HUD Multifamily Southwest Region Southwestern Affordable Housing Management Association (SWAHMA) March 17-18, 2015
Presentation Agenda Kelly Haines Regional Director 1. MFT Transformation Wave 1 Overview & Updates Daisy Parker Resolution Specialist Branch Chief 2. Preparing Budget Based Rent Adjustments Christie Newhouse Asset Management Branch Chief 3. Management Fees 2
Multifamily for Tomorrow (MFT) Transformation Wave 1 Overview 3
Timeline of Activities for Wave 1 - Digitize Assets - Electronic Intake - Space Adjustments (move) - Reassignment Process - Hire Additional Staff - Shift Work in Anticipation of Staff Training (Alpine/ Summit/Workload Share) Trained all Staff on New Business Model Operate Southwest Region Under New Model Support Future Waves Through Their Transformations Started in May and Worked Up to Reassignment Date of 10-5-14 Supervisor Training Sept-14 Frontline Training Oct-Dec 14 Completed 12-31-14 4
Reassignment Date = Implementation Date On October 5 th Regions 6 & 7 became the Southwest Region 75% of staff were reassigned into new roles 5
Wave 1 Hiring Process KEY NUMBERS 46 Buyouts 4 (8 participants) Job Exchanges 20 Resume Bank Placements/ Reassignments 6
Wave 1 Hiring Process In preparation for the implementation of Wave 1 of MFT Transformation, we interviewed over 150 potential candidates in both Fort Worth and Kansas City, which resulted in 43 new hires 7
New Multifamily Business Model Highlights Workload sharing nationally Underwriter Model and risk-based processing in Production Account Executive Model in Asset Management Streamlined organizational structures in Headquarters and field 8
Asset Management Production FORMER MF MODEL Project Manager Senior Project Manager Project Manager Housing Representative Mortgage Credit Analyst Senior Project Manager Senior Housing Representative Senior Mortgage Credit Analyst NEW MF MODEL Account Executive Senior Account Executive Resolution Specialist Underwriter Senior Underwriter Underwriter Analyst Closing Coordinator 9
Multifamily Southwest Region Organizational Structure 10
11 Southwest Region Leadership
12 Southwest Region Operations
Southwest Region Production Division 13
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Application Intake and Assignment As of May 5, 2014, all applications are submitted electronically to the Fort Worth Office Applications are uploaded to a Regional system and assigned for processing (based on capacity) throughout Fort Worth or Kansas City Within 3 5 days of receipt of application, the assigned Underwriter emails the lender with instructions on where to send the hard copy Underwriters can begin processing applications immediately using the uploaded submission; we are no longer waiting to receive hard copies of the application to begin our review 15
Closing Coordination New organizational structure has a Closing Coordinator in both Kansas City and Fort Worth to facilitate closings Closing Coordinators take the loan from Firm Commitment to closing, and pull in Underwriters and Technical Specialists as needed Closing Coordinator ensures all documentation is in place and routes comments between lender attorneys and HUD attorneys The location of the property will determine the Regional Counsel, not the location of the Multifamily employee 16
Southwest Region Asset Management Division 17
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Portfolio Assignments All properties that were temporarily serviced by Alpine have now been reassigned back to Account Executives in the Southwest Region Alpine is moving forward to support future Waves during their transformation timelines The Southwest Region is supporting other parts of the country through National Workload Share Letters regarding property reassignments were recently mailed out using stakeholder contact information in irems; because a large number of properties had missing or incorrect data in our system, staff will be reaching out to stakeholders to ensure all information is current 20
The Southwest Region is Going Paperless! Asset Management has adopted an electronic intake process for all incoming Asset Management work AMPS (Asset Management Project System) AMPS was implemented several years ago by the Detroit HUD Office as a tool to reduce paperwork and balance the workload We have developed standard email boxes to receive all incoming work 21
Electronic Mailboxes The following two mailboxes are used to receive new incoming work from external and internal clients: MFSouthwest@hud.gov This box receives general correspondence/incoming requests for all properties serviced by the Southwest Region. Oversight of this box is assigned to support staff and their respective Branch Chiefs. MFSouthwestMARs@hud.gov This box receives all incoming Monthly Accounting Reports (MARs) for properties serviced by the Southwest Region. Oversight of this box is assigned to support staff and their respective Branch Chiefs. 22
AMPS Workflow Process Incoming work arrives in electronic inbox Support staff logs assignment into workflow management system (AMPS) Support staff saves electronic assignment to a shared drive Assigned technical staff retrieves assignment from shared drive and processes item Upon completion of work, support staff logs out work item in AMPS and uploads copy to electronic storage system 23
AMPS: Key Points We encourage stakeholders to submit all work electronically using the appropriate email box When paper mail is received, support staff will scan it and forward it to the appropriate mailbox AMPS accommodates property reassignments among Account Executives; the person originally assigned to a task always completes current work they have outstanding, regardless of the timing of the reassignment We will have more meaningful data to report in Quarters 3 and 4 24
Stakeholder Communications Telephone Customer Service Desk (1-800-568-2893) provided to the industry during regular office hours (8:00 a.m. 4:30 p.m.) every Monday through Friday; a live person will answer and assist all callers (received over 4,000 calls last year) Email FTWMultifamilyHousing@hud.gov available to answer questions along the way (mailbox checked daily) Website Updates Production Loan Processing Report posted on both the Fort Worth and Kansas City websites Link to current Asset Management portfolio assignments updated twice per month 25
Southwest Region Website Links Fort Worth http://portal.hud.gov/hudportal/hud?src=/ states/shared/working/r6/mf Kansas City http://portal.hud.gov/hudportal/hud?src=/ states/shared/working/r7/mfhsg 26
Up Next Preparing Budget Based Rent Adjustments 27
Preparing Budget Based Rent Adjustments Daisy Parker, Resolution Specialist Branch Chief Kansas City Satellite Office 28
Budget Based Rent Adjustment Guidance Chapter 7 of HUD Handbook 4350.1 REV-1, Multifamily Asset Management and Project Servicing Chapter 4 of HUD Handbook 4370.2, REV-1, Financial Operations and Accounting Procedures for Insured Multifamily Projects Housing Notices related to PRAC Operating Cost Increases 29
Submission Requirements Cover Letter Form HUD-92547-A, Budget Worksheet Income and Expense Projects (Exp. 12/31/2014) Explanation Documentation Notices Reserve for Replacement Additional Information 30
Cover Letter The Cover Letter should summarize why a rent increase is needed The Cover Letter must: Explain the need for the increase State the percentage of rent increase requested Describe the project s physical condition and any proposed improvements that are included within the budget State the requested effective date of the rent increase Describe any proposed changes in services, equipment, or fees along with reasons for the change 31
Budget Worksheet The Budget Worksheet provides income and expenses for the 12 months following the anticipated effective date of the proposed rent increase Left column: Most recent audited financials figures (these figures must match the latest audited annual financial statements submitted to HUD) Center column: Year-To-Date actual expenses; include the number of months for the reporting period Right column: Proposed figures for the requested budget year **This form must be signed and dated by the owner or a designated representative authorized to prepare and submit the budget 32
33 Sample Budget Worksheet
Explanation The Explanation is a statement detailing the basis for any increase in the expense line items on the budget worksheet A written justification must be provided for budget line items that have increased by more than a five percent (5%) since the last audit. If the income or expense was estimated at the prior annual period's actual, or if the increase is less than $500, no explanation is required Acceptable Explanation: A new part-time site manager will start on 08/01/2015 and work twenty (20) hours per week at a salary of $18/hour. The total salary for the last five months of 2015 will be approximately $7,200 Unacceptable Explanation: Will hire a part-time site manager 34
Documentation Examples of supporting Documentation include: Current (past 12 months) copies of contracts, invoices, bills, or estimates obtained Dated notice of an increase received from a utility provider, insurance company, etc. Analysis and back-up documentation of how the projected expenses were estimated 35
Notices Notice to Tenants (if the project is not 100% subsidized); must show when and how it was distributed Copy of Comments from Residents and Owner Evaluation of Comments and Owner s Certification as to Compliance with Tenant Comment Procedures in 24 CFR 245 (formerly in 24 CFR 401); refer to Chapter 7 of HUD Handbook 4350.1, REV-1 Owner s Certification Regarding Purchasing Practices and Reasonableness of Expenses. Copy must be executed, signed, and dated by the owner Energy Conservation Plan 36
Reserve for Replacement Any requests to modify the monthly Reserve for Replacement deposit amount must be accompanied by a completed form HUD-9250, Funds Authorizations (Exp. 09/30/2016) At a minimum, an analysis of the Reserve for Replacement account should be done every five (5) years NOTE: Do not include the addition of capital items in the Operating Budget; capital items should be funded through the Reserve for Replacement account and are ultimately the responsibility of the owner 37
Additional Information For projects with tenant-paid utilities, the budget submission must include a utility survey from the utility provider and owner s recommendation for changes to the utility allowance, along with documentation to support the recommendation (i.e., 12-month actual expense sheet from utility provider by unit type) For non-profit projects with a Residual Receipts account, the budget submission must include documentation of the current Residual Receipts account balance 38
Up Next Management Fees 39
Management Fees Presented by Christie Newhouse, Asset Management Branch Chief Fort Worth Regional Center 40
Spoiler Alerts!! The primary source of today s material is HUD Handbook 4381.5, REV-2, The Management Agent Handbook Owners determine the actual amount of fee to be paid to the management agent For certain projects, HUD determines the amount of fee that may reasonably be paid out of project funds Management fees may be paid only to the person or entity approved by HUD to manage the project 41
Types of Management Fees Residential Income Commercial Income Miscellaneous Income Special Fees Add-On Fees NOTE: Residential, Commercial, and Miscellaneous Fees are quoted and calculated as a percentage of the amount of income collected by the agent Special and Add-On Fees are quoted as dollar per unit amounts 42
Residential Income Residential income is the income received from the rental of housing units Are the following items included in residential income? Utility Reimbursement Payments INCLUDED Section 8 Special Claims NOT INCLUDED 43
Commercial Income Sources of commercial income The yield likely to be derived from the fee proposed for the project must not exceed the yields generated by projects with comparable types of commercial space (e.g., stores, offices, etc.) The commercial income percentage must not exceed the residential fee percentage Are the following items included in commercial income? Charges for Services Paid Directly to an Outside Contractor NOT INCLUDED Fees for Parking Spaces or Garages INCLUDED 44
Miscellaneous Income Selected types of miscellaneous income The miscellaneous fee percentage must not exceed the residential income fee percentage Are the following items included in miscellaneous income? Refund of Property Tax Appeal NOT INCLUDED Reserve for Replacement Reimbursements Laundry Income NOT INCLUDED INCLUDED 45
Special Fees Owner may agree to pay if a project has unusual needs or problems Special fees are an appropriate way to address specific, temporary conditions Only allowed if all 6 conditions below are met: 1. Agent did not cause the problem(s) for which the fee is designed to address 2. Fee is tied to the correction of a problem or the completion of tasks 3. Fee is structured so that it is payable only if required actions or results are obtained 4. Fee does not include services that are already covered by other sources of compensation (to include residential, commercial, miscellaneous income) 5. Fee is reasonably related to the time, effort, and expertise required of the agent 6. Fee is paid only for a limited period of time 46
Add-On Fees May ONLY be considered AFTER computation of the permitted percentages for residential, commercial, and miscellaneous income have been determined and approved by HUD. This calculated permissible percentage fee PUPM Yield must fit within the established range of the HUD area office (Regional Center) Flat dollar per unit fee paid to agents managing projects with longterm project characteristics/conditions that require additional management effort beyond the activities covered by the residential management fee (i.e., Scattered Site Project) HUD area offices establish a schedule of fees Schedule is updated every 2 years 47
Region VI Management Fee Schedule 48
Renewal of Existing Fixed-Term Agreements Owners with fixed-term agreements that propose to change the management fee percentage must be reviewed in accordance with the reasonableness criteria If the fee is subject to HUD review and exceeds the maximum amount allowed, HUD staff must cap the fee at its current yield, even if it was not previously capped An owner of a project where HUD has capped the fee yield may request HUD reconsider the fee at any time 49
Renewal of Existing Fixed-Term Agreements (Continued) The fee must remain capped until: It no longer exceeds the maximum allowable yield The financial or physical condition of the project has changed The scope of management services has changed REMINDER: Commercial and miscellaneous income percentage fees cannot exceed the residential fee percentage. If the residential fee percentage is reduced to maintain the capped fee yield, the commercial and miscellaneous income percentage fees must be reduced accordingly 50
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Questions or Comments? 52