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>> GOOD AFTERNOON. HI.
I'M GATES DUNAWAY AND THIS IS MARGIE MAISONET.
>> YES, WELCOME BACK AND WELCOME TO THOSE THAT ARE NEW.
>> WE HAD A SESSION THIS MORNING AND NOW WE ARE LEARNING MORE
ABOUT WHAT YOU HAVE, THE PRODUCT YOU HAVE AND THE HURDLES YOU
HAVE TO THE PRODUCT. THIS IS LESSON 2.
THIS IS A LESSON ON THE NEXT 236.
AND THE REQUIREMENTS FOR PREPAYMENT PERMISSION FROM HUD.
FROM THE FIRST LESSON WE LEARNED THAT ARE 1150 ACTIVE 236 LOANS
OUT THERE AND NO NEW ACTIVITY ON THE LOANS SINCE 1973.
AND THAT MANY ARE OWNED BY NONPROFITS AND BEAMERS THERE ARE
36 ACROSS THE COUNTRY AND THEY HAVE PARTICULAR ISSUES WITH
BEING FINANCED. IN LESSON 2 WE ARE COVERING
THESE OBJECTIVES. FIRST RECOGNIZING THE PREPAYMENT
AND REFINANCE OF CERTAIN HUD PROPERTIES.
WE ARE GOING TO IDENTIFY TWO PROVISIONS THAT RELATE TO
PREPAYMENT. THE FIRST IS SECTION 250
PROVISIONS AND APPLYING TO THE PROPERTIES AND THE IMPACT ON
REPAYING OR PREPAYING YOUR MORTGAGE AND SECTION 219
PROVISIONS. THE LAST THREE OBJECTIVES, OUT
LINING THE PROCESS FOR REQUESTING PREPAYMENT APPROVAL
IN THE TIMING CONSIDERATIONS FOR THE PROCESS AND PREPAYING IS A
MEANS FOR PRESERVING AFFORDABLE HOUSING AND THE POTENTIAL IMPACT
OF REGULAR AND ENHANCED VOUCHERS, TPZ'S AN THE ABILITY
TO AFFORDABLE HOUSING. FIRST WE HAVE RECOGNIZING
POTENTIAL BENEFITS. IN SUSTAINING AFFORDABLE HOUSING
WHAT TYPES OF SITUATIONS LEAD YOU TO PREPAY YOUR EXISTING
MORTGAGE AND THE BENEFITS OF PREPAYING AN EXISTING MORTGAGE.
THIS HAS COME UP ACROSS THE COUNTRY.
WE ARE GOING THROUGH THE STEPS HOW THERE ARE INCENTIVES OUT
THERE TO PRESERVE THE PROPERTY AND IMPROVE IT FOR A LONGER
PERIOD OF TIME. WHY PREPAYING?
THE FIRST ONE WOULD BE TO TAKE ADVANTAGE OF LOWER INTEREST
RATES SO THAT YOU CAN DO LARGE CAPITAL NEEDS TO THE PROPERTY,
REPLACE SYSTEMS, RECONFIGURE UNITS AND TALKING ABOUT UNITS
THAT OBSOLETE TODAY. IMPROVE YOUR AMENITIES AND
ENHANCE YOUR SERVICES EVEN THROUGH SOME OF THE PREPAYMENT
OPTIONS. THE SECOND IS THAT YOU CAN
REPLACE CURRENT HIGH INTEREST DEBT WITH THE PHENOMENAL LOW
INTEREST RATE AND REAMORTIZE IS LOANS OUT AND RELEVERAGE A BRAND
NEW LOAN AND USED FOR CAPITAL IMPROVEMENTS.
IN CERTAIN CASES IT IS TRIGGERING VOUCHERS FOR TENANTS
AND IT IS ONLY AVAILABLE TO FOLKS THAT PREPAY.
NOW WE ARE GOING INTO SECTION 250 OF THE NATIONAL HOUSING ACT.
CAN YOU PREPAY WITHOUT HUD'S PERMISSION?
IF THE ANSWER IS NO, THAT SECTION 250A APPLIES TO YOUR
PROPERTY AND HOW THAT APPLIES AND WHAT YOU CAN DO.
THE FIRST QUESTION TO ASK IS HOW DO YOU DETERMINE THE PREPAYMENT
REQUIREMENTS? THE TOPIC IN THE NEXT PROVIDES
THE GUIDELINES FOR THE PROPERTIES SUBJECT TO SECTION
250 AND SECTION 219. IF PREPAYMENT IS REQUIRED, IT IS
RECOMMENDED TO CHECK ON THE MORTGAGE NOTE.
AGAIN WE WERE TRAVELLING ACROSS THE COUNTRY AND TALKING TO FOLKS
THE FIRST QUESTION DO YOU KNOW WHERE YOUR MORTGAGE NOTE AND THE
AGREEMENT IS AND IF YOU DON'T, YOU HAVE TO FIND OUT WHERE THEY
ARE. THAT IS WHERE YOU FIND OUT IF
PREPAYMENT PERMISSION THE REQUIRED.
LOOK AT THE LANGUAGE WITHIN THE NOTE AND AS ALWAYS, IF YOU CAN
NOT FIND YOUR NOTE OR DON'T KNOW WHAT IT SAYS, TALK TO YOUR LOCAL
HUD OFFICE. THEY'LL HAVE A COPY OF THE NOTE
AND CAN HELP YOU INTERPRET IT. THIS IS REPEATING WHAT I SAID,
CHECK OUT THE MORTGAGE NOTE AND IT SHOULD CLEARLY STATE IF
PERMISSION IS REQUIRED TO PREPAY.
WE HAVE GUIDANCE ON THE PROCESS FOR SECTION 250A PREPAYMENTS.
AGAIN, YOU CAN GO AND FIND HUD NOTICES ON THE PRESERVATION
WEBSITE AT THE HUD WEBSITE AND YOU CAN GOOGLE IT AND BRING IT
UP. THE TYPES OF SECTION OF
PROPERTIES OF PREPAYMENT PERMISSION IS REQUIRED.
SOME OF THE PROPERTIES WITH SUPPLEMENT CONTRACTS NEEDS
PERMISSION. ALL OF THE NONPROFIT OWNED
PROPERTIES REQUIRE APPROVAL FOR PREPAYMENT AND REQUIRED TO
COMPLY ARE SECTION 250A. SOME PROJECTS OWNED BY PROFIT
MOTIVATED OWNERS ARE REQUIRED TO APPLY.
LOOK AT YOUR MORTGAGE NOTE TO FIND OUT.
SO THIS A NOTICE YOU WOULD GO TO LOOK FOR THE REQUIREMENTS.
YOU MUST NOTIFY THE TENANTS OF THE REQUEST OF THE PREPAYMENT
APPROVAL THROUGH A LETTER. AFTER THE TENANT NOTIFICATION IS
FILED THE TENANTS HAVE THE OPPORTUNITY TO COMMENT ON THE
PREPAYMENT AND COMMENTS ARE SUBMITTED FOR HUD TO REVIEW.
THE POINT OF THIS PROCESS IS TO ALLOW THE TENANTS ENOUGH TIME TO
UNDERSTAND AND COMMENT. THEY MUST PROVIDE A LETTER TO
THE HUD FIELD OFFICE WITH A SIGNED CERTIFICATION DELIVERED
TO THE TENANTS. SO YOU CAN FOLLOW THE TYPICAL
PROTOCOLS FOR DELIVERS NOTICES TO TENANTS AND MAKING SURE
EVERYONE GOT IT AND 150 DAY MARK FOR THE APPLICATION IS MADE.
IF THE PREPAYMENT IS FOR REHAPPEN OF THE PROPERTY, THE
DISCLOSURE MUST INCLUDE A DETAILED DESCRIPTION OF THE
REHAB. YOU WILL BE SHOWING HUD THROUGH
THE APPLICATION IS REFINANCING STRATEGY.
LASTLY, THE OWNER MUST EXECUTE AN APPROPRIATE AGREEMENT IN
RETURN FOR THE PREPAYMENT PERMISSION.
AND AGREEING IT IS RETAINED AS RENTAL HOUSING FOR LOW INCOME
FAMILIES AND POTENTIALLY BEYOND THE LOAN TERM NOTE.
THERE IS A HUD PROCESS FOR EVALUATING THE REQUESTS.
THE FIRST STEP IS THAT THE LENDER SUBMITS A REQUEST TO HUD
HEADQUARTERS. YOU COMPLETE THE TENANT
NOTIFICATION REQUIREMENTS, AND THAT IS 150 DAYS.
SUBMIT THE NOTIFICATIONS TO THE TENANTS 150 DAYS BEFORE
SUBMITTING THE APPLICATION. HUD HEADQUARTERS REQUEST THE
DOCUMENTS FROM THE FIELD OFFICE TO PROCESS THAT PREPAYMENT.
AND IN THE FIELD OFFICE WILL REVIEW IT AND MAKING SURE YOU
HAVE COMPLIED WITH THE REQUIREMENTS AND PREPAYMENT
CHECKLIST AND SUBMITS IN THE REQUIRED DOCUMENTS TO HUD
HEADQUARTERS. THE OFFICE OF ASSET MANAGEMENT
COMPLETES THE PROCESSING OF THE PREPAYMENT REQUEST.
HUD HEADQUARTERS WORKS WITH THE FIELD TO ADDRESS OUTSTANDING
QUESTIONS AND ISSUE A TERMS AND CONDITIONS SHEET.
AND THE LENDER IS INFORMED OF APPROVAL OF PREPAYMENT.
IT IS IMPORTANT TO NOTE THAT THIS ONE OF MANY STEPS THAT IS
PART OF A REFINANCING STRATEGY AND YOU HAVE TO TIME THINGS AND
KNOW WHEN THE 150 DAY CLOCK STARTS AND THEN YOU MUST TIME IT
SO YOU ARE SUBMITTING THE REFINANCING APPLICATION BEYOND
THE PREPAYMENT REQUEST APPLICATION.
THE DOCUMENTS THAT ARE REQUIRED FOR PREPAYMENT REQUEST
APPLICATION INCLUDE THE REGULATORY AGREEMENT, YOU MUST
KNOW WHERE THE AGREEMENT IS. MORTGAGE NOTE.
THE USE AGREEMENTS. YOUR ORIGINAL SECTION 8 PAYMENT
CONTRACTS. IF YOU HAVE A FLEXIBLE SUBSIDY
LOAN, WHICH WE'LL TALK ABOUT, INCLUDE THAT DOCUMENT.
AND THE DEED OF TRUST SHOWING THE OWNERSHIP OF THE PROPERTY.
THE REQUIREMENTS ON THE APPLICATION INCLUDE THE
FOLLOWING, THE FIRST IS THAT THE TOTAL HARD COSTS MUST EXCEED
$15,000 A UNIT. HARD COSTS ARE THOSE COSTS THAT
ARE REQUIRED TO RENOVATE THE COMPANY AND CONSTRUCTION COSTS
RELATED TO THAT. THE SECOND IS THAT YOU MUST
INCLUDE THE REPLACEMENT OR MODERNIZATION OF ONE OF THE
SYSTEMS. FOR INSTANCE THE ROOF, REPLACING
THE WINDOWS, REPLACING THE HVAC UNITS IS A SYSTEM.
THE LAST OPTION IS THAT THE TOTAL HARD COSTS MUST EXCEED OR
EQUAL 25% OF THE TOTAL DEVELOPMENT COSTS.
TOTAL DEVELOPMENT COSTS ARE THOSE COSTS INCLUSIVE OF THE
ENTIRE TRANSACTION. THAT IS THE COST OF THE
RENOVATION, THE SOFT COSTS ASSOCIATED WITH THE FINANCE AND
INTEREST, AND THE ARCHITECT, AND THE PAYOFF OF THE LOAN ITSELF.
SO THAT WAS THE 250 REQUIREMENTS.
NOW MOVING ON TO SECTION 219. THE QUESTION IS DOES 219 APPLY
TO YOUR PROPERTY. IT IS LOANS THAT CAN BE PREPAID
WITHOUT HUD APPROVAL OR THEY'LL BE ELIGIBLE FOR PREPAYMENT BY
RIGHT WITHIN THE NEXT TWO YEARS. THE OWNER CAN PREPAY WITHOUT HUD
APPROVAL REQUIRED UNDER SECTION 250A.
BUT 219 HAS THE FEW IMPORTANT REQUIREMENTS.
UNDER 219, YOU MUST PROVIDE THE 150 DAY NOTICE AND IF YOU DON'T
YOU ARE RECORDING EXTENDED USE AGREEMENT FOR THE PROPERTY TO
OPERATE THE SAME AFFORDABILITY RESTRICTIONS UP TO THE MATURITY
DATE OF THE MORTGAGE. IT HAS THE FLEXIBILITY OF NOT
PROVIDING THE TENANT NOTICE, BUT THEN YOU HAVE TO EXTEND THE
AGREEMENT AND THAT ENTICES THE TENANT NOTICES.
THE FOLLOWING ARE PROJECT TYPES: THE FIRST WOULD BE 221D 3
PROJECTS THAT RECEIVED SECTION 8 AS A RESULT OF CONVERSION.
THE SECOND IS BEAMER PROJECTS. THESE SHOULD EVALUATED TO SEE IF
THEY ARE QUALIFYING. LET'S TALK ABOUT THE 150 DAY
NOTICE THAT HUD HAS. OWNERS PROVIDE A PREPAYMENT
NOTICE TO THE TENANTS TO THE LOCAL GOVERNMENT, AND THE LOCAL
HUD AT THE SAME TIME, 150 DAYS PRIOR TO THE DAY THAT THEY ARE
GOING TO SUBMIT THE APPLICATION FOR PREPAYMENT.
UNDER SECTION 219, THIS NOTICE EXPIRES 270 DAYS AFTER DELIVERED
TO HUD. THIS MEANS IF YOU DON'T CLOSE ON
THE NEW FINANCING WITHIN 270 DAYS OF THE ORIGINAL NOTICE DATE
YOU HAVE TO RENOTICE. ON THE 150TH DAY OF THE NOTICE,
THEY WOULD GO AHEAD AND REISSUE THE 150 DAY NOTICE TO TENANTS.
IF THE CLOSING IS DELAYED BEYOND THE 270 DAYS, THE 150 DAY NOTICE
MUST BE DELIVERED AGAIN. HERE IS A LITTLE BIT ABOUT THE
USE OF PROCEEDS FROM THE SALE OF A PROJECT OF A NONPROFIT OWNER.
THIS IS GETTING A LOT OF ATTENTION AND TALK.
THIS IS RELATIVELY NEW. HUD RECENTLY ISSUED GUIDANCE IN
NOTICE 2011, AND NEW FLEXN'TS TO NONPROFIT OWNERS OF SECTION 236,
221, AND OTHER FHA INSURED PROPERTIES THAT PREPAY
MORTGAGES. IF THE NONPROFIT SALES OR
PURCHASER SUCCESSFULLY OWNED AND OPERATED ON THE AFFORDABLE
HOUSING AND HAS THE 20 YEAR AGREEMENT, THE SELLER, THE
NONPROFIT SELLER CAN RECEIVE A HUNDRED PERCENT NET PROCEEDS OF
THE SALE. IT IS CLEAR THAT THE NET
PROCEEDS FROM THE SALE ARE THOSE FUNDS LEFT OVER ONCE THE
MORTGAGE IS PAID OFF AND THE TRANSACTION COSTS ARE PAID, ALL
THE COSTS REMAINING CAN BE RETAINED BY THE ORIGINAL SELLER.
IS THIS TO HELP THE NONPROFITS SELL THE PROPERTIES AND
SAFEGUARD THEM FOR AFFORDABLE HOUSING.
THERE IS A POSSIBILITY THAT FOLKS HAVE DEAL FATIGUE.
THEY HAVE OWNED THE PROPERTY FOR 30 YEARS AND THE MAKE UP OF THE
BOARD CHANGED AND THEY DON'T WANT TO OWN THE PROPERTY ANY
MORE AND IF THEY SOLD THE PROPERTY THEY WOULDN'T BE ABLE
TO KEEP THE SALES PROCEEDS. NOTWITHSTANDING THEY HAVE TO USE
THE SALES PROCEEDS IN KEEPING WITH THE IRS DESIGNATION AND
KEEPING TO THAT PIECE OF IT. SO NOW WE HAVE TWO QUICK LITTLE
EXAMPLES, PROPERTY A, THE MORTGAGE IS A HUD INSURED UNDER
THE 221D 3. IT IS A BEAMER.
THE PROPERTY UNITS RECEIVE SECTION 8 ASSISTANCE PAYMENTS
FOR HUNDRED PERCENT OF THE UNITS.
THE MORTGAGE NOTE, IT DOESN'T HAVE A PREPAYMENT RESTRICTION
REQUIRED HUD APPROVAL. THE OWNER CHOOSES TO PREPAY THE
OWNER PRIOR TO MATURITY OF THE MORTGAGE.
MUST THE OWNER COMPLY WITH 250 OR 219 OR NEITHER?
THE MORTGAGE DOESN'T HAVE THE REQUIREMENT AND 219 APPLIES.
LOOKING AT PROPERTY B. HUNDRED PERCENT RECEIVE SECTION
8. IT HAS A PREPAYMENT RESTRICTION
AND THE OWNER WANTS TO PREPAY THE OWNER PRIOR TO MATURITY.
MOST THE OWNER COMPLY WITH 250 OR 219?
>> 250A BECAUSE OF THE REQUIREMENT TO OBTAIN
PREAPPROVAL. >> YES.
NOW TO THE FIRST CASE STUDY. WE SHOULD HAVE OPENED THE
WORKSHOP AND WE HAVE THREE METHODS OF TEACHING THROUGH THE
LIVE WORKSHOPS AND THROUGH THE WEBINAR AND THE FIRST IS THE
SLIDE DRIVEN INSTRUCTIONAL INFORMATION.
THE SECOND ARE SMALL ACTIVITIES LIKE THE ONE WE JUST DID AND THE
THIRD IS A CASE STUDY AND TURNED INTO A METHOD THAT WE CAN GET
THE POINT ACROSS TO OUR VIRTUAL AUDIENCE OUT THERE.
WE ARE GOING TO READ THROUGH THE CASE STUDY.
YOU ARE GOING TO RED THIS ONE? >> YES.
>> WE'LL LINGER ON SOME OF THE SLIDES SO THAT YOU ARE ABLE TO
ABSORB THE INFORMATION THAT IS DELIVERED.
NOW GOING TO THE SLIDES. >> WE ARE GOING TO MIX IT UP A
LITTLE BIT AND GIVING YOU THE BACKGROUND OF THE STUDY AND
RECOGNIZING THAT THROUGHOUT THE CASE STUDIES THERE ARE
ADDITIONAL ANSWERS THAT WE CAN'T COVER AND BASED ON THE SPECIFICS
OF THE PROPERTY. SO NOW THIS CASE STUDY INVOLVES
AN APARTMENT COMPLEX WITH HUD SECTION, A 236 MORTGAGE
SCHEDULED TO MATURE JUNE 1, 2013.
AND THE CURRENT OWNER IS LOOKING TO SELL THE APARTMENT COMPLEX IN
ORDER TO GENERATE THE REQUIRED CAPITAL TO INVEST IN OTHER
VENTURES. WE ARE GOING TO LOOK AT THE
PROPERTY WITH 236 MORTGAGE FROM THE PERSPECTIVE OF THE SELLER
AND POTENTIAL BUYER AND THINGS THEY ARE GOING TO LOOK FOR.
THE APARTMENT COMPLEX HAS 80 UNITS AND 60 HAS SECTION 8.
THE SECTION 8 IS EXPIRING ON HALLOWEEN OF THIS YEAR AND THE
20 UNITS ARE 236 UNITS WITH THE BASIC OR THE MARKET RENT.
FAMILIES ARE ELIGIBLE TO RECEIVE VOUCHERS.
IT IS NOT INCLUDING PROVISION FOR PRIOR APPROVAL FOR
PREPAYMENT. NO USE IN AGREEMENT IN PLACE TO
MAINTAIN THE PROPERTY AFFORDABLE AFTER THE MATURITY DATE.
THERE IS A STUDY WITH EFFECTIVE DATE RANGE OF JANUARY 27, 2009,
TO 2014. THE SELLER PROPOSES TO PREPAY
THE SECTION 236 MORTGAGE AND SELL THE PROPERTY.
CAN I ASK YOU A QUESTION? >> IF YOU MUST.
YES. >> WHAT MIGHT THE STUDY REVEAL?
>> LET ME ALSO EXPLAIN IT. SOMETIMES ON PURPOSE WE HAVE
INFORMATION IN THERE THAT YOU NEED TO KNOW AND YOU HAVE
INFORMATION IN THERE JUST BECAUSE WE WANT TO PUT IN
ADDITIONAL INFORMATION AND NO BEARING.
IN THIS CASE, I WILL SAY TO ANSWER YOUR QUESTION THAT THE
RENT COMPARABILITY STUDY IS AN IMPORTANT TOOL TO HAVE WHEN
TALKING ABOUT THE SECTION 8 RENTS AND YOUR CONTRACT.
THAT'S THE GERMAINE PART OF NEEDING THAT.
OKAY, SPEAKING OF ADJUSTMENTS. AFTER THE SALE OF PROPERTY, THE
HUD REQUIRES THE BUYERS TO USE THE ANNUAL RETURN ON EQUITY WHEN
SUBMITTING A REQUEST FOR RENT ADJUSTMENT.
WE ARE TALKING TOMORROW ABOUT BUDGET BASE, MARKET TO MARKET,
ALL OF THAT, THIS IS JUST FOR THE BUDGET BASED PROCESS.
THIS IS A PROFIT MOTIVATED OWNER.
HUD APPROVAL IS NOT REQUIRED FOR THE REPAYMENT AND I CAN'T SAY
ALWAYS, BUT GENERALLY, HUD APPROVAL IS NOT REQUIRED FOR A
PROFIT GENERATED OWNER. LOOK AT YOUR DOCUMENTS TO MAKE
SURE. THE PROFIT MOTIVATED OWNER, THEY
ARE ENTITLED TO THE SURPLUS CASH.
WHEN SECTION 236 MORTGAGE IS REPAID PRIOR TO THE SALE OF
PROPERTY -- YOU CAN HAVE BOTH OWNERSHIP ENTITY TYPES ON 236.
>> NOW TO OPPORTUNITIES. >> OKAY.
SO GETTING INTO SOME OF THE MEAT OF THE CASE STUDY, THE BUYER
MUST DETERMINE THE ADVANTAGE OF PURCHASING A PROPERTY WITH 80
TOTAL UNITS, 60 COVERED BY THE CONTRACT AND 20 SUBJECTED TO
MARKET RATE RENTS. NO RELOCATION OR FLIGHT OF THE
TENANTS. WE WANT TO CONTINUE PRESERVING
AFFORDABLE HOUSING. SO NOW, GATES, IT IS GOING TO
YOU. WHAT ACTIONS MUST THE SELLER
PERFORM TO APPLY TO THE POLICIES AND PREPAYING THE EXISTING
MORTGAGE. IF THE COUNTRY OWNER DOESN'T
PERFORM THE ACTIONS WHAT RAMIFICATIONS ARE LIKELY TO
OCCUR? >> A WHAT ACTIONS MUST THE
SELLER PERFORM TO COMPLY WITH THE HUD POLICIES?
THIS IS A SITUATION WHERE HUD PREPAYMENT PERMISSION IS
REQUIRED, HOWEVER, AS A SELLER THEY DON'T WANT TO BE SUBJECTED
TO THE LONG TERM PROVISIONS. THEY WANT TO GIVE THE 150 DAY
NOTICE FALLING UNDER THE SECTION 219, SO THEY AVOID THE LONG TERM
USE AGREEMENT. IF THE OWNER DOESN'T PERFORM
THIS ACTION, WHAT RAMIFICATIONS WILL OCCUR.
IF NOT GIVING THE TENANT NOTICE, THEY WOULD THEN HAVE TO SIGN A
LONG TERM USE AGREEMENT IN STEAD.
>> RIGHT. ANOTHER IMPORTANT REASON IS THAT
YOU WANT TO MAKE SURE YOU PROTECT THE NONSECTION 8 TENANTS
WITH VOUCHERS. >> WHAT DUE DILIGENCE SHOULD THE
BUYER CONDUCT IN ASSESSING IT IS BENEFICIAL TO PURCHASE THE
APARTMENTS FROM A FINANCIAL STANDPOINT?
>> IT IS INTERESTING TO SEE THE MOST RECENT AUDIT, YEAR END
FINANCIAL STATEMENT, THE MOST RECENT YEAR TO DATE STATEMENTS.
I WOULD WANT TO SEE THE RENT THE ROLLS AND RENTING ABOVE THE
TYPICAL RATES AND IF THERE ARE PROBLEMS WITH VACANCIES AND I
WOULD WANT TO LOOK AT ANY OF THEIR CONTRACTS IN PLACE TO SEE
IF THERE IS ANYTHING IN THE CONTRACTS THAT HAVE ISSUES WITH
REFINANCING FROM THE FINANCIAL STANDPOINT.
>> OKAY. ALL RIGHT.
NOW ON TO QUESTION NUMBER 3, WHAT ARE THE PROS AND CONS OF
PURCHASING PARTIALLY ASSISTED SECTION 8 COMPLEX.
IF YOU ARE A NEW PROPERTY OWNER WHAT ACTION WOULD YOU TAKE TO
THE EXISTING CONTRACT THAT IS EXPIRING ON OCTOBER 31ST OF THIS
YEAR? >> THE PROS AND CONS, THE PRO
WOULD BE RELATIVELY GUARANTEED INCOME ON THOSE UNITS, I WOULD
THINK. THE CON I GUESS SOME PEOPLE
LOOKING AT THE CON AS REGULATIONS AND COMPLIANCE THAT
COMES ALONG WITH THE SECTION 8. WHAT ACTION WOULD YOU TAKE?
I WOULD PROBABLY LOOK AT THIS RENT COMPARABILITY STUDY AND SEE
IF THERE ARE OPPORTUNITIES TO MARK THE RENTS UP TO MARKET AND
THEN TRY TO GET A 20 YEAR RENEWAL AND TO HAVE A GUARANTEED
STREAM OF INCOME. >> OKAY.
>> DOES THAT SOUND RIGHT? >> YES, I LIKE IT.
IF YOU ARE NEW TO THE HUD PROGRAMS AND GOING THROUGH THE
PROCESSES AND GETTING PREAPPROVED, BUT BE FAMILIAR
WITH THE OPTIONS AVAILABLE TO YOU AND HOPEFULLY YOU CAN DO A
20 YEAR RENEWAL. MOVING ON TO THE NEXT QUESTION
IS WHAT METHODS AND SCENARIOS FOR THE PROPOSED REVENUES AND
EXPENSES. >> I DON'T HAVE MUCH TO ADD.
AS AN OWNER THAT IS ENTITLED TO KEEP THE EQUITIES THERE IS A
RETURN ON INVESTMENT FORMULAS YOU CAN LOOK AT THERE.
>> OKAY. THAT'S IT FOR THE CASE STUDY.
>> ALL RIGHT. >> YOU DID PRETTY GOOD.
>> THE SIXTH TIME IS A CHARM. >> I AM FORTUNATE TO WORK WITH
GATES IN CHICAGO AND DENVER. I'M A LITTLE JEALOUS, SHE'S
YOUNGER THAN I AM AND YOU CAN REALLY TELL.
WE HAVE THE BINDERS AND I HAVE TWO SLIDES ON EACH PAGE AND
SHE'S GOT SIX. >> AND GLASSES.
>> WELL, I HAVE CONTACTS IN. MOVING ON TO TOPIC 2-4.
THERE IS A SLIDE HERE A LITTLE LATE THEY ARE GIVES YOU THE
REFERENCE MATERIALS, HOUSING NOTICE 2012-3.
THAT WAS PUBLISHED BY HUD OF FEBRUARY THIS YEAR.
THIS IS A COMPANION NOTICE, AND THE BULLETS YOU ARE GOING TO SEE
ARE COMING OUT OF THAT NOTICE. THE TENANT VOUCHERS ARE NOTICED.
NO DISPLACEMENT OF THE TENANTS. ONE OF THE THINGS THAT YOU WILL
SEE WHEN YOU PULL THE NOTICE, I THINK IT IS ACTUALLY QUITE GOOD,
IT IS DETAILED. IT IS TALKING ABOUT HUD HAS
MANDATORY AND DISCRETIONARY AUTHORITY TO ISSUE TENANT
PROTECTION VOUCHERS. FOR CERTAIN PREPAYMENTS HUD IS
REQUIRED TO ISSUE ENHANCED VOUCHERS, PROTECTION VOUCHERS
AND IN OTHER CASES, RAFT, THEY HAVE MORE ADDITION --
DISCRETIONARY AUTHORITY. >> RENT PAYMENTS ABOVE THE LOCAL
VOUCHER PAYMENT STANDARD, THE COMPARABLE MARKET RENTS TO ALLOW
THE EXISTING FAMILIES TO REMAIN IN THE UNITS EVEN IF THE OWNER
INCREASES THE REPRESENT. YOU THINK OF A REGULAR VOUCHER
AND THE PAYMENT STANDARDS. NOW IN THIS CASE, THE HOUSING
AUTHORITY STILL HAS TO CONCUR WITH THE COMPARABLE MARKET RENTS
FOR UNASSISTED UNITS. IF YOU HAVE ENHANCED VOUCHER YOU
COULD QUALIFY FOR HIGHER RENTS THAN THE PROPERTY NEXT DOOR.
MOVING ON. WHEN A MORTGAGE IS PREPAID,
CERTAIN MORTGAGES, VOUCHERS ARE PROVIDED TO THE UNASSISTED
RESIDENTS. IF THEY HAVE A HUNDRED UNITS AND
40 WITH THE SECTION 8 CONTRACT, THE 60 MAY RECEIVE VOUCHERS.
THEY HAVE TO QUALITY AND EVERYTHING.
THAT IS A TOOL THAT THE OWNERS HAVE TO PRESERVE THE AFFORDABLE
HOUSING. THEY ARE PROTECTED FROM
POTENTIAL RENT INCREASES. AGAIN, THE VOUCHERS WILL PAY THE
MARKET RENT LEVELS. LET'S TALK ABOUT SOME OF THE
COVERED CONVERSION FACTORS. IT IS ELIGIBILITY EVENTS AND
THAT THE IMPORTANT WHETHER THEY ARE GETTING ENHANCED VOUCHER OR
REGULAR VOUCHER. A COUPLE WE HAVE HERE, THE
TENANTS RESIDING ON THE PROPERTY ARE ELIGIBLE FOR ENHANCED
VOUCHER ASSISTANCE. THE OWNER OPT OUT.
THE TENANTS CAN GET ENHANCED VOUCHERS AND PRESERVATION
PREPAYMENTS AND THAT IS WHAT WE ARE DISCUSSING TODAY.
PREPAYMENT IS A PRESERVATION METHOD.
GATES MENTIONED YOU THINK OF PREPAYING THE AFFORD MORTGAGES
AS A MEANS FOR PRESERVING THE HOUSING BUT IT IS POSSIBLE TO DO
THAT. HUD CAN PROVIDE ELIGIBLE TENANTS
WITH ENHANCED VOUCHERS. THEN WE MENTIONED IN THE LAST
SESSION THAT IF THE 150 DAY NOTICE REQUIREMENT IS NOT MET
THE OWNERS CAN ENTER INTO A SHORT TERM USE AGREEMENT AND NOT
ONLY TO MEET THE 150 DAY REQUIREMENT AND PROTECTING THE
TENANTS. WHEN THE MORTGAGE IS PAID OFF ON
SCHEDULE, HUD CANNOT PROVIDE VOUCHERS TO THE AFFECTED
TENANTS. IN THIS CASE, THE ROLE OF THE
PUBLIC HOUSING AGENCY, SECTION 8 CONTRACT, OR SECTION 236 OR D 3
YOU ARE WORKING WITH THE MULTIFAMILY FIELD HOUSE OF
CONTRACT ADMINISTRATOR OR THE PBCA'S OR IN THIS CASE WITH THE
VOUCHERS YOU ARE WORKING WITH THE HOUSING AUTHORITY AND THE
VOUCHERS ARE ADMINISTERED LOCALLY AND RECEIVING FEDERAL
FUNDS TO ADMINISTER THE VOUCHER PROGRAM.
WHEN YOU HAVE A CONVERSION FACTOR AND YOU ARE IN A SMALL
TOWN AND IT IS A NICE PROPERTY, HUD CAN REACH OUT TO ANOTHER
HOUSING AUTHORITY TO ADMINISTER THE VOUCHER.
THE RENTAL UNITS HAVE TO MEET THE HOUSING AND HEALTH
STANDARDS. THIS TALKS ABOUT THE VOUCHER
PAYMENT PROCESS. BASICALLY THIS COVERS THE ROLE
OF THE HOUSING AUTHORITY, THE FAMILY THAT RECEIVES THE VOUCHER
AND THE PROPERTY OWNER/LANDLORD. THE HOUSING AUTHORITY DETERMINES
THE PAYMENT STANDARD, AND PAYING 30% OF THE ADJUSTED GROSS INCOME
FOR RENT AND UTILITIES. THE PHA SENDS THE OWNER THE
MONTHLY PAYMENT. THE FAMILIES REQUIRED TO COMPLY
WITH THE HOUSEKEEPING AND OTHER STANDARDS, CERTIFICATION AND
THAT GOOD STUFF. THE OWNERS IS REQUIRED TO
MAINTAIN THE OWNER ACCORDING TO THE CONTRACT.
FINALLY, AS I MENTIONED THE HPA PERFORMS THE ANNUAL INSPECTION.
NOW WE HAVE A FEW EXCEPTIONS. IF THE RENT CHARGED BY THE
LANDLORD IS HIGHER THAN THE PAYMENT STANDARD THE FAMILY MUST
PAY THE DIFFERENCE. THE MOST THEY CAN PAY IS 40% OF
THE ADJUSTED GROSS INCOME AND SOMETIMES THE FAMILIES CHOOSE TO
DO BECAUSE IT IS A NICER UNIT OR IN A CERTAIN SCHOOL DISTRICT.
SO THEY CAN PAY UP TO 40%. PHA EASE CAN ISSUE ENHANCED
VOUCHERS. IN ORDER TO ALLOW THE EXISTING
FAMILY TO REMAIN IN THE UNITS IF THE RENTS INCREASE.
IT IS IMPORTANT TO NOTE THAT THIS PAYMENT STANDARD THAT IS
HIGHER IT REALLY, THE RENT IS REALLY BASED ON THE CURRENT
CONDITION OF THE UNIT AS NOT REPAIRS.
IF YOU ARE DOING A REHAB PROGRAM AND EXPECTED TO RAISE THE RENT,
THAT IS NOT DETERMINED HOW THE RENT IS SET.
IT IS THE CURRENT CONDITION OF THE UNIT.
WITH ENHANCED VOUCHERS THE FAMILY CAN REMAIN IN THE CURRENT
UNIT UNLESS CONVERSION TO ANOTHER USE.
ON A REGULAR VOUCHER, THE TENANT DOESN'T HAVE THE SAME RIGHT TO
REMAIN. THERE ARE LOCAL JURISDICTIONAL
UNITS. THERE IS A DISTENSION BETWEEN
ENHANCED VOUCHER AND REGULAR VOUCHER AND ENHANCED VOUCHER THE
TENANT DOESN'T HAVE TO MOVE AND THE LAND LORD HAS TO ACCEPT THE
VOUCHER. I LIKE THIS CHART ALLOT.
IT IS TALKING ABOUT THE EVENTS TO PROVIDE THE TENANTS WITH
VOUCHERS. PREPAYMENT OF THE LOANS.
EXCEPT FOR NONPROFIT PROJECTS, THE NONPROFITS DON'T HAVE THE
RIGHT TO PREPAY. WE ARE TALKING PROFIT MOTIVATED
OWNERS. SO IN THIS CASE, THE PREPAYMENT
OF ONE OF THESE MORTGAGES THE TENANTS THAT DON'T HAVE
ASSISTANCE ARE ENTITLED TO RECEIVE AN ENHANCED VOUCHER.
IF YOU HAVE EXPIRE RATION OF A CONTRACT, INCLUDING REHAB, WHICH
WE HAVE NOT TALKED ABOUT YET, THE TENANTS THAT ARE INCOME
ELIGIBLE AND CURRENTLY ASSISTED CAN AGAIN RECEIVE ENHANCES
VOUCHERS. THE PREPAYMENT OR REFINANCE OF
PROPERTIES WITH FLEX SUB LOANS AND TRANSACTION.
THE TENANTS THAT ARE ELIGIBLE WITHOUT SECTION 8 CAN RECEIVE
ENHANCED VOUCHER AND USUALLY IT IS SECTION 236, OR 3D BEAMER OR
202 PROJECT. THE LAST ONE I WANT TO TALK
ABOUT, TERMINATION CONTRACT. NOW ALL THE UNITS ON THE
ORIGINAL RAP CONTRACT OCCUPIED IN THE PRIOR 24 MONTHS, THOSE
TENANTS RECEIVE REGULAR VOUCHERS, NOT ENHANCED VOUCHERS.
THIS CHANGE IS SOMETHING THAT CAME ABOUT UNDER THIS
ADMINISTRATION BECAUSE A LOT OF OWNERS ARE NOT BILLING FOR THE
FULL MAX OF THE RAP CONTRACTS BECAUSE THERE IS NO INCREASED
FUNDING FOR THESE. I THINK IS SOMETHING THAT YOU
PRESERVE MORE UNITS THAN YOU THOUGHT POSSIBLE.
IT IS ALL UNITS OCCUPIED IN THE 24 MONTHS PRIOR.
NOT JUST THE ONES OCCUPIED AT THE I'M OF ELIGIBILITY EVENT.
MOVING ON THE VOUCHER BENEFITS. WE HAVE A FEW HERE.
TENANT PROTECTION VOUCHERS HELPING THE PRESERVE THE
STABILITY DURING THE TRANSITION FROM ONE FINANCING MECHANISM TO
ANOTHER. THE RESULTING RENT SECURITY
HELPS TO CREATE AND PRESERVE THE INCOME STREAM.
AND ANOTHER ONE IS THE NEW PROGRAM, RAD, PROVIDES OPTIONS
TO CONVERT TENANT PROTECTION VOUCHERS TO PROJECT BASED
VOUCHERS WHERE THERE IS AN EXPIRING RAP CONTRACT.
IT IS PROVIDING INCOME FOR THE PROPERTY AND AGAIN THIS IS A
NICE FORM OF CREDIT ENHANCEMENT. IF YOU WANT TO KNOW MORE ABOUT
RAD, HUD.GOV HAS A TON OF INFORMATION THERE.
BESIDES YOUR BENEFITS YOU HAVE SOME CHALLENGES ASSOCIATED WITH
VOUCHERS. PORTABILITY IS ONE OF THEM.
THE TENANT PROTECTION VOUCHERS ARE TENANT BASED ASSISTANCE.
IF THE TENANT MOVES OUT THE ASSISTANCE MOVES WITH THE
REPRESENTER. MUST BE MAINTAINED TO QUALITY
STANDARDS THROUGHOUT THE LEASE OR THE CONTRACT.
I DON'T SEE THAT SO MUCH AS A CHALLENGE.
THAT IS A BASIC REQUIREMENT WHETHER OR NOT YOU HAVE A
VOUCHER. OVER TIME, VOUCHER TENANTS ARE
LIKELY TO BE REPLACED WITH THE TENANTS THAT PAY THE FULL RENT.
THE INCOMES AND REPRESENTS OF REPLACEMENT TENANTS ARE LIMITED
TO THE PROGRAMS. SO THE TAX CREDIT RENT IS LOWER
THAN THE VOUCHER THAT IS THE RENT YOU WILL RECEIVE.
ALL RIGHT. I PREVIOUSLY MENTIONED THE
TENANT PROTECTION VOUCHER NOTICES.
THE FIRST ONE YOU SEE HERE IS NOTICE PIH.
THAT IS THE PUBLIC HOUSING NOTICE, COME PAIN I DON'T KNOW
TO THE HOUSING NOTICE, WHICH IS SHOWN ON THE SECOND BULLET.
GUIDANCE ON ELIGIBILITY FOR TENANT PROTECTION VOUCHERS.
THAT AGAIN IS THE ONE THAT WE REALLY PILL THE INFORMATION FROM
THIS PRESENTATION ON. ALL RIGHT.
SO THAT IS BRINGING US CLOSE TO THE END OF THIS MODULE.
NOW TO GATES FOR REVIEW QUESTIONS.
>> THANK YOU. >> REMIND THE FOLKS HOW THE
REVIEW QUESTIONS CORRELATE WITH THE PRE AND POST ASSESSMENT.
>> YES, THERE IS A KNOWLEDGE TRACK MADE AVAILABLE TO EVERYONE
REGISTERED FOR THE WEBER IN AND WE HOPE YOU TOOK THE TEST.
AFTER EACH LESSON THERE ARE FIVE OR SIX QUESTIONS.
WHEN YOU TAKE THE POST CHECK YOU CAN ANSWER CORRECTLY.
THE FIRST REVIEW QUESTION, IS WHICH OF THE FOLLOWING IS NOT A
PREPAYMENT REQUEST REQUIREMENT UNDER SECTION 250A?
THAT IS THE REQUIREMENT FOR NEEDING PERMISSION TO REPAY.
YOU MUST NOTIFY TENANTS OF THE REQUEST VIA A LETTER 150 DAYS
PRIOR TO THE REQUEST. AND SECOND ANSWER YOU MUST VIDEO
A COPY OF THE LETTER TO THE HUD FIELD OFFICE WITH A SIGNED
CERTIFICATION THAT IS DELIVERED TO THE TENANTS AND THE THIRD IS
THAT THE OWNER MUST EXECUTE AN APPROPRIATE USE AGREEMENT AND
REHAB OF THE PROPERTY, THE PROPOSAL MUST INCLUDE A DETAILED
DESCRIPTION OF THE REHAB. WHICH DO NOT APPLY UNDER SECTION
250A? >> A.
WHICH IS MUST NOTIFY TENANTS BY A LETTER 30 DAYS.
>> BECAUSE HOW LONG? >> IT MUST BE A 150 DAYS.
IT IS A DIFFERENCE ON WHAT IT SHOULD BE.
IT IS 150 DAYS. THE REST DO APPLY.
>> ALSO, ONE OF THE SECTIONS, I REMEMBER THAT ONE OF THE
PARTICIPANTS WAS SAYING WELL THE TENANTS DON'T USUALLY COMMENT
AND WHY DO WE HAVE TO DO THIS AND IT'S A PAIN.
A GOOD REASON, IT IS IN THE REGULATIONS, THAT IS ALSO AN
AGREEMENT THAT HUD HAD WITH THE TENANT GROUPS OUT THERE THAT
TENANTS HAVE TO BE NOTIFIED THAT AFFECT THEIR LIVES.
IT IS NOT UNUSUAL TO HAVE THE TENANT GROUPS PROTESTING IF THEY
ARE FINDING OUT ACTIONS AFTER THE FACT.
THAT'S WHY THIS IS AN IMPORTANT PIECE.
NOTIFYING THEM THAT IT IS COMING IS AN IMPORTANT THING TO DO.
>> NOW TO QUESTION NUMBER TWO. WHICH ALLOWS PREPAYMENT WITHOUT
THE HUD APPROVAL ON 250A. THE PROPERTIES SUBJECT TO 219,
THOSE THAT ARE 221D 3 PROPERTIES, SECTION 236, AND
SOME PROPERTIES WITH RENT SUP CONTRACTS?
THIS IS A SLIGHTLY CONFUSING QUESTION.
THE ANSWER IS SUBJECTED TO 219. >> TENANT VOUCHERS PROVIDE
SEVERAL PROTECTIONS. PROVIDING ECONOMIC STABILITY TO
PROPERTIES WHEN THEY ARE TRANSITIONING FROM ONE TYPE OF
FINANCING TO ANOTHER. HERE IS THE QUESTION, WHICH OF
THE FOLLOWING ENABLES HUD TO PROVIDE TENANTS WITH ENHANCED
VOUCHERS. EXPIRE RAIGS OF RAP CONTRACT.
B IS REFINANCING THE PROPERTY WITH A FLEX SUB LOAN.
C IS PREPAYMENT OF A LOAN WITH SECTION 221 MORTGAGE INSURANCE
AND BELOW MARKET INTEREST RATE AND TERMINATION OF A PROJECT
BASED SECTION 8 CONTRACT. SO YOU WANT TO TAKE A GUESS?
MORE THAN ONE. >> THAT IS A GOOD ONE.
MORE THAN ONE RIGHT ANSWER. REFINANCE OF A PROPERTY WITH A
FLEX SUB LOAN WOULD TRIGGER THIS.
IS THAT ONE OF THEM? >> THAT IS ONE OF THEM.
HOW ABOUT THE PREPAYMENT OF A LOAN WITH SECTION 221D 3
MORTGAGE INSURANCE AND BEAMER PROPERTY?
>> YES. >> YES.
THE THIRD WOULD BE THE TERMINATION OF A PROJECT BASED
SECTION 8 CONTRACT. >> RIGHT.
>> OKAY. >> ALL RIGHT.
SO RECAPPING THE LESSON TWO. WE WANT TO RECOGNIZE THE
POTENTIAL BENEFITS ASSOCIATED WITH PREPAYMENT AND REFINANCING
ON CERTAIN PROPERTIES AND BENEFIT OF SECTION 250 AND
AFFECT OF REPAYING THE MORTGAGES.
THE THIRD IS TO IDENTIFY SECTION 219 PROVISIONS THAT MAY APPLY TO
PROPERTIES AND THEIR IMPACT ON REPAYING OR PREPAYING MORTGAGES.
OKAY. LET ME JUST -- HERE WE GO.
WE WANTED TO OUTLINE THE PROCESS FOR REQUESTING REPAYMENT
APPROVAL AND TIMING CONSIDERATIONS.
ALSO, WANTED TO RECOGNIZE THAT PREPAYING A MORTGAGE CAN SERVE
AS A MEANS TO RETAIN AFFORDABLE HOUSING AND THE POTENTIAL IMPACT
OF REGULAR AND ENHANCED TPA'S ON THE ABILITY TO PRESERVE
AFFORDABLE HOUSING. WITH THAT.
>> THANK YOU. WE ARE NOW AT THE END OF LESSON
TWO. WE ARE GOING TO COME BACK AT
2:30 EASTERN TIME TO START ON LESSON 3.
TO RECAP LESSON 3, WITH 236 PROPERTIES WE ARE CONTINUING
WITH PRESERVING 236 WITH A LESSON ON DECOUPLING AND THE
FLEX SUB LOANS AND CONVERSION OF UNITS TO ONE BEDROOM UNITS.
THAT IS 2:30 TO 3:30 AND TAKING A BREAK AND THE LAST LESSON IS
4, WHICH IS ON PREPAYMENT SITUATIONS WITH 202 PROPERTIES.
THAT LESSON IS ABOUT 30 MINUTES AND SHOULD BE WRAPPING UP BY
4:15 TODAY EASTERN TIME. SO WE'LL SEE YOU AGAIN IN 30
MINUTES. THANK YOU.