Midwest Lenders Annual Conference September 5, 2018 Chicago Elizabeth H. Arteaga, Housing Program Officer, Affordable Programs

LIHTC Production Data In the past 12 months, what is the shortest time a deal took to get a Firm Commitment – that’s from the date of submission (not assigned to an underwriter) nation-wide.    In the past 12 months, what is the longest time a deal took to get a Firm Commitment – that’s from the date of submission (not assigned to an underwriter) nation-wide.   In the past 12 months, what is the average time a deal took to get a Firm Commitment – that’s from the date of submission (not assigned to an underwriter) nation-wide. 

Section 221(d)(4)/220 LIHTC Pilot Program

Section 221(d)(4)/ 220 LIHTC Pilot Program - Introduction Under the same authority and requirements, our goal is to streamline and better align the Section 221(d)(4)/220 New Const. & Sub. Rehab. programs with LIHTC, without altering current Multifamily policies. Loans under this product create a lot more construction activity, infrastructure development, and job creation. As the primary vehicle for the production of new affordable housing nationally, (d)(4) should have a greater position in the financing market. After extensive outreach, both internally and externally, and review of best practices, we have come up with a streamlined program which reduces administrative requirements, and frees lenders to do what they do best, while maintaining a conservative risk position. Pilot will run for 3 years and HUD will evaluate what needs to be approved with staff and lenders. Lessons will be incorporated into the MAP Guide and permanent mortgage insurance programs. The program includes 2 distinct processing tracks: Expedited Approval and Standard Pilot Approval processing.

Expedited Approval Processing Eligible deal types 9% LIHTC New Construction at 65% maximum Loan To Cost w/ rents 10% below market 4% or 9% LIHTC Sub Rehab. w/ Sec. 8 at 75% maximum Loan To Cost Goal: Close within 90 calendar days (30 day review + 60 days to close) Loan underwriting, construction monitoring, and release of escrow funds will be performed by the lender. HUD will perform a limited review of the lender’s underwriting and will enforce statutory and regulatory requirements (i.e. environmental reviews, 2530s, Fair Housing Act compliance).

Standard Pilot Approval Eligible deal type 4% or 9% re-syndication LIHTC sub. rehab. without Section 8 at 75% maximum Loan to Cost w/ rents 10% below market Goal: Close within 120 calendar days (60 day review + 60 days to close) HUD will review and approve the Lender’s underwriting conclusions & ensure compliance with statutory and regulatory requirements Lender will be allowed additional authority during the construction phase (approve most change orders, escrow releases)

Eligibility Requirements for Both Tracks Experienced Borrower Teams Clear 2530s Limited environmental risk factors Evidence of LIHTC commitment Maximum Loan Amount: $25 million Pose limited risk (low Loan to Cost, few environmental issues) Fast turn-around (excludes complex deals such as RAD) Subject to Concept Meeting and Loan Committee reviews

HUD’s Commitment to Affordable Housing Lower MIP; Higher LTC/LTV Ratios; Lower Vacancy Rates; No Cost Certification if < 80% LTC/LTV; Mortgageable Developer Fees (see MG Appdx. 2); 20% Equity Pay-In Requirement; Equity Installments thru Const. No tax credit escrowing requirements; Straight-to-Firm; Streamlined A&E/Cost Review; No Subsidy Layering Review

HUD’s Commitment to Affordable Housing 10% Assur. Of Compl.; Single Underwriter Model; EBLs for up to 80% of Equity Requ.; Lax RLC/NLC review requirements ( > $20 million); LLCI/Passive Investor Certification only, no credit review for Investor (typically 99.99% LP and 0.01%GP); Developer Fee + Builder/GC Profit is o.k. (Developer Fee + BSPRA NOT OK); Private debt up to 100% of Total Project Costs may be secured w/project; Concept Meeting optional Investor required reserves (IOD and Wkg. Cap) can be credited towards HUD’s requ. Amounts.

HUD/MBA LIHTC Committee Initiatives: Working together GP’s Pledge of Ownership Interest/ EBLs Documenting Surplus Cash Note Wheelbarrow 2.0 LIHTC Pilot Training Equity Bridge Loan Repayment Terms Chapter 14 of the MAP Guide Income Averaging