HB3-3560, Chapter 7 Overview

HB3-3560, Chapter 7OverviewCHAPTER 7: TRANSFER OFOWNERSHIP7 CFR 3560.406Industry Interface CallApril 19, 20171

GoalStreamline process to support theTransfer Improvement Project, updatepolicies to more closely adoptindustry standards, eliminateredundancies, clarify programrequirements, and correct oversightsand omissions.2

Accomplishments Shortened timeframe for RD reviews Clarified minimum acceptable submission Implements use of Preliminary AssessmentTemplate (PAT) Uses industry standards when appropriate Recognizes allowable industry practices Promotes loan making and servicingcooperation3

Eliminated redundant forms and informationsubmissions Clarified responsibilities for RD and Applicant Expanded opportunities to access available RDservicing tools Emphasized Agency preservation goals Considered internal and external customercomments and limitations4

General Applies to all RRH and FLH TransfersProvides Guidelines and Direction to StaffRequires Eligibility and other determinationsRelies on HB1-3560, Chapters 4 and 5Requires Underwriter & Servicer CooperationClarifies Objectives and ResponsibilitiesEstablishes Goals and TimelinesEstablishes use of PAT for documentationRequires Agency Prior Consent and Approval5

Authority Loan Agreement/Resolution– Regulatory Covenants So long as the Loan Obligations remain unsatisfied, the Borrowershall comply with all appropriate regulations of the Governmentand . Unless the Government gives prior consent: 1) Not use the Housing for any purpose other than as rentalhousing and related facilities for eligible occupants. 2) Not enter into any contract or agreement for improvements orextensions to the Housing or other property securing the loanobligations. 3) Not cause or permit any transfer or encumbrance of title to theHousing or any part thereof or interest therein, by sale, mortgage,lease, or otherwise. 4) Not borrow any money, nor incur any liability which would havedetrimental effect on the Housing.6

Regulation §3560.406 MFH ownership transfers or sales– applies to ownership transfers or sales (e.g., titletransfers) involving an Agency financed housingproject. The provisions cover situations where Agencyloans are being assumed as a part of a housing projecttransfer or sale. §3560.407 Sales or other disposition of securityproperty– must obtain Agency approval prior to selling orexchanging all or a part of, or an interest in, propertyserving as security for Agency loans7

Resources Website– ily-housing-direct-loans CFR– https://www.ecfr.gov/cgi-bin/textidx?SID 5e8f4ad77dd162fd10ae34935ea54a83&node pt7.15.3560&rgn div58

Objectives Must be in best interests of Gov’t & Tenants Improve & maintain physical & financial viabilitywithin reason Improve & maintain affordability for RD eligibleTenants Improve & maintain consistency in applicationprocessing and review Provides consistent framework for working withtransaction funding partners throughout theprocess (state agencies, third party funders,investors, etc.)9

Definitions Transfer – Any change in ownership that:– Places title in a new owner’s hands– A new owner assumes liability for the debt,– There is a change in the ownership entity that iscommonly considered to create a distinct andseparate entity form the original borrower including anew IRS tax number or resulting in 100% of theownership interests being transferred within 12consecutive months,– Is not excluded by the limited servicing exceptions inHB3-3560, Chap. 5,– or is required by loan documents10

Conditions for Transfers Revitalization Remove Hardship– Serious Illness or Death– Financial difficulties beyond borrower’s control– Maintain affordable rents Court OrderAlternative to PrepaymentBest interests of Government & Tenant

–Eligible uses defined in HB1-3560 and CFR –Effective date completion of approved repairs/rehab 15. LIHTC and Basic Rents Rents are set in Chapter 7, HB2-3560 Basic rents are set at a level necessary to provide