Eligible HOME & HTF Activities Chapter 2

Transcription

1 Eligible HOME & HTF Activities Chapter 2 (Red font indicates changes) TABLE OF CONTENTS RENTAL Housing Activities... 6 Minimum/Maximum HOME and HTF Per-unit Subsidy... 6 mber of Assisted Projects and Funding... 6 Assurance of Project Completion... 7 Compliance and Monitoring Fee... 7 Eligible Properties... 7 HTF-Specific... 7 Ineligible Properties... 7 Property Standards... 8 Eligible Costs Match Requirement Leverage Developer Fee Financing Terms Subordination Terms HOME Loan Terms Housing Trust Fund Loan Terms Application of Payment Designation of Assisted Units Composition of Units Fixed/Floating assisted-units HOME Rents Tenant Income Eligibility Requirements Tenant Income Limits Tenant Protections Prohibited lease terms Termination of Tenancy Tenant Selection HOME-Only Project Rule HOME-Only Program Rule Fixed HOME Units Floating HOME Units HOME Program Administrative Plan Page 2-1

2 Period of Affordability Recordation Order of Loan Documents HUD 811/202 Capital Advance Program DEFINITIONS Acquisition Acquisition of Newly Constructed/Rehabilitated Housing Acquisition and/or Rehabilitation of existing housing Applicant Commitment of Funds Environmental Review Environmental Review Process Existing Structure HTF Operating Assistance And Operating Cost Assistance Reserves HTF- Specific- HUD Methodology for determining Operating Assistance Reserve New Construction Major Systems Physical Needs Assessment (PNA) Preservation (of affordable rental housing) Project Completion Date (when the Period of Affordability begins) Purchase Option Agreement/Conditional Contract Reconstruction Rental Housing Preservation Rural- Definition Special Housing Needs Populations Sponsor Standard Condition Housing Substandard Condition Housing Rehabilitation Substantial Rehabilitation Surplus Cash Eligible Applicants SINGLE-FAMILY HOMEBUYER ACTIVITIES General Program Requirements Assets Buy-back liability Page 2-2 January 1, 2017 HOME & HTF Programs Administrative Plan Idaho Housing and Finance Association

3 Cash Back at Closing Credit Score Deed of Trust & Note Default Borrower(s) Investment Combined Loan To Value (CLTV) Eligible Activities Environmental Review(24 CFR ) (24 CFR Part b (5) Income Targeting Income Calculator Homebuyer Eligibility and Approval Homebuyer Education Course Requirement Homebuyer Investment Impounds Ineligible Loan Types Loan terms Maximum Homebuyer Sales Price Limit Minimum Homebuyer Eligibility Requirements Occupancy Monitoring Passbook Rate Primary Mortgage Property Standards Properties- Eligible Properties- Ineligible Period of Affordability o Principal Residence Requirement o Principal Residence Hardship Exception Net Proceeds of Sale Primary Loan Programs Not Allowed Recapture Option Reservation of HOME Funds Refinancing & Subordination Of HOME Loans Second (Other) Mortgage Programs Seller Contribution/Financing Senior Liens HOME & HTF Program -Eligible Activities Page 2-3

4 Uniform Relocation and Voluntary Sales Disclosure (Required Documentation) Down Payment and Closing Cost Assistance Program General Requirements Maximum Subsidy Limit Occupancy Status of Property Manufactured Housing Subsidy Layering Eligible Activity Ineligible DP/CC Costs Eligible Costs (24 CFR ) Property Types Lead Based Paint Requirement (24 CFR ) Property Inspection DPCC- Property Standard Principle Occupancy Requirement Ownership Ownership Interest Homebuyer Properties Activity See General Program Requirements Activity Description Maximum Developer Fee of 14% Ineligible Properties Property Standards Completion Date Conversion of Homeownership Unit to a Rental Unit Fair Market Value Purchase Price And After-Rehabilitation Value Subsidy Limits to Project Sponsor Subsidy Limits to Homebuyer Eligible Sponsors Homeowner Voucher Program (HOV) Eligible Activities Homebuyer Eligibility Requirements Tenant-Based Rental Assistance (TBRA) Program Eligible recipients Page 2-4 January 1, 2017 HOME & HTF Programs Administrative Plan Idaho Housing and Finance Association

5 Eligible activities Ineligible activities HOME & HTF Program -Eligible Activities Page 2-5

6 IHFA reserves the right to work with any eligible applicant and design an activity that is consistent with the current Five-Year Consolidated Plan for Affordable Housing and Community Development Programs. RENTAL HOUSING ACTIVITIES HOME and HTF funds can be used for a variety of activities that produce and/or sustain affordable housing for Idaho s low-income residents. Acquisition of existing Standard Condition units Acquisition and rehabilitation of Substandard Condition units Rehabilitation of existing units Reconstruction Conversion of building(s) for use as rental housing ( current use of property is other than housing; i.e. a warehouse) New construction Acquisition of land(purchase of raw land with no structures) for an affordable housing project that will begin construction within 12 months Onsite Infrastructure improvements, i.e. sewer, water, etc. Minimum/Maximum HOME and HTF Per-unit Subsidy Minimum- $1,000 per assisted unit [24 CFR (c)] Use the current HOME and HTF maximum per unit subsidy limit in effect at the time funds are committed to the activity. See Exhibit B of this plan. [Starting in 2013, Section 221(d)(3) subsidy limits are no longer calculated and published by HUD due to the elimination of the 221(d)(3) Mortgage Program. The HOME regulation at 24 CFR (a) limits the amount of HOME funds a PJ may invest in an assisted unit. The maximum per-unit subsidy limit is set at the basic Section 221(d)(3)(ii) mortgage limit for elevator-type projects, by bedroom size(with adjustments up to 240% for high cost geographic areas)]. For additional information: The current maximum subsidy limits for Idaho are available at mber of Assisted Projects and Funding A project owner/sponsor or developer is not allowed more than three (3) HOME and/or HTF-assisted projects under development at any one time, and/or a combined commitment of HOME and/or HTF funds in excess of $2,000,000. A written waiver or exception request must be submitted at least 10 days prior to the application deadline. Written waiver/exception requests are considered on a project-by-project basis when the project meets one of the definitions below, or the project will provide exceptional value to the community as defined by IHFA: Proposed activity would serve a Special Needs (housing) population as identified in the this Plan (See Definitions section) Property is located in a community defined as "Rural" (see Chapter 1) Page 2-6 January 1, 2017 HOME & HTF Programs Administrative Plan Idaho Housing and Finance Association

7 Activity is defined a Rental Housing Preservation (see Definitions Section of this chapter) From time to time, IHFA may need to exchange HOME funds with Housing Trust Funds or vice versa. If this exchange of funds were needed, IHFA would first present the option to the owner/developer for approval. The exchange would take place prior to committing the funds to an activity. Assurance of Project Completion A project owner(s) is required to repay the HOME and/or HTF funds to IHFA as specified within the terms of the executed written agreement. For the purposes of this requirement, project completion is defined as the date the project is completed in IDIS. Compliance and Monitoring Fee Effective August 23, 2013 IHFA will charge the owner of a HOME and/or HTF-Assisted rental project a reasonable annual monitoring fee. The fee is based on the average actual cost of performing the monitoring of HOME and HTF-assisted rental projects. This annual fee will apply to a project that receives a commitment of funds on or after August 23, 2013 and throughout the Period of Affordability. The annual fee will be determined by averaging IHFA HOME and/or HTF compliance and monitoring costs incurred during the previous fiscal year then divided by the number of rental units that are in IHFA's portfolio currently within the period of affordability. These costs include activities related to monitoring, i.e. desk monitoring, risk assessments, physical inspections, training, etc. Each project s annual monitoring fee will be based on the total number of assisted units in the project. A project owner may be charged an additional fee if a re-inspection(s) of the project is required. Eligible Properties Rental project of one or more buildings on a single site Rental project on multiple sites that are under common ownership, management and financing Mixed-Income Mixed-Use Transitional Housing Permanent Housing Group Home Single Room Occupancy (SRO) HTF-Specific Transitional Housing not an eligible activity/property Ineligible Properties Activities within the HOME Period of Affordability 1 1 During the first year after a project is completed in IDIS additional HOME/HTF funds may be provided under certain circumstances, as approved by IHFA s Resource Committee. After the first year, no additional funds can be provided during the period of affordability. HOME & HTF Program -Eligible Activities Page 2-7

8 Nursing Homes Mental Health Facilities Homeless Shelters A Property in which refinancing of the current debt is the only proposed activity Student housing, including dormitories HTF-Specific Transitional Housing is not an eligible property Property Standards Prior to the commitment of funds, the project's architectural plans and specifications must be reviewed and approved by both the IHFA-HOME Program architect and consultant and the owner/developer architect. Both parties must agree to Fair Housing Design requirements, as applicable to the activity. If the parties are unable to reach consensus, the more stringent interpretation will apply. New Construction State of Idaho most current International Building Code Local property/housing quality standards, codes, ordinances, zoning, as applicable International Energy Conservation Code published by the International Code Council Site and Neighborhood Standards Reference: 24 CFR 983.6(b) Covered multifamily dwellings, as defined at 24 CFR , must also meet the design and construction requirements at 24 CFR , which implements the Fair Housing Act. "Covered" defined as multi-unit residential buildings built for first occupancy after March 13, 1991 with four or more units to meet the accessibility requirements of this law. Subject to specific exceptions, all units in elevator buildings and all one-story ground floor units in nonelevator buildings must meet FHA standards. Section 504 Reasonable accommodation /modification Reference: Americans with Disabilities Act (ADA) Uniform Federal Accessibility Standards (UFAS) Current Edition of the American Society of Heating, Refrigerating, and Air-conditioning Engineers(ASHRAE 90.1) for multifamily buildings Acquisition of newly constructed or newly rehabilitated housing Existing housing that has been newly constructed or rehabilitated within one year of the date of the commitment of HOME funds must meet the property standards for new construction or rehabilitation. IHFA must be able to document property standard compliance based on a review of approved building plans and a Certificate of Occupancy (new construction), other local certification, and an inspection conducted no earlier than 90 days before the commitment of HOME assistance. If it does not meet the property standard i.e. new construction or rehabilitation, it cannot be acquired unless is brought up to the applicable standard. Page 2-8 January 1, 2017 HOME & HTF Programs Administrative Plan Idaho Housing and Finance Association

9 Acquisition Of Existing Housing At application, The residential units and all tenant common areas must meet o local housing quality standards o If no state of local standards, then Uniform Physical Condition Standards (UPCS) o Meet HUD Lead Safe Housing Rule (25 CFR 35) o Must be inspected o Must meet these standards at the time of loan closing If the property was constructed within 12 months of project completion, the property must meet New Construction property standards and UPCS requirements (see above- click here Prior to the commitment of funds, the project's architectural plans and specifications must be reviewed and approved by both the IHFA-HOME Program architect and consultant and the owner/developer architect. Both parties must agree to Fair Housing Design requirements, as applicable to the activity. If the parties are unable to reach consensus, the more stringent interpretation will apply. New Construction) If the property was rehabilitated within 12 months of project completion, the property must meet Acquisition and/or Rehabilitation of existing housing property standards (see below- click here Acquisition and/or Rehabilitation Of Existing Housing) If property was not constructed or rehabilitated within 12 months of project completion, the property must meet IHFA-HOME Rehabilitation Standards (see Admin Plan Exh. C-Rehab Standards.doc) Acquisition and/or Rehabilitation Of Existing Housing At application- If residential units and tenant common areas do not meet the state and local building code for existing structures, and/or local property standard or, if no local standard exists, then the default (HOME/HTF) property standard- Uniform Physical Conditions Standard (UPCS). At project completion- All residential units and tenant common areas meet the following: o Applicable state and local standards, codes, ordinances, and zoning requirements including disaster mitigation o Local rehabilitation standards o Revised HOME/HTF Rehabilitation Standards(Exhibit C) o Lead-Based Paint requirements as applicable (original construction began on or before January 1, 1978 (temporarily suspended from program) o UFAS as applicable to a multi-family rental rehab projects to the maximum extent feasible o Fair Housing Act o Site and Neighborhood Standards(new construction rental housing) o Section 504 as applicable HOME & HTF Program -Eligible Activities Page 2-9

10 o o Local property/housing quality standards, codes, and ordinances Rental Housing- Inspectable areas of the Uniform Physical Condition Standards Eligible Costs Acquisition of Vacant Land Project must begin construction within one year of the acquisition. On-Site Improvements Includes but not limited to sewer and water hookups, power, road and sidewalks Relocation Costs Costs related to permanent and temporary relocation are eligible, including any related staff and overhead costs. Project Soft Costs These costs must be reasonable, necessary, and paid for by the owner as part of the project costs. They include: o o Finance Related Costs Origination fees Credit reports Title reports and updates Recordation fee Preparation and filing legal documents Appraisals Attorney's fees Loan processing fees Translator fees Other customary fees Construction Related Costs Architectural fees Engineering fees Preparation of work write-ups/cost estimates Builder or Developer fees Environmental studies Performance bonds Impact Fees o Project Audit Costs Certification costs are eligible when performed by a 3 rd party Certified Public Accountant Costs Incurred Prior To HOME Funding Award Professional services may be an eligible cost item if incurred within 24 months of the HOME Commitment and IHFA authorizes payment in the HOME Award Agreement or the HOME loan and regulatory agreement Project Hard Costs Improvements to meet Codes/Standards Page 2-10 January 1, 2017 HOME & HTF Programs Administrative Plan Idaho Housing and Finance Association

11 Cost to construct or rehabilitate laundry and community facilities, parking structures which are located in or connected to the same building as the rental housing units and are for the use of project residents and their guests Essential improvements Energy-related improvements Removal of lead-based paint hazards Accessibility Improvements Infrastructure Repairs and improvements of a non-luxury nature Initial Operating Deficit Reserves - For new construction or rehabilitation of rental housing only. Operating deficit reserve fund may only be used during the initial 18 months lease-up period to pay for operating expenses, Reserve for replacement payments, Debt service -Remaining funds may be transferred to a project s replacement reserve account or reduce the outstanding principal balance with IHFA written approval Project reserve accounts, except as provided in Sec (d)(5) and Operating subsidies Tenant-based rental assistance for existing Section 8 programs Off-site infrastructure cost Delinquent taxes, fees or charges on properties Any cost not eligible under Sec through Laundry, community facilities, parking structures, or any other structure not located in, or connected to a building in which rental housing units are also located o HTF Specific- Wiring for Broadband internet (Internet connectivity is included in the definition of "utility connections"). [2017] HTF Specific-Project Operating Assistance and Operating Assistance Reserves [ (e)] Because operating cost assistance reserves are an eligible activity and may be provided by more than one grant, the prohibition on providing additional HTF funds to a project during the period of affordability ( (a)) does not apply to renewal of operating cost assistance reserves. HTF funds may be used to pay for operating assistance and operating cost assistance reserves for rental housing activities. On any given year, operating assistance/reserve can be awarded from Non-appropriated HTF funds, Appropriated HTF funds, or a combination of both. The type of funding will determine how the owner/developer should apply for the operating assistance during the HTF period of affordability. IHFA strongly urges the owner/developer to contact IHFA early in the development/application process to determine how a future project's operating assistance/reserve would be funded. The following conditions apply: Eligible costs include insurance, utilities, real property taxes, maintenance, and scheduled payment to a reserve for replacement of major systems; Eligible costs must be calculated using HUD methodology (See Definitions Section- HTF- Specific- HUD Methodology for determining Operating Assistance Reserve Operating assistance can ONLY be provided if the HTF-assisted units do not have projectbased assistance; HOME & HTF Program -Eligible Activities Page 2-11

12 Operating costs assistance must be based on the underwriting of the project and must be specified in the written agreement (HTF Award Agreement) between IHFA and owner/developer Operating reserves must be calculated using HUD methodology 1) For reserves funded with Non-appropriated HTF funds Reserve may be funded for the amount estimated to be necessary for the entire period of affordability at the time the written agreement is executed. 2) For reserves funded with Appropriated HTF funds For each grant, assistance is limited to the amount necessary for a period of up to five (5) years. Funding for the operating cost assistance may be provided in addition to funding an initial operating deficit reserve, which would help meet any shortfall in project income during the period of project rentup (not to exceed 18 months). Match Requirement For every dollar of HOME project funds drawn a.25 match liability is incurred. Match credits are defined as non-federal contribution of cash, assets, services, labor, and other resources of value to the HOME program. See Chapter 4. HTF Specific- No match requirement Leverage HOME funds are only one source of funding. HOME requires applicants to utilize other sources of leverage to complete the project. Leverage is all other funding sources that are part of a project or activity, not including the HOME funds. Leverage includes match and all other investments in the project. Not all leverage can be counted as Match. See Chapter 4. Developer Fee Developer Fee is restricted to the total cost of development, as reflected in the original HOME application. 1) Joint HOME and/or HTF/Low-Income Housing Tax Credit Projects HOME and HTF defer to the LIHTC calculation for joint projects up to a maximum of 14%. 2) HOME and/or HTF Projects (no Low-Income Housing Tax Credits) Maximum Developer Fee of 14% evaluated and based on: Total development cost (includes both eligible and non-eligible costs) Size of the development Type of development i.e. acquisition only, acquisition and/or repair, acquisition and/or rehabilitation, new construction Characteristics of the development, i.e. location, serving a priority need population and/or rural community Page 2-12 January 1, 2017 HOME & HTF Programs Administrative Plan Idaho Housing and Finance Association

13 Financing Terms In order to maximize the benefit of HOME and HTF Program funds and create a renewable resource for the development of affordable housing in Idaho, HOME funds invested in multi-family rental housing development are distributed as a loan. The terms may be determined using the guidelines below. Applications must demonstrate financial feasibility using the following guidelines: Project development costs will be examined to determine cost reasonableness and necessity. Project costs determined to be unreasonable will receive an additional level of review for acceptance or denial. Project income and expense projections, including any syndicator and/or partner fees, must be reasonable and customary to the area. Any exceptional expenses must receive written approval of IHFA prior to project implementation. Project must maximize private loan(s) for permanent financing and other sources of leverage before HOME funds. The project s pro-forma must demonstrate a reasonable expectation that the HOME loan will be repaid within the term of the primary financing. Deferred Developer Fees may be paid out of Surplus Cash (SC) as defined in this chapter (See Definitions section). In the event there is inadequate Surplus Cash to make the scheduled minimum HOME loan payment in any year, the deferred Developer Fee due for that fiscal year will be deferred until the end of the deferred Developer Fee repayment term for the project. Any annual amounts of forgone deferred Developer Fee will not be added to the following year s deferred Developer Fee amount entitlement. The potential for owner s equity investment will be examined and utilized to the maximum amount feasible. Subsidy Layering -Before committing funds to a project, IHFA must evaluate the project in accordance with guidelines that IHFA will not invest any more HOME funds, in combination with other sources, than is necessary to provide affordable housing. See Exhibit Q. Interest rates may be based on project s ability to pay. Repayment may be based on amortization period of primary lender s loan HTF Specific In order to maximize the benefit of HTF Program and create a renewable resource for the development of affordable housing in Idaho, the HTF funds invested in rental housing development may be a loan or a grant. The terms may be determined using the guidelines below. Application must demonstrate financial feasibility using the following guidelines: Project development costs will be examined to determine cost reasonableness and necessity. Project costs determined to be unreasonable will receive an additional level of review for acceptance or denial. Project income and expense projections, including any syndicator and/or partner fees, must be reasonable and customary to the area. Any exceptional expenses must receive written approval of IHFA prior to project implementation. Project must maximize other sources of leverage before HTF funds. HOME & HTF Program -Eligible Activities Page 2-13

14 Deferred Developer Fees may be paid out of Surplus Cash (SC) as defined in this chapter (See Definitions section). In the event there is inadequate Surplus Cash to make the scheduled minimum HTF loan payment in any year, the deferred Developer Fee due for that fiscal year will be deferred until the end of the deferred Developer Fee repayment term for the project. Any annual amounts of forgone deferred Developer Fee will not be added to the following year s deferred Developer Fee amount entitlement. The potential for owner s equity investment will be examined and utilized to the maximum amount feasible. Subsidy Layering -Before committing funds to a project, IHFA must evaluate the project in accordance with guidelines that IHFA will not invest any more HTF funds, in combination with other sources, than is necessary to provide affordable housing. Subordination Terms Subordination of the HOME and/or HTF Deed of Trust may occur when a proposed senior lender is requesting IHFA to subordinate the HOME and/or HTF position due to one of the following: A construction loan was used to finance the construction phase of the project and the term loan lender is different than the construction lender. A term loan is refinanced to provide the borrower more favorable terms than the current term loan. IHFA may not approve a subordination agreement to a new proposed senior lender if there is cash-out to the borrower. IHFA may request cash out be applied to existing HOME debt. IHFA may approve a cash-out refinance under mutually beneficial circumstances. The Memorandum Restrictive Covenants will be filed in the senior position ahead of all other regulatory and debt instruments. If both HOME and HTF funds are invested in a project, the most restrictive Memorandum of Restrictive Covenants will be filed first but both MORCs will always be filed in the senior position ahead of all other non-ihfa regulatory and debt instrument. HOME Loan Terms Annual Payments 1) Loan terms are determined by several factors including but not limited to Operating proforma, ability to make reasonable loan payments, overall financial viability, and current and past financial performance on other HOME projects. 1) Regular Scheduled Payment- When feasible (as determined by IHFA), the annual payment will be amortized and fixed, and included in the primary lenders debt service coverage requirement. The amount of the payment shall be determined by IHFA. 2) Due-on-Sale- At IHFA's discretion. When the project owner is a qualified non-profit and/or when 100% of the units will be designated to a Special Housing Needs population(s) [see Chapter 8 for definitions of Special Needs Population], a loan may be made Due-on-Sale. 3) Surplus Cash- Payments shall otherwise be solely from Surplus Cash (defined in the Loan Agreement), as follows: First, a payment to IHFA equal to one-percent (1%) of the HOME loan amount in the Funding Commitment; second, one-twelfth (1/12) of the lesser of (a) the actual DDF as determined by IHFA in its subsidy layering review or (b) the DDF represented by sponsor in its application for funding; third, the remaining SC shall be split Page 2-14 January 1, 2017 HOME & HTF Programs Administrative Plan Idaho Housing and Finance Association

15 between the borrower and IHFA, with IHFA receiving the lesser of 75% or the percentage required to repay the HOME Loan in full over its term. The second layer (1/12 of DDF) is paid only during the first 12 years or until the DDF is repaid, whichever occurs first. Modifications to this arrangement shall be at the sole and absolute discretion of IHFA. i.surplus Cash- Any cash (excluding tenant security deposits) remaining at the end of each fiscal year of the Borrower after: (A) Payment of all Project Operating Expenses for such fiscal year; (B) payment of all sums due or currently required to be paid under the terms of any Permitted Senior Loans [as defined in Loan Agreement] encumbering the Project and the promissory note secured by such Permitted Senior Loans; and (C) payment of all amounts required to be deposited into any reserve fund for the payment of operating expenses, any reserve for replacements to the Project, or any other special reserve funds required to be maintained by the Project under the Permitted Senior Loans or the Loan Documents, subject to IHFA consent, provided the amounts for required reserves, which may also be Project Operating Expenses, shall not be deducted more than once. Notwithstanding the foregoing, accrued Deferred Developer Fees, advances made under the Operating Deficit Guaranty (see Operating Deficit and Operating Deficit Guaranty below), or any other operating advances to the property by the borrower or affiliates of the borrower may only be repaid from the borrower s share of positive Surplus Cash. 1. Project Operating Expenses: All cash costs and cash expenses of every kind and character which the Borrower incurs in connection with the operation of the Project (excluding principal and interest due and payable under the Loan and those expenses previously accrued, but including capital expenditures other than those paid for out of replacement reserves), and amounts required by IHFA to be allocated to any reserve account (less amounts paid and reflected in the operating expenses), and all operating expenses of the Project that must be accrued monthly (including property taxes and insurance premiums based upon the completed Project); Project Operating Expenses do not include Non-Operating Expenses. 2. Non-Operating Expense: All expenses and costs of the Borrower other than Project Operating Expenses. Non-Operating Expenses may not be paid from the operating account. Non-Operating Expenses shall include, without limitation: any and all costs of developing the project, payment of deferred developer fee, asset management fees and investor service fees, tax credit adjusters, income taxes of the Borrower, distributions to persons or entities having an ownership interest in the Borrower, deposits to reserve accounts and escrow accounts (other than deposits specifically approved in advance, in writing by IHFA), payments on any loans other than a Permitted Senior Loan, payments to the management agent or any Affiliate (other than the property management fee and other payments specifically approved in advance, in writing by IHFA), and payments to the Borrower or any Affiliate (other than payment specifically approved in advance, in writing by IHFA). 3. Operating Deficit: For any relevant period, the excess of Project Operating Expenses (or a portion thereof) plus the payment of HOME & HTF Program -Eligible Activities Page 2-15

16 principal and interest due and payable on the Permitted Senior Loan over the Borrower s cash revenues of every kind from the Borrower s operation of the Project for such fiscal period (excluding extraordinary cash proceeds and capital contributions, and excluding amounts drawn from a reserve account). 4. Operating Deficit Guaranty: Borrower and Key Principals acceptable to IHFA will be required to guarantee annual operating deficits. The Operation Deficit Guaranty shall become effective on the first day of the first full fiscal year for the Borrower following completion of construction of the Project. Annual operating deficits shall be funded by the Key Principals under the Operating Deficit Guaranty on or before the date on which annual audited financial statements for the Project are due to IHFA. 2) Application of Payment ii.to support the Surplus Cash calculation, Owner will furnish the following: a) Within one hundred and twenty (120) days after the end of each fiscal year of Borrower, a rent schedule for the Project showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid; b) Within one hundred and twenty (120) days after the end of each fiscal year of Borrower, an accounting of all security deposits held pursuant to all leases. For the purposes of this submission, the Security Deposit Asset (as a cash item in the Surplus Cash Computation) and the Security Deposit Liability (as a short-term obligation in the Surplus Cash Computation) are to be included on the Balance Sheet and in the Surplus Cash Computation. c) Within one hundred and twenty (120) days after the end of each fiscal year of Borrower, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members. Please see Attachment B for a sample Certification that meets IHFA s requirements. d) Within one hundred and twenty (120) days of the end of each fiscal year of Borrower, an audited calculation of Surplus Cash for such fiscal year, in form and substance acceptable to IHFA, and in accordance with IHFA requirements. HOME payment will be applied to the following categories in the following order unless otherwise pre-approved by IHFA at their sole discretion: 1) Late Fees 2) Penalties 3) Escrows 4) NSF Fee 5) Other IHFA Approved Deductions 6) Interest Page 2-16 January 1, 2017 HOME & HTF Programs Administrative Plan Idaho Housing and Finance Association

17 7) Principal Housing Trust Fund Loan Terms Loan terms are determined by several factors including but not limited to operating pro-forma, ability to make reasonable loan payments, overall financial viability, and current and past financial performance on other HOME/HTF assisted projects. 1) Due-on-Sale- At IHFA's discretion. When the project owner is a qualified non-profit and/or when 100% of the units will be designated to a Special Needs population(s) [see Chapter 8 for definitions of Special Needs Population], a loan may be made Due On Sale. 2) Surplus Cash- Any cash (excluding tenant security deposits) remaining at the end of each fiscal year of the borrower after: (A) Payment of all Project Operating Expenses for such fiscal year; (B) payment of all sums due or currently required to be paid under the terms of any Permitted Senior Loans [as defined in Loan Agreement] encumbering the Project and the promissory note secured by such Permitted Senior Loans; and (C) payment of all amounts required to be deposited into any reserve fund for the payment of operating expenses, any reserve for replacements to the Project, or any other special reserve funds required to be maintained by the Project under the Permitted Senior Loans or the Loan Documents, subject to IHFA consent, provided the amounts for required reserves, which may also be Project Operating Expenses, shall not be deducted more than once. Notwithstanding the foregoing, accrued Deferred Developer Fees, advances made under the Operating Deficit Guaranty (see Operating Deficit and Operating Deficit Guaranty below), or any other operating advances to the property by the borrower or affiliates of the borrower may only be repaid from the borrower s share of positive Surplus Cash. Payments shall otherwise be solely from surplus cash (as defined in the loan and regulatory agreement), as follows: First, a payment to IHFA equal to one-percent (1%) of the HOME loan amount in the Funding Commitment; second, one-twelfth (1/12) of the lesser of (a) the actual DDF as determined by IHFA in its subsidy layering review or (b) the DDF represented by sponsor in its application for funding; third, the remaining SC shall be split between the borrower and IHFA, with IHFA receiving the lesser of 75% or the percentage required to repay the HOME Loan in full over its term. The second layer (1/12 of DDF) is paid only during the first 12 years or until the DDF is repaid, whichever occurs first. Modifications to this arrangement are at the sole discretion of IHFA. 1. Project Operating Expenses: All cash costs and cash expenses of every kind and character which the Borrower incurs in connection with the operation of the Project (excluding principal and interest due and payable under the Loan and those expenses previously accrued, but including capital expenditures other than those paid for out of replacement reserves), and amounts required by IHFA to be allocated to any reserve account (less amounts paid and reflected in the operating expenses), and all operating expenses of the Project that must be accrued monthly (including property taxes and insurance premiums based upon the completed Project); Project Operating Expenses do not include Non-Operating Expenses. 2. Non-Operating Expenses: All expenses and costs of the Borrower other than Project Operating Expenses. Non-Operating Expenses may not be paid from the operating account. Non-Operating Expenses shall include, without limitation: any and all costs of developing the project, payment of deferred developer fee, asset management fees and investor service fees, tax credit adjusters, income taxes of the Borrower, distributions to persons or entities having an ownership interest in the Borrower, deposits to reserve HOME & HTF Program -Eligible Activities Page 2-17

18 accounts and escrow accounts (other than deposits specifically approved in advance, in writing by IHFA), payments on any loans other than a Permitted Senior Loan, payments to the management agent or any Affiliate (other than the property management fee and other payments specifically approved in advance, in writing by IHFA), and payments to the Borrower or any Affiliate (other than payment specifically approved in advance, in writing by IHFA). 3. Operating Deficit: For any relevant period, the excess of Project Operating Expenses (or a portion thereof) plus the payment of principal and interest due and payable on the Permitted Senior Loan over the Borrower s cash revenues of every kind from the Borrower s operation of the Project for such fiscal period (excluding extraordinary cash proceeds and capital contributions, and excluding amounts drawn from a reserve account). 4. Operating Deficit Guaranty: Borrower and Key Principals acceptable to IHFA will be required to guarantee annual operating deficits. The Operation Deficit Guaranty shall become effective on the first day of the first full fiscal year for the Borrower following completion of construction of the Project. Annual operating deficits shall be funded by the Key Principals under the Operating Deficit Guaranty on or before the date on which annual audited financial statements for the Project are due to IHFA. a) To support the Surplus Cash calculation, Borrower will furnish the following: i. Within one hundred and twenty (120) days after the end of each fiscal year of Borrower, a rent schedule for the Project showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid; ii. Within one hundred and twenty (120) days after the end of each fiscal year of Borrower, an accounting of all security deposits held pursuant to all leases. For the purposes of this submission, the Security Deposit Asset (as a cash item in the Surplus Cash Computation) and the Security Deposit Liability (as a short-term obligation in the Surplus Cash Computation) are to be included on the Balance Sheet and in the Surplus Cash Computation. iii. Within one hundred and twenty (120) days after the end of each fiscal year of Borrower, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members. Please see Attachment B for a sample Certification that meets IHFA s requirements. iv. Within one hundred and twenty (120) days of the end of each fiscal year of Borrower, an audited calculation of Surplus Cash for such fiscal year, in form and substance acceptable to IHFA, and in accordance with IHFA requirements. Application of Payment Payment will be applied to the following categories in the following order unless otherwise preapproved by IHFA at their sole discretion: 1) Principal Page 2-18 January 1, 2017 HOME & HTF Programs Administrative Plan Idaho Housing and Finance Association

19 2) Late Fees 3) Penalties 4) NSF Fee 5) Other IHFA Approved Deductions 6) Interest Designation of Assisted Units IHFA is allowed to charge certain project-related administration costs directly to a HOME and/or HTF project (however, these costs will not be included or part of the HOME and/or HTF loan), e.g. loan underwriting, application review, development inspections and oversight, environmental review, etc. If during the application review phase, it appears IHFA's project related costs, when added to the project could exceed the per-unit maximum subsidy limits, IHFA may ask the project sponsor to designate an additional HOME and/or HTF unit(s) to the project. IHFA will not allow project-related administration costs to trigger Davis-Bacon or other Federal Regulations without prior discussion with the project sponsor/applicant (Note: The Labor standards of Davis-Bacon are not applicable to HTF. See Chapter 6 for additional information) Option #1- Pro-rating Cost Allocation Method (assisted units and non-assisted units are comparable) In general, the minimum number of assisted units in a project is determined by the actual investment in the rental units. The ratio of the investment in assisted units to the total eligible development costs is equivalent to the ratio of the minimum number of units that must be HOME or HTF assisted (depending on the type of funding). Relocation costs should be subtracted from both the investment and the total HOME eligible development costs for the purposes of pro-ration (of determining # of assisted units), then added back in determine the amount of funds requested. It is noted that IHFA's project costs may require a greater number of assisted units. Option #2- Unit by Unit Cost Allocation Method (assisted and non-assisted units are not comparable) In general, IHFA will determine the actual eligible costs for the acquisition and development of the assisted units, plus any common costs that can be attributed to the HOME and/or HTF assisted portion of the project, based on the actual costs (based on a pro forma and tracked for the assisted units). Common costs attributable to assisted units are determined by calculating the total square footage in assisted units as a percentage of the total square footage in the project. HOME and/or HTF funds can pay for that percentage of common costs. Fractions are rounded up to the nearest whole number when making this calculation. Composition of Units (For projects that have less than 51% in HOME assisted units, any cash contributions made to the project must be made to HOME assisted units in order for contributions to count as HOME Match.) Therefore, the number of HOME units may need to be increased so that the percentage of HOME units equals the percentage of the total development costs made up of the combined HOME funds and cash contributions. EXAMPLE A: Home Town Apartments contains 24 units, costs $1,400,000 to develop, and received a loan of $400,000 in HOME funds. The minimum number of HOME assisted units would equal 400,000/1,400,000 times 24 (4/14 x 24 = 6.86 or seven HOME units). EXAMPLE B: River View Apartments contains 20 units, costs $1,200,000 to develop, and received a loan of $600,000 in HOME funds. As few as eleven units (one more than 50%) could be designated as HOME assisted units. HOME & HTF Program -Eligible Activities Page 2-19

20 Fixed/Floating assisted-units HOME units must be designated as "fixed" or "floating" at the time of application. When a project has a mix of unit sizes and/or amenities and the number of HOME units is based on prorating the HOME funds to the total development cost, the HOME assisted unit mix must match the total project unit mix. Fixed: HOME assisted units are fixed when the specific units that are HOME assisted and, therefore, subject to HOME rental and occupancy requirements, are designated and can never change to another unit. Units will be identified by unit number or letter in the HOME written agreement. Floating: When HOME assisted units are defined as "floating" when the designated HOME units may change. If the floating designation is used, the owner must ensure that the HOME assisted units remain comparable to the non-assisted units over the affordability period in terms of size, features, and number of bedrooms. The floating designation gives the owner some flexibility in assigning units, and can help avoid stigmatizing the HOME assisted units. HOME units must be representative of the total mix of the project, in terms of size, amenities, and total bedrooms. HOME Rents IHFA enforces rent and occupancy requirements through restrictive covenants and/or deed restrictions. All HOME-assisted units are subject to rent limits. Maximum rents are referred to as HOME Rents. Maximum HOME rents are established annually by HUD. HOME Rents are based on Fair Market Rents (FMR) and percentage of area median-incomes (AMI) as determined by HUD. The maximum HOME Rents must be adjusted for utility allowances if the tenants pay utilities. There are two HOME Rents used in the HOME program: High HOME Rents: Maximum HOME rents are the lesser of Fair Market Rents (FMRs) for existing housing OR 30% of adjusted income of the household with an annual income equal percent to 60% of area median income. Low HOME Rents: For properties with five (5) or more HOME-assisted units, at least 20% of HOME units must have rents which are no greater 30% of the tenant s monthly adjusted income, OR 30% of the annual income of a family, whose income equals 50% of area median income, OR if a project has a federal or state projectbased rental subsidy and the tenant pays no more than 30% of his or her adjusted income toward rent, the maximum rent may be the rent allowable under the projectbased rental subsidy program. Current HOME program rent limits are available at Page 2-20 January 1, 2017 HOME & HTF Programs Administrative Plan Idaho Housing and Finance Association

21 Tenant Income Eligibility Requirements Income eligibility is based on anticipated income and source documents must be obtained prior to occupancy of a unit. Both programs use Annual (gross) Income household income to determine eligibility. The definition of annual gross income is defined at 24 CFR (24 CFR Part 5). Tenant Income Limits Program Income Limits are included as Exhibit A and at The income of each tenant must be determined initially in accordance with (a) (1) (I) by examining the source documents evidencing annual income (e.g., wage statement, interest statement, unemployment compensation statement) for the family. Each year during the period of affordability, the project owner must re-examine the annual income of each tenant. Increase in Income (HOME Only) i. The project owner must take steps to ensure the correct number of High HOME and Low HOME-assisted units are maintained throughout the Period of Affordability. HOME units continue to qualify despite temporary non-compliance caused by increases in the income of existing tenants if actions satisfactory to HUD are being taken to ensure that all vacancies are filled in accordance with regulations until non-compliance is corrected. In those instances, the following should be considered (also see 24 CFR (I)): ii. If the income of a tenant occupying a Low HOME rent unit increases, but does not exceed 80% of the area median income, that unit becomes a High HOME rent unit. The owner must rent the next available unit (for floating unit projects) or HOME-assisted unit (for fixed unit projects) to a very low-income tenant. Subject to the terms in the lease, the rent of the initial tenant whose income has increased may be increased to the High HOME rent for the unit. The number of HOME assisted units should not be increased by this process. iii. If a tenant s income increases above 80% of the area median income, the unit the tenant occupies is still considered to be a HOME unit, but the tenant s rent must be adjusted as described below. In projects where the HOME units float, the next available unit in the project of comparable size or larger must be rented to a HOME-eligible tenant. The unit occupied by the over-income tenant is no longer considered HOME-assisted, and the rent of the unit can be adjusted as appropriate. iv. In units designated as both HOME and Low Income Housing Tax Credits (LIHTC), LIHTC rules apply Tenant Protections The lease agreement in HOME and HTF-assisted housing cannot be less than one year unless it is in writing and mutually agreed upon between the tenant(s) and owner/management. Prohibited lease terms Agree to be sued- Agreement by tenant to be sued, admit guilt, or a judgment in favor of the owner in a lawsuit brought in connection with the lease; HOME & HTF Program -Eligible Activities Page 2-21