WHATS NEW IN RURAL DEVELOPMENT? NORTH CAROLINA AFFORDABLE HOUSING CONFERENCE RALEIGH, NORTH CAROLINA SEPTEMBER 16, 2010

MEL ELLIS. DIRECTOR, SINGLE FAMILY HOUSING USDA RURAL DEVELOPMENT (NC) (919)

WHO HAS HEARD OF USDA RURAL DEVELOPMENT BEFORE TODAY?

MISSION STATEMENT To enhance the ability of rural communities and to develop, grow, and improve their quality of life by targeting financial and technical resources in areas of greatest need through activities of greatest potential. Rural Development consists of three areas: Rural Housing Rural Utilities Rural Business

Single Family Housing Programs Section 502 Guaranteed Loans OVER $805.0 M Section 502 Direct Loans $75.8 M Section 504 Repair Loans $1.54 M Section 504 Repair Grants $1.52 M FISCAL YEAR 2010 NORTH CAROLINA

Single Family Housing Programs Section 502 Direct Loans ($75.8 M) Assisted 575 Rural Households with Mortgage Loans

Section 502 Direct Loans Purpose Provide people in rural communities the opportunity to own adequate, modest, decent, safe and sanitary homes

BASIC ELIGIBILITY CRITERIA Do not currently own adequate housing Must be a U.S. Citizen, or Legal Resident Alien Have legal capacity to enter into a contractual relationship Possess acceptable credit Have a stable and dependable income

BASIC ELIGIBILITY CRITERIA Down Payment: None Required Property: No square footage or amenity limitations Exception: No swimming pools

RATES, TERMS, AND LIMITS Interest Rate: (Changes monthly, depending upon the cost of money to the Government). Payments may be subsidized to as low as 1% financing. Terms: Typically 33 years, but may be extended to 38 years for very low income applicants if needed in order to achieve adequate repayment capacity. Loan Ceiling: Varies by County

CREDIT HISTORY Indicators of Unacceptable Credit Account payments delinquent > 30 days on two or more occasions within a 12-month period Foreclosure that has been completed within the last 36 months Outstanding Internal Revenue Service (IRS) tax lien or any other outstanding tax liens with no satisfactory arrangement for payment Two or more rent payments paid 30 or more days late within the last 2 years

CREDIT HISTORY Indicators of Unacceptable Credit Outstanding collection accounts with no satisfactory arrangements for repayment or paid in full within the last 6 months Non-Agency debts written off within last 36 months unless paid in full at least 12 months ago Delinquency on a federal debt

CREDIT HISTORY Indicators of Unacceptable Credit A court-created or court-affirmed obligation or judgment caused by nonpayment that is currently outstanding or has been outstanding within the last 12 months, except : A bankruptcy in which: Debts were discharged >36 months prior to the date of application Debt restructuring plan successfully completed and applicant has met obligations when due for the 12 months prior to the date of application A judgment satisfied more than 12 months before the date of application An applicant with an outstanding judgment obtained by the United States in a Federal court, other than the United States Tax Court, is NOT eligible for a Section 502 loan. This requirement is statutory and cannot be waived.

YOU MAY HAVE SOME CREDIT ISSUES BUT DONT GIVE UP YOUR DREAM!!!

CREDIT HISTORY Credit Waivers Rural Development may consider mitigating circumstances to establish the borrowers intent for good credit when the applicant provides documentation that: The circumstances were of a temporary nature, were beyond the applicants control, and have been removed. The adverse action or delinquency was the result of a refusal to make full payment because of defective goods or services or as a result of some other justifiable dispute relating to the goods or services purchased or contracted for.

Credit counseling is also available to help put you on the right track to homeownership Local Non-Profit Community Development Corporations & Community Action Agencies that are active in housing CREDIT HISTORY

Section 502 Direct Loan Borrower

Single Family Housing Programs Section 502 Loan Guarantees (OVER $805.0M) Assisted over 5,949 Rural Residents

Sec. 502 Guaranteed Loan customer

Section 502 Rural Housing Loan Guarantees Purpose: To help those at the moderate income level purchase homes in rural areas. Funds can be used to build or purchase a home.

Section 502 Rural Housing Loan Guarantees Role of USDA: To Guarantee a Lender that we will repay that lender 90% of the total loan value if the Loan goes bad & is not re-paid

Section 502 Rural Housing Loan Guarantees Eligibility: Income of up to 115% of median income for the area. The lender determines repayment feasibility, using repayment ratios.

Section 502 Rural Housing Loan Guarantees Terms: Loans are for 30 years Interest rate is set by the lender No required down payment

Home Financed Through Section 502 Guaranteed Home Loan

SFH 504 LOAN PROGRAM ($1.54 M) PURPOSE: To provide a source of funds for rural homeowners for the removal of safety hazards and repairs to existing properties.

SFH 504 LOANS Provides a source of funds for very low income owner occupants for removal of safety hazards and repairs to existing properties. Interest Rate: 1% Terms: Maximum of 20 years Maximum Loan Amount: $20,000

SFH 504 LOANS ELIGIBILITY Must own and occupy property that needs repairs Household income must be below the areas very low income limit Must be a US Citizen or Legal Resident Citizen Possess legal capacity to enter into loan relationship Have satisfactory credit history

SFH 504 GRANT PROGRAM ($1.52 M) Funds Purpose: Emergency repairs, energy conservation, and the removal of safety hazards Maximum Grant Amount: $7,500 (FUNDS HAVE BEEN EXTREMELY LIMITED WITH NORMALLY A LENGTHY WAITING LIST) Who is Eligible: Owner occupants aged 62 years or older) who lack repayment capacity for a loan Grant recipients must sign a statement agreeing to repay the grant if the property is sold within 3 years from the date of grant.

RURAL HOUSING SITE LOAN PROGRAM Rural Housing Site Loans are loans made to provide financing for the purchase and development of affordable housing sites in rural areas for low and moderate-income families. Loans are made to acquire and develop sites for housing to be constructed or for site development to build affordable homes for low or moderate income rural residents.

RURAL HOUSING SITE LOAN PROGRAM Eligible organizations include nonprofit organizations, public bodies and Federal recognized Indian Tribes.

For more information about these or other USDA housing programs, contact the USDA Rural Development State Office at or visit our website at:

USDA RURAL DEVELOPMENT STATE OFFICE 4405 Bland Road, Suite 260 Raleigh, NC Phone: (919)

RURAL DEVELOPMENT NEW HAPPENINGS MULTI FAMILY HOUSING

WHATS NEW? New Underwriting Templates Handbook Changes for Appraisals Capital Needs Assessment (CNA) Guaranteed Rural Rental Housing Program (GRRH)

New Underwriting Templates RD is releasing three new tools for evaluation by RD staff The three tools are: –New construction underwriting template supports the underwriting for new construction 515 projects and new construction farm labor housing projects –Preliminary analysis tool for transfers (for use by RD staff, borrowers, and potential purchasers) allows rapid assessment of whether a potential transfer transaction is likely to be approvable by RD. –Preliminary analysis tool for MPR (for use by RD staff, borrowers, and potential purchasers, to evaluate whether a potential MPR transaction may be approvable by RD) should allow sellers and purchasers and RD staff to structure their transfer requests in a way that complies with RD requirements, leading to rapid RD approval with minimal changes to the proposed transaction.

Handbook Changes for Appraisals HB Attachment 7-C SPECIFIC VALUE TYPES TO BE REQUESTED AND REPORTED BASED ON THE INTENDED USE OF THE APPRAISAL –Value types that should be requested in an appraisal Statement of Work (SOW) are specific to the loan-making, loan-servicing, preservation, or disposition decision(s) for which the appraisal is ordered. In other words, the intended use of the appraisal determines the value type(s) to be requested and reported. The value types listed are –NEW OR SUBSEQUENT LOAN –EXISTING LOAN –VALUE OF PROPERTY –VALUE FOR SALE - NON PROGRAM PROPERTY –VALUE FOR SALE - ELIGIBLE AS PROGRAM PROPERTY This guidance does not require an appraisal when it is not otherwise needed and does not restrict Rural Development from requesting additional values if a need for analysis or for any other purpose is determined or requested.

Capital Needs Assessments Information Update Tips & Tricks

Existing MFH Portfolio Size of Portfolio: – 2003: 17,287 properties – 2008: 15,361 properties – (predominantly due to consolidations) Average Age of Property: 28 years

Capital Needs Assessment (CNA) WHAT ARE THEY ? –A snapshot in time useful for projecting reserves and a tool for financial planning. –A written report which identifies the repair, replacement, and improvement needs of a property over an extended period of time.

Capital Needs Assessment (CNA) WHAT ARE THEY NOT ? –An assessment of ALL costs of ownership over the economic life of the material or system. (Life Cycle Cost Analysis) –A comprehensive report on work items and their related costs for a proposed/potential rehabilitation project. (Unit by Unit Inspection) –Not a rehab/repair list

When Are CNAs Required? 1. New Construction Loans 2. Rehabilitation Loans 3. Transfer of project ownership 4. Loan Servicing: a. Loan Reamortization. b. Loan Write-down. 5. MultiFamily Housing Preservation and Revitalization program (MPR) Capital Needs Assessments

WHAT DO THEY INCLUDE ? 1. Description of the property. 2. Condition of materials and systems. 3. Accessibility Issues. 4. Environmental Issues. 5. Repair / Replacement / Improvement Costs. 6. Repair / Replacement / Improvement Schedule. (IMMEDIATE & LONG TERM)

Capital Needs Assessments OWNER ACCEPTANCE ? The CNA final report accepted by the property owner BEFORE accepted by Rural Development.

Contact Information MPR Public Website: Contact location for general public Information on MPR Program –includes CNA Provider List and application –Unnumbered Letter on CNAs –Latest RD CNA Template –2008 data / information will be replaced with current as it becomes available

Section 538 Guaranteed Rural Rental Housing Program (GRRHP) Rural rental housing guarantee loan program housing very low to moderate income tenants guided by Title V of the Housing Act of 1949 and RD regulations 7 CFR Part 3565 Types: New Construction Loan only Construction & New Construction Loan Rehabilitation Loan Specifics: Up to 90% on principal and accrued interest Initial tenant income less than 115% of AMI Up to 40 year amortization of loan Loan uses include soft costs

Section 538 Guaranteed Rural Rental Housing Program (GRRHP) Where are we now? In FY 2009 approximately 30% of the GRRHP was used for 515 preservation and rehab Continuous funding – funding lender requests 12 months a year Providing seamless construction/permanent guarantees Vibrant secondary market for guaranteed loans

Section 538 Guaranteed Rural Rental Housing Program (GRRHP) Where are we going? Regulation – seamless const./permanent guarantee Handbook changes More extensive regulation changes Greater secondary market participation Moving towards a costless product Workforce housing component

State Office, Raleigh, NC CONTACT INFORMATION Program Director –Beverly Casey State Office Specialists –Rebecca Dillard –Susan Ekalo x119 –Barbara Owens

COMMUNITY PROGRAMS = COMMUNITY FACILITIES (CF) & WATER AND ENVIRONMENTAL (WEP)

PROGRAM SUPPORT = ENGINEERS ARCHITECT APPRAISER ENVIRNOMENTAL COORD.

SO…………… HOW MANY OF YOU HAVE USDA/RD/CP EXPERIENCE?

LETS LOOK AT COMMUNITY FACILITIES…..

THE DEAL ABOUT CF….. HEALTH CARE EDUCATION PUBLIC SAFETY PUBLIC SERVICE

THE DEAL ABOUT CF….. WE FINANCE ESSENTIAL COMMUNITY FACILITIES FOR RURAL COMMUNITIES THE APPLICANTS CAN BE PUBLIC BODIES, NON-PROFITS OR INDIAN TRIBES. $$$ CAN BE USED TO BUILD FACILITIES AND PURCHASE EQUIPMENT FOR FIRE/RESCUE, EARLY WARNING SYSTEMS, POLICE STATIONS, HEALTH CLINICS, SCHOOLS, LIBRARIES, HOSPITALS, FARMERS MARKETS, ETC…. FOR POPULATIONS OF LESS THAN 20K CAN BE A LOAN, LOAN GUARANTEE, GRANT (C HAIR ON HEAD) OR COMBINATION THEREOF CAN GO TO 100% APPRAISED VALUE UP TO 40 YRS/LIFE OF THE SECURITY MAX GRANT IS 75% OF TOTAL PROJECT COST

NORTH CAROLINAS CF PORTFOLIO: AS OF SEPT 1, 2010, $398.7 MILLION THRU AUGUST THIS FY, $192.1 MILLION PROCESSED WITH $274.3 MILLION MORE IN PIPELINE LARGEST CF PORTFOLIO IN USA

COMMUNITY FACILITIES REGS CAN BE 1942-A, CF LOANS 1942-C, FIRE/RESCUE 3570-B, CF GRANT PROG 3575-A, CP GUAR LOANS And at

THE DEAL ABOUT WEP….. TO PROVIDE WATER AND WASTE FINANCING IN RURAL AREAS TO THE MOST FINANCIALLY NEEDY APPLICANTS RESULTING IN REASONABLE USER FEES. THE APPLICANTS MUST BE PUBLIC ENTITIES, NON-PROFITS AND INDIAN TRIBES. $$$ CAN BE USED TO BUILD, REPAIR, AND IMPROVE PUBLIC WATER SYSTEMS, AND WASTE COLLECTION AND TREATMENT SYSTEMS FOR RURAL AREAS, CITIES AND TOWNS WITH POPULATIONS OF LESS THAN 10K CAN BE A LOAN, LOAN GUARANTEE, GRANT OR COMBINATION THEREOF INTEREST RATES ARE SET QUARTERLY BASED 0N AN INDEX OF CURRENT MARKET YIELDS FOR MUNICIPAL OBLIGATIONS. REPAYMENT PERIOD IS UP T0 40 YEARS.

WATER AND ENVIRON REGS CAN BE 1778, 1779, and STAFF INSTRUCTION And at

LETS LOOK AT WATER AND ENVIRONMENTAL DEALS….

NORTH CAROLINAS WEP PORTFOLIO: AS OF SEPT 2, 2010 $625 MILLION THRU AUG 27 THIS FY, $ MILLION WITH $145 MILLION MORE IN PIPELINE LARGEST WEP PORTFOLIO IN USA

COMMUNITY PROGRAMS!!