Guide to Units, Chapters, Section Headings & Subheadings Multifamily Asset Management and Project Servicing Re-write HUD Handbook 4350.

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1 Guide to Units, Chapters, Section Headings & Subheadings Multifamily Asset Management and Project Servicing Re-write HUD Handbook Unit Numbers and Titles 1.0 Introduction (4 Chapters) 2.0 Getting Started (6 Chapters) 3.0 Project Monitoring (7 Chapters) 4.0 Servicing Troubled Projects (4 Chapters) 5.0 HUD-Held Mortgages (2 Chapters) 6.0 Property Disposition (5 Chapters) 7.0 Reserves and Escrows (7 Chapters) 8.0 Subordinate Debt (1 Chapter) 9.0 Transfers of Physical Assets (1 Chapter) 10.0 Enforcement (3 Chapters) 11.0 Emergency and Disaster Assistance (2 Chapters) 12.0 Preservation (14 Chapters) Definitions Acronyms Index Note: Each unit chapter will: 1. Begin with a Table of Contents that identifies its section headings and, if applicable, subheadings (i.e., major topics). 2. Start with page number one. 3. Include related appendixes, forms, and exhibits (each as a separate scanned document that can be downloaded by a user). Guide to Units & Chapters Re-write 1 February 7, 2014

2 1.0 Introduction 1.1 Introduction Mission Monitoring Responsibility of Housing Inter-relationships Cooperation Mortgage Insurance Programs HUD/Mortgagor/Managing Agent Relationship HUD/Mortgagee Relationship Mortgagee/Mortgagor Relationship 1.2 Changing Concepts and Asset Management Perspective Description HUD Asset Management Functions Loan Servicing/Asset Management Skills 1.3 Applications of Asset Management Concepts Loan Servicing vs. Asset Management Asset Management Initiatives Objectivity Project Tenants Recommendations for Effective Communication Other Communication Principles for Loan Specialists/Asset Managers 1.4 Organization of This Handbook and Other References Primary Handbook General Guidance Other Handbooks Guide to Units & Chapters Re-write 2 February 7, 2014

3 2.0 Getting Started 2.1 Basic Document Files Introduction Names of Documents and Description Dockets and List 2.2 Initial Servicing Files and Record Retention and Disposition Financial Requirement for Mortgagors Post Construction Activities Furniture, Equipment and Additional Services 2.3 Role of GNMA Overview Multifamily Loan Programs Eligible for Securitization Publications and Databases Topics for Securitized Loans A. Common Pool Types B. Pass-Through Payments C. Investor Call Protection (lockouts and prepayments D. Pool Termination E. Transfer of Issuer Responsibility F. Letter of Credit G. Servicing Fees and Guaranty Fees H. Technical Defaults I. Investor Interests J. Notification Process K. Bond financing Issues GNMA Special Topics for Non-Performing Loans A. Pass-Through Payments B. Repurchase of Delinquent Loans C. Investor Call Protection D. Technical Defaults E. Investor Interests F. Notification Process G. Bond Financing Issues 2.4 Mortgagor Structures Previous Participation Guide to Units & Chapters Re-write 3 February 7, 2014

4 2.6 Record Keeping Systems Purpose Applicability Authority Guide to Units & Chapters Re-write 4 February 7, 2014

5 3.0 Project Monitoring 3.1 Financial Statements/FASS Purpose Applicability Definitions and Acronyms FASS Annual Financial Statements and irems Monthly Accounting Reports Additional Handbooks and References 3.2 Commercial and Ground Leases Purpose Applicability Definitions Ground Leases A. Term of Lease B. Valuation of Mortgage C. Acceptable Lease Payments D. Option to Purchase Lease Commercial Leases Sources of Authority 3.3 Infestations 3.4 Insurance and Loss Drafts Purpose Applicability Required Insurance Insurance That May Be Required Forms of Recommended Insurance Insurance Providers Reviewing Insurance Coverage Failure to Insure Loss Settlement Drafts 3.5 Management and Occupancy Reviews Introduction Applicability Reviewing Officials Primary Responsibilities Scope of the Management Review Frequency of Management Reviews Management Review Form Guide to Units & Chapters Re-write 5 February 7, 2014

6 3.5.8 Management Review Categories and Ratings Notification of Results and Management Review Appeal Procedures for Owners Actions in the Event of Noncompliance, Nonresponse, or Nonperformance Statutory, Regulatory, and Administrative References Appendix 3.5.1: Form HUD-9834 Management Review for Multifamily Projects Appendix 3.5.2: MOR Frequently Asked Questions Appendix 3.5.3: Sample Letter to Owner/Agent (Prior to On-site Review) Appendix 3.5.4: Sample Letter to Owner/Agent (Post Review) Appendix 3.5.5: Sample Closeout Letter to Owner/Agent Appendix 3.5.6: Sample Decision Appeal Decision Letter 3.6 Physical Inspections/PASS/Reverse Auctions Purpose Background Applicability Timing of Inspections Mortgagee Inspections Reverse Auction Inspections Quality Assurance Inspections Limited Quality Assurance Inspections Appeals - Technical Review Database Adjustments Managing Exigent Health and Safety Conditions Physical Inspection Requests/Postponements/Cancelations Inspector Cancellations of a Previously Scheduled Real Estate Assessment Center (REAC) Physical Inspection HUD Cancellation/Postponement of a Physical Inspection Guidelines for Declaring Dwelling Units or Buildings Off-Line Before a Real Estate Assessment Center (REAC) Physical Inspection Protocol for Physical Inspections and Active Partners Performance System (APPS) Flags when a Property Receives a Score Below Tracking Scheduled Inspections and Results Appendix 3.6.1: 3.7 Preventing Defaults and Assignments Purpose Applicability Defaults Multifamily Delinquency and Reporting System Processing Fiscal Delinquencies Processing Technical or Covenant Defaults Elections to Assign Owner Responsibilities Hub/Program Center Responsibilities Appendix 3.7.1: Guide to Units & Chapters Re-write 6 February 7, 2014

7 Appendix 3.7.2: 3.8 Updating irems Guide to Units & Chapters Re-write 7 February 7, 2014

8 4.0 Servicing Troubled Projects 4.1 Mortgage Modifications Purpose Applicability Interest Rate Reduction Procedures Interest Rate Reduction Approval Process GNMA Processing Guidelines Modification to Avoid an Assignment 4.2 Partial Payment of Claims Risk Management/Watch List/MROC Risk Management/Watch List/MROC Guide to Units & Chapters Re-write 8 February 7, 2014

9 5.0 HUD-Held Mortgages 5.1 HUD-Held Servicing Assignment of Mortgage (Including M2M notes that can be assigned to NP owners) Foreclosures Mortgage Sales Workouts (Including Mark-to-Market and Demo Notes and other Partial Payment of Claim Notes) Surplus Cash Analysis 5.2 Mortgage Sales Guide to Units & Chapters Re-write 9 February 7, 2014

10 6.0 Property Disposition 6.1 Pre-foreclosure/Troubled Project Consultation 6.2 Relocation HAP Abatement Vouchers PD responsibilities FO/Hub responsibilities 6.3 Property Management MIP HUD-Owned (Deed-in-Lieu) 6.4 Sales Foreclosure A. Types of default B. Bankruptcy C. One time right to cure D. The foreclosure recommendation E. The Use Agreement Unit of Local Government (HUD-Owned) Sales A. Reverter deeds B. Equity participation C. The Special Warranty Deed Terms and Conditions of Sale How the PD Center Advertises Sales and Listserv 6.5 Post Sale Monitoring FO Responsibilities PD Responsibilities A. Repairs B. Up-Front Grant Post Sale Requests A. Conveyance B. Sale/Refi C. LIHTC Pass-through Leases D. The Equity Review Guide to Units & Chapters Re-write 10 February 7, 2014

11 7.0 Reserves and Escrows 7.1 General Operating Reserves 7.2 Reserve for Replacements Definition and Purpose Applicability Uses of Reserve for Replacement Account Initial Reserve for Replacement Escrow Balance Reserve for Replacement Analysis Documenting Reserve for Replacement Transactions Five Types of Reserve for Replacement Transactions Frequency, Timing and Follow-up of a Reserve for Replacement Reimbursement Request Processing Reserve for Replacement Reimbursement Liquidity Requirements Investing Reserve for Replacement Funds Disposition of the Reserve for Replacement Account at Prepayment 7.3 Residual Receipts Purpose Applicability Required Deposits to Residual Receipts Programmatic Requirements Impacting Required Deposits to Residual Receipts HUD s Authority to Direct the Use of Residual Receipts Use of Residual Receipts to Offset Section 8 HAP Payments Other Permissible Uses of Residual Receipts Implementing 20-Year Contract Requirements Investing Residual Receipts Account Balances Disposition of Residual Receipts at Contract Termination or Assignment 7.4 Section 202 Debt Service Reserves Special Escrows: Pre- and Post-Final Endorsement LIHTC Reserves New Projects with Special Escrows Guide to Units & Chapters Re-write 11 February 7, 2014

12 8.0 Subordinate Debt 8.1 Subordinate Debt Introduction Types and Uses of Subordinate Finance Basic Terms and Conditions Required HUD Approvals Subordinate Financing by Federal Home Loan Banks for Section 202 and Section 811 Projects Approval of debt service for subordinate financing Subordination of Section 202 Direct Loans Guide to Units & Chapters Re-write 12 February 7, 2014

13 9.0 Transfers of Physical Assets 9.1 Transfers of Physical Assets Introduction Applicability Transfer Fees Delegations of Authority and Exceptions Initial and Final Approval Actions Procedures for Processing a Full Review of TPAs Procedures for Processing a Review with a Subsidy Transfer Procedures for Processing a Limited Review of TPAs Procedure for Processing a TPA with the Assignment of a Subsidy Contract Only Legislative, Regulatory, and Administrative References Special Consideration Monitoring and Reporting Non-Compliance with Transfer Guide to Units & Chapters Re-write 13 February 7, 2014

14 10.0 Enforcement 10.1 Audits (I.G., GAO) Purpose Applicability Audit Conduct and Response Resolution 10.2 Departmental Enforcement Center Purpose Background Applicability The Referral Process DEC Analyses, Recommendations and Actions Mortgagor Requirements Enforcement Tools Appendix : Appendix : 10.3 Monitoring Civil Rights Statutes, Regulations and Program Requirements Introduction Applicability Nondiscrimination Requirements On-Site Limited Monitoring Review Front-End Review Frequency of Reviews Scheduling the Review Monitoring Tools Monitoring Compliance Coordination of Enforcement Efforts by FHEO and MFH Program Sanctions Economic Opportunities for Low- and Very-Low Income Persons Appendix : Appendix : Appendix : Guide to Units & Chapters Re-write 14 February 7, 2014

15 11.0 Emergency and Disaster Assistance 11.1 Multifamily Emergency/Disaster Guidance Introduction Purpose Applicability Continuity of Operation Plan Pre-Disaster and Emergency Goals and Planning The Emergency Response Team The Emergency Response Coordinator Preparing for an Emergency Declaration Reports/Event Warnings Disaster Information Script Integrated Real Estate Management Systems (irems) Tenant Responsibilities Owner Responsibilities The Presidentially-Declared Disaster Field Office Procedures Preliminary Assessment and Reporting Reporting Tools Final Recovery Technical Assistance to Owners and Management Final Disaster Assessment Recovery Plans for Damaged Properties Components of a Recovery Plan Monitoring and Evaluating Recovery Plans Emergency Response Team Closeout Program and Disaster Relief Options During a PDD FEMA Eligibility Waivers of Handbooks, Notices, etc Priority for Temporary and Permanent Housing Multiple Occupants in a Unit Leases and Rents for Non-Permanent Residents Use of Community Space Other Regulatory/Policy Relief Section 8 Servicing (Note: Section 8 Pass-Through Leases are discussed here and in Chapter 1) FHA-Insured Projects in the Development Phase Approval of Insurance Loss Drafts Mark-to-Market Properties Use of Project Reserve Funds and Owner Contributions Contacting HUD Headquarters, Field Office, Owner/Agent and Resident Responsibilities Guide to Units & Chapters Re-write 15 February 7, 2014

16 Future Disaster Management Policy Guidance Appendix : Appendix : Appendix : Appendix : 11.2 Section 8 Pass-Through Leases Summary/Purpose Background/History/Legal Authority Applicability Programmatic Requirements Owner s Proposal/Requirements Resident s Requirements Hub/Program Center Processing Appendix : Appendix : Guide to Units & Chapters Re-write 16 February 7, 2014

17 12.0 Preservation 12.1 Combining Section 8 Contracts and Section 8 HAP Assignments Purpose Background/Applicability Threshold Requirements Programmatic Requirements Owners Roles Responsibilities, Requirements Short-Term Renewals Early Termination Assignment of Section 8 HAP Contracts Threshold Requirements Owners Requirements PM Requirements Purchaser s Proposal and Requirements Hub/Program Center Processing Appendix : Appendix : 12.2 Decoupling Purpose Applicability General Eligible Lenders Eligible Borrowers Eligible Properties Tenant Participation Change in Ownership Properties Being Restructured by the OAHP Application Procedures and Proposal Other Outstanding HUD Debt at Time of Refinancing Establishing Basic Rents Allowable Distributions Additional Rent Issues As-Is Appraisal/Rent Comparability Studies Transfer of Section 236 Interest Reduction Payments IRP Payments Section 8 Enhanced Vouchers Existing RAP and Rent Supplement Contracts Use Agreements HAP Contract Renewal Efficiency Units Relocation/Displacement Subsidy Layering Guide to Units & Chapters Re-write 17 February 7, 2014

18 HUD Processing OAHP Approval Authority Approval for IRP Decoupling Closings Multifamily Hub Post Closing Documentation Post Decoupling Monitoring Refinancing of Formerly Decoupled Properties 12.3 Emergency Low-Income Housing Preservation Act (ELIHPA) and Low-Income Housing Preservation and Resident Homeownership Act of 1991 (LIHPRHA) Flexible Subsidy Introduction Legal and Policy Background Threshold Requirements and Owner s Submission Programmatic Requirements Required Elements of the Owner s Proposal Processing the Application: Underwriting Analysis Processing the Application: Completion and Transmittal of the Approval Package The Pre-Closing Process Finishing the Case: Closing and Thereafter Appendix : 12.5 Mark-to-Market (M2M) (As a Preservation tool) Purpose Applicability Definitions and Acronyms Post-Closing Project Manager Responsibilities Multifamily Project Manager Responsibilities Regarding the Surplus Cash Process Responsibilities of Owner Regarding the Surplus Cash Process Responsibilities of the Multifamily Project Manager regarding Insufficient Reserve for Replacement funding Assumption, Subordination or Assignment of M2M Loans Projects Refinancing 1 st Mortgage Debt and Keeping Surplus Notes Outstanding DEC Responsibilities 12.6 Nonprofit Proceeds Notice Purpose Background Applicability Requirements for Release of Proceeds Multifamily Hub/Program Center Processing of Nonprofit Sales Transactions Guide to Units & Chapters Re-write 18 February 7, 2014

19 12.7 Partial Release of Security Purpose Covered Programs Special Circumstances Tenant Involvement Initial Submission of Materials to HUD Delegations Owner Submission Requirements HUD Processing Notification to Tenants of HUD s Decision Easements Appendix : 12.8 Prepayments, Lockouts, Penalties, Releases and Satisfactions Prepayment of Section 202 Loans Authority and Background Applicability Approval of Prepayment of Debt Which Require HUD Consent Prepayments Which Do Not Require HUD Approval Refinancing resulting in Reduction of Debt Service Refinancing to Address the Physical Needs of the Project Structure of the Transaction and Additional Considerations Tenant Involvement In Prepayment and Refinancing Process to Request Prepayment Approval HUD Processing Additional Information Tax Credits and Subsidy Layering Purpose Applicability LIHTC s and Transfers of Ownership Previous Participation (HUD-2530) Requirements Subsidy Layering Reviews Contract Renewals Rehabilitation and the Uniform Relocation Act (URA) Tax Credit Transactions and M2M Deferred Developers Fees Prorated Surplus Cash Calculations Prepayment Submission Requirements Rent for Non-Section 8 Units Combining LIHTC and Project Based Section 8 Guide to Units & Chapters Re-write 19 February 7, 2014

20 12.11 Section 8(bb) Purpose Background Program Applicability Definitions Programmatic Requirements Project A Programmatic Requirements Project B Proposal from Owner of Project A Proposal from Owner of Project B HUB/Program Center Responsibilities Appendix : Appendix : Section Use Agreements Purpose/Background Stand-Along Use Agreements Use Agreement Types A. Foreclosure Sale B. Interest Reduction Payment Decoupling C. Section 202 Prepayment/Refinance D. Mark-to-Market Transactions E. Demonstration Program F. 202/811 Capital Advance/Direct Loan G. Preservation Use Agreements H. Prepayment of HUD-Insured/HUD-Held Mortgages That Require HUD Approval to Prepay: I. Authority: Section 250(a) of the National Housing Act and Notice H J. Flexible Subsidy Program K. Emergency Capital Repair Program Grants HUD Processing A. Executing a Use Agreement B. Servicing a Use Agreement New Preservation Programs Guide to Units & Chapters Re-write 20 February 7, 2014

CHAPTER TAX CREDITS AND SUBSIDY LAYERING. The Table of Contents

CHAPTER TAX CREDITS AND SUBSIDY LAYERING. The Table of Contents UNIT 12.0 PRESERVATION CHAPTER 12.10 TAX CREDITS AND SUBSIDY LAYERING The Table of Contents 12.10.1 Purpose.. I-1 12.10.2 Applicability.. I-2 12.10.3 Definitions and Acronyms... I-2 12.10.4 LIHTC s and