whats new in rural development? north carolina affordable housing conference raleigh, north carolina...
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WHAT’S NEW IN RURAL DEVELOPMENT?
NORTH CAROLINA AFFORDABLE HOUSING CONFERENCE
RALEIGH, NORTH CAROLINA
SEPTEMBER 16, 2010
MEL ELLIS .
DIRECTOR, SINGLE FAMILY HOUSING
USDA RURAL DEVELOPMENT (NC)
(919) 873-2060
WHO HAS HEARD OF
USDA RURAL DEVELOPMENT
BEFORE TODAY?
MISSION STATEMENT“To enhance the ability of rural communities and to develop, grow, and improve their quality of life by targeting financial and technical resources in areas of greatest need through activities of greatest potential.”
Rural Development consists of three areas:
Rural Housing
Rural Utilities
Rural Business
Single Family Housing Programs
• Section 502 Guaranteed Loans OVER $805.0 M• Section 502 Direct Loans $75.8 M• Section 504 Repair Loans $1.54 M• Section 504 Repair Grants $1.52 M
FISCAL YEAR 2010NORTH CAROLINA
Single Family Housing Programs
Section 502 Direct Loans ($75.8 M)
Assisted 575 Rural Households with Mortgage Loans
Section 502 Direct Loans
Purpose
Provide people in rural communities the opportunity to
own adequate, modest, decent, safe and sanitary homes
BASIC ELIGIBILITY CRITERIA
Do not currently own adequate housing
Must be a U.S. Citizen, or Legal Resident Alien
Have legal capacity to enter into a contractual relationship
Possess acceptable credit
Have a stable and dependable income
BASIC ELIGIBILITY CRITERIA
Down Payment: None Required
Property: No square footage or amenity limitations Exception: No swimming pools
RATES, TERMS, AND LIMITS
Interest Rate: (Changes monthly, depending upon the cost of money to the Government). Payments may be subsidized to as low as 1% financing.
Terms: Typically 33 years, but may be extended to 38 years for very low income applicants if needed in order to achieve adequate repayment capacity.
Loan Ceiling: Varies by County
CREDIT HISTORY
Indicators of Unacceptable Credit
Account payments delinquent > 30 days on two or more occasions within a 12-month period
Foreclosure that has been completed within the last 36 months
Outstanding Internal Revenue Service (IRS) tax lien or any other outstanding tax liens with no satisfactory arrangement for payment
Two or more rent payments paid 30 or more days late within the last 2 years
CREDIT HISTORY
Indicators of Unacceptable CreditOutstanding collection accounts
with no satisfactory arrangements for repayment or paid in full within the last 6 months
Non-Agency debts written off within last 36 months unless paid in full at least 12 months ago
Delinquency on a federal debt
CREDIT HISTORYIndicators of Unacceptable Credit
A court-created or court-affirmed obligation or judgment caused by nonpayment that is currently outstanding or has been outstanding within the last 12 months, except:
A bankruptcy in which:
Debts were discharged >36 months prior to the date of application
Debt restructuring plan successfully completed and applicant has met obligations when due for the 12 months prior to the date of application
A judgment satisfied more than 12 months before the date of application
An applicant with an outstanding judgment obtained by the United States ina Federal court, other than the United States Tax Court, is NOT eligible for aSection 502 loan. This requirement is statutory and cannot be waived.
YOU MAY HAVE SOME CREDIT ISSUES
BUT
DON’T GIVE UP YOUR DREAM!!!
CREDIT HISTORYCredit Waivers
Rural Development may consider mitigating circumstances to establish the borrower’s intent for good credit when the applicant provides documentation that:
The circumstances were of a temporary nature, were beyond the applicant’s control, and have been removed.
The adverse action or delinquency was the result of a refusal to make full payment because of defective goods or services or as a result of some other justifiable dispute relating to the goods or services purchased or contracted for.
• Credit counseling is also available to help put you on the right track to homeownership
• Local Non-Profit Community Development Corporations & Community Action Agencies that are active in housing
CREDIT HISTORY
Section 502 Direct Loan Borrower
Single Family Housing Programs
Section 502 Loan Guarantees
(OVER $805.0M)
Assisted over 5,949 Rural Residents
Sec. 502 Guaranteed Loan customer
Section 502 Rural Housing Loan Guarantees
Purpose:
• To help those at the moderate income level purchase homes in rural areas. Funds can be used to build or purchase a home.
Section 502 Rural Housing Loan Guarantees
Role of USDA:
To Guarantee a Lender that we willrepay that lender 90% of the total loanvalue if the Loan goes bad &is not re-paid
Section 502 Rural Housing Loan Guarantees
Eligibility:
• Income of up to 115% of median income
for the area. • The lender determines repayment
feasibility, using repayment ratios.
Section 502 Rural Housing Loan Guarantees
Terms: • Loans are for 30 years
• Interest rate is set by the lender
• No required down payment
Home Financed Through Section 502 Guaranteed Home Loan
SFH 504 LOAN PROGRAM ($1.54 M)
PURPOSE:
To provide a source of funds for rural homeowners
for the removal of safety hazards and repairs to
existing properties.
SFH 504 LOANS
Provides a source of funds for very low income owner occupants for removal of safety hazards and repairs to existing properties.
Interest Rate: 1%
Terms: Maximum of 20 years
Maximum Loan Amount: $20,000
SFH 504 LOANSELIGIBILITY
Must own and occupy property that needs repairs
Household income must be below the area’s very low income limit
Must be a US Citizen or Legal Resident Citizen
Possess legal capacity to enter into loan relationship
Have satisfactory credit history
SFH 504 GRANT PROGRAM ($1.52 M)Funds Purpose: Emergency repairs, energy conservation, and the removal of safety hazards
Maximum Grant Amount: $7,500 (FUNDS HAVE BEEN EXTREMELY LIMITED WITH NORMALLY
A LENGTHY WAITING LIST)
Who is Eligible: Owner occupants aged 62 years or older) who lack repayment capacity for a loan
Grant recipients must sign a statement agreeing to repay the grant if the property is sold within 3 years from the date of grant.
RURAL HOUSING SITE LOAN PROGRAM
• Rural Housing Site Loans are loans made to provide financing for the purchase and development of affordable housing sites in rural areas for low and moderate-income families. Loans are made to acquire and develop sites for housing to be constructed or for site development to build affordable homes for low or moderate income rural residents.
RURAL HOUSING SITE LOAN PROGRAM
• Eligible organizations include nonprofit organizations, public bodies and Federal recognized Indian Tribes.
For more information about these or other USDA housing programs, contact the USDA Rural Development State Office at 919-873-2060 or visit our website at:
www.rurdev.usda.gov
USDA RURAL DEVELOPMENTSTATE OFFICE
4405 Bland Road, Suite 260Raleigh, NC 27609
Phone:(919) 873-2060
RURAL DEVELOPMENTNEW HAPPENINGS
MULTI FAMILY HOUSING
WHAT’S NEW?
• New Underwriting Templates• Handbook Changes for Appraisals• Capital Needs Assessment (CNA)• Guaranteed Rural Rental Housing Program
(GRRH)
New Underwriting Templates
• RD is releasing three new tools for evaluation by RD staff
• The three tools are:
– New construction underwriting template• supports the underwriting for new construction 515 projects and
new construction farm labor housing projects
– Preliminary analysis tool for transfers (for use by RD staff, borrowers, and potential purchasers)
• allows rapid assessment of whether a potential transfer transaction is likely to be approvable by RD.
– Preliminary analysis tool for MPR (for use by RD staff, borrowers, and potential purchasers, to evaluate whether a potential MPR transaction may be approvable by RD)
• should allow sellers and purchasers and RD staff to structure their transfer requests in a way that complies with RD requirements, leading to rapid RD approval with minimal changes to the proposed transaction.
Handbook Changes for AppraisalsHB-1-3560 Attachment 7-C
• SPECIFIC VALUE TYPES TO BE REQUESTED AND REPORTED BASED ON THE INTENDED USE OF THE APPRAISAL
– Value types that should be requested in an appraisal Statement of Work (SOW) are specific to the loan-making, loan-servicing, preservation, or disposition decision(s) for which the appraisal is ordered. In other words, the intended use of the appraisal determines the value type(s) to be requested and reported.
• The value types listed are
– NEW OR SUBSEQUENT LOAN – EXISTING LOAN– VALUE OF PROPERTY – VALUE OF PROPERTY– VALUE FOR SALE - NON PROGRAM PROPERTY– VALUE FOR SALE - ELIGIBLE AS PROGRAM PROPERTY
• This guidance does not require an appraisal when it is not otherwise needed and does not restrict Rural Development from requesting additional values if a need for analysis or for any other purpose is determined or requested.
Capital Needs Assessments Information Update
“Tips & Tricks”
Existing MFH Portfolio
• Size of Portfolio:– 2003: 17,287 properties – 2008: 15,361 properties– (predominantly due to
consolidations)
• Average Age of Property: 28 years
Capital Needs Assessment (CNA)
• WHAT ARE THEY ?– A snapshot in time useful for projecting reserves
and a tool for financial planning.
– A written report which identifies the repair, replacement, and improvement needs of a property over an extended period of time.
Capital Needs Assessment (CNA)
• WHAT ARE THEY NOT ?
– An assessment of ALL costs of ownership over the economic life of the material or system. (Life Cycle Cost Analysis)
– A comprehensive report on work items and their related costs for a proposed/potential rehabilitation project. (Unit by Unit Inspection)
– Not a rehab/repair list
When Are CNAs Required?
1. New Construction Loans 2. Rehabilitation Loans 3. Transfer of project ownership4. Loan Servicing:
a. Loan Reamortization.b. Loan Write-down.
5. MultiFamily Housing Preservation and Revitalization program (MPR)
Capital Needs Assessments
Capital Needs Assessments
WHAT DO THEY INCLUDE ? 1. Description of the property.
2. Condition of materials and systems.3. Accessibility Issues.4. Environmental Issues.5. Repair / Replacement / Improvement Costs.6. Repair / Replacement / Improvement
Schedule. (IMMEDIATE & LONG TERM)
Capital Needs Assessments
• OWNER ACCEPTANCE ?
The CNA final report accepted by the property owner BEFORE accepted by Rural Development.
Contact InformationMPR Public Website:• Contact location for general public• Information on MPR Program
– includes CNA Provider List and application– Unnumbered Letter on CNAs– Latest RD CNA Template– 2008 data / information will be replaced with current as it
becomes available
http://www.rurdev.usda.gov/rhs/mfh/MPR/MPRHome.htm
Section 538 Guaranteed Rural Rental Housing Program (GRRHP)
Rural rental housing guarantee loan program housing very low to moderate income tenants guided by Title V of the Housing Act of 1949 and RD regulations 7 CFR Part 3565
Types:New Construction Loan onlyConstruction & New Construction LoanRehabilitation Loan
Specifics:Up to 90% on principal and accrued interestInitial tenant income less than 115% of AMIUp to 40 year amortization of loanLoan uses include soft costs
Section 538 Guaranteed Rural Rental Housing Program (GRRHP)
Where are we now?
In FY 2009 approximately 30% of the GRRHP was used for 515 preservation and rehabContinuous funding – funding lender requests 12 months a year Providing seamless construction/permanent guaranteesVibrant secondary market for guaranteed loans
Section 538 Guaranteed Rural Rental Housing Program (GRRHP)
Where are we going?
Regulation – seamless const./permanent guarantee
Handbook changes More extensive regulation changes Greater secondary market participation Moving towards a costless product Workforce housing component
State Office, Raleigh, NCCONTACT INFORMATION
• Program Director– Beverly Casey 919-873-2055 [email protected]
• State Office Specialists– Rebecca Dillard 919-873-2062 [email protected]
– Susan Ekalo 828-254-0916 x119 [email protected]
– Barbara Owens 252-204-0472 [email protected]
COMMUNITY PROGRAMS =
COMMUNITY FACILITIES (CF)
&
WATER AND ENVIRONMENTAL (WEP)
PROGRAM SUPPORT =ENGINEERS
ARCHITECT
APPRAISER
ENVIRNOMENTAL COORD.
SO……………HOW MANY OF YOU HAVE
USDA/RD/CP EXPERIENCE?
LET’S LOOK AT COMMUNITY FACILITIES…..
THE DEAL ABOUT CF…..
HEALTH CARE
EDUCATION
PUBLIC SAFETY
PUBLIC SERVICE
THE DEAL ABOUT CF…..WE FINANCE ESSENTIAL COMMUNITY FACILITIES FOR RURAL COMMUNITIES
THE APPLICANTS CAN BE PUBLIC BODIES, NON-PROFITS OR INDIAN TRIBES.
$$$ CAN BE USED TO BUILD FACILITIES AND PURCHASE EQUIPMENT FOR FIRE/RESCUE,EARLY WARNING SYSTEMS, POLICE STATIONS, HEALTH CLINICS, SCHOOLS,LIBRARIES, HOSPITALS, FARMERS’ MARKETS, ETC….
FOR POPULATIONS OF LESS THAN 20K
CAN BE A LOAN, LOAN GUARANTEE, GRANT (C HAIR ON HEAD) OR COMBINATION THEREOF
CAN GO TO 100% APPRAISED VALUE UP TO 40 YRS/LIFE OF THE SECURITY
MAX GRANT IS 75% OF TOTAL PROJECT COST
NORTH CAROLINA’S CF PORTFOLIO:AS OF SEPT 1, 2010, $398.7 MILLION
THRU AUGUST THIS FY, $192.1 MILLION PROCESSEDWITH $274.3 MILLION MORE IN PIPELINE
LARGEST CF PORTFOLIO IN USA
COMMUNITY FACILITIES REGS CAN BE FOUND @1942-A, CF LOANS1942-C, FIRE/RESCUE3570-B, CF GRANT PROG3575-A, CP GUAR LOANSAnd at http://www.rurdev.usda.gov/rhs/cf/cp.htm
THE DEAL ABOUT WEP…..TO PROVIDE WATER AND WASTE FINANCING IN RURAL AREAS TO THE MOST
FINANCIALLY NEEDY APPLICANTS RESULTING IN REASONABLE USER FEES.
THE APPLICANTS MUST BE PUBLIC ENTITIES, NON-PROFITS AND INDIAN TRIBES.
$$$ CAN BE USED TO BUILD, REPAIR, AND IMPROVE PUBLIC WATER SYSTEMS, ANDWASTE COLLECTION AND TREATMENT SYSTEMS
FOR RURAL AREAS, CITIES AND TOWNS WITH POPULATIONS OF LESS THAN 10K
CAN BE A LOAN, LOAN GUARANTEE, GRANT OR COMBINATION THEREOF
INTEREST RATES ARE SET QUARTERLY BASED 0N AN INDEX OF CURRENT MARKETYIELDS FOR MUNICIPAL OBLIGATIONS. REPAYMENT PERIOD IS UP T0 40YEARS.
WATER AND ENVIRON REGS CAN BE FOUND @1780, 1778, 1779, and STAFF INSTRUCTION 1782-1And athttp://www.usda.gov/rus/water/
LET’S LOOK AT WATER AND ENVIRONMENTAL DEALS….
NORTH CAROLINA’S WEP PORTFOLIO:AS OF SEPT 2, 2010 $625 MILLION
THRU AUG 27 THIS FY, $163.79 MILLION WITH $145 MILLION MORE IN PIPELINE
LARGEST WEP PORTFOLIO IN USA
COMMUNITY PROGRAMS!!