FORECLOSURE HEARING (21-day) LETTER

II. FORECLOSURE HEARING (21-day) LETTER Currently, the Hub Director/Field Office sends a foreclosure recommendation to the appropriate Property Disposition Center. Hub Directors/Field Offices also issue foreclosure-hearing letters to owners of properties recommended for foreclosure. At the expiration of the 21-day period, absent a HUD determination that legal reasons prevent the Department from pursuing the foreclosure action, the Property Disposition Center commences the foreclosure processing which includes notification of the foreclosure to: 1) the owner; 2) the residents, and 3) ULGs. Effective the date of this Memorandum, Hub Directors/Field Offices are no longer responsible for issuing the foreclosure hearing letter. Field Offices will forward a complete foreclosure package to the Hub Director. After reviewing the foreclosure package, the Hub Director will either concur in the foreclosure recommendation and forward it to the appropriate Property Disposition Center, or return it to the Field Office for additional information /documentation. The Property Disposition Center will review the foreclosure package for completeness and accuracy and, if in agreement with the recommendation, will issue the foreclosure-hearing letter to the owner(s) of the property. The 21-day hearing letter will indicate whether it is solely a financial default, a covenant default, or both a financial and covenant default (Attachment B are the letters that will be used by both Property Disposition Centers). A copy of the 21-day letter will be sent to the Field Office Program Center Director and Hub Director. Incomplete or inaccurate foreclosure recommendation packages will be returned by the Property Disposition Center to the Hub Director within 10 days of receipt, and the hearing letter will not be issued until a complete foreclosure recommendation package is received and accepted by the Property Disposition Center. A complete foreclosure recommendation package consists of the following: Summary Memorandum (reasons for default and attempts to cure) Foreclosure Recommendation (Attachment C) concurred on by Hub Director Attachments, if applicable: Copy of recorded Mortgage Assignment to the Secretary Copy(s) of Notice(s) of Violation Copy(s) of Notice(s) of Financial Default Copy(s) of Notice(s) of Physical Default Copies of last 4 Monthly Account Reports Copy of most recent Statement of Multifamily Mortgage (HUD 2771) Copy of most recent P & L (form HUD-92410) Copy of the original Housing Assistance Payments Contract (HAP) and last renewal, including its status and a recommendation as to whether or not the HAP contract should be continued following foreclosure. Copy of PRAC, RAP or Rent Supplement Contract Copy of operating license for nursing homes or assisted living facilities Copy of Firm Commitment 2264 or 92264 Photographs (if available) A Market (EMAS) Study or other documentation, if the Program Center/Hub exit strategy 2

includes a non-preservation determination. Property Survey, including any updates. III. RIGHT TO CURE Pursuant to the Multifamily Foreclosure Act of 1997, an owner is allowed a one-time right to cure the default(s) prior to and up to the actual foreclosure sale. In order for an owner to cure a financial default, the following must occur: All delinquent amounts due and payable under the terms of the mortgage and note, as well as any expenses the Department has incurred as a result of the foreclosure action, must be paid in full to the Department prior to the foreclosure process being halted. In the event there is a covenant default or there is a covenant default in addition to curing the financial default in the manner described above, the following must also occur to cure the covenant default: All repairs required to bring the property into acceptable physical condition must be completed. To evidence completion of repairs, the owner must provide a certification that the project has been fully repaired. Attached is the certification form that is to be executed by the owner (Attachment D). A REAC inspection will be done to verify that the project has been fully repaired. This inspection will cover at least 60% of the units in the project, vacant as well as occupied. The property will have to receive a score above 60 before the default would be considered cured. Any questions regarding any postponement or cancellation of the foreclosure sale should be directed to the appropriate Property Disposition Center for response. The Director of Asset Management in Headquarters has the sole authority to postpone or cancel the foreclosure sale and make the determination that the owner has cured the default(s) or there are other circumstances that warrant such an action by the Department. IV. RESPONSIBILITIES OF THE FIELD OFFICE VS. PROPERTY DISPOSITION CENTER DURING THE FORECLOSURE PROCESS During the foreclosure process, the Hub/Field Office will continue to perform all applicable servicing related functions including, but not limited to, the following: Preparation of the foreclosure recommendation package with all applicable attachments; Administration and oversight of the HAP contract; Management reviews; Resident complaints; Releases from the Replacement Reserve account; Review financial statements and monthly accounting reports and financial; and update REMS as appropriate. 3

The Property Disposition Centers will have the following responsibilities during the foreclosure process as applicable: Issue the foreclosure hearing (21-day) letter to the owner(s) of the property; Conduct the foreclosure hearing; Notify ULGs and the residents of the proposed foreclosure action; Participate in discussions with the ULG for Right of First Refusal sales; Prepare Contract of Sale for Right of First Refusal sales; Order Comprehensive Repair Surveys (including inspection of completed repairs following the foreclosure sale); Order Section 8 vouchers; Relocation (note, Headquarters approval required before initiating relocation); Conduct the sales analysis to determine the sales price and the terms and conditions of the foreclosure sale; Prepare Bid Kits; Prepare Property Disposition HAP Contract; Approve the high bidder(s) (with input from Field on 2530 s/management Agent); Coordinate sales closing; and Administration and oversight of Upfront Grant. V. PROJECT BASED SECTION 8 ASSISTANCE Background In accordance with Section 311 of the Department s FY 2006 Appropriations Act, Public Law 109-115, 119 Stat. 2936 (2005), the Secretary is required to maintain the project-based Section 8 HAP contract in any multifamily property that the Secretary owns or for which the Secretary holds the mortgage and is in the process of disposing the property at foreclosure. To the extent the Secretary determines that it is not feasible to continue such assistance for the property, based on the cost of maintaining such assistance or other factors, the Secretary, in consultation with the residents, may provide project-based Section 8 rental assistance at another existing property (or properties) or provide other rental assistance. (See below, under the Feasibility Analysis Section, if it is recommended that the Section 8 HAP contract should be terminated after the foreclosure sale.) Note: For properties where assistance under the project-based Section 8 HAP contract has been abated and the HAP contract has been or will be terminated upon completion of the relocation of all the residents, the Department will not offer the property with a HAP contract at the foreclosure sale. Processing Instructions All foreclosure sales and sales of HUD-owned properties with a project-based Section 8 HAP contract will be sold with the requirement that the new owner accept the project-based Section 8 rental assistance. The standard Contract of Sale and Bid Kit, including the Terms and Requirements of Foreclosure Sale and Foreclosure Sale Use Agreement, will be amended to reflect this requirement. The following processing instructions are effective with the date of this Memorandum: 4

Determination of Rents: There will be no increase in the rents as the result of the foreclosure sale. Therefore, the rents will be established at the current contract rents for any units sold with a project-based Section 8 HAP contract. During the term of the HAP contract, the Contract Administrator shall annually, on the anniversary date, adjust the amount of the monthly contract rents in accordance with HUD requirements by using an operating cost adjustment factor (OCAF). The term of the initial contract will be for 20 years subject to available appropriations and statutory authority. Income/Certification Eligibility: When a vacancy occurs in any unit in the property assisted under the project-based Section 8 HAP contract, the unit shall be rented to a family that is eligible for Section 8 assistance under the HAP contract at the property. Unit Inspections: To complete the Sales Analysis (HUD-9650), the Property Disposition Centers are directed to inspect 25% of the units for all properties to be sold with the continuation of the project-based Section 8 HAP contract unless a greater or lesser percentage is warranted. The purchaser will ensure that all units under the Section 8 HAP contract meet the Department s Uniform Physical Inspection Standards before Section 8 assistance is provided after a foreclosure or HUD-owned sale. The Property Disposition Centers will inspect units to determine compliance with Uniform Physical Inspection Standards. Unit inspections will not occur more frequently than monthly. The owner will submit a certification to the appropriate Property Disposition Center (Attachment E) certifying that the specific units to be inspected are in full compliance with the Department s Uniform Physical Inspection Standards. The Property Disposition Center will notify the appropriate Hub/Field Office of the specific units determined to be in compliance after completion of the inspection. The Field Office administering the HAP contract will be responsible to resume the assistance on units deemed in compliance. Maintaining the HAP Contract: The Field Office staff will ensure that the contract is renewed (if necessary) during the foreclosure process if all the terms and conditions of the contract are met. In the event the contract cannot be renewed, the Field Office must notify the appropriate Property Disposition Center immediately to determine the next steps regarding the disposition of the property and the status of the HAP contract. Withdrawal: All HAP contracts on properties offered for sale with project-based Section 8 assistance must be removed from the inventory of the Contract Administrator. At either the expiration of (1) the 21-day foreclosure hearing letter, or (2) when a hearing has been held and the Department has notified the owner of HUD s decision to pursue foreclosure, the Property Disposition Center will send a notification via e-mail to the Hub Director requesting that the HAP contract be withdrawn. Upon withdrawal, the Hub Director shall notify the appropriate Property Disposition Center via e-mail that the contract has been withdrawn. The Program Center staff will be responsible to administer the HAP contract until such time as the HAP Contract may be returned to the administration of a PBCA. 5

Contract Administration: Within 30 days of taking title to the property, the owner must meet with representatives from the appropriate Field Office with responsibility for oversight of the administration of the HAP contract. The purpose of the meeting is to apprise the owner of administrative requirements and the owner s ongoing responsibilities under the HAP contract including, but not limited to the following: cooperating in management reviews and REAC inspections; conducting income certifications/re-certifications; authorizing releases from the Reserve for Replacements account; providing rent adjustments consistent with the provisions of the HAP contract; conducting HAP contract renewals; and preparing and submitting monthly accounting reports, etc. Feasibility Analysis (for properties with project-based Section 8 HAP contracts): In consultation with the appropriate Hub Director, the Property Disposition Center will make a recommendation whether it is feasible to continue assistance for all units under the projectbased Section 8 HAP contract. In the event the recommendation is not to continue with the projectbased Section 8 HAP contract for all units, the Property Disposition Center is required to conduct a feasibility analysis. If the Property Disposition Center concludes that it is not feasible to continue with the current HAP contract, its recommendation with the supporting documentation will be forwarded to Headquarters for review. The Office of Asset Management in consultation with the Office of General Counsel will review the recommendation. The Director of Asset Management will make the final determination whether to approve or disapprove the recommendation. Section 311 does not apply to projects subject to a Rent Supplement, Rental Assistance Payments (RAP) contract, or Project Rental Assistance Contract (PRAC). These types of assistance terminate with the foreclosure sale of the project and no feasibility analysis is required. In conducting the feasibility analysis, the Property Disposition Center must demonstrate that a property meets one or more of the following criteria in order to warrant a determination of nonfeasibility: The costs to rehabilitate the property make it economically infeasible to pay the monthly debt service needed to amortize the cost of rehabilitation and pay the expenses of operating the property on a monthly basis at current Section 8 HAP contract rents. The proposed rehabilitation costs will be determined by the Comprehensive Repair Survey completed by the Department as part of the foreclosure process. The operating costs will be determined by the Property Disposition Center s completion of the Peer Analysis and review of any other pertinent historical data obtained by the Property Disposition Center. Preservation of the property is not feasible due to environmental factors that cannot be mitigated by HUD or the purchaser including, but not limited to: noise, air pollution, flooding, site stability, drainage, soil erosion, hazardous industrial operations, etc. The Property Disposition Center must conduct or obtain an environmental assessment from an independent, third party environmental consultant to support the assertion that the project cannot be preserved due to environmental factors. 6

If the Phase I Environmental assessment conducted as part of the Comprehensive Repair Survey indicates the presence of environmental factors that may render the property infeasible, the Property Disposition Center will commission a Phase II Environmental assessment to determine if the condition(s) can be mitigated and whether or not it would be cost prohibitive to mitigate the condition(s). Copies of the assessments and cost analysis must be maintained in the project file. Conditions in the neighborhood in which the property is located have deteriorated significantly due to inadequate police or fire protection, high crime rates, drug infestation, or lack of public community services needed to support a safe and healthy living environment for residents. If the Field Office/Hub s recommendation is to sell the property and terminate the project-based Section 8 assistance with the concurrence of Headquarters based on neighborhood conditions, the Field Office/Hub must obtain police/fire records and documentation regarding the lack of public community services to support the assertion that conditions in the neighborhood are not conducive to a safe and healthy living environment for the residents. Copies of the supporting documentation must be maintained in the Property Disposition Center s project file. Continued preservation of the project as rental or cooperative housing is not in compliance with State or local land use plans for the area in which the property is located. The Unit of Local Government (ULG) must demonstrate non-compliance with specific documentation, which could include a copy of their consolidated plan, economic development plan, etc. Copies of the supporting documentation must be maintained in the Property Disposition Center s project file. The ULG will be required to provide one-for-one replacement of affordable housing elsewhere in the community. In the event the ULG contends that there is no need for the replacement affordable housing in their community, the ULG will be required to provide supportive documentation, including a market analysis of similar properties (i.e., low-income elderly or families properties) for the Department s review. The ULG must pay the cost associated with relocating the residents in accordance with the applicable Uniform Relocation Act requirements. If the Field Office/Hub disagrees with the ULG s assessment on the need for affordable housing or compatibility issues, Headquarters will review the recommendation and the supporting documentation from the Field Office/Hub and the ULG and make the final determination. In conducting this analysis, the Department will also consider other factors not identified above if presented by the Hub Director or interested third parties. Section 311 also requires the Department to consult with the residents if the project-based Section 8 HAP contract will not be maintained. If the Field Office/Hub office foreclosure recommendation includes a request to terminate the project-based Section 8 Contract, a feasibility analysis will be required and the foreclosure notification will not be sent to the residents until the analysis has been completed and a determination made and concurred on by Headquarters. If the foreclosure recommendation indicates the continuation of the project-based Section 8 HAP contract, the resident notification will be sent at that time. The foreclosure notification will include the 7

Department s requirements for disposing of the property. Whether the property will be sold with or without continuation of the project-based Section 8 HAP contract, the residents will be given 30 days to respond and comment on the foreclosure notification and the Department s disposition requirements. Resident notification will be sent via both regular and certified mail. If a determination is made to offer the property for sale without the current project-based Section 8 HAP contract, the Property Disposition Center will request through the appropriate Program Center Director, Section 8 Tenant Protection vouchers to assist all eligible current residents of the property. The Department will no longer provide Tenant Protection Vouchers for vacant units. Since there are a number of other sources of financing available in today s market that are not considered in the property disposition sale analysis, if the analysis indicates that it may not be feasible to continue the project-based Section 8 contract based on cost alone, the Property Disposition Center may advertise the property for sale to the highest qualified bidder with the project-based Section 8 HAP contract at current contract rents and require the high bidder to complete all repairs; maintain affordability; and comply with all other appropriate requirements. If no qualified bidders bid at the sale, the Property Disposition Center should (postpone/cancel) the sale. The Property Disposition Center will conduct a revised feasibility analysis at that time based on the cost of repairing/rehabilitating and operating the property with the rental income available. The analysis may determine that the property should be sold with the option to bring the property into compliance with local code requirements, demolish within an appropriate timeframe and not continue the project-based Section 8 HAP contract, or other appropriate action. If the revised analysis leads to the conclusion that the property should be sold without continuing the project-based Section 8 HAP contract and Headquarters has concurred, the Property Disposition Center shall order a sufficient number of tenant-based Section 8 vouchers to assist residents in units assisted under the project-based HAP contract. VI. RELOCATION If the Field Office is considering abating the Section 8 project-based Contract, for a specific project, and relocating the residents using the Multifamily Property Disposition relocation contractor, a request must be sent to the Office of Asset Management (with a copy to the appropriate Property Disposition Center) requesting approval of the proposed relocation action. The request should include justification for the proposed relocation. The Property Disposition Center will contact the Field Office to verify the number of units under the Section 8 HAP Contract, obtain a copy of the HAP Contract to verify it contains the required relocation language and obtain a unit breakout in order to estimate the relocation costs and verify whether adequate funds are available. If the HAP Contract does not contain the required relocation language, the Field Office must amend the contract to include the language and determine that there are sufficient funds in the HAP contract to fund the relocation activities. The Field Office shall determine the relocation cost estimates through discussions with their respective Property Disposition Center. Upon receipt of approval from HQ and verification that adequate funds are available, the Property Disposition Center will request that the Contracting Officer issue a Task 8

Order to the Relocation Contractor to undertake the relocation effort. Upon issuance of the Task Order, a conference call is required to be held with the Field Office, Property Disposition Center and all other key players to discuss the relocation with the key players and set a date to meet with the residents and initiate the relocation. Effective the date of this Memorandum, staged abatements of project-based Section 8 contracts is not permitted. The current owner(s) will be required to maintain a safe and healthy living environment at the property until relocation is completed. If the owner(s) are unwilling or unable to maintain the property during relocation, the Hub Director should request Headquarters permission to take control of the property through Mortgagee-in-Possession (MIP). VII. BID KITS The following changes are effective for all foreclosure sale bid kits prepared on or after the date of this Memorandum: (a) Certification of Substantial Compliance All bid kits will include a requirement that the high bidder/purchaser certify to HUD that any other projects that are owned by the high bidder/purchaser or its affiliates and are located in the same city/town as the project being purchased are in substantial compliance with applicable State and/or local housing statutes, regulations, ordinances and codes and that HUD may, at its discretion, verify the accuracy of such certification and request supporting documentation from the high bidder/purchaser. If HUD determines, in its sole discretion, that such other project(s) is/are not in substantial compliance, HUD will have the right to refuse to sell the project to that high bidder and HUD will retain the earnest money deposit of the high bidder. Foreclosure sale and HUD-owned sale bid kits will be revised to alert bidders of this change. (b) Prorations All bid kits must state that there will be no prorations at closing, except for the proration of property taxes prepaid by HUD, if any. The bid kit must clearly state that the high bidder is responsible for paying all outstanding property taxes and utility bills including, but not limited to, water/sewer, gas, electric, etc., as well as any other liens/assessments encumbering the property not extinguished by the foreclosure sale action. (c) Management In the event elderly and/or disabled residents occupy the project, the Department will require that the purchaser hire an independent management agent with demonstrated experience in dealing with elderly and/or disabled residents. This requirement should be included in the bid kit. 9

The Department will not approve the highest bidder to be co-property manager if the bidder has no experience in managing elderly or disabled. The approval/disapproval of a property management company will be made within 10 working days of receipt of documentation. In addition to HUD s right to approve project management prior to closing and during the life of the Use Agreement/Deed restriction, not only for the high bidder but also subsequent Owners of the project, HUD reserves the right to require a change in project management for good cause at any time during the term of the Use Agreement/Deed restriction. The Field Office with jurisdiction over the property will be responsible for approving management. VIII. STATUTORY RIGHT OF FIRST REFUSAL In cases where HUD has provided notice to ULGs of HUD s intent to foreclose on a mortgage held by HUD and HUD s subsequent acquisition of a multifamily housing project, an exclusive option shall be given to the ULG to, within 30 days of the date of notification, to make an offer to purchase the project. This is known as the Right of First Refusal. Effective the date of this Memorandum Right of First Refusal offers to ULGs will require the ULGs to waive all delinquent municipal liens (water, real estate taxes, etc.) as a condition of sale. Additionally, properties will be sold at market, using the HUD-9650 Sales Analysis, with market rents and HUD s estimate of expenses to derive the sales price of the property. The market value will not reflect any repairs costs or affordable use restrictions. IX. UPFRONT GRANTS/DISCOUNT SALES For FY 2006, the Department will not offer a HUD-owned property at a below-market (discount) price or provide an Upfront Grant for any projects previously FHA-insured. In accordance with the Deficit Reduction Act of 2005, Upfront Grants and Discount Sales for projects previously FHA insured can only be made available to the extent that appropriations are made in advance for such purposes unless the transaction formally commenced within one year prior to the enactment of the legislation. There are no appropriations for these actions for fiscal year 2006. The Department has defined formally commenced as receiving a written response from the ULG that they are interested in purchasing the property if HUD acquires title to the property at the foreclosure sale. At this time, the Property Disposition Center has identified those properties in their respective areas and may offer those properties at a below market discount price and provide an Up-Front Grant (if requested). Please note that we are still awaiting an Office of General Counsel opinion as to whether projects under the Section 202 and 811 programs will be exempted from the Deficit Reduction Act of 2005. This relates to the requirement that the Department cannot sell a project at a discount without appropriations. Upon receipt of the opinion and if necessary, we will revise this Memorandum accordingly. 10

X. RECORDING AND PROCESSING OF DEEDS AND USE AGREEMENTS The Property Disposition Centers shall request the Foreclosure Commissioner (Commissioner) to record the Deed and Use Agreement at closing. If a title company is handling the closing, the Commissioner may deliver the Deed for recording to the title company with instructions to record. Whether or not a title company is involved, the Commissioner will be required to record the Use Agreement. The fee for recording the Use Agreement should be charged to HUD. If a title company is not handling the closing, the Commissioner is required to take the Deed and Use Agreement to the appropriate recording office, the fee is charged to HUD. This new procedure assures the Department that these documents will be recorded and HUD will receive copies of the recorded Deed and Use Agreement. After the property is sold and the closing documents are received from the Office of General Counsel, the appropriate Property Disposition Center will issue a memorandum to the appropriate Program Center regarding the disposition of the property and the after-sale management responsibility for the project. The memorandum should include the following information and documentation, as appropriate: 1) Date of sale, name of the purchaser and contact point; 2) Closing Statement; 3) Recorded Deed including Use Agreement with Riders; 4) Previous Participation Certification (Form HUD 2530); 5) Copy of the executed HAP Contract; 6) Affirmative Fair Housing Marketing Plan (Form HUD 935.2); 7) Management Entity Profile (Form HUD 9832); 8) Direct Deposit Sign-up (Form SF 1199A); and 9) Sales Analysis (Form HUD 9650) (defines initial rents approved by HUD). In the event that the recorded copy of the Deed/Use Agreement is not available when the memorandum is prepared, copies of the fully executed unrecorded documents shall be sent with the memorandum. When the recorded Deed and Use Agreement are received, these documents must be forwarded to the appropriate Program Center. Please note that a copy of the Use Agreement should also be sent to the Office of Asset Management in Headquarters, Attention: Richard Pace. Any requests for modification(s) of foreclosure sale or HUD-owned sale use restrictions or Deed restrictions (including equity participation riders/restrictions) shall be processed by the appropriate Property Disposition Center in consultation with the Office of Asset Management in Headquarters. 11

XI. REPORTING REQUIREMENTS The Property Disposition Center will submit a monthly report to Headquarters detailing the status of the following: Pipeline Properties - This report should include all projects that are being processed for foreclosure and their status. Relocations -This report should reflect all projects that are being processed for relocation and/or are relocating residents and their status. Upfront Grants -This report should reflect all active and open projects that have Up-Front Grant balances or construction is not completed. Reports will be due in Headquarters by the 10 th day of every month. Upon receipt and review of the report by Headquarters, a conference call will be scheduled to discuss the reports with each Property Disposition Center. Headquarters will furnish the reporting format to the Property Disposition Centers under separate cover. If you require additional information or assistance regarding this memorandum, please contact Courtland Wilson at (202) 708-3730, extension 2542. Attachments 12

The deed shall include the following provision: (1) Definitions. As used in this Rider, the term: ATTACHMENT A RIDER of CHRONICALLY HOMELESS PERSONS Chronically Homeless Person is: an unaccompanied, disabled individual who has been on the street for more than a year, or has had four episodes of homelessness in the last three years. Unaccompanied Person shall mean one person, not a mother with an infant or child and not a youth within the foster care system. (1) Ten percent (10%) of the units are required to be set-aside for occupancy by chronically homeless persons. The project is responsible for providing the utilities and appliances/furnishings required to maintain the units including but not limited to needed repairs and/or replacements, until such time that the individual is financially able to assume the responsibility. All basic utilities (water, electricity, and gas (if applicable)) must be maintained in the name of the project. The cost for the utilities and any required repairs and/or replacements are to be borne by the project and not the occupant for as long as the occupant is financially unable to assume the costs. (2) The maximum payment to be charged to a chronically homeless person cannot exceed thirty (30%) percent of the individual s monthly income. The payment charged the individual will be zero if thirty (30%) of the income of the chronically homeless person is zero. (3) The owner may restrict this provision to apply only to one-bedroom units, if at least ten percent of the units are retained as one-bedroom units; otherwise two or more bedroom units must also be designated for this purpose even though the unit is to be occupied by one individual. (4) If the chronically homeless person occupies a unit assisted with project-based Section 8 under a Housing Assistance Payments (HAP) contract, the Owner may receive payments for that unit, if the chronically homeless person is otherwise eligible for Section 8 assistance and the unit meets HUD s Uniform Physical Standards, or other successor criteria. However, the Owner is prohibited from receiving payments under the projectbased Section 8 HAP contract if the Owner is receiving rental assistance on behalf of the chronically homeless individual from any other sources. By initialing hereunder, the parties acknowledge that this Rider is incorporated into and is a part of the Contract of Sale.

GRANTEE SECRETARY OF HOUSING AND URBAN DEVELOPMENT

ATTACHMENT B (financial default) NOTE: Send this letter by regular first class mail also. Certified Mail - Return Receipt Requested (Address) Dear : SUBJECT: Project Name: Project No.: Project Location: The Department's policy is that it will initiate foreclosure proceedings on mortgages in default and not under an approved reinstatement plan. A reinstatement plan is any course of action agreed to between HUD as the mortgagee and the mortgagor that is designed to reinstate the mortgage and to stabilize a project both physically and financially. HUD has determined that the mortgage on, Project No., is in default, and sufficient payments are not being made to cure the default. By virtue of this default, and your failure to submit an acceptable reinstatement plan, HUD declares the entire unpaid principal balance due and payable. Before instituting foreclosure proceedings, however, HUD will provide you with an opportunity to show reasons why foreclosure should not take place. If you believe that no default exists, or if you know of some other legal reason that HUD should not foreclose, these reasons should be submitted, in writing, within twenty-one (21) days of the receipt of this letter. Where there are disputes of facts between you and HUD, your position should be supported with sworn affidavits from appropriate parties. All written submissions should be sent to, Director, Multifamily Property Disposition Center, at the following address: Department of Housing and Urban Development [INSERT APPROPRIATE ADDRESS] If you believe it would be beneficial, a meeting may be scheduled to hear your appeal by calling ( ) Ext., or Faxing your request to ( ) within seven (7) days of the date you receive this letter. Although the meeting will be informal and no official transcript will be made, you may have an attorney present. The meeting will be held in at the above address.

The sole purpose of a meeting is to provide you with an opportunity to present legal reasons why you believe your mortgage should not be foreclosed. It is not an appropriate forum for discussing any reinstatement plan or provisional workout. After consideration of any material you present, HUD will notify you of its decision to proceed with or to terminate foreclosure, and will state the reasons for the decision. Under the provisions of Title 24 Code of Federal Regulations Part 27.25(b) the foreclosure commissioner may not withdraw the property from foreclosure under the Multifamily Mortgage Foreclosure Act more than once upon the cure of a default unless the Secretary consents in writing to such withdrawal. If you do not request a meeting within seven (7) days of the date you receive this letter, or do not submit a written statement as to why foreclosure should not take place within twentyone (21) days of the date of this letter, this office will proceed with foreclosure without further notice. Sincerely, 2. Director Multifamily Property Disposition Center

ATTACHMENT B (technical default) NOTE: Send this letter by regular first class mail also. Certified Mail - Return Receipt Requested (Address) Dear : SUBJECT: Project Name: Project No.: Project Location: The Department's policy is that it will initiate foreclosure proceedings on mortgages in default and not under an approved reinstatement plan. A reinstatement plan is any course of action agreed to between HUD as the mortgagee and the mortgagor that is designed to reinstate the mortgage and to stabilize a project both physically and financially. HUD has determined that the mortgage on, Project No., is in default for failure to comply with provisions of the Regulatory Agreement/HAP contract. Specifically, you are in violation of (cite specific violations of Regulatory Agreement/HAP contract). By virtue of this default, and your failure to submit an acceptable reinstatement plan, HUD declares the entire unpaid principal balance due and payable. Before instituting foreclosure proceedings, however, HUD will provide you with an opportunity to show reasons why foreclosure should not take place. If you believe that no default exists, or if you know of some other legal reason that HUD should not foreclose, these reasons should be submitted, in writing, within twenty-one (21) days of the receipt of this letter. Where there are disputes of facts between you and HUD, your position should be supported with sworn affidavits from appropriate parties. All written submissions should be sent to, Director, Multifamily Property Disposition Center, at the following address: Department of Housing and Urban Development [INSERT APPROPRIATE ADDRESS] If you believe it would be beneficial, a meeting may be scheduled to hear your appeal by calling ( ) Ext., or Faxing your request to ( ) within seven (7) days of the date you receive this letter. Although the meeting will be informal and no official transcript will be made, you may have an attorney present. The meeting will be held in at the above address.

The purpose of a meeting is to provide you with an opportunity to present legal reasons why you believe your mortgage should not be foreclosed. It is not an appropriate forum for discussing any reinstatement plan or provisional workout. After consideration of any material you present, HUD will notify you of its decision to proceed with or to terminate foreclosure, and will state the reasons for the decision. Under the provisions of Title 24 Code of Federal Regulations Part 27.25(b) the foreclosure commissioner may not withdraw the property from foreclosure under the Multifamily Mortgage Foreclosure Act more than once upon the cure of a default unless the Secretary consents in writing to such withdrawal. If you do not request a meeting within seven (7) days of the date you receive this letter, or do not submit a written statement as to why foreclosure should not take place within twentyone (21) days of the date of this letter, this office will proceed with foreclosure without further notice. Sincerely, 2. Director Multifamily Property Disposition Center

ATTACHMENT B (financial and technical default) NOTE: Send this letter by regular first class mail also. Certified Mail - Return Receipt Requested (Address) Dear : SUBJECT: Project Name: Project No.: Project Location: The Department's policy is that it will initiate foreclosure proceedings on mortgages in default and not under an approved reinstatement plan. A reinstatement plan is any course of action agreed to between HUD as the mortgagee and the mortgagor that is designed to reinstate the mortgage and to stabilize a project both physically and financially. HUD has determined that the mortgage on, Project No., is in default for failure to comply with provisions of the Regulatory Agreement/HAP contract and because of a monetary default under terms of the loan documents. Specifically you are in violation of (cite specific violations of Regulatory Agreement/HAP contract). By virtue of this default, and your failure to submit an acceptable reinstatement plan, HUD declares the entire unpaid principal balance due and payable. Before instituting foreclosure proceedings, however, HUD will provide you with an opportunity to show reasons why foreclosure should not take place. If you believe that no default exists, or if you know of some other legal reason that HUD should not foreclose, these reasons should be submitted, in writing, within twenty-one (21) days of the receipt of this letter. Where there are disputes of facts between you and HUD, your position should be supported with sworn affidavits from appropriate parties. All written submissions should be sent to, Director, Multifamily Property Disposition Center, at the following address: Department of Housing and Urban Development [INSERT APPROPRIATE ADDRESS] If you believe it would be beneficial, a meeting may be scheduled to hear your appeal by calling ( ) Ext., or Faxing your request to ( ) within seven (7) days of the date you receive this letter. Although the meeting will be informal and no official transcript will be made, you may have an attorney present. The meeting will be held in at the above address.

The sole purpose of a meeting is to provide you with an opportunity to present legal reasons why you believe your mortgage should not be foreclosed. It is not an appropriate forum for discussing any reinstatement plan or provisional workout. After consideration of any material you present, HUD will notify you of its decision to proceed with or to terminate foreclosure, and will state the reasons for the decision. Under the provisions of Title 24 Code of Federal Regulations Part 27.25(b) the foreclosure commissioner may not withdraw the property from foreclosure under the Multifamily Mortgage Foreclosure Act more than once upon the cure of a default unless the Secretary consents in writing to such withdrawal. If you do not request a meeting within seven (7) days of the date you receive this letter, or do not submit a written statement as to why foreclosure should not take place within twentyone (21) days of the date of this letter, this office will proceed with foreclosure without further notice. Sincerely, Director Multifamily Property Disposition Center

ATTACHMENT C Project Name: FORECLOSURE PROPERTY INFORMATION ATTACHMENT Address: FHA #: County: Mortgage Information: Date Insured: HAP Information: HAP Number: Section of the Act: Date of Assignment: Original Mortgage: Date of Original Mort: Name of Contract Administrator (CA): Default Date: Type of CA: HA, PBCA, etc.: Mortgage Interest Rate: Nature of Default: Fiscal Technical If the property is to be sold with a HAP, be advised that if HUD is not the Contract Administrator, the HAP must be pulled back from the CA prior to closing. Management Information: Agency: Phone Number: ( ) - ext. Address: Contact Name: Owner Information: Owning Entity: Address: Phone Number: ( ) - ext. Contact for Owner Contact Name: Contact Contact Phone #: ( ) - ext. Address Project Information: TYPE Scattered site High-rise Retirement Service Center (RSC) Mobile Home (Lots) Row Walk-up Assisted Living Facility (ALF) Vacant Land Single family house(s) Garden Intermediate Care (IC) Other: Townhouse Nursing Home (NH) Board and Care TOTAL NUMBER OF UNITS: Not just subsidized # of residential units # of beds # of pads # of commercial units # of Medicaid beds Acreage # of non-revenue residential units # of Medicare beds Lot size # of Private pay beds # of Bldgs Yr. Built Date license expires # of Stories Rehab Yr. Attach last state inspection (Yes or No) Net rentable Sq. State Contact: Ftg. Land/lot size Sq. acreage Phone Number: Ft. ( ) - ext. Neighborhood: Stable Upward Transitional Blighted Downward Transitional Property Information Sheet Page 1

CONSTRUCTION Foundation Floor ( ie..concrete, wood): Exterior Walls Flooring: Roof Windows Screen Storm Insulated Heating Fuel Electric Gas Propane Oil Other Heating System Individual Central None A/C System Individual Central None Hot Water Fuel Electric Gas Propane Oil Other Hot Water System Individual Central None UTILITIES PAVING Concrete Asphalt Other PARKING Public Water Supply Street # Lots Gas Main Curb # Spaces Electric Service Sidewalk Carport Sanitary Sewer Parking Lot Garage Septic Tank Individually Metered Utilities Electricity Gas Water Propane Other: COMMUNITY, PROPERTY SERVICES, OWNER EXPENSE: Cold Water Refrigerator Exhaust Fan (Kitchen) Carpet Hot Water Range (Elect) W/D Hookups in Unit Blinds Electricity Range (Gas) W/D in Unit Drapes Gas Microwave Exhaust Fan (Bath) Cable TV Hook-up heat Disposal Other: Satellite System Other: Dishwasher Other: Other: COMMUNITY, PROPERTY SERVICES, OWNER EXPENSE: Refuse removal Network Learning Center Playground Transportation Security Computer Room Tennis Court Meals Limited Access Gate Fitness Center Basketball Court Sewer System Laundry Facility (See below) Pool Picnic Area Septic Tank Is Laundry Facility Leased? Storage Parking Is Laundry Facility Owned? Club House Community Room TENANT FURNISHES/EXPENSE: Electricity Cold Water Hot Water Gas Heat Air Conditioner Appliances Parking Garage Storage Cable TV Hook-up Other: Other: Other: Other: Other: OCCUPANCY PERCENTAGE: (Start with current year.) Year Jan Feb March April May June July Aug Sept Oct Nov Dec 2006 % % % % % % % % % % % % % % % % % % % % % % % % Number of occupied units: Total Elderly Physically HDCP Disabled Other Oil Property Information Sheet Page 2

CURRENT ACTUAL RENTS (Income Earned by Project..Attach current rent schedule.) Residential Units Beds (NH, ILF, RSC ect.) Pads # of # of Monthly Utility Sq. # Beds Pd by # Beds Pd by # of Pri- Amt # of Mthly Bdrs Units Rent Allow Ft. Medicaid Medicaid Medicare Medicare vate Pay Rent Pads Rent SUBSIDY CURRENTLY IN PROPERTY: Type and Amount (number of units, vouchers, etc ), if no subsidy exists at property, leave blank. Project Based For Units Certificates For Units Rent Supplement For Units LMSA For Units Vouchers For Units Other: For Units Other: For Units Other: For Units Other: For Units MARKET DATA: IF you are submitting a copy of the most recent Market Comparability Study on Form HUD-92273, which was submitted and approved by HUD, you are NOT required to complete the section below. In completing the section below, use comparable properties which are NOT subsidized and in the geographic market area. Comparable 1 Comparable 2 Comparable 3 Property Name Property Address City, ST Zip Phone # Type of Project (Garden, Walk-up, Elevator) (Garden, Walk-up, Elevator) (Garden, Walk-up, Elevator) # of Stories Yr. Built Square Feet AMENITY/SERVICE (Use Y to indicate the existence of an amenity, service EX: Fireplace Y Garage N) Balc/Terrace/Patio Garage/Carpet Air Conditioning Range Oven Type (gas/elect) (gas/elect) (gas/elect) Refrigerator Disposal Microwave Washer/Dryer in Unit in Unit in Unit Washer/Dryer Hook-ups Hook-ups Hook-ups Carpet/Drapes/ Blinds Pool Recreation Area Fitness Center Limited Access Gate Security Alarm System Cable Hook-up Laundry Facility Property Information Sheet Page 3

SERVICES Indicate T (for tenant paid) O (for owner paid) Heating Cooking Electricity Water (Hot & Cold) RENTS Type Sq Ft. Rent Baths Type Sq Ft. Rent Baths Type Sq Ft. Rent Baths PROJECT OWNER/MANAGEMENT - FINANCIAL INFORMATION I. NATURE OF DEFAULT: a. Fiscal: Yes No 1) Work-out Agreement Yes Expiration Date: No Unknown Provision Not Complied with. 2) Modification Agreement Yes - Expiration Date: No Unknown Provision Not Complied with. b. Technical: Yes No Last REAC Score: Date of REAC inspection: Include inspection reports, letters to owner advising of technical default and letter from HQ declaring default. Was the owner given an opportunity to cure the technical (regulatory) default? Yes No Include the notification letters in your foreclosure recommendation. II. PENDING ACTIONS: Transfer of physical assets in process: Yes No Negotiations for reinstatement plan ongoing: Yes No Is project in bankruptcy: Yes No Diversion of funds: Yes No Has audit been requested: Yes No IG audit attached: Yes No Have sanctions been taken: Yes No LDP or debarment requested: Yes No Has 2530 been documented: Yes No III. HISTORY: State briefly why foreclosure is being recommended. This property failed because: IV. DESCRIPTION: Briefly describe the property and surrounding neighborhood: Provide a copy of any appraisal done within the last 12 months. Should HUD consider incorporating a neighborhood network center at the property when the property is sold? Yes Explain: No Property Information Sheet Page 4

Include mailing addresses for all units and a current rent roll with all tenant names listed. exists, complete the information below: If a tenant organization Tenant Organization: Name of Organization Phone Number: ( ) - ext. Address: Contact Name: Has the resident of tenant association requested that the project be converted to a cooperative? If yes, explain: V. HUD PIH INFORMATION: Contact Name: Program Office: Phone Number: ( ) - extension VII. DEMOLITION Demolition is not expected in this sale. Demolition is expected, see Attachment. Justification: VIII. DISPLACEMENT AND RELOCATION Displacement/relocation is not expected. Displacement/relocation of residents is expected, because:. All displaced/relocated tenants will be offered the assistance provided pursuant to outstanding statutes, regulations, policies, and procedures. IX. UNITS OF LOCAL GOVERNMENT CITY STATE HOUSING FINANCE PUBLIC HOUSING AUTH Organization Contact and Title Address City, ST Zip Phone ( ) - ext ( ) - ext ( ) - ext X. ULG INTEREST Has a state or local government PHA or other non-profit expressed a firm interest to the Field Office in purchasing the project: No Yes : Organization: Contact: Address: City, ST Zip XI. ADVERTISING Provide at least three (3) newspapers. One (1) regional and one (1) minority. Newspaper Minority Address (include city, state and zip) Phone ( ) - ext ( ) - ext ( ) - ext ( ) - ext ( ) - ext ( ) - ext Recommendation for special advertising: XII: Disposition Recommendation: Please note that if you are not recommending that the property remain Affordable, you must include with this package a recent EMAD study. Attach copies of all documents listed in the Service Agreement. If you have photos, that would assist in the marketing of the property, please include them in your package. Property Information Sheet Page 5