25% Set Aside Webinar. Enterprise Community Partners

Transcription

1 Page 1 25% Set Aside Webinar Enterprise Community Partners May 18, pm EDT [WEBINAR ]01:00:05 Good afternoon, and, uh, good morning to those of you on Pacific Time. Uh, this is Peter Werwath. I'm a housing consultant based in Columbia, Maryland. Uh, for our panelists we have David Noguera from, uh, HUD Headquarters who will be on, on hand to answer questions about regulatory issues. Uh, Melinda Pollack is an enterprise specialist in the Denver office focusing on rental housing and supportive housing. And Steve Gimilaro is also one of our panelists who will address issues about the low income housing tax credit project. Uh, as far as the order of events, we're, we're going to following an agenda which I will put up right now. And after one or two, uh, bullets, uh, we'll, we'll call time for questions. At that time we'll take some questions, uh, ones about, uh, issues that will come up later in the agenda, we'll have to defer and we will likely have a long question and answer period, uh, at the end of the, uh, presentation. [WEBINAR ]01:01:25 (CONTINUED) The presentation itself will take about 20 minutes. But that will be plus the question period that, uh, we can't predict exactly how long those will be. So, without further ado I will, um, go to the first topic, uh, I think this is one that's familiar to most everyone by now. The eligible uses under NSP. Uh, we just point out that, uh, uh, the focus here being the, set-aside for families the households with incomes below 25 percent of AMI. They do have to be abandoned and foreclosed homes. But if you budgeted funds in other, uh, uh, categories of use, such as demolition and redevelopment, even financing mechanism, they can be spent on an abandoned and foreclosed home and still meet the set-aside, um, requirements. Uh, let's go through the basic requirements. Again, I think these are familiar to most folks on the call. But, uh, there is some prime points we want to make sure there's no misunderstanding about. [WEBINAR ]01:02:48 (CONTINUED) Rates 25 percent of the award amount, not the housing units, not the award amount minus administrative costs, its the entire award must be used to create housing for low income residents. The fine is added below, 50 percent of Area Median income. The, uh, use of the initial award and NSP program income, they both count towards meeting the set-aside requirement. However, just to be clear the 25 percent requirement applies only to the original grant amount and not program income. And it's 25 percent again, the total funds, not of beneficiaries, not of housing units. And it does not apply to each your activity separately. It can be carried out through a single activity. So Melinda, let's take a pause here and see if there are any questions on these basic requirements. [WEBINAR ]01:03:46 Sure, let's do that. And, um, two things, when we do take the phone off mute for you to ask your question. Again, we ask that you please lower your hands, by clicking on the hand buttons, so that you don't continue to show up as someone with a question. And we greatly appreciate if you could state your name and where you're from, um, and what organization you represent before you ask your question. Let s start by taking Nicole Rivera s question

2 Page 2 [WEBINAR ]01:04:20 Okay, Nicole, you're ready to go. DONNA [WEBINAR ]01:04:20 NICOLE RIVERA I work as a neighborhood stabilization coordinator with the City of Lawton. And that's in Oklahoma. My major question is everything for the 25 percent requirement has to be foreclosed or abandoned? [WEBINAR ]01:04:34 Yes, that, that's true. [WEBINAR ]01:04:36 Okay, so if... NICOLE RIVERA [WEBINAR ]01:04:38 Uh, vacant properties under UC would not qualify. That's been an issue all along. It goes back to the statute in the HUD tells us that it is not waivable. It would require Congressional action to make it more liberal. [WEBINAR ]01:04:56 NICOLE RIVERA Okay. So then, so then if it's not foreclosure or abandon then I can't use it for the 25 percent? [WEBINAR ]01:05:01 That's correct. [WEBINAR ]01:05:03 Okay. Great, thank you. NICOLE RIVERA [WEBINAR ]01:05:05 Thanks for the call. Let's take Jonah Hudson's question. [WEBINAR ]01:05:10 DONNA Okay, Jonah, go ahead. Jonah, do you have a question for us? [WEBINAR ]01:05:20 JONAH HUDSON No, sorry, I don't, I can't get my hand down though. [WEBINAR ]01:05:24 DONNA Not to worry. Just reclick that, that raised hand button and it will go right down. [WEBINAR ]01:05:29 I'm clicking, it's not going down. JONAH HUDSON [WEBINAR ]01:05:31 DONNA Not to worry. We'll, we'll just pass over. But thanks very much. [WEBINAR ]01:05:34 Let's take Janelle, Janelle Besiki s question. [WEBINAR ]01:05:38 Okay, let me find Janelle. Okay Janelle. DONNA

3 Page 3 [WEBINAR ]01:05:45 JANELLE Um, when we develop in a multi-family development for less than 50 percent AMI target, uh, which has amenities such as a community center. Can the total cost of the development including the cost of the community center and soft cost and the infrastructure cost be counted towards the set-aside? [WEBINAR ]01:06:10 Uh, David I hope you can, uh, address that. David, David. David? [WEBINAR ]01:06:20 Huh, I'll get him, just a second. [WEBINAR ]01:06:24 Okay. DONNA [WEBINAR ]01:06:23 DAVID N. Hello. [WEBINAR ]01:06:26 Yeah, David. [WEBINAR ]01:06:27 DAVID N. Yes. I was trying to comment before but I couldn't be heard. Um, I, I didn't hear this question. I just wanted to clarify the previous question. That, um, new construction could count towards the set-aside requirement if the land that, um, the structure is being built on was abandon or foreclosed when you acquired it. Um, I just wanted to make sure that you're clear on that one. What, what was the last one that was asked? [WEBINAR ]01:06:58 The question was whether, uh, in a multi-family rental project if it's all restricted to 50 percent of AMI or below, to the expenditure on common space, uh, amenities, uh, count toward the set-aside? [WEBINAR ]01:07:13 DAVID N. Right. When the units were counting new projects. So the project benefits the, um, the, uh, the low mode individuals. So you'd count all the dollars, um, associated with that project. You wouldn't single out, uh, you wouldn't separate out the units from the common area. It would all, it would all be counted. [WEBINAR ]01:07:44 Does that answer your question? [WEBINAR ]01:07:46 JANELLE Yes, that'll answer it. Uh, I also have a second question. Um, we have a project that, um, is, is abandon, um, and, um, it was sold to one of the grantees. It was, it was a, it was joint NSP grantees on the project. It was sold to one of the grantees in the same day, the property was transferred to the second grantee who actually is going to be doing a construction. And I'm wondering if this would be eligible for the 25 percent set-aside. [WEBINAR ]01:08:24 Does he want to take that also?

4 Page 4 [WEBINAR ]01:08:24 DAVID N. Sure, can you tell me again. The issue when the first grantee purchased the property, was there an intent to, um, NSP funds on the property? [WEBINAR ]01:08:41 Yes. JANELLE [WEBINAR ]01:08:44 DAVID N. Was there an agreement in place as to how this, this property would be used, that it would be transferred from one to the next and so forth. [WEBINAR ]01:08:53 Yes. JANELLE [WEBINAR ]01:08:55 DAVID N. Then you're fine. [WEBINAR ]01:08:57 Okay. JANELLE [WEBINAR ]01:08:57 DAVID N. Once it came into the program it doesn't matter how many times it transfers hands. Um, just that it's been designated as an NSP property. [WEBINAR ]01:09:07 And then that transfer would have to occur after the, uh, prime grantee executed its award with HUD. Isn't that true. [WEBINAR ]01:09:15 DAVID N. Yeah, I'm assuming, you didn't tell me exactly when you, when you, when the first grantee purchased it. I was assuming that was... [WEBINAR ]01:09:25 JANELLE The first grantee purchased it prior to the contract. [WEBINAR ]01:09:30 DAVID N. Now, prior to what contract? [WEBINAR ]01:09:32 Our contract, the NSP is doing this. JANELLE [WEBINAR ]01:09:38 Yeah, the question is was it prior to the award... [WEBINAR ]01:09:41 DAVID N. Was it prior to December 1, 2008? [WEBINAR ]01:09:43 Yes. JANELLE

5 Page 5 [WEBINAR ]01:09:46 DAVID N. Okay, how much prior? [WEBINAR ]01:09:49 JANELLE It was actually May of It was an old school. And, um, and, um, but it was residential. [WEBINAR ]01:10:02 DAVID N. Yeah, that's a bit too early. So, so once the first grantee purchased the property, there was no NSP. The industry wasn't even a thought in It did not purchase the property with the intent to use NSP assistance on it. Do you follow me? [WEBINAR ]01:10:24 Okay. JANELLE [WEBINAR ]01:10:26 DAVID N. So, so, while, while it can be, um, assisted with NSP funds, it wouldn't count towards the 25 percent setaside. [WEBINAR ]01:10:37 Okay. JANELLE [WEBINAR ]01:10:37 DAVID N. Because when they acquired it, it's no longer foreclosed or abandon. [WEBINAR ]01:10:43 Okay. Alright, well thank you. [WEBINAR ]01:10:50 Let's take Debra Delong's question. JANELLE [WEBINAR ]01:10:54 DEBRA DELONG Hello. Hi, Debra Delong, Westchester County. Um, I actually have a couple questions if you wouldn't mind. Um, the first thing is someone just said a few minutes ago that so the 25 percent money we're not counting units. Um, we're counting projects. Are we're talking about in terms of dollar amounts then? [WEBINAR ]01:11:08 DAVID N. Dollar amounts, yes. [WEBINAR ]01:11:12 DEBRA DELONG Okay, so, so as long as we, we document that the 25 percent goes towards units that assist, or those dollars go to the 50 percent under we're okay on that. Okay. Um, the next question is, please identify the couple of properties where, um, the building has gone to foreclosure judgments, so is the owner hasn't removed his owners and it has been turn over, 'cause the bank owns the property. But we do have tenants in place who mainly are 50 percent requirement. Can we go forward with this, I think it's probably under Section E or activity E. Um, to keep the tenants in place, um, and transfer it to a new owner, and he will acquire within NSP funds, transfer it to new owner, um, who then would operate it as affordable housing with those tenants remaining. [WEBINAR ]01:12:08 We're going to address that later and I'll make a note. Is that fair? And Melinda I think we need to move on. I don't know how many hands up we have.

6 Page 6 [WEBINAR ]01:12:19 That's fine. Let's go ahead and keep moving and, and we will, uh, circle back at our next, at our next pause. [WEBINAR ]01:12:26 Okay. Thanks and folks be patient. We can only take five or six questions per section, or we'll lose our train of thought here. So, that please, uh, we will have a long Q&A period at the end. Alright, we've, we've already addressed this. It does have to be an abandon or foreclosed properties only. There was in the Spring a more liberal definition of abandoned and foreclosed, that was, uh, uh, put in a NSP notice. And there's this guidance piece, uh, there's a link on your screen right now. And if you haven't read that I'd suggest you do. Because it, it liberalized the definitions it makes it, um, just a certain percentage more properties, uh, qualified then would have been before. Um, redeveloping vacant properties. You can use funds under that use. You can redevelop them. You can build, uh, new construction on a vacant lot as David said. If the property was abandoned and foreclosed. It must be permanent housing. [WEBINAR ]01:13:36 (CONTINUED) Uh, occupancy cannot be time limited. So this would rule out some, uh, transitional housing with the very limited, uh, uh, tenure of the residents. Uh, the renters have to have to a lease agreement. No group homes or shelters are allowed. Uh, we're going to, uh, talk about some kind of general strategies to, to meet the set-aside. Uh, very briefly and then get into much more detail about how, uh, you, you might develop, either rental or for sale housing, uh, to meet the set-aside requirement. We, we just at late date I think we all know that the, uh, obligation deadlines are looming in September. So if you do not have projects that are ready, uh, it's obviously beneficial to focus first on shovel ready, we call 'em, low income projects. Multi-family rental properties. Uh, obviously offer efficiency and we find those of us working in the field on technical assistance the NSP are finding this is a very common, perhaps the most common strategy for meeting the set-aside requirement. One or several multi-family properties. [WEBINAR ]01:14:56 (CONTINUED) Obviously developing rental housing has advantages because the, uh, rent structure and the, uh, the management of the properties, the qualifications for tenants, uh, do lend themselves to the very low income population. Uh, we are seeing some homes that were very well income households, uh, we say especially to grind. Because there is some real issues, uh, the roofs involved in selling to households with, uh, very low incomes. Uh, these, it can be overcome and are. With the HUD for humanity models is, is widely, uh, being used. HUD affiliates are participating and providing set-aside, uh, uh, projects. Uh, another use obviously to create permanent special needs housing. And Melinda is going to address that, um, a little further on or take questions on that. And new construction replacing blighting housing it is allowed. And this, again, the property must to begin with, had been abandoned and foreclosed and abandoned and foreclosed within the time period of the, uh, original NSP grant. [WEBINAR ]01:16:16 (CONTINUED) So Melinda with let's, let's break for a few more questions. [WEBINAR ]01:16:20 Okay. And I just want to pause and say, that there's a few folks who are, have their hands raised with questions. But it occurred that you're not called in. Um, so if you go, Donna, is right to say if they're going to communicate on the top of their, um, on the top of their screen they can pull down the caller in number?

7 Page 7 [WEBINAR ]01:16:38 DONNA Actually it means that they did not include the attendee I.D. number when they logged in. So the only way to really compensate them would be hang up, then call back in. And this time be include the attendee I.D. number. That ties your phone and your computer together. [WEBINAR ]01:16:56 And we'll be happy to try and get your questions. So let's, um, start by I'm meeting Dwayne Ingram. [WEBINAR ]01:17:01 Okay, let me find Dwayne here. DONNA [WEBINAR ]01:17:04 DWAYNE INGRAM This, uh, King Park Area Development Corporation. Uh, we have partnered with habitat on a couple of our builds. And we have agreed to use NSP funds. But the only difficulty is, there's very, very, uh, limited foreclosed properties that are very difficult to acquire in our area. Several of the, the two, the three lots that we're going to use for habitat builds, they're not foreclosed lots. We purchased them, um, just from a, from, off the regular market. Is it possible for us to even though they're not foreclosed lots, but they are habitats, um, partnerships and they will be, they will meet the 50 percent set-aside, 50 percent goal. Can we still count those towards our set-aside? [WEBINAR ]01:17:50 I'm afraid the answer is no to that. The, the, uh, HUD rules and guidance, even the statute are very clear, uh, it may or may not have been intentional on the part of Congress, but the law specifically said that the set-aside had to be, um, uh, satisfied by using abandoned and foreclosed properties. So I think their only, uh, out on this would be to sub it with abandoned or foreclosed, uh, properties. And you might if you go back and look at the new definitions they might find them a little easier, uh, to meet. [WEBINAR ]01:18:26 Yeah, okay, and thank you. [WEBINAR ]01:18:32 Let's, uh, a Tatayna Escobar. [WEBINAR ]01:18:37 Okay, Tatayna. DWAYNE INGRAM DONNA [WEBINAR ]01:18:39 TATAYNA ESCOBAR Hi, um, our question is, um, regarding the new construction replacing blighted housing. We have some properties that we purchased for the set-aside. And our question is, would, we wanted to demolish and rebuild. Would that be allowable just because, um, one of the issues that we're coming across is that the, the houses are in such bad condition that to repair them cost more than what we actually paid for the houses. So we were considering rebuilding. [WEBINAR ]01:19:16 Yes, uh, generally speaking it's allowed. But there, there are a couple of, uh, factors. Again, the properties would have to be abandoned or foreclosed and bought in the right timeframe and not having gone through, you know, three or four hands, uh, without the intent to use in a C-fund. The other thing and then David, David, correct me if I'm wrong, but they, they do need to be declared blighted as well if they're going to be torn down. Is that correct?

8 Page 8 [WEBINAR ]01:19:46 DAVID N. Um, yes, yes. Yes. [WEBINAR ]01:19:49 TATAYNA ESCOBAR And that's the blighted would be under our local established definition? [WEBINAR ]01:19:54 That's correct. [WEBINAR ]01:19:54 TATAYNA ESCOBAR Okay. And they were purchased as foreclosed properties. So they do meet that criteria. [WEBINAR ]01:20:00 You just state as declared blighted by the proper agency or, uh... [WEBINAR ]01:20:06 DAVID N. By your local government. [WEBINAR ]01:20:08 Okay. Alright. Thank you. TATAYNA ESCOBAR [WEBINAR ]01:20:12 Let's take one more question and mute, Sherie Harris. [WEBINAR ]01:20:16 SHERIE HARRIS Yes, Sherie Harris, Penalope County Florida. Uh, my question here is we have a, uh, development, a parcel that has been foreclosed and it's going to be redevelopment. Um, we do have blighted structures on there. It's a multi-family development that will require two parcels. Uh, one of the parcels if not foreclosed. Um, can you provide suggestions on how we might structure that. There will be other financing involved with it. Can we do a percentage of it an NSP funds towards the foreclosed parcel? [WEBINAR ]01:20:54 Uh, that sounds like a special case. And, uh, I think we found with questions like those that are those specific as to, you know, breaking out, allocating funds, two parcels. I would suggest and David correct if you'd like to do something different. But I think submitting all the facts of the case to ask a question feature on the NSP resource exchange, would be a good way to solve that. I know this has come up and it's in the context of, uh, so you're buying a foreclosed home that's on a blighted and an, uh, a lot that's no longer big enough to build on, could you add on, uh, another lot next to it, that was not foreclosed? I don't believe that question has yet been answered. And this seems to be kind of in that category. So, David would you agree with this? [WEBINAR ]01:21:48 DAVID N. Yes, yes, I think that it would take a little time to deal with your specific question. But I will say this, that NSP funds can be used on a pro-rated basis, right. So to the extent that you're using NSP funds, um, to leverage other sources of funds. And you maybe, um, joining properties together, um, you know, it's certainly possible. But how you, exactly how you'd structure that, um, would take some time to, um, to think about. [WEBINAR ]01:22:22 Okay, thank you very much. SHERIE HARRIS

9 Page 9 [WEBINAR ]01:22:27 And just now I had an abstract was next one in responding to very specific, uh, scenarios. They are often things that it can be worked more easily in the specifics than in the abstract. [WEBINAR ]01:22:44 Let's keep going Peter. [WEBINAR ]01:22:46 Oh, okay. Thank you. That was the last question for a while. Uh, and this gets back to the question that was asked earlier, uh, about acquiring occupied building. Uh, yes, of course, uh, it is eligible to, um, uh, to count toward the set-aside any project that already has income eligible tenants in it. You don't need to create a new project to state funds to acquire, simple acquire or acquire in rehab the tenants, uh, left in place or temporarily relocated and we did mention it. But, uh, it would be counter productive, but, uh, they could be relocated and, uh, permanently and new tenants, uh, recruited for the, for the project. And again, as David mentioned well you could count the, uh, the allocated cost of units with, uh, you say it's a mixed income project. Let's say it's 40 percent of the units or below 50 percent of the AMI they're restricted in the, uh, grant, funding agreement. [WEBINAR ]01:23:56 (CONTINUED) Or loan agreements. So in that case you could, uh, roughly again, uh, allocated, uh, 40 percent of the, uh, or across for that project to the set-aside. But again, without the specifics of how you allocate it, uh, we can't really go into this on this call. We have a lot of participants and we want to get to all their questions. So, um, let me move on to the next slide. Um, partnership strategies, um, we thought, this is a different topic. Melinda, let's take any questions on that specifically. I'll, uh, hands up on occupied, uh, properties would be the subject right now. [WEBINAR ]01:24:41 Okay, we've got a number of hands up. Um, hands up. So let's try to get to the couple that have been up for a few minutes before we go to the next topic so. [WEBINAR ]01:24:50 A clean break. So let's take a few more questions than we have before. [WEBINAR ]01:24:58 Let's start with Ronald Pullman. [WEBINAR ]01:25:01 RONALD PULLMAN Hello. Yeah, Warrick County Illinois. Um, just to clarify a position. If you set aside money for, for the 25 percent, uh, and we do that before, uh, the September deadline, what is the deadline for having that property occupied actually occupied or sold to or rented to a 50 percent or below person? We've identified properties and we've purchased properties and rehabbed them for the future sale to a qualified person, but, uh, you know, we're not sure when we're going to find that actual buyer whose going to meet that income, but we are reserving it for that specific purpose. And I just want to make sure that we're on the right track. [WEBINAR ]01:25:44 David. [WEBINAR ]01:25:46 DAVID N. What I would say, is if you look at the actual specifics 2008 notice, the language that references the 25 percent set-aside it speaks to using the funds to, um, to benefit 50 percent AMI or below. So, um, it's, it's

10 Page 10 good that, that you either have the properties under contract or have set them aside for this target population. But come, um, what is it March, that's where we're going to be looking to see okay, did you, did you indeed, um, serve them. And but, but by the point, you either did it or you didn't. It's not that they were reserved for this group. They, they were either served or they were not. So. [WEBINAR ]01:26:32 RONALD PULLMAN But what you're saying is March 2013, not September of this year? [WEBINAR ]01:26:37 DAVID N. No, no. September of this year we're just looking for contracts. [WEBINAR ]01:26:40 Okay. Thank you very much. [WEBINAR ]01:26:44 Let's un-mute, I'm sorry, Mary Monte. [WEBINAR ]01:26:51 Hi Mary. [WEBINAR ]01:26:54 Mary, are you there? [WEBINAR ]01:26:57 No, I think we've lost her. [WEBINAR ]01:26:58 Okay. Let's go on to Lester Mont. [WEBINAR ]01:27:03 Hi Lester. RONALD PULLMAN DONNA DONNA DONNA [WEBINAR ]01:27:05 LESTER MONT Yeah, this is Lester Mont. I was going to ask attorney. I want to ask two questions. I want, on the side you mentioned about, uh, renters not, they need to have a lease agreement. And what we're doing, we're not going rentals. We're only going as a last resort, but we are going, uh, leave purchases and we're doing straight sales. So when we do a lease purchase and we have set that particular property aside for our 25 percent, can we do a lease purchase for that property? [WEBINAR ]01:27:39 The answer is yes. And it is, as long as the, uh, tenancy or the lease, uh, purchase participants are, are in that income group and you certify what incomes, that's fine. There, there would have to be a lease. And the lease would have to give them an option to purchase. [WEBINAR ]01:27:59 LESTER MONT Okay. And my second question is. We're also, we're, um, we're using developers to develop the nonprofits to do all of our construction work. And we have an acquired for us, and we're giving them a developer's fee. And when we give the money, that set-aside for the 25 percent, does that amount of money count towards the 25 percent as well?

11 Page 11 [WEBINAR ]01:28:20 Yes, it does. Uh, and well let's just get a specific where you're into abrogating those funds. We'll get to this later. But we might as well get to it now. Uh, if it's a developer they need to have the property, um, under a purchase contract at least. And in order to, uh, out, and then the acquisition cost, the estimated cost, the contract price can be obligated. And then it's necessary to do a scope of work and a pretty firm rehab estimate. When that's done the, the, uh, rehab funds and any associated soft costs can be obligated. So, you would basically have to do a complete budget for, for each home, um, uh, that is to be acquired or has been acquired complete total development budget with all the fees, all the expected soft costs. And those can all be, um, obligated as those steps are done. You can obligate the acquisition costs when there's a contract if it's with the developer you can obligate the rehab and soft costs when the rehab estimates comes on it. The grantee, uh, you would have to go the extra step of having a rehab, uh, contract. [WEBINAR ]01:29:45 LESTER MONT Okay. Alright, thank you for answering my question. [WEBINAR ]01:29:49 Let's, let's take one more question. Um, and again if you've asked your question or you're not, you don't need to ask a question, if you could press on the raised hand button, so you're computer to show up that would be great. Let's take, um, Harry Green. [WEBINAR ]01:30:06 HARRY GREEN Harry Green with the City of Memphis. Uh, calling, I wanted some clarification. Uh, I think they spoke on acquiring a multi-family property where that was foreclosed or abandoned earlier. And I kind of wanted to a little more clarification. I think from the fee regarding, uh, possibly, uh, it was a foreclosed property that was acquired. Uh, but the owner, uh, was sitting on the property was doing anything with it. And it was, we identified it. And wanted to consider acquiring it for the NSP program. It was acquired, uh, uh, in July of '09. And I just wanted to know if it would be an eligible property under the NSP. [WEBINAR ]01:30:54 DAVID N. Well, you're hitting right on the time that the President Bush signed the Housing Economic, wait, wait, wait you said '09? [WEBINAR ]01:31:06 Yes. HARRY GREEN [WEBINAR ]01:31:07 DAVID N. Oh, I'm thinking '08, '08. So July '09 and you're talking about NSP 1? [WEBINAR ]01:31:12 Yes sir. HARRY GREEN [WEBINAR ]01:31:14 DAVID N. Yeah, so, so, so NSP, um, I don't think it's timing issue as much as it is, um, an intent to use NSP funds issue. When, when you're, when you, um, acquired the property in July '09, um, it was without... to use the funds on it. [WEBINAR ]01:31:35 HARRY GREEN It's not for acquired the property. But did nothing with it, so it's stayed abandoned.

12 [WEBINAR ]01:31:44 DAVID N. Did the developer have a contract with you to go out and acquire properties? Enterprise Community Partners Page 12 [WEBINAR ]01:31:48 No. HARRY GREEN [WEBINAR ]01:31:49 DAVID N. Alright. You have, well then that, then that wouldn't work. Um, yeah, for, for any affiliate of the grantee to begin acquiring properties, um, that are intended to be used in the NSP program they would have to have a prior, from the prior consent of the grantee to do so. [WEBINAR ]01:32:14 Okay. HARRY GREEN [WEBINAR ]01:32:15 If the grantee was not blessed the acquisition either by an agreement or by some communication, unfortunately it would not count. [WEBINAR ]01:32:26 DAVID N. Right. [WEBINAR ]01:32:26 HARRY GREEN Right. But if this was like intermediary aggregator for the lender at the time it was acquired. [WEBINAR ]01:32:34 DAVID N. Okay. So, I would, if you look at the new definitions, um, aggregators count. Um, so you would need to, to justify that they are an aggregator and not an investor. So there's a big difference. [WEBINAR ]01:32:51 Okay. Thank you. [WEBINAR ]01:32:55 Okay. Let's, let us keep going here. HARRY GREEN [WEBINAR ]01:32:58 Okay. Well, uh, again the main purpose of this webinar is to help, uh, all of you, uh, meet your set-aside requirements. Uh, I think some of you just have more technical and regulatory questions. But others are still looking for, uh, ways to put together a project in these primal months before the obligation deadlines. So if you're in that position, uh, then these are really what we suggest would be the likely developers. Public Housing authorities around the country are participating with many NSP grantees to set-aside it's set-aside requirement. We're seeing them acquire, uh, multi-family properties and single-family properties for rental. But most, uh, transferring public housing subsidies to them using project based Section 8. Or just using 100 percent or nearly 100 percent, uh, NSP funding. Uh, developers of supportive housing, uh, Melinda is going to take some questions on that later. But, uh, I think it's a little late in the game to be putting together one of these projects the supportive housing developer had a qualified property. [WEBINAR ]01:34:11 (CONTINUED) Add the, uh, all important services and operating subsidies lined up already. So this would have to be pretty a shovel-ready project. Uh, those, those projects tend to take quite a bit of time to structure, not just the, uh, construction development but the operating money. Uh, low income housing tax credit

13 Page 13 developers are, are participating in many, many communities. And this is a good fit. But again, if you're starting from scratch it's, it's pretty late in the game. And, uh, if Steve Genalotto a little later will take questions on these types of projects. Uh, habitat for humanity affiliates around the country are participating in, in NSP. With their, uh, home construction and sales programs. We had noted in many communities that, that, uh, there are issues with them having qualified properties. Many habitat groups tend to stock pile properties long in advance. [WEBINAR ]01:35:23 (CONTINUED) And many of them have faced this timing issue. There's some that had foreclosed properties that predated, uh, the, uh, NSP program, those unfortunately don't count. So it's not enough that they're serving very low income home buyers but the timing of the purchase and the, uh, foreclosed or abandoned sales to the property are very important things to, uh, focus on if you're talking to a habitat for humanity group. Uh, in the rural instances, uh, particularly in places like California that have a lot of inclusionary zoning, uh, programs you could find that you deal or link up with a developer who has some sort of an inclusionary zoning obligation. It wouldn't necessarily have to be an obligation for below 50 percent NSP money, the funding could potentially be piggy-backed on that project to bring the rents down to that range. [WEBINAR ]01:36:21 (CONTINUED) So that's in a few places, this may be an option. And then a very important partners, indispensable partners for, for sale program or the counseling agencies that support, uh, home sales programs. Uh, it's not just that 8 hours of counseling is required under NSP, this is just a very important function for getting folks prepared for home ownership and pre-qualified for getting mortgage financing. Are indentifying deals, this is not a webinar on how to find properties and unfortunately we can't spend a lot of time on that. But we just note that, uh, looking for abandoned and foreclosed properties, are the typical avenues are realtors, uh, hired so you're on a contract to just simply do research on properties, not as a broker, but as a researcher. Uh, tax assessor records, head FHA has, um, a, uh, data, online database, uh, of HUD, HUD on homes. So do Fannie Mae, Freddie Mac and some of the major lenders. [WEBINAR ]01:37:37 (CONTINUED) It's not very hard to find those websites if you just do a Google search for foreclosed homes. HUD foreclosed homes, Fannie Mae, etc. And it's well worth buying into the proprietary databases to find qualified bank owned, uh, properties. There, there's some national sites. These tend to be more useful if they're state specific, uh, databases, uh, we've found. The states, specific databases seem to have much pressure information. It might cost as much as $20 or $30 or $40 a month, but are well worth it. Uh, identifying developers, well I think most of you know how to do that. But, uh, you know, we just want to run through it. The usual routine, obviously you can make informal contacts with existing partners. You could do a very, uh, brief and streamlined or a request for qualifications. There's no need to compute this, you can design a program and just announce that you're taking applications from developers. [WEBINAR ]01:38:42 (CONTINUED) So it's a very streamlined, uh, a quick process to, um, to, um, designate developers. Uh, unlike some other programs. That would, um, um, be essential in all these cases to have a workable program already designed and the terms of your financing already figured out. We found that in some programs, they have been very, very slow to get off because they've done open RFQ's, they're looking to find works very well. There's HUD technical assistance available. Uh, and if you don't have a complete design you don't know what the terms of the financing would be, the parameters of the projects, uh, it's really urgent to get that together either as a staff effort or using consultants or TA. So, uh, we will, Melinda let's take a break for a few more questions.

14 [WEBINAR ]01:39:45 Okay. Any questions in indentifying deals with problems. Let's start with Mike Gilcrest. Enterprise Community Partners Page 14 [WEBINAR ]01:39:53 MIKE GILCREST Hi, thank you. Um, my questions involves, uh, working with habitat for humanity. We have just had in the past some discussions with the, the Dallas area habitat for humanity, uh, folks and we had discussed the possibility of having the City of Mesquite, uh, purchase properties and, and, uh, complete the rehab because some of the properties that we were looking at would have been built before 1978 and the lead based paint issues were a concern to the local habitat, uh, office. And we were wondering, um, would it be possible to have the, the City as grantee purchase the properties, and take care of the rehabilitations and then, uh, transfer the properties or sell the properties or some other method of conveying the properties to habitat for them to then sell to buyers who meet the 50 percent AMI? [WEBINAR ]01:40:54 Well, I think there is a couple of alternatives. I mean in essence there, uh, they're kind of brokering the homes for you. They're looking for the buyers and they're preparing them and handling the, the sale. Uh, yes, you could do that interim transfer. There's probably other arrangements that could be made where the title would ghost buyer. So I think you have a couple of options there. But it, it probably speaking there's no reason why not. [WEBINAR ]01:41:21 MIKE GILCREST Okay. Well, I guess our concern was just that at the time when and the discussions were happening, there was some question over what if the property was still considered foreclosed, if it belongs to the City and then changed hands. [WEBINAR ]01:41:40 Yeah, as long as everything in that chain of title has been documented, the intent is clear. There is an agreement with habitats to the effect that this is going to happen, that just the intent that David has been mentioning, that intent needs to be documented. But is there anything you want add David to that? [WEBINAR ]01:42:00 DAVID N. Um, no. No. I think, um, no, no. I'm just going to repeat myself. [WEBINAR ]01:42:11 Okay. Thanks, thank you. [WEBINAR ]01:42:13 Thank you. [WEBINAR ]01:42:16 Debra, Debra Delong. MIKE GILCREST [WEBINAR ]01:42:20 DEBRA DELONG Hi, this is Debra Delong, Westchester County again. Um, kind of going back to how to structure some, some things. 'Cause again we're out there looking for properties and sometimes the unexpected happens. Um, one of the buildings that identified again is a puzzle. It hasn't foreclosed, the owner, the owners, um, has a judgment against it. It's a thing going. Our tenants in place, which we asked you that question earlier, but apparently there's also commercial space involved. Um, if we were able to work with that property, would, would we still, if some of the tenants could meet this 50 percent requirement, would that, working with the commercial portion of the building would that knock it out of the NSP program? Or if it s separate funding so it was separate from the NSP program.

15 Page 15 [WEBINAR ]01:43:05 David? [WEBINAR ]01:43:12 DAVID N. Hello. [WEBINAR ]01:43:12 We're can hear you. [WEBINAR ]01:43:06 DAVID N. Yeah, I think I got most of it. But I didn't get the whole thing, I'm sorry. I have some noise in the background. [WEBINAR ]01:43:24 I can take a stab at that. This is another project that's mixed use. And it's a matter of allocating. [WEBINAR ]01:43:32 DAVID N. Oh yeah, that's the prorating. [WEBINAR ]01:43:33 It's prorating. So you would need to find some very reliable method of cost accounting. The commercial space, if their in careful distribution and allocation of cost, I think there are a number of methods to do that. It might be wise to, uh, run, uh, and once you've figured out a method of calculating that. And the cost per square foot or some other method. And that, to run that by your field office or ask a question. [WEBINAR ]01:44:06 DAVID N. Would this be owner occupied or a rental? Um, probably a rental. [WEBINAR ]01:44:07 DEBRA DELONG Um, again, we were going to just transfer and head up the allocations portion because we do that kind of thing a lot. It was more, I think I talked, we actually a sub-recipient for the state. Um, and it was more along the lines of, you know, will the, if the units qualify at the 50 percent below, would they qualify under an activity where the building could be a commercial space and that, you know, we weren't, you know, I guess we were all not clear on the answer to that. [WEBINAR ]01:44:35 DAVID N. Yeah, yeah. Well, it would be two different activities. Right. So, the only way the commercial space would qualify is if it's considered, um, I don't want to say a public facility, but, but a, a commercial business that supports the, um, low, moderate, median income area. Right. Um, so it's not supporting those area residents, then it would be funded separately. [WEBINAR ]01:45:08 And it also has to be a vacant commercial structure in order to use the redevelopment funds, is that not correct David? [WEBINAR ]01:45:14 DAVID N. You would have to start out vacant.

16 Page 16 [WEBINAR ]01:45:16 DEBRA DELONG Yeah, I believe it is. But I don't know that. Again, it was kind of something that came across. We may not do it. But in case we're faced with that again I think our guy just wanted to kind of get the sense of how to handle it. [WEBINAR ]01:45:26 DAVID N. Right, right. Yeah, I would just break it up to be cheaper. [WEBINAR ]01:45:33 It makes sense to me. Thank you so much. DEBRA DELONG [WEBINAR ]01:45:36 Okay. Let's take one more question and then let's try to keep going. Um, Nicole Rivera. [WEBINAR ]01:45:44 NICOLE RIVERA Nicole Rivera, from Lawton again. Um, I just wanted to clarify what somebody else had asked earlier. I had to step out of the question and answer session 'cause I had a meeting to go to. Um, so I remember somebody asking that there was vacant lots that had been foreclosed that were donated to a city. That unless they were going to be for the NSP funds and they're going to be used for that, they were not eligible. 'Cause we have some vacant properties that weren't foreclosed, that were donated to the city. And somebody told me that that drops the foreclosure title and that they would not be eligible because they were not donated with the intent to use NSP funds. Is that correct? [WEBINAR ]01:46:30 DAVID N. Yes. [WEBINAR ]01:46:33 NICOLE RIVERA Yes, okay. And then I have another question. If we were to do a new construction for rental housing, the City of Lawton doesn't manage rental housing, if we were to donate that rental housing to one of our nonprofit organizations that we work with, would that be eligible or do we have to manage the rental housing ourselves? [WEBINAR ]01:46:48 DEBRA DELONG Oh, no, no. Yeah, yeah, you, any one of your colleagues can manage it. Right. But there's going to be an agreement that you have in place specifying the terms of that management and relationship to NSP. [WEBINAR ]01:47:02 NICOLE RIVERA Okay. So if it, I just wanted to clarify. So if we have those donated properties from the County to the City, they will not be eligible because they were not. [WEBINAR ]01:47:12 DAVID N. So, so the timing is a big issue. Right. If they were donated the property a few years ago, then I'd say no. If they were donated the properties to, excuse me. If they were donated to the City, um, you know, since NSP has been, been, um, been in effect, then and, and, um, you planned to use NSP funds on them, then they're fine. Remember the whole purpose of this program is to, is to, um, use the funding to access an address those foreclosed and abandoned properties in the market. To the extent that you've already taken off the market, they're no longer the problem. It's the ones that you haven't, you haven't, um, touched yet. [WEBINAR ]01:48:00 Yes, yes, I understand that. NICOLE RIVERA

17 Page 17 [WEBINAR ]01:48:00 DAVID N. Okay. [WEBINAR ]01:48:04 Okay. NICOLE RIVERA [WEBINAR ]01:48:03 STEVE G. Alright Peter, let's keep going. [WEBINAR ]01:48:06 Uh, there's a question in the Q&A box, I didn't know that was active, but let me address that. At least I can read it. It says, do I understand you to say, we can always use realtors to look for properties but they can't be used as a broker. No, that wasn't what we were suggesting. We were just saying that realtors are a very good resource to use for, uh, locating abandoned and foreclosed properties, uh, especially those realtors who have become what are called REO specialists. Uh, they can certainly be used, uh, to help sell a property. Uh, under the, any, any kind of brokerage agreement. But that's, we were really talking about the front end. And that's why we didn't mention, uh, the broker agreements, uh, to help sell the properties once completed. [WEBINAR ]01:48:55 Great. Again, let's stick with using the raised hand button. We've got so many questions, it's hard to, um, to manage them all. [WEBINAR ]01:49:08 Okay. So now we're going to move to the technical uses of NSP funds. Um, keep, dive into some of the long term affordability rules. Starting with development subsidies. And not all grantees we're working with, uh, understand exactly what a development subsidy can mean. NSP offers the home long term affordability rules as a safe harbor. Uh, for me and NSP long term affordability requirements. And if you, uh, are familiar with those or you want to look into them, what you'll find is that, uh, any amount of particular on a single-family home, I think rental is a different matter. Which we can go into later. But on a single-family home if you invest over the market value, uh, that entire amount over market value can be just simply written off, not subject to a second mortgage on the buyer. It's what's called a development subsidy. [WEBINAR ]01:50:09 (CONTINUED) So that, that is one, uh, use of NSP funds. I mean we're not even addressing the fact that obviously I think we all know it can be used for acquisition rehab and all manner of reasonable soft costs. So now we're talking about some more, uh, technical points. It can be used for development subsidy. We do suggest, we're finding, uh, in many communities a little confusion over pricing the homes. And, uh, we find that this is sort of a best case scenario that fits with the home rules is to actually sell the home at market value. Which means you get an appraisal before selling it, and you price the home at the, after rehab or after construction, appraised value. And any investment over that amount again can be just used as a permanent subsidy, not subject to a lean or repayment. Uh, but in addition to that, you can on home buyer financing, uh, offer second mortgages, obviously called soft second or, uh, a mortgage assistance. There are many names for these, uh, principle, right downs and so forth. [WEBINAR ]01:51:21 (CONTINUED) Uh, but we're talking about here about the set-aside. And we're talking about buyers below, at or below 50 percent of AMI. They're typically going to need larger depth funding than, than the normal buyer you might, uh, see in your home programs. So we're suggesting that if you're, you're addressing different income groups with your home buyer program that some part of that program might address very low

18 Page 18 income buyers. You're generally going to need a larger, perhaps much larger second mortgage. So some kind of sliding scale or a program designed where you individually underwrite each buyer and fill in gap between the mortgage they can afford and the market value that that's a good practice. And we are seeing in some cases a last resort where a developer as the grantees don't feel that they can locate any lenders in the market, um, so they are, there a few grantees we've encountered are using 100 percent NSP financing as a first mortgage. Where, uh, buyers, uh, below 50 percent of the AMI. [WEBINAR ]01:52:35 (CONTINUED) We've said that's a last resort unless the developer or grantee is used to this habitat for humanity. Obviously this is their model. They require small down payments. And offer near 100 percent financing. But unless you're experienced at underwriting this group, uh, of buyers I think it's much better in our experience to, uh, uh, look to a first mortgage lender to do the credit underwriting and all of that. Uh, when a project, again, on this for the set-aside only, that's our subject today. We are seeing NSP funds used as 100 percent financing in some instances or in combination with other loans or subsidies. And we're going to get to rental structuring I think on the next slide. So I'm just going to keep going. And another thing to keep in mind that NSP funds, uh, can be used to pre-fund replacement reserves if required by the lenders. Uh, since we're on that subject and you'll skip ahead a few slides to structuring, uh, rental projects. [WEBINAR ]01:53:48 (CONTINUED) Uh, and one of the reasons we're screening 100 percent NSP financing is that the affordable rents for this group and especially in a high cost market can cover no more than the, the operating costs. Uh, absent the rent subsidies, many of the projects can't afford to pay debt service, so additional rent subsidies are sometimes needed particularly with supportive housing programs. Uh, you would find, uh, resident incomes may be below 30, even below 20 percent of AMI. So, again, um, the, the projects that don't have rent subsidy, they're probably going to be right at that 40 to 50 percent of AMI. Uh, ones that go lower, uh, 30, 20 percent of AMI are probably going to need a credit face vouchers or something like SHP or Shelter Plus Care subsidies on the rent. And just while we're mentioning rental projects the single-family rentals, we're seeing a lot of that. [WEBINAR ]01:54:55 (CONTINUED) Because in some markets there are very few foreclosed multi-family properties, but there's quite a few single-family foreclosed properties. So we are seeing some programs where developers are buying single-family homes to rent. And let me just point out that specifically they're more difficult to manage. And it's probably not something that to rely on at this late stage for the set-aside, unless you're working with a developer that has a successful, uh, track record in this regard. So Melinda, let's take a few more questions. [WEBINAR ]01:55:34 STEVE G. Okay. And just to point out there are a couple folks who've got hands raised to, um, are not, um, dialed in using your attendee I.D. and so, um, Trisha Powers, if you want to see the answer to your question, you're going to need to call back in I think. Um, let's go to Jay Perlmutter?. [WEBINAR ]01:55:54 JAY P. Hi there. Uh, we have, uh, some rental projects going on right now. Um, where we're funding at 100 percent. Our question is... [WEBINAR ]01:56:06 STEVE G. That's okay. Go ahead, we can hear you. You're fine.