Transcript USDA 538 - RRHA of Illinois

U.S. Dept. of Agriculture
Rural
Development
538 Program
Rural Rental Housing
Association o f Illinois
Offering Financial Advice and
Solutions to Health Care, Senior
Living, and Housing Providers.
Brian W. Coate
Vice President
Lancaster Pollard & Co.
Lancaster Pollard Mortgage Company
Table of Contents
Program Purpose
Program Outreach
Program Features
Qualifying Borrowers & Properties
Eligible Uses
Program Fees
Roles & Responsibilities
Lender Incentives
Eligible Lenders
Application Process
Reference Information
GRRHP Flow Chart
Program Purposes
• To encourage economic development in rural areas
• To increase and preserve the supply of affordable
multifamily housing in rural areas
• To ensure the availability of housing for rural
residents whose incomes are 115% of area median
income or less
Program Purposes, cont.
• Foster risk-sharing partnerships with public and
private lenders
• Increase moderately-priced housing in rural America
• Facilitate affordability for low and moderate income
rural residents
Program Features
• Covers 90% of outstanding principal and interest
• Offered for construction and permanent loans or
permanent loans
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Creating Affordability
• Flexible tool that works well with 9% and 4% tax credits,
as well as other sources of financing.
• Rents are restricted to 115% of adjusted area median
income (or less, depending on funding source).
• Average project rent may not exceed 30 percent of 100
percent of AMI.
Qualified Borrowers and Properties
Qualified Borrowers
• Non-profit corps. or
partnerships
• Public entities
• Indian Tribes
• For-profit comps.
• Individuals
• Trusts
Qualified Properties
• New construction
• Substantial rehab. of at least
$6,500 per unit for
acquisition or to create new
units.
• Can be used with acquisition
and rehab. or a rehab. with
no change of ownership.
3565.205 Eligible uses of loan proceeds.
• New construction costs of the project;
• Acquisition with rehabilitation of at
least $6,500 per unit;
• Sales Proceeds;
• Developer’s Fee;
• Refer to Sec. 3565.205 for more
specifics
3565.206 Ineligible uses of loan proceeds
• Housing in military impact areas;
• Housing that serves primarily
temporary and transient residents;
• Institutional type homes that require
licensing as a medical care facility;
• Refinancing existing debt
Roles and Responsibilities
Government’s
• Approval and issuance of
loan guarantee and interest
assistance
• Oversight of lender and
program
• Process and reimburse
losses
Lender’s
• Originate, service, close and
monitor loans
• Oversight of borrower for
compliance with program
regulations
• Liquidation of property for
collection
Application Process
• Notice of Funding Availability
(NOFA) in Federal Register.
• Continuous review and
selection of lender responses
to NOFA until published
deadline.
• Review and selection
continues until funds
exhausted
• Submission of proof of lender
eligibility and documentation
for lender approval
• Completion of National
Environmental Protection Act
(NEPA) requirement
• Submission of complete
application
Application Process, cont.
• Obligation of FY Funds
and Issuance of
Conditional
Commitment
• Construction Phase
• Loan Closing
• Issuance of Loan Note
Guarantee
• Lender Monitoring and
Servicing
Flow Chart of Processes
Issuance of NOFA
(National Office)
Selection of NOFA Responses / Invitation to Proceed with Processing
(National Office)
Meeting with All Parties (Pre-Construction or Planning Session)
(State Office)
Lender Eligibility / Lender Application / Lender Approval
National Office Receipt of Lender Application
State Office input in GLS / National Office Lender Approval in GLS
GRRHP Application Development
Lender Underwrites Loan Application / State Office Reviews Application
Obligation of FY Funds & Issuance of Conditional Commitment
(National Office in GLS)
(State Office Issues Commitment)
Construction Phase
(State Office Oversight)
Loan Closing
(Lender)
Issuance of Loan Note Guarantee
(State Office Issuance)
Lender Monitoring & Servicing
(State Office)
How do I juggle
the meetings, calls,
and paperwork?
The Players, Process, and Money Flow
TC
Syndicator
Equity
Tax Credits
Developer
Debt
Lender
Application
State Allocating
Agency
USDA
Loan
Guarantee
Program Fees
• Initial guarantee fee equal to 1% of the total loan
guarantee due when guarantee is issued
• Annual guarantee fee equal to 0.5% of the total
outstanding principal and interest of the loan.
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Reference Information
http://rdinit.usda.gov/regs/
HB-1-3565 - Guaranteed Rural Rental Housing Program
Origination and Servicing Handbook
7 CFR part 3565 - Program Regulations found in
Appendix 1 of HB-1-3565.
7 CFR part 1940, subpart G - National Environmental
Protection Act
What Does a Typical Sec. 538 Property Look
Like?
Port Byron Apartments
Port Byron, Illinois
(Case Study)
Project Overview
Project:
Location:
Financing:
TDC:
538 Loan:
LTV:
Type:
Rents:
Port Byron Apartments
Port Byron, Illinois
LIHTC (9%) and Sec. 538 GRHP Loan
$8,300,000
$1,555,000
22.1%
Family Property
Range from $ 590 - $680
A Perfect Sec. 538 Candidate
72 units
• 40 1-bedroom units
• 32 2-bedroom units
Population of 1,396
Proposed rehab of approx. $40k/unit
Addition of
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•
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•
•
Library
Walking trail with benches
Garden plots
Playground
Bike racks
Challenges
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Phase I
Phase II
Phase III
24 units
24 units
24 units
20 units of RA
22 units of RA
24 units of PB Sec. 8
Key Players
Borrower: General Capital
• Extensive real estate development experience but first 538 GRHP
Mgmt. Co.: Oakbrook Corp
Lender: Lancaster Pollard Mortgage Co.
• USDA-approved lender for Sec. 538 and Community Facilities
programs
General Contractor: Schemel-Tarrillion, Inc.
Architect: Tyson and Billy Architects, P.C.
Tax Credit Syndicator: Enterprise
Community Amenities
Community Amenities
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Pre-Rehab
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Pre-Rehab
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Post Rehab
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Post Rehab Cont.
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QUESTIONS?
Lancaster Pollard
65 East State Street, 16th Floor
Columbus, OH 43215
Phone (614) 224-8800
Fax (614) 224-8805
www.lancasterpollard.com