Strategies To Preserve And Refinance HUD Supported Affordable Rental .
Welcome to Preservation:Strategies to Preserve and Refinance HUDSupported Affordable Rental PropertiesThe Office of RecapitalizationHUD Office of Multifamily Housing ProgramsDecember 2, 2014
Webinar Format Webinar will last no more than 60 minutes and is beingrecorded. Materials will be available on HUD Exchange Training and Eventspage. https://www.hudexchange.info/training-events/ Webinar PowerPoint slides (available now) Recording of the presentation (within 2 weeks) FAQs, fact sheets, glossary of preservation terms (by end ofDecember) Use Question Box to submit questions at any time during thewebinar. Use Question Box to request assistance with technicaldifficulties. Feedback survey link will be emailed.2
PresentersPresenterGates Dunaway, Principal of the Gates Dunaway Groupgates@gatesdunawaygroup.comHUD Office of RecapitalizationClaude Dickson, Claude.C.Dickson@hud.govMarilyn Edge, Marilyn.M.Edge@hud.govSabra Loewus, Sabra.Loewus@hud.govDouglass Lynott, Douglass.B.Lynott@hud.govMinnie Monroe-Baldwin, Minnie.X.MonroeBaldwin@hud.govOffice of Asset Management and Portfolio Oversight (OAMPO)John Hall, John.Hall@hud.govYvonne Jefferson, yvonne.b.jefferson@hud.gov3
Overview of Webinar HUD WelcomeMaking the Case for PreservationUnderstanding Your OptionsCase StudyResourcesNext StepsQ&A4
HUD WELCOME MESSAGETHANK YOUMultifamily Properties: Your stewardship and property management arecritical to the success of HUD’s affordable housingmission. Your properties have met the affordable rentalhousing needs of millions of low-income tenants fordecades. HUD and your tenants still need you.5
Multifamily by the NumbersAll Section 236 MortgagesProjectsUnitsTotal Historical Production4,496565,320Currently Affordable (IRP, FHA-insured,Rental Assistance OR Use Restriction)No Longer in HUD Portfolio3,067413,1051,429152,215547102,646At Risk (Maturing Between FY 2015-2020)6
Multifamily by the NumbersAll Section 202 MortgagesProjectsUnitsTotal Historical Production4,682265,075Currently Affordable (202, FHA-insured,Rental Assistance OR Use Restriction)No Longer in HUD Portfolio4,313252,22036912,85521124,343At Risk (Maturing Between FY 2015-2020)7
Why Preservation?Growing Need for Safe, Decent Affordable Housing: Substantial Rehabilitation Needs of Existing HousingStock Renter households with worst case needs increased from7.10 million in 2009 to 8.48 million in 2011. Eroding Availability of Affordable Rental Housing Between 2003 – 2011, the number of affordable andavailable rental units decreased:– From 80 to 65 units per 100 very low-income renters– From 41 to 36 units per 100 extremely low-income renters.Source: Worst Case Housing Needs 2011: Report to Congress – Summary. U.S. Department of Housing andUrban Development, February 2013 /wc HsgNeeds11.html)8
Join the Preservation MovementWhat’s at Stake? HUD does not have the budget resources to supportnew construction to replace older properties. Once Section 236 and Section 202 mortgagesmature, preservation options essentially vanish. Thousands of low-income elderly, special needs, andother households are at risk of losing affordablehousing.9
What Can We Accomplish? Work together to secure the affordable housing gainswe have made over the past 40 – 50 years. Preserve critically-needed affordable housing assetsacross the country.HUD Can Guide You Through theProcess.10
MAKING THE CASE FORPRESERVATION11
What Does Preservation Mean?Preservation means successfully recapitalizingaffordable rental housing in order to: Safeguard long-term rental assistance for currentand future generations. Improve and modernize properties throughcapital repairs. Stabilize properties by placing them on solidfinancial footing.12
Which HUD ProgramsAre We Talking About?HUD 202Direct LoanSection 236Insured LoanOther HUD Assistance:Rental Assistance Payment Contract (RAP)Rent Supplement Contract (Rent Supp)Section 8 Project-Based Rental Assistance (Section 8)Flexible Subsidy Loan13
Look familiar?Built in the 50’s to mid-80’s, HUD 202 or 236 assistance, FHA or stateHFA financing, Section 8, and built to last 14
Look familiar?Outdated fixtures and cabinets15
Units Are At RiskSection 202 and Section 236 loans are maturing, whichmeans: End of regulatory agreement that controls rents Last opportunity to seek Tenant Protection Vouchersfor unsubsidized rentersExpiration of rental assistance contracts results in: Loss of subsidies for low income residents Loss of income stream that could leverage capitalfunds for renovations16
What Are Reasons an Owner MayWant to Preserve a Property? Achieve the mission by ensuring the property isaffordable for future occupants.Be good community stewards by taking care of theassets.Stabilize the community by addressing capitalimprovement needs.Refinance debt to increase income and derive cash.Lower operating costs by improving systems.Improve energy efficiency.Protect the rental subsidy income.17
Are you wondering how to preserveabove market rents at a Section 202building?What will happen when your loan ispaid off, especially that “debtservice” line in your HUD Section 8budget?Does your property have mountingmaintenance needs?Are your property's outdatedsystems imposing serious constraintson cash flow and reserves?Are your current Section 8 rents wellbelow market?18Your propertyis nearing itsloan maturityor your rentalassistanceterm isexpiring.
Is your Rental Assistance Payment(RAP) or Rent Supplement (RentSupp) contract expiring?Do you have a Flexible SubsidyLoan balloon note due?Are you tired of owning yourproperty but want to make sure itcontinues as affordable housingwith a new owner?Are you confused about yourpreservation options and whereyou can go for useful information?19Your propertyis nearing itsloan maturityor your rentalassistanceterm isexpiring.
HUD has created a number of toolsto make it easier for owners torefinance and stabilize theirproperty, as well as incentives tourge them along a path ofpreserving their valuableaffordable housing inventory.20Your propertyis nearing itsloan maturityor your rentalassistanceterm isexpiring.
Understand that preservationactions can improve yourproperty and your residents’lives.Know how to move forwardwith the best options for youand your property.Your propertyis nearing itsloan maturityor your rentalassistanceterm isexpiring.Find the simplest path to your goals.21
UNDERSTANDING YOUROPTIONS22
Issue:After the original loan matures, Iam worried about potential markdown of the Section 8 rents sincethere is no more debt service.Solution:Leverage the income to refinancethe property with new debt.23All optionstake time.Startplanningnow.
Issue:The property has so many capitalupgrades needed, and the oldsystems are inefficient.Solution:Leverage the income to refinancethe property with new debt.Proceeds from the new loan canbe used for capital upgrades andrepairs.24All optionstake time.Startplanningnow.
Issue:Section 8 rents are below marketand the current income does notleverage enough debt to addressrepair needs.Solution:Increase rental income through theMark-up-to-Budget or Mark-Up-toMarket process and then refinance.25All optionstake time.Startplanningnow.
Issue:I have a Section 202 property andmy rents are over market. Howdo I protect them?Solution:Prepay the Section 202 loanunder the applicable Notice H2013-17 to ensure continuedability to retain over-marketrents.26All optionstake time.Startplanningnow.
Issue:My Rent Supp and RAP contractsare expiring, and HUD does nothave the authority to renew orextend them.Solution:Convert the contracts throughRental Assistance Demonstration(RAD) Component II to create along-term stable rent subsidy.27All optionstake time.Startplanningnow.
Issue:My fully deferred Flexible SubsidyLoan is due. HELP!Solution:Defer and re-amortize theFlexible Subsidy Loan throughHUD; utilize the income stream torecapitalize.28All optionstake time.Startplanningnow.
Issue:We have “board fatigue” and wouldlike to get out of the affordablehousing business, but we want toprotect affordability for the tenantsof our Section 202 property.Solution:Sell to or joint venture with anentity with a preservation mission.29All optionstake time.Startplanningnow.
Issue:Can I help my current residents whoare not receiving rental assistancein my Section 236 property?Solution:Prepay the Section 236 loan and itmay be possible to receiveEnhanced Vouchers for unassistedresidents.30All optionstake time.Startplanningnow.
Issue:My mortgage is maturing and mySection 8 contract is expiring soon.What can I do in this short periodof time?Solution:Renew the Section 8 contract tocontinue the subsidy, andleverage income to refinance andpreserve property. Call HUD forguidance.31All optionstake time.Startplanningnow.
CASE STUDYHUD Office of Recapitalization32
Senior TowersCase Study Background Originally financed with a HUD Section 202 loan in1976. 100% Section 8. Took out a Flexible Subsidy Loan in the 1990’s;principal and interest deferred until maturity of theSection 202 loan. Nonprofit owner desired to refinance the existingSection 202 loan to payoff the Flexible Subsidy Loanand to recapitalize the property.33
Senior TowersCase Study Preservation Strategy FHA 223(f) loan was best fit to address capital upgradeneeds. New loan allowed owner to pay off Flexible SubsidyLoan and to complete approximately 10,000 per unitin upgrades. Section 8 rents were at market. Executed a new 20year HAP contract when closed on the new loan. Increased surplus cash is being programmed foradditional improvements over time.34
Senior Towers KitchenBEFORESenior Towers KitchenAFTER35
Senior Towers Kitchen – AFTER New cabinets, granite,fixtures, lighting, flooringKitchen opened up to livingroom to allow natural light36
Senior Towers Bathroom - AFTER 37New sinkNew low flow,comfort heighttoiletNew fixturesand accessoriesTile and paint
Preservation TimingThere are many components to a successful preservation,and the timing of each needs to be coordinated carefullyto work with the overall strategy. To consider: Board education and agreement on the best strategy Assembling the team Understanding the details HUD approvals required Applications for new funding Timeline for new funding38
RESOURCESHUD Office of Recapitalization39
HUD Preservation Resources Office of Recapitalization home page:http://portal.hud.gov/hudportal/HUD?src /program offices/housing/mfh/hsgmfbus/aboutahp 202 Prepayment Notice (HUD Notice H 2013-17)http://portal.hud.gov/huddoc/13-17hsgn.pdf Multifamily Preservation Resource Desk - ForSection 236 projectshttp://www.hudmfpreservation.net/40
HUD Preservation ResourcesMultifamily HousingPreservation Mailing List:https://hudexchange.info/mailinglist Subscribe to receiveemails with news, events,training, and informationabout how to maintainaffordability.41
HUD Preservation ResourcesFuture Website: https://hudexchange.info Housing Preservation webpages to belaunched on the HUD Exchange. Webpages will consolidate and link existingweb-based materials into easy to accessand searchable formats. Webpages will include new fact sheets,guidance, and webinar materials.42
HUD Preservation ResourcesPreservation webinars planned onbasic and advanced topics in2015. For information: https://hudexchange.info/trainingevents Webinar dates and times Slides, recordings, andinstructional materials Announcements made through theMultifamily Housing PreservationMailing List. (See slide 41.)Next webinar:“Section 236 Basics”in January 2015.43
NEXT STEPSHUD Office of Recapitalization44
Agree to Start NowWhy? Favorable changes in HUD regulations Favorable financing Expiring subsidies force action Maturing balloon notes must be addressed45
What Are My Next Steps?1.Stay informed and get educated (see HUDresources).2.Understand the details and hurdles for yourproperty.3.Agree on your desired outcomes.4.Decide the best path to meet your desiredoutcomes.5.Assemble your team and proceed.46
What Are My Next Steps? Contact HUD as soon as possible. Email HUD withproperty name, property address, mortgagematurity date, and primary contact person/contactinformation as follows: For Section 202 properties, emailSection202@hud.gov For Section 236 properties, email236Preservation@hud.gov47
Form Your TeamGather a team ofprofessionals who arefamiliar with andspecialize in thepreservation process. HUD Program Staff,Headquarters and/orField o not do this alone!48
Sign up for the mailing list on the HUDExchange. Know your project – its financing,subsidies, and capital needs. Talk to your board. Talk to your HUD representative. Stay informed. Ask for information and assistance.Start now!49Summary
Questions & AnswersUse Question Box in GoToWebinar dashboard tosubmit written questions.For specific project questions, contact your HUDrepresentative or email to: For Section 202 propertiesSection202@hud.gov For Section 236 properties236Preservation@hud.govHUD Office of Recapitalization50
PLEASE GIVE US YOUR FEEDBACKFeedback survey link will be sent after the webinar.Thank You51
by ensuring the property is affordable for future occupants. Be good. community stewards . by taking care of the assets. Stabilize the community by addressing . capital improvement. needs. Refinance debt . to increase income and derive cash. Lower operating costs by . improving systems. Improve . energy efficiency. Protect the . rental subsidy .
The existing loan is not required to be FHA insured. Loan is fully credit qualifying with appraisal. Impac’s FHA Simple Refinance program is a no cash-out refinance of an existing FHA-insured mortgage in which all proceeds are used to pay the existing FHA-insured mortgage lien on the subject property and costs associated with the transaction.File Size: 849KB
Ten states accounted for over 60 percent of the nation's HARP eligible loans with a refinance incentive as of June 30, 2016. Overview and Eligibility of the Home Affordable Refinance Program (HARP) FHFA Refinance Report Third Quarter 2016 Borrowers completed 15,597 refinances through HARP,
refinance, this nonprofit lender participated in several waves of offers to their clients that would allow them to refinance. By working directly with the lender, we were able to identify in the data which households were eligible (preapproved) to refinance. Consistent with the results from the nationally-representative data, we find that a large 4
Refinance Activities (Number of loans) 2Q20 3Q20 Total Refinance 1,522,472 1,758,940 Total High LTV Refinance Option 51 35 5.225 million troubled homeowners helped during conservatorships 41% of loan modifications in 3Q20 reduced borrowers' monthly payments by over 20% Serious delinquency rate jumped to 3.14%
Fannie Mae and Freddie Mac suspended the High LTV Refinance option in 2021. The total refinance volume from the inception to the end of the program reached 201 loans. The percentage of borrowers refinancing into shorter term 15-year fixed rate mortgages decreased to 24 percent in December as the difference between 15-and 30-year fixed rate
Refinance Net Tangible Benefit: ㆍ A Net Tangible Benefit is required for all refinance transactions. A letter of explanation for the refinance must be included in the loan file. ㆍ A Net Tangible Benefit includes but is not limited to a 5% reduction in PITIA, 5% reduction in DTI, a 2% reduction in rate, a reduced term, and/or
little or no equity in their homes to refinance their home loans, as long as they are current on their mortgage payments. As of March 2013, more than 2.4 million homeowners have obtained a HARP refinance. This report was prepared by Alexa Strear, Investigative Counsel, and Brian Harris, Investigative Counsel.
The second part discusses mortgage 1 Specifically, this regulatory review covered the French national mortgage liquidity, Caisse de Refinancement de l'Habitat (CRH), the Tanzania Mortgage Refinance Company, the Egyptian Mortgage Refinance Company, and the United States' national mortgage liquidity facility, the Federal Home Loan Bank System.
