[Federal Register: March 12, 2008 (Volume 73, Number 49)]
[Notices]
[Page 13194-13203]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12mr08-49]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
Notice of Funding Availability: Section 514, 515, and 516 Multi-
Family Housing Revitalization Demonstration Program (MPR) for Fiscal
Year 2008
AGENCY: Rural Housing Service, USDA.
ACTION: Notice.
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Announcement Type: Inviting applications from eligible applicants
for Fiscal Year 2008 funding.
Catalog of Federal Domestic Assistance Number (CFDA): 10.447.
SUMMARY: USDA Rural Development which administers the programs of the
Rural Housing Service (RHS) announces the availability of funds and the
timeframe to submit applications to participate in a demonstration
program to preserve and revitalize existing rural rental housing
projects financed by Rural Development under Section 515, Section 514,
and Section 516 of the Housing Act of 1949, as amended. The intended
effect is to restructure selected existing Section 515 multi-family
housing loans and Section 514 and 516 off-farm labor housing loans and
grants expressly for the purpose of ensuring
[[Page 13195]]
that sufficient resources are available to preserve the rental project
for the purpose of providing safe and affordable housing for very low-,
low-, or moderate-income residents. Expectations are that properties
participating in this program will be revitalized and the affordable
use extended without displacing tenants because of increased rents. No
additional Rural Development rental assistance units will be made
available under this program.
DATES: The deadline for receipt of all pre-applications in response to
this Notice of Funding Availability (NOFA) is 5 p.m., Eastern time, May
12, 2008. The pre-application closing deadline is firm as to date and
hour. The Agency will not consider any pre-application that is received
after the closing deadline. Applicants intending to mail pre-
applications must allow sufficient time to permit delivery on or before
the closing deadline. Acceptance by a post office or private mailer
does not constitute delivery. Facsimile (FAX) and postage-due pre-
applications will not be accepted.
FOR FURTHER INFORMATION CONTACT: Sherry Engel, sherry.engel@wi.usda.gov
(715) 345-7677; Carlton Jarratt, carlton.jarratt@usda.gov, (804) 561-
0665; Barbara Chism, barbara.chism@usda.gov, (202) 690-1436; or Sandra
Mercier, sandra.mercier@usda.gov, (202) 720-1617, Senior Loan
Specialists, Multi-Family Housing Office of Rental Housing
Preservation, STOP 0782, (Room 1263-S), U.S. Department of Agriculture,
Rural Housing Service, 1400 Independence Avenue, SW., Washington, DC
20250-0782. (Please note these telephone numbers are not toll-free
numbers.)
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The information collection requirements contained in this Notice
have received approval from the Office of Management and Budget (OMB)
under Control Number 0570-0190.
Overview
The Agriculture, Rural Development, Food and Drug Administration,
and Related Agencies Appropriations Act, 2008 (Pub. L. 110-161),
December 26, 2007, provides funding for and authorizes Rural
Development to conduct a demonstration program for the preservation and
revitalization of the Section 515 multi-family housing portfolio and
Section 514 and 516 off-farm labor housing portfolio. Sections 514, 515
and 516 multi-family housing programs are authorized by the Housing Act
of 1949, as amended (42 U.S.C. 1484, 1485, 1486) and provide Rural
Development with the authority to make loans for low-income multi-
family housing and farm labor housing and related facilities.
Program Administration
I. Funding Opportunities Description
This NOFA solicits pre-applications from eligible borrowers/
applicants to restructure existing multi-family housing within the
Agency's Section 515 multi-family housing portfolio and the 514/516
off-farm labor housing portfolio for the purpose of revitalization and
preservation. The demonstration program shall be referred to in this
notice as the Multi-Family Housing Revitalization Demonstration program
(MPR). Agency regulations for the Section 515 multi-family housing
program and for the Sections 514/516 off farm labor housing program are
published at 7 CFR part 3560.
The MPR is intended to assure that existing rental projects will
continue to deliver decent, safe, and sanitary affordable rental
housing for the lesser of the remaining term of the loan or 20 years
from the date of the MPR transaction closing. Once an applicant has
been confirmed eligible and the project has been selected by the Agency
in the process described in this notice, and the applicant agrees to
participate in the MPR demonstration by written notification to the
Agency, an independent third-party capital needs assessment (CNA) will
be conducted to provide a fair and objective review of projected
capital needs. The Agency shall implement this NOFA through an MPR
Conditional Commitment (MPRCC) with the eligible borrower, which will
include all the terms and conditions under this NOFA, including the MPR
Debt Deferral Agreement.
The primary restructuring tool to be used in this program is debt
deferral up to 20 years of the existing Section 514 and 515 loans
obligated prior to October 1, 1991. The cash flow from the deferred
payment will be deposited, as directed by the Agency, to the reserve
account to help meet the future physical needs of the property or to
reduce rents. Debt deferral is described as follows:
Debt Deferral: A deferral of the existing Agency debt for the
lesser of the remaining term of the loan or 20 years. All terms and
conditions of the deferral will be described in the MPR Debt Deferral
Agreement. A balloon payment of principal and accrued interest will be
due at the end of the deferral period. Interest will accrue at the
promissory note rate and subsidy will be applied as set out in the
Agency's Interest Credit Agreement. Interest will not be charged on the
deferred interest.
If the resulting cash flow is not adequate to address the long-term
needs of the project, the Agency may use the following sources of
funds:
(1) other Agency restructuring tools as follows:
(i) MPR Revitalization Grant: A revitalization grant (for non-
profit applicants/borrowers only) is limited to the cost of correcting
health and safety violations as identified by the CNA. The grant
administration will be in accordance with applicable provisions of 7
CFR parts 3015 and 3019.
(ii) MPR Revitalization Zero Percent Loan: A revitalization loan at
zero percent interest that will be amortized over 30 years.
(iii) MPR Soft-Second Loan: A loan with a one percent interest rate
that will have its accrued interest and principal deferred, to a
balloon payment, due at the time the latest maturing Section 514 or
Section 515 loan becomes due.
MPR funds cannot be used to add new units, community rooms,
playgrounds, and/or laundry rooms. However, other funding sources as
outlined below in (2) through (6) can be used either for revitalization
or for improvements listed above to the projects.
(2) Rural Development Section 515 Rehabilitation loan funds;
(3) Rural Development Section 514/516 rehabilitation loan and grant
funds;
(4) Rural Development Section 538 Guaranteed Rural Rental Housing
Program financing;
(5) Rural Development Multi-Family Housing Re-lending Demonstration
Program Funds;
(6) Third-party funds in the form of loans with below market rates
(below the AFR), grants, tax credits, and tax exempt financing; and
(7) Owner-provided capital contributions in the form of a cash
infusion.
Transfers, subordinations, and consolidations may be approved as
part of a MPR transaction in accordance with existing servicing
authorities of the Agency as available in 7 CFR part 3560. If a
transfer is part of the MPR transaction, the transfer must meet the
requirements of 7 CFR part 3560.406 before underwriting of the MPR
transaction.
For the purposes of the MPR, the restructuring transactions will be
identified in three categories:
(1) Simple transactions involve no change in ownership.
(2) Complex transactions will consist of a property transfer to new
ownership
[[Page 13196]]
processed in accordance with 7 CFR 3560.406, or transactions requiring
a subordination agreement as a result of third party funds.
(3) Portfolio Sale transactions that are defined as multiple
project sale transactions with a common purchaser all within one state
closed no earlier than September 30, 2007.
Each transactional category may utilize any or all restructuring
tools. Restructuring tools that may be available to address capital
needs during the MPR demonstration are based on the capital needs
assessment process and the underwriting feasibility determination.
While all non-deferred Agency debt, either in first lien position
or a subordinated lien position must be secured within market value,
deferred debt may exceed the market value of the security. Payment of
such deferred debt will not be required from normal project operation
income, but from excess cash from project operations and the value of
the property after all other secured debts are satisfied.
(1) Pre-application: Applicants must submit a pre-application
described in Section VI. This pre-application process is designed to
lessen the cost burden on all applicants including those who may not be
eligible or whose proposals may not be feasible.
(2) Eligible Properties: Using criteria described below in Section
III, USDA will conduct an initial screening for eligibility. As
described in Section VIII, USDA will conduct additional eligibility
screening later in the selection process.
(3) Scoring and Ranking: All eligible, complete and timely-filed
pre-applications will be scored, ranked and put in funding categories
as discussed in Sections VI and VII.
(4) Formal Applications: Top ranked pre-applicants will be invited
to submit a formal application. As discussed in Section VIII paragraph
(2) of this notice, USDA will require the owner to provide a capital
needs assessment in order to determine the proper combination of tools
to be offered to the applicant, to perform additional eligibility
review, and to underwrite the proposal to determine financial
feasibility. Where proposals are found to be ineligible or financially
infeasible, owners will be informed and proposals lower in the funding
categories will be considered.
(5) Financial Feasibility: Using the results of the CNA to help
identify the need for resources and applicant provided information
regarding anticipated or available third-party financing, the Agency
will determine the financial feasibility of each potential transaction,
using restructuring tools available either through existing regulatory
authorities or specifically authorized through this demonstration
program.
Project financial feasibility is determined when a property can
provide affordable, safe, decent, and sanitary housing for 20 years or
the remaining term of any Agency loan whichever ends later, by using
the authorities of this program while minimizing the cost to the
Agency, and without increasing rents for tenants and farm laborers,
except when necessary to meet normal and necessary operating expenses.
If the transaction is determined financially feasible by the Agency,
the borrower will be offered a restructuring proposal, which will
include the requirement that the borrower will execute, for
recordation, a restrictive use covenant for a period of 20 years, the
remaining term of any loans, or the remaining term of any existing
restrictive-use provisions, whichever ends later. The restructuring
proposal will be established in the form of the MPR Conditional
Commitment (MPRCC).
MPR Agreements: If the offer is accepted by the applicant, the
Agency and applicant will enter into a MPRCC. The applicant must also
agree to restrict the property use pursuant to Agency direction when
the MPR transaction is closed. Any third-party lender will be required
to subordinate to the Agency's restrictive use covenant unless the
Agency determines on a case-by-case basis that the lender refuses to
subordinate and such refusal will not compromise the purpose of the
MPR. The Agency may also request that the applicant sign an agreement
that would require the owner to escrow reserve, tax, and insurance
payments in accordance with all pertinent current and future Agency
regulations.
General Requirements: The MPR transactions may be conducted with a
stay-in owner (simple) or may involve a change in ownership (complex or
portfolio sale). Any housing or related facilities that are constructed
or repaired must meet the Agency design and construction standards and
the development standards contained in 7 CFR part 1924, subparts A and
C, respectively. Once constructed, Section 515 multi-family housing and
Sections 514/516 off farm labor housing must be managed in accordance
with 7 CFR part 3560. Tenant eligibility will be limited to persons who
qualify as an eligible household under Agency regulations or who are
eligible under the requirements established to qualify for housing
benefits provided by sources other than the Agency, such as U.S.
Department of Housing and Urban Development Section 8 assistance or Low
Income Housing Tax Credit Assistance. Additional tenant eligibility
requirements are contained in 7 CFR 3560.152.
Voluntary Community Market Rent Demonstration (available for
Section 515 properties only): In conjunction with this demonstration,
Rural Development also announces the opportunity for all successful
Section 515 applicants to participate on a voluntary basis in a
viability test of a 30 percent limitation on tenant rents, as proposed
in Section 544(b)(7) of Saving America's Rural Housing Act of 2006,
H.R. 5039, for post-restructured properties. Owners of properties in
the Section 515 restructuring program may elect to participate in the
``community market rent'' demonstration which will allow an owner to
set a rent above the approved basic rent for any unit not currently
occupied by a tenant receiving Rural Development rental assistance.
Eligible tenants for these units must have adjusted annual incomes
sufficient to allow them to pay the community market rent using less
than 30 percent of their adjusted income. Tenants would be allowed to
occupy without paying overage, additional sums that would otherwise be
required to bring their rent payment up to 30 percent of income. With
Rural Development's consent, up to 50 percent of the difference between
the basic rent and the new ``community market rent'' could be retained
by the owner as an increased return.
For example, if the basic rent is $350, the owner could create a
community market rent at $410, and market the unit to tenants who could
pay that rent at less than 30 percent of adjusted income. A percentage
of the difference, $60 could be retained by the owner, as negotiated
with Rural Development, up to $30.
Prior to implementation of the community market rent
demonstrations, Rural Development will issue guidance to successful
applicants who have indicated an interest in participating in the
demonstration providing further details with respect to the program.
Stay in owners, existing borrowers that will retain their property,
who contribute cash to fund any hard costs of construction to meet
immediate needs identified by the CNA may receive a return on
investment on those funds provided the Agency determines an increased
return on investment is financially feasible, and it approves such a
return in the revitalization plan presented to the borrower as an MPR
offer.
[[Page 13197]]
II. Award Information
Public Law 110-161 makes funding available to the Secretary of
Agriculture for Rural Development to provide the restructuring tools of
the MPR demonstration. $19,860,000 in budget authority will be
available during FY 2008.
All funding must be approved no later than September 15, 2008, and
obligated by the Agency not later than September 22, 2008. If funds
available for the MPR are fully used before all pre-applications that
have been determined eligible and selected under this NOFA are funded,
the unfunded approved properties may receive priority for funding from
the next fiscal year's resources available for multi-family housing
revitalization if additional funds become available and the selected
properties/owners meet any future eligibility criteria.
III. Eligibility Information
Applicants (and the principals associated with each applicant) must
meet the following requirements:
(1) Eligibility under 7 CFR 3560.55; however, the requirements
described in 7 CFR 3560.55(a)(5) pertaining to required borrower
contributions and 7 CFR 3560.55(a)(6) pertaining to required
contributions of initial operating capital are waived for all MPR
proposals.
(2) For Section 515 multi-family housing projects an average
physical vacancy rate over the twelve months preceding the filing of
the pre-application of no more than 10 percent for projects of 16 units
or more and 15 percent for projects under 16 units unless an exception
applies under Section VI paragraph (1)(ii) of this notice. For Sections
514 and 516 off-farm labor housing projects, rather than an average
physical vacancy rate as stated above, the property must have positive
cash flow for the previous full three years of operation unless an
exception applies under Section VI paragraph (1)(ii) of this Notice .
(3) Ownership of and ability to operate the facility after the
transaction is completed. (In the event of a transfer, the proposed
transferee with an executed purchase agreement or other evidence of
site control will be the applicant.)
(4) A CNA and Agency financial evaluation must be conducted to
ensure that utilization of the restructuring tools of the MPR program
is financially feasible and necessary for the revitalization and
preservation of the property for affordable housing. Eligibility for
processing will be determined as of the date of the pre-application
filing deadline. The Agency reserves the right to discontinue
processing in the event that material changes in the applicant's status
occurs any time after the initial determination.
IV. Equal Opportunity and Nondiscrimination Requirements
USDA is an equal opportunity provider, employer, and lender.
(1) Borrowers and applicants will comply with the provisions of 7
CFR 3560.2.
(2) All housing must meet the accessibility requirements found at 7
CFR 3560.60(d).
(3) All MPR participants must submit or have on file a valid Form
RD 400-1, ``Equal Opportunity Agreement'' and Form RD 400-4,
``Assurance Agreement.''
The U. S. Department of Agriculture (USDA) prohibits discrimination
in all its programs and activities on the basis of race, color,
national origin, age, disability, sex, marital status, familial status,
religion, or because all or part of an individual's income is derived
from any public assistance program. (Not all prohibited bases apply to
all programs.) Persons with disabilities who require alternative means
for communication of program information (Braille, large print,
audiotape, etc.) should contact USDA's TARGET Center at (202) 720-2600
(Voice and TDD).
To file a complaint of discrimination, write to USDA, Director,
Office of Civil Rights, 1400 Independence Avenue, SW., Washington, DC
20250-9410, or call (800) 795-3272 (Voice) or (202) 720-6382 (TDD).
The policies and regulations contained in 7 CFR part 1901, subpart
E, apply to this program.
V. Authorities Available for MPR
MPR tools will be used in accordance with 7 CFR part 3560 and its
associated handbooks (available in any Rural Development office). The
program will be administered within the resources available to the
Agency through Public Law 110-161 for the preservation and
revitalization of Sections 514/516 and Section 515 financed properties.
In the event that provisions of 7 CFR part 3560 conflict with this
demonstration program, the provisions of the MPR will take precedence.
VI. Application and Submission Information
(1) The application submission and scoring process will be
completed in two phases in order to avoid unnecessary effort and
expense on the part of interested borrowers/applicants and to allow
additional points for applicants that propose a transfer of a troubled
project to an eligible owner.
The first phase is the pre-application process. The applicant must
submit a complete pre-application by the deadline date under the DATES
section of this Notice. The applicant's submission will be classified
as ``complete'' when a ``pre-application'' is received by multi-family
housing staff for each MPR proposal the applicant wishes to be
considered in the demonstration. In the event the MPR proposal involves
a project consolidation it will be completed in accordance with 7 CFR
3560.410. One pre-application for the proposed consolidated project is
required and must identify each project included in the consolidation.
If the MPR proposal involves a portfolio sale, one pre-application for
each project in the portfolio is required and each pre-application must
identify each project to be purchased as part of the portfolio sale.
The suggested form to be used for the pre-application is ``MPR Pre-
application'' and is attached at the end of this Notice. An electronic
version of this form may be found on the internet at http://
www.rurdev.usda.gov/rd/nofas/index.html. In addition, a synopsis of
this program and the pre-application's universal resource locator (URL)
will be listed by Catalog of Federal Domestic Assistance Number or by
FedGrants Funding Opportunity Number at http://www.grants.gov.
In order for the pre-application to be considered complete, all
applicable information requested on the MPR Pre-application form must
be provided
Additional information that must be provided with the pre-
application, when applicable, includes:
(i) A copy of a purchase agreement if a transfer is being
considered.
(ii) A market survey if the projects' occupancy standards cited in
Section III (2) above are not met and there is an overwhelming market
demand evidenced by waiting lists and a housing shortage confirmed by
local housing agencies and realtors. The market survey must show a
clear need and demand for the project once a restructuring transaction
is completed. The results of the survey of existing or proposed rental
or labor housing, including complex name, location, number of units,
bedroom mix, family or elderly type, year built, rent charges must be
provided as well as the existing vacancy rate of all available rental
units in the community, their waiting lists and amenities, and the
availability of rental assistance or other subsidies. For proposals
where the applicant is requesting low-income housing tax credits
(LIHTC), the number of LIHTC
[[Page 13198]]
units and the maximum LIHTC incomes and rents by unit size must be
provided. The Rural Development State Director will determine whether
or not the proposal has market feasibility based on the data provided
by the applicant. Any costs associated with the completion of the
market survey will not be considered a project expense.
Unless an exception under this section applies, the requirements
stated in Section III, paragraph (2) of this notice must be met.
The second phase of the application process will be completed by
the Agency based on Agency records and the pre-application information.
All eligible, complete, and timely-filed pre-applications will then
be scored and ranked based on points received during this two-phase
application process. Further, the Agency will categorize each MPR
proposal as being potentially Simple, Complex, or Portfolio Sale based
on the information submitted on the pre-application and in accordance
with the category description provided in Section I of this Notice.
(2) Pre-applications can be submitted either electronically or in
hard copy. The Agency will record pre-applications received
electronically by the actual date and time received in the Web site
mail box. Hard copy pre-applications received on the deadline date will
receive the close of business time of the day received as the receipt
time. Assistance for filing electronic and hard copy pre-applications
can be obtained from any Rural Development State Office.
The pre-application is stored in the form of an Adobe Acrobat
format and may be completed as a fillable form. The form contains a
button labeled ``Submit by E-mail.'' Clicking on the button will result
in an e-mail containing a completed pre-application being sent to the
Office of Rental Housing Preservation in Washington, DC for
consideration. If a purchase agreement or market survey is required,
these additional documents are to be attached to the resulting e-mail
prior to submission.
Pre-application forms may be downloaded from the Agency's internet
Web site http://www.rurdev.usda.gov/rd/nofas/index.html or obtained by
contacting the State Office in the state the project is located. Hard
copy pre-applications and additional materials can be mailed to the
attention of Sandra L. Mercier or Barbara Chism, Senior Loan
Specialists, Multi-Family Housing Office of Rental Housing
Preservation-STOP 0782 (Room 1263-S), U. S. Department of Agriculture,
Rural Housing Service, 1400 Independence Avenue, SW., Washington, DC
20250-0781.
Note: All documents must be received on or before the pre-
application closing deadline to be considered complete and timely
filed. Pre-applications that do not include a Purchase Agreement for
transfer proposals, and/or market surveys for projects that don't
meet the occupancy standards of Section III paragraph (2) of this
notice, or if applicable, the requirements for the exception in
Section VI paragraph (1)(ii) of this notice, will be considered
incomplete and will be returned to the applicant with appeal rights
if not submitted by the closing deadline.
VII. Selection Process
Pre-application ranking points will be based on information
provided during the submission process and in Agency records. Points
will be awarded as follows:
(1) Contribution of other sources of funds. Other funds are those
discussed in the third paragraph, of Section I ``Funding Opportunities
Description'' items (2) through (6). Points awarded are to be based on
documented written evidence that the funds are committed. The maximum
points awarded for this criterion is 20 points. These points will be
awarded in the following manner:
(i) Evidence of a commitment of at least $3,000 to $5,000 per unit
per property from other sources--15 points, or
(ii) Evidence of a commitment greater than $5,000 per unit per
property from other sources--20 points.
(2) Owner contribution sufficient to pay transaction costs. (These
funds cannot be from project reserve or operating funds). Transaction
costs are defined as those costs required to complete the transaction
and include, but are not limited to, the CNA, legal and closing costs,
appraisal costs and filing/recording fees. The minimum contribution
required to receive these points is $5,000 per project and will be
required to be deposited in the property reserve account prior to
closing--5 points.
(3) Age of project. Since the age of the project and the date that
the loan was made are directly related to physical needs, a maximum of
25 points will be awarded on the following criteria:
(i) Projects with initial operational dates prior to December 21,
1979--25 points.
(ii) Projects with initial operational dates on or after December
21, 1979, but before December 15, 1989--20 points.
(iii) Projects with initial operational dates on or after December
15, 1989, but before October 1, 1991--15 points.
Note: For project consolidation or portfolio sale proposals, the
project with the earliest operational date will be used.
(4) Troubled project points. The Agency may award up to 25
additional points to facilitate the transfer and revitalization of
projects the Agency considers as troubled due to an act of nature or
where physical and/or financial deterioration or management
deficiencies exist. Projects with an Agency classification of ``C'' or
``D'' according to Handbook 2-3560, Chapter 9, Paragraph 9.7 (available
at http://www.rurdev.usda.gov/regs/hblist.html) will be considered
troubled. Projects that are classified ``B'' and do not involve a
transfer will also receive consideration. Points will be awarded in the
following manner:
(i) For Stay-in Owners only: If the Agency servicing classification
is B as a result of a workout plan approved by the Agency prior to
January 1, 2008--25 points.
(ii) If the Agency servicing classification is C or D for 24 months
or more--20 points.
(iii) If the Agency servicing classification is C or D for less
than 24 months--15 points.
(5) Prior Agency approvals. In the interest of ensuring timely
application processing and underwriting, the Agency will award up to 20
points for properties with CNAs already approved by the Agency. CNAs
over 12 months old may not be used for MPR underwriting without an
update approved by the Agency. Points will be awarded for:
(i) CNAs approved after October 1, 2006 and prior to October 1,
2007--10 points.
(ii) CNAs approved after October 1, 2007 but before April 1, 2008--
20 points.
(6) Energy generation. Applicants will be awarded 5 points if the
proposal includes the installation of energy generation systems to be
funded by a third party. The proposal must include an overview of the
energy generation system being proposed. Evidence that an energy
generation system has been funded by a third party and that it has a
quantifiable positive impact on energy consumption will be required.
(7) Energy conservation. Applicants will be awarded 5 points if the
proposal includes rehabilitation that earns the ENERGY STAR label for
residential construction. Units earning the ENERGY STAR label must be
independently verified to meet guidelines for energy efficiency as set
by the U.S. Environmental Protection Agency. All procedures used in
verifying a unit for the ENERGY STAR label must comply
[[Page 13199]]
with National Home Energy Ratings System (HERS) guidelines. ENERGY STAR
guidelines for residential construction apply to single or low-rise
multi-family residential buildings.
(8) Tenant service provision. The Agency will award 5 points for
applications that include new services provided by a non-profit
organization, which may include a faith-based organization, or by a
Government agency. Such services shall be provided at no cost to the
project and shall be made available to all tenants. Examples of such
services are transportation for the elderly, after-school day care
services or after-school tutoring.
For portfolio sales and project consolidations, the Agency will
calculate the average score for each project within the sale or
consolidation.
The Agency will total the points awarded to each pre-application
received within the timeframes of this Notice and rank each pre-
application according to total score. If point totals are equal, the
earliest time and date the pre-application was received by the Agency
will determine the ranking. In the event pre-applications are still
tied, they will be further ranked by giving priority to those
properties with the earliest Rural Development operational date.
Eligibility will then be confirmed on the 16 highest-scoring and
complete pre-applications in each State. If one or more of the 16
highest-scoring pre-applications is determined ineligible, (i.e. the
applicant is a borrower that is not in good standing with the Agency or
has been debarred or suspended by the Agency, etc.) the next highest-
scoring pre-application will be confirmed for eligibility.
If one or more of the 16 highest-ranking pre-applications is a
portfolio sale, then eligibility determinations will be conducted on
all of the pre-applications associated with the portfolio sale. Should
any of the pre-applications associated with the portfolio sale be
determined ineligible, that pre-application will be dropped, but the
overall eligibility of the portfolio sale will not be affected as long
as the requirements in Section I ``Funding Opportunities Description''
are met.
If one or more of the 16 highest-ranking pre-applications is a
project consolidation, and one of the projects involved in the
consolidation does not meet the occupancy standards cited in Section
III(2), that project will be determined ineligible and eliminated from
the proposed consolidation transaction.
Once ranking has been established, the Agency will conduct a four-
step process to select pre-applications for submission of formal
applications. This process is needed to assure that the Agency can
process the proposed transactions within available staffing resources,
develop a representative sampling of revitalization transaction types,
assure geographic distribution, and assure an adequate pipeline of
transactions to use all available funding.
Step One: The Agency will review the eligible pre-applications,
identify pre-applications as either Simple, Complex, or Portfolio Sale
and separate them by state.
Step Two: The Agency will select, for further processing, the top-
ranked portfolio sale transactions until a total of $150,000,000 in
potential debt deferral is reached. Portfolio sale transactions will be
limited to one per State and will count as 1 MPR transaction.
Step Three: The highest ranked complex transactions in each state
will be selected for further processing, not to exceed 2 per state.
Step Four: Additional projects will be selected from the highest
ranked eligible pre-applications involving simple transactions in that
state until a total of 5 pre-applications for MPR transactions per
state is reached.
VIII. Processing for Selected Pre-applications
Those proposals that are ranked and then selected for further
processing will be invited to submit a formal application on SF 424
``Application for Federal Assistance.'' Those pre-applications that are
rejected by the Agency will be returned to the applicant and the
applicant will be given appeal rights pursuant to 7 CFR part 11. Those
proposals that are not selected due to low scores will be retained by
the Agency unless they are withdrawn by the applicant. In the event
that a pre-application is selected for further processing and the pre-
applicant declines, the next highest ranked pre-application of the same
transaction type in that state will be selected provided there is no
change in the preliminary eligibility of the pre-applicant.
If there are no other pre-applications of the same transaction
type, then the next highest-ranked pre-application regardless of
transaction type will be selected.
Applications (SF 424s) can be obtained and completed online. An
electronic version of this form may be found on the Internet at http://
forms.sc.egov.usda.gov/eforms/mainservlet or a hard copy may be
obtained by contacting the State Office in the state where the project
is located and can be submitted either electronically or in hard copy.
If a pre-application is accepted for further processing, the
applicant will be expected to submit additional information needed to
demonstrate eligibility and feasibility (such as a CNA), consistent
with this NOFA and the appropriate sections of 7 CFR part 3560, prior
to the issuance of a restructuring offer.
Rural Development will work with pre-applicants selected for
further processing in accordance with the following steps:
(1) Based on the feasibility of the type of transaction that will
best suit the project and the availability of funds, further
eligibility confirmation determinations will be conducted by the
designated Multi-Family Housing Revitalization Coordinators assigned by
each Rural Development State Director with the assistance of the Office
of Rental Housing Preservation.
(2) If one is not already available to the Agency, a CNA will be
required and conducted in accordance with the requirements of 7 CFR
3560.103(c), Handbook 3-3560, Chapter 7, ``Guidance on the Capital
Needs Assessment Process,'' and the CNA Statement of Work together with
any non-conflicting amendments (available in any Rural Development
State Office.) A CNA is prepared by a qualified independent contractor
and is obtained to determine needed repairs and any necessary
adjustments to the reserve account for long-term project viability.
While the requirements of the CNA are described in the materials
referenced above, at a minimum, to be considered acceptable, a CNA must
include:
(i) A physical inspection of the site, architectural features,
common areas and all electrical and mechanical systems;
(ii) An inspection of a sample of dwelling units;
(iii) Identify repair or replacement needs;
(iv) Provide a cost estimate of the repair and replacement
expenses; and
(v) Provide at least a 20-year analysis of the timing and funding
for identified needs which includes reasonable assumptions regarding
inflation. The cost of the CNA will be considered a part of the project
expense and may be paid from the ``project reserve'' with prior
approval of the Agency. The Agency approval for participation in this
program will be contingent upon the Agency's final approval of the CNA
and concurrence in the scope of work by the owner. The Agency, in its
sole discretion, may choose to obtain a CNA, at its expense, if it
determines that
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doing so is in the best interest of the Government.
(3) Underwriting will be conducted by the designated Multi-Family
Housing Revitalization Coordinator assigned by each Rural Development
State Director with the assistance of the Office of Rental Housing
Preservation. The feasibility and structure of each revitalization
proposal will be determined using this underwriting process and will
include a determination of the restructuring tools that will minimize
the cost to the Government consistent with the purposes of this NOFA.
To help assure a balanced utilization of revitalization tools and the
long-term economic viability of revitalized projects, the MPR
underwriting guidelines include, but are not limited to the following:
(i) The maximum soft-second loan is limited to no more than $5,000
per unit,
(ii) The total assistance provided from a revitalization grant,
revitalization zero percent loan, and/or revitalization soft-second
loan is limited to $10,000 per unit,
(iii) The maximum Section 515 loan or Section 514/516 loan and
grant is limited to no more than $20,000 per unit, and
(iv) Properties receiving tax credits are expected to have
sufficient funding sources and generally will receive debt deferral
only.
(4) Properties with more than 75 percent of the units receiving
significant subsidy such as Rural Development rental assistance or HUD-
funded subsidy will be supplemented with Section 514, 515 and 516 loans
and grants before revitalization grants and revitalization soft-second
loans are considered.
(5) MPR revitalization grants will be limited to $5,000 per unit.
(6) Any rent increases that may be necessary will not exceed 10
percent in any one year.
(7) The approved MPR transaction will include projected revenue
sufficient to cover a 10 percent Operations and Maintenance increase in
the second year after the transaction.
(8) Full return to owner will be budgeted pursuant to the Loan
Agreement.
(9) Budgeted increases to reserve deposit will not exceed 3 percent
per annum.
(10) The remaining reserve balance at the end of the 20-year
analysis period should be at least 2.0 times the average annual needs,
including inflation, over the 20-year analysis period.
These guidelines have been developed based on experience in the FY
2005, FY 2006 and FY 2007 Demonstrations. The Agency believes that
these guidelines will be appropriate for typical transactions. However,
the Agency reserves the right to waive any of the guidelines if, in the
Agency's judgment, doing so would further the objectives of the MPR and
is in the best interest of the Government.
The Agency expects that some of the transactions proposed by
selected pre-applicants will prove to be infeasible. The applicant
entity may be determined to be ineligible under Section III of this
Notice. If a proposed transaction is determined infeasible or the
applicant determined ineligible, the Agency will then select the next
highest ranked project for processing regardless of transaction type.
Each MPR offer will be approved by the Revitalization Review
Committee chaired by the Deputy Administrator for Multi-Family Housing
or an agency-authorized delegate. Approved MPR offers will be presented
to applicants who will then have up to 15 calendar days to accept or
reject the offer in writing. Offers will expire after 15 days. The
Agency will replace expired applications by selecting the next highest
ranked project. Closing of MPR offers will occur within 90 days of
acceptance by the applicant unless extended by the Agency.
IX. Funding Restrictions
Applicants will be selected in accordance with selection criteria
and the four-step process identified in Section VII of this Notice.
Once selected to proceed, the Agency will provide additional guidance
to the applicant and request information and documents necessary to
complete the underwriting and review process. Since the character of
each application may vary substantially depending on the type of
transactions proposed, information requirements will be provided as
appropriate. Complete project information must be submitted as soon as
possible but in no case later than 45 days from the date of Agency
notification of the applicant's selection for further processing or
September 1, 2008, whichever occurs first. Failure to submit the
required information in a timely manner may result in the Agency
discontinuing the processing of the request.
Funding under this NOFA will be obligated to selectees that finish
the processing steps outlined above first within each of the 3 funding
categories described in Section VII of this Notice and to result in a
ratio as close as possible to 30 percent portfolio sale transactions,
50 percent complex transactions, and 20 percent simple transactions.
X. Application Review
A review committee will make recommendations for final decision
regarding funding to the appropriate Rural Development State Director
based on the selection criteria contained in this NOFA.
XI. Appeal Process
All adverse determinations regarding applicant eligibility and the
awarding of points as a part of the selection process are appealable.
Instructions on the appeal process will be provided at the time an
applicant is notified of the adverse action.
Dated: March 5, 2008.
Peter D. Morgan,
Acting Administrator, Rural Housing Service.
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[FR Doc. E8-4952 Filed 3-11-08; 8:45 am]
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