at least $3,000 to $5,000 per unit from other
sources--15 points, or
(iv) A commitment greater than $5,000 per unit from other sources--
20 points.
(2) Age of project. Since the age of the project and the date that
the loan was made are directly related to physical needs, a maximum of
25 points will be awarded on the following criteria:
(i) Initial loans closed prior to December 21, 1979--25 points.
(ii) Initial loans closed on or after December 21, 1979, but before
December 15, 1989--20 points.
(iii) Initial loans closed on or after December 15, 1989, but
before October 1, 1991--15 points.
Note: For multiple property transactions, the closing date of
the earliest loan will be used.
(3) Troubled project points. The Agency may award up to 25
additional points to facilitate the transfer and revitalization of
troubled projects with an Agency classification of ``C'' or ``D''
according to HB 2-3560, Paragraph 9.7 (available at http://www.rurdev.usda.gov/regs/hblist.html
). Troubled properties that are
classified ``B'' and do not involve a transfer will also receive
consideration. These projects may be troubled due to an act of nature
or physical or financial deterioration or to correct management issues.
Points will be awarded in the following manner:
(i) If the Agency servicing classification is C or D for less than
24 months--15 points.
(ii) If the Agency servicing classification is C or D for more than
24 months--20 points.
(iii) For Stay-in Owners only: If the Agency servicing
classification is B as a result of a workout plan approved by the
agency prior to January 1, 2007--25 points.
(4) Prior Agency approvals. The Agency will award up to 20 points
for properties with CNAs already approved by the Agency. Points will be
awarded for:
[[Page 21215]]
(i) CNAs approved after October 1, 2005 and prior to October 1,
2006--20 points.
(ii) CNAs approved after October 1, 2006 but before April 1, 2007--
10 points.
(5) Energy generation. Applicants will be awarded 5 points if the
proposal includes the installation of energy generation systems to be
funded by a third party.
The proposal must include an overview of the energy generation
system being proposed. Evidence that an energy generation system has
been funded by a third party and that it has a quantifiable positive
impact on energy consumption will be required.
(6) Tenant service provision. The Agency will award 10 points for
applications that include new services provided by a non-profit
organization, which may include a faith-based organization, or by a
Government agency. Such services shall be provided at no cost to the
project and shall be made available to all tenants. Examples of such
services are transportation for the elderly, after-school day care
services or after-school tutoring, etc.
The Agency will total the points awarded to each pre-application
received within the timeframes of this Notice and rank each pre-
application according to total score. If point totals are equal, the
earliest time and date the pre-application was received by the Agency
will determine the ranking. In the event pre-applications are still
tied, they will be further ranked by giving priority to those pre-
applications with the earliest Rural Development loan closing date.
Eligibility will then be confirmed on the 10 highest-scoring pre-
applications in each State. If one or more of the 10 highest-scoring
pre-applications is determined ineligible, (i.e. the applicant is a
borrower that is not in good standing with the Agency or has been
debarred or suspended by the Agency, etc.) the next highest-scoring
pre-application will be confirmed for eligibility.
If one or more of the highest ranking pre-applications is a
portfolio sale, then eligibility determinations will be conducted on
all of the pre-applications associated with the portfolio sale. Should
any of the pre-applications associated with the portfolio sale be
determined ineligible, the overall eligibility of the portfolio sale
will not be affected as long as the definition in Section I ``Funding
Opportunities Description'', of ``portfolio sale'' is still met.
Once ranking has been established, the Agency will conduct a five-
step process to select pre-applications for submission of formal
applications. This process is needed to assure that the Agency can
process the proposed transactions within available staffing resources,
develop a representative sampling of revitalization transaction types,
assure geographic distribution, and assure an adequate pipeline of
transactions to use all available funding.
Step One: The Agency will review the eligible pre-applications,
identify pre-applications as either Simple, Complex or Portfolio Sale
and separate them by state.
Step Two: For portfolio sale transactions, the Agency will re-
calculate an average score for each portfolio sale transaction and then
score and separately rank the simple, complex and portfolio sale
transactions.
Step Three: The Agency will select, for further processing, the
top-ranked portfolio sale transactions until a total of $100,000,000 in
potential debt deferral is reached. Portfolio sale transactions will be
limited to one per State.
Step Four: The highest ranked complex transaction in each State
will be selected for further processing, not to exceed 3 per State.
Step Five: For those states not having a portfolio transaction and
at least two eligible complex transactions, additional projects will be
selected from the highest ranking eligible pre-applications involving
simple transactions in that state, seeking a minimum of 4 pre-
applications for MPR transactions per state.
VIII. Processing for Selected Pre-applications
Those proposals that are ranked and then selected for further
processing will be invited to submit a formal application on SF 424
``Application for Federal Assistance.'' Those proposals that are
rejected by the Agency will be returned to the applicant and the
applicant will be given appeal rights pursuant to 7 CFR Part 11. In the
event that a proposal is selected for further processing and the pre-
applicant declines, the next highest ranked pre-application in that
state will be selected. Applications can be obtained and completed on
line. An electronic version of this form may be found on the internet
at http://forms.sc.egov.usda.gov/eforms/mainservlet and can be
submitted either electronically or in hard copy.
If a pre-application is accepted for further processing, the
applicant will be expected to submit additional information needed to
demonstrate eligibility and feasibility (such as a CNA), consistent
with this NOFA and the appropriate sections of 7 CFR part 3560, prior
to the issuance of a restructuring offer.
Rural Development will work with pre-applicants selected for
further processing in accordance with the following steps:
(1) Based on the feasibility of the type of transaction that will
best suit the project and the availability of funds, further
eligibility confirmation determinations will be conducted by the
designated Multi-Family Housing Revitalization Coordinators assigned by
each Rural Development State Director with the assistance of the Office
of Rental Housing Preservation.
(2) If one is not already available to the Agency, a CNA will be
required and conducted in accordance with the requirements of 7 CFR
3560.103(c), HB 3-3560, Chapter 7, ``Guidance on the Capital Needs
Assessment Process,'' and the CNA Statement of Work (available in any
Rural Development State Office.) A CNA is prepared by a qualified
independent contractor and is obtained to determine needed repairs and
any necessary adjustments to the reserve account for long-term project
viability. While the requirements of the CNA are described in the
materials referenced above, at a minimum, to be considered acceptable,
a CNA must include:
(i) A physical inspection of the site, architectural features,
common areas and all electrical and mechanical systems,
(ii) An inspection of a sample of dwelling units;
(iii) Identify repair or replacement needs,
(iv) Provide a cost estimate of the repair and replacement
expenses, and
(v) Provide at least a 20-year analysis of the timing and funding
for identified needs which includes reasonable assumptions regarding
inflation. The cost of the CNA will be considered a part of the project
expense and may be paid from the ``project reserve'' with prior
approval of the Agency. The Agency approval for participation in this
program will be contingent upon the Agency's final approval of the CNA
and concurrence in the scope of work by the owner. The Agency, in its
sole discretion, may choose to obtain a CNA, at its expense, if it
determines that doing so is in the best interest of the Government.
(3) Underwriting will be conducted by the designated Multi-Family
Housing Revitalization Coordinator assigned by each Rural Development
State Director with the assistance of the Office of Rental Housing
Preservation. The feasibility and structure of each revitalization
proposal will be
[[Page 21216]]
determined using this underwriting process and will include a
determination of the restructuring tools that will minimize the cost to
the Government consistent with the purposes of this NOFA. To help
assure a balanced utilization of revitalization tools and the long-term
economic viability of revitalized projects, the MPR underwriting
guidelines include, but are not limited to the following:
(i) The maximum bullet loan is limited to no more than $5,000 per
unit,
(ii) The total assistance provided from a revitalization grant,
rehabilitation loan, and/or a bullet loan is limited to $10,000 per
unit,
(iii) The maximum Section 515 one percent loan is limited to no
more than $20,000 per unit,
(iv) Properties receiving tax credits are expected to have
sufficient funding sources and generally will receive debt deferral
only.
(4) Properties with more than 75 percent of the units receiving
deep tenant subsidy such as Rural Development rental assistance or HUD-
funded tenant subsidy will be supplemented with rehabilitation loans
and Section 515 loans before grant and bullet loans are considered,
(5) Grants will be limited to $5,000 per unit,
(6) Any rent increases that may be necessary will not exceed 10
percent in any one year,
(7) The approved MPR transaction will include projected revenue
sufficient to cover a 10 percent Operations and Maintenance increase in
the second year after the transaction,
(8) Full return to owner will be budgeted pursuant to the Loan
Agreement,
(9) Budgeted increases to reserve deposit will not exceed 3 percent
per annum,
(10) The remaining reserve balance at the end of the 20-year
analysis period should be at least 2.0 times the average annual needs,
including inflation, over the 20-year analysis period.
These guidelines have been developed based on experience in the FY
2005 and FY 2006 Demonstrations. The Agency believes that these
guidelines will be appropriate for typical transactions. However, the
Agency reserves the right to waive any of the guidelines if, in the
Agency's judgment, doing so would further the objectives of the
Demonstration and is in the best interest of the Government.
The Agency expects that some of the transactions proposed by
selected pre-applicants will prove to be infeasible. The applicant
entity may be determined to be ineligible under Section III of this
Notice. If a proposed transaction is determined infeasible or the
applicant determined ineligible, the Agency will then select the next
highest ranked project for processing.
Each MPR offer will be approved by the Revitalization Review
Committee chaired by the Deputy Administrator for Multi-Family Housing
or an agency-authorized delegate. Approved MPR offers will be presented
to applicants who will then have up to 15 calendar days to accept or
reject the offer in writing. Offers will expire after 15 days. The
Agency will replace expired applications by selecting the next highest
ranked project. Closing of MPR offers will occur within 90 days of
acceptance by the applicant unless extended by the Agency.
IX. Funding Restrictions
Applicants will be selected in accordance with selection criteria
and the five-step process identified in Section VII of this Notice.
Once selected to proceed, the Agency will provide additional guidance
to the applicant and request information and documents necessary to
complete the underwriting and review process. Since the character of
each application may vary substantially depending on the type of
transactions proposed, information requirements will be provided as
appropriate. Complete project information must be submitted as soon as
possible but in no case later than 45 days from the date of Agency
notification of the applicant's selection for further processing or
September 1, 2007, whichever occurs first. Failure to submit the
required information in a timely manner may result in the Agency
discontinuing the processing of the request.
Funding under this NOFA will be obligated to selectees that finish
the processing steps outlined above first within each of the 3 funding
queues described in Section VII of this Notice and to result in a ratio
as close as possible to 30 percent portfolio sale transactions, 50
percent complex transactions, and 20 percent simple transactions.
X. Application Review
A review committee will make recommendations for final decision
regarding funding to the appropriate Rural Development State Director
based on the selection criteria contained in this NOFA.
XI. Appeal Process
All adverse determinations regarding applicant eligibility and the
awarding of points as a part of the selection process are appealable.
Instructions on the appeal process will be provided at the time an
applicant is notified of the adverse action.
Dated: April 20, 2007
Russell T. Davis,
Administrator, Rural Housing Service.
[FR Doc. E7-8148 Filed 4-27-07; 8:45 am]
BILLING CODE 3410-XV-P