U.S. Department of Housing & Urban Development Income Calculation/Form HUD 92264T Debt Service Criterion (92264a #5) Tax Credits/FHA Mortgage Insurance Good afternoon, and thank you for joining us on today’s webcast – this is the first of three training sessions for HUD staff we’ll conduct over the next week. We welcome our lender partners as well who we hope are able to watch with the HUD staff or remotely.

Rent by Market Comparison-92264t Form 1. Line 1 of Form HUD-92264-T for each affected unit size, enter the market rental estimates from Form HUD-92273. Instructions from Notice H 92-97 (HUD)

Personal Benefit Expense-92264t 2. Line 2 - If utility costs are to be paid by the tenant, enter an estimated Personal Benefit Expense (PBE) for services or utilities not included in the market rental estimate. ibid

Tax Credit Restricted Income-92264t Income limits based on AREA Median Income (AMI) can usually be accessed on the applicable State Housing Authority website. Example: IHDA http://www.ihda.org/manager/documents/AllPrograms2014Final.xls Also Novogradac has a pretty cool rent and income limit calculator: http://www.novoco.com/products/rentincome.php Adjust the appropriate per person income limit (% of AMI) by 1 ½ persons per bedroom (1 person for a studio/efficiency unit) and enter on line 3.

Calculation of Restricted Rents-92264t 4. Line 4 - Compute and enter the estimated maximum affordable monthly rent for each affected unit size. Compute that rental estimate as follows: a. Multiply the income limit on line 3 of the form by 30 percent (.30); b. Divide the product obtained in step a by 12; c. Subtract the monthly PBE (if any) on Line 2 from the quotient obtained in step b. Ibid *Where State or local laws, ordinances or regulations limit rent to an amount lower than this formula estimate, or the sponsor's proposed rent is less than this formula estimate, enter the lower amount and explain below.

Achievable rents if lower-92264t 5. Line 5 - Where the appraiser has evidence that the project's tax credit assisted units would not be marketable to income eligible households at the lesser of the maximum affordable monthly rents (Line 4) or the rent by market comparison (Line 1), based on the market study or market analysis review by the HUD EMAD, enter the recommended estimated monthly rent obtainable for the restricted units, as approved by the Director, Housing Production. For Section 223(f) cases involving projects with existing Section 8 HAP contracts, use this line to enter the processing rents calculated in accordance with the outstanding instructions involving the refinancing or purchase of Section 8 projects with outstanding project based contracts. ibid

Underwritten Rents for Criterion 5-92264t 6. Line 6 - Monthly Rent Estimate for Restricted Units. Enter the least of lines 1, 4, or 5. Ibid ***enter in Section C of form HUD 92264 (restricted rent analysis)

Unit Distribution by Type (Restricted/Market)-92264t Enter number of units for each unit type

Form 92264t

Treatment of HAP Contract Renewals for Section 8 Assisted Tax Credit Projects Rental assistance for LIHTC projects with Project Based Section 8 Rental Assistance (“Assisted Projects”) should take the form of a 20-year, Project Based Rental Assistance Section 8 Housing Assistance Payment (HAP) contract or a 15-year Project Based Voucher contract.

Rent Comparability Rent Comparability Studies (“RCSs”) form the basis of and must be completed in advance of any loan application, because they provide justification for rent increases and are a requirement of the HAP Contract Renewal Request. Benjamin T. Metcalf Memo of August 7, 2014, Use of a Lender Ordered MAP Appraisal in Lieu of a Separate Rent Comparability Study (RCS) For Mark-Up-to-Market Transactions If the Performance Based Contract Administrator’s (“PBCA”) appraiser has not undertaken a detailed review of the RCS, the HUD appraiser must also review the RCS to determine reasonableness using Guidelines in Chapter 9 of the “Section 8 Renewal Policy”.

Office of Asset Management and Portfolio Oversight (OAMPO) Close coordination among the assigned HUD Underwriter, the field office’s Office of Asset Management and Portfolio Oversight (OAMPO) representative assigned to the project, and if necessary, HUD HQS’ OAMPO staff is essential to ensure that the Section 8 HAP contract renewal request and rent increase, if applicable, are approved in a timely fashion, a prepayment approval is obtained if needed, and any other waivers are processed and approved in a timely fashion.

Involvement of Performance Based Contract Administrator (PBCA) Section 8 HAP Renewal Requests and Rent Adjustment Requests must be delivered to the PBCA at least 60 days prior to the submission of the LIHTC Firm Commitment application, and 120 days in advance is preferable. The Rent Comparability Study, or “RCS” rents and the appraiser’s rents must be determined within 180 days of the issuance of the Firm Commitment, or those rents must be updated according to MAP Part 7.6.B. The PBCA working under the direction of OAMPO prepares and signs the new contract and an attached cover letter for delivery to the owner.

Prepayment Requests Lenders’ requests for prepayment of an FHA insured loan should be submitted to headquarters well before submission of the Firm Application package to the HUD field office.

Section 8 subsidized Pilot Program Section 8 subsidized Pilot Program projects require owners to execute a 20 year HAP contract (except for Mark-to-Market (M2M) projects that received exception rents). RAD projects are eligible for the Pilot as long as at least 90% of their units are Section 8 assisted, and they have new 15-year Project Based Voucher contracts.

Existing Contract Termination This will require HUD to authorize the Owner to terminate the existing HAP contract for the purposes of executing a new 20 year HAP contract. If the project is operating under a multi-year term contract, the Owner and HUD must, by mutual agreement, terminate the existing HAP contract and execute a Renewal Contract with a new 20 year term, subject to the policy at the time and the availability of appropriations. The Owner must also execute an Exhibit to the Section 8 HAP contract, agreeing to renew the HAP contract again at the end of the new 20-year term, for at least the number of years remaining on the contract in place at the time of the early termination.

Preservation Exhibit The Preservation Exhibit must also be executed.

substantial rehabilitation project at “post rehab” market rent levels If the borrower requests a market-based rent increase on a substantial rehabilitation project at “post rehab” market rent levels to support a new 221(d)(4) insured loan at initial closing, a Section 8 escrow will be required to fund the difference between the existing rents and the post-rehabilitation rents during the construction period. Lenders should include this escrow in their underwriting. Alternatively under the Section 223(f) program, a waiver of the prohibition against post rehab rents during construction can be obtained. Borrowers and their lenders should refer to the Section 8 Renewal Policy for details on post rehabilitation rents.

LIHTC Firm Approval Application Exhibits A copy of the HAP Contract Renewal Request Project Rent Comparability Study (If not using the MAP Appraisal in lieu) MAP-compliant appraisal HUD forms 92264, 92273 and 92274

Rental Assistance Demonstration (RAD) Program Note: regarding RAD/FHA/LIHTC Projects: HUD has issued separate guidance for Rental Assistance Demonstration projects with regard to the underwriting of RAD transactions with FHA-insured loans and LIHTC. (See Notice H 2012-20)