Presentation on theme: "Loan Execution Panel Discussion"— Presentation transcript:
1 Loan Execution Panel Discussion Presented ByKatey Forth Moderator Great Lakes Capital FundPaul DeKruiff Originator Great Lakes Capital Fund Zina Risk Underwriter Great Lakes Capital Fund Brian Jones Director Love FundingGreg Mayernik Originator Love Funding
2 How To Choose The Best Loan Product. Know Where Your Asset Is In Its Life-CycleMaking, Setting, And Achieving Your Goal
3 Permanent Lending Products Program NameFannie Mae LIHTCFannie Mae PreservationPrivate InvestorPredevelopmentMaximum Loan To Value*90%**80%80% - 90%90%Minimum Debt Coverage Ratio*1.15**1.20N/AAmortization30Loan Term7,10,18,30At least 15 yearsMonthsRates (as of May 21, 2014)4.15% %CallGeneral Notes Prepayment Options AvailablePrepayment Open With Payment Annotations*These standards apply only to LIHTC projects with at least 8 years remaining in the initial 15-year compliance period. The Mortgage Loan must have a loan term that is equal to or greater than the remaining initial compliance period with 30-year amortization. (New tax credit deals)**Applies to PRESERVATION deals - includes LIHTC with less than 8 years of compliance remaining, and catch all for recorded rent restrictions - ie, LURA
4 Loan Term Sheet Eligible Projects Properties that are designated affordable via regulatory agreements or rent restrictions(Including coterminous HAP contracts)Any location in the countryTerm and Amortization7, 10, 18, or 30 year term30 year amortization for new construction or significant rehabilitation35 years available for properties with long term HAP contractsEligible Loan Amounts$500,000 minimumNO MaximumUnderwriting CriteriaMinimum Debt-Service-Coverage of 1.20xMaximum Loan-to-Value 80% for refi or up to 90% for new 9% creditsRecourse/ GuaranteesLoans are non-recourse to borrowerPersonal guarantees are required against fraud and bad actsRate Locked CommitmentImmediate loans rate locked for 30 days after completion of underwritingForward loan commitments can be rate locked for up to 30 months with 2% depositLegal Fees fixed at a maximum of $12,000 per loan for a typical transactionPre-paymentLoans will have yield maintenance provisionPre-payment fee after the expiration of the yield maintenance is 1% of principal balanceApplication and Origination$2,500 plus deposit to pay for all third party reports – appraisals, credit checks, etc.Origination Fee ranges from 1.0% to 2.0% depending upon loan size and complexityLegal FeesLegal Fees fixed at a maximum of $12,000 per loanReplacement ReservesA minimum of $250 per unit per year to be funded on a monthly basisReplacement Reserve funding level will be evaluated after tenth year of the mortgageSubordinate FinancingSoft subordinate loans are allowed, but must be subordinated to first mortgageLoan Term Sheet
5 Fannie Mae Financing Loan Application And Submission Stage Our InspectionsThird Party ReportsCredit ReviewMildly Painful forms….Post-ClosingNO Audit RequiredALL Communication Is With GLCFNo REAC Inspections
6 FHA Financing Overview May 21, 2014 Brian JonesPhone:@bwjfinanceGreg MayernikPhone:
7 About Love FundingLove Funding is a fully-approved HUD LEAN and MAP lender serving clients across the country from its headquarters in Washington D.C. and offices in Boston, Cleveland, Dallas, Denver, Kansas City, Knoxville, New York, Palm Beach, Tampa and St. Louis. The company offers refinance, construction and acquisition financing programs for multifamily, senior housing and healthcare facilities, including hospitals. Love Funding is one of the Love Companies, a St. Louis-based investment holding company with origins dating back to 1875.
8 HUD Section 221(d)(4) New Construction or Substantial Rehab Manage expenses, collections and occupancy to maximize loan proceedsHUD Section 221(d)(4) New Construction or Substantial RehabMarket RateAffordable>90% Rental AssistanceMaximum Term40 years fully amortizingDebt Service Coverage1.20x1.15x1.11xLoan to Replacement Cost83.3%87%90%MIP (1.0% at closing).65%.45%Maximum Underwritten Occupancy93%95%Working Capital Escrow4% of loan amountAnnual Replacement ReserveGreater of: 1) .60% of total structure cost for new construction or .40% of loan amount for rehab or 2) $250 per unit per year.HUD considers waivers when formula exceeds $500 per unit.Initial Operating DeficitTypically the greater of: 1) amount determined by underwriter, 2) 3% of loan amount or 3) 4 months debt service for walk-up or 6 months debt service for elevator buildings subject to a Certificate of Occupancy issuance.Substantial Rehab ThresholdCost of Repairs, replacements and/or improvements of the existing property must exceed the greater of: 1) 15% of the estimated replacement cost after completion of all repairs and improvements or 2) $6,500 adjusted regional HUD high cost factor.Additionally, a property can qualify for substantial rehab if two or more building systems are being replaced.OtherDavis-Bacon prevailing wage rates applyLarge loans are subject to more conservative underwritingSubordinate financing is allowed from a governmental source and only in the form of a surplus cash note.
9 HUD Section 223(f) Refinance or Acquisition Manage expenses, collections and occupancy to maximize loan proceedsMarket RateAffordable>90% Rental AssistanceMaximum Term35 years fully amortizing limited to 75% of the remaining economic lifeMaximum Loan is Limited to the Lesser of:Refinancing1) Debt Service Coverage1.20x1.17x1.15x2) Loan to Value83.3%85%87%3) Eligible CostsGreater of: 100% of eligible costs or, if cash out, 80% of market valueAcquisition3) Eligible Transaction CostsMIP.65%.45%Maximum Underwritten Occupancy93%95%Replacement ReserveInitial deposit based on PCNA then annual deposits at the greater of $250 per unit or as identified in the PCNAOtherRepairs can not exceed the greater of $6,500/unit multiplied by the high cost factor or 15% of the estimated replacement cost after completion repairs. Repairs are also limited to one major building system.Davis-Bacon prevailing wage rates do not apply to repairs
10 >90% Project Based Rental Assistance LIHTC Pilot Program Permanent Financing for Multifamily Housing with LIHTCOverviewWorking within the framework of the 223(f) loan program regulations, HUD created a loan program with a streamlined review process on transactions that are low risk. The Pilot program is designed to expedite application processing to meet tight external deadlines imposed by the LIHTC program.Eligible Properties:1) Re-syndicated LIHTC projectsPermanent financing for acquisition and/or refinance with moderate rehabilitation up to $40,000 per unit2) Acquisition & Rehabilitation with LIHTCPermanent financing for acquisition and/or refinance with moderate rehabilitation up to $40,000 per unit.Projects with >90% rental assistance, market rate converting to LIHTC or affordable projects converting to LIHTC.3) New constructed stabilized propertiesPermanent financing under waiver of three year rule. Projects must have building permits prior to September 18, 2014.MIP.45%Maximum Loan is Limited to the Lesser of:Affordable>90% Project Based Rental Assistance1) LTV85%87%2) Refinance LTC100%3) Acquisition LTC90%4) DSC1.176x1.15x5) Dollar Maximum$25 million
11 FHA Financing What is means for asset management Pre-loan Application Stage- Manage expenses- Manage collections- Manage occupancyLoan Application and Submission Stage- Forms, forms and more forms- Forms…. see above- InspectionsPost Loan Closing Stage- Registration for on-line HUD reporting systems- Physical inspections- Annual audit and submission requirements