“THIS IS THE FIGHT OF OUR LIVES” HUD Environmental Topics

“THIS IS THE FIGHT OF OUR LIVES” HUD Environmental Topics
Have any of you seen Endgame yet? Well, I thought I’d start our morning with a few spoilers, only kidding, but I thought Korg would make a good environmental mascot being quite intimidating character and being made out of rock. May 14, 2019

Panel participants MODERATOR Gwen Robinson Vice President & Managing Deputy Chief Underwriter, Berkadia PANELISTS John Schneider Chief Technical Support Team, Chicago Michael Wurl Regional Environmental Officer, Chicago John Flaherty Review Appraiser, HUD Minneapolis Angelique Crews Technical Director HUD Environmental Services, Partner Engineering and Science Keith Bayer Managing Director of Environmental Services, Dominion Due Diligence I’d like to thank my panel participants this morning. I appreciate the time and thought they have given to the presentation today. The first portion of today’s training and discussion will cover unacceptable noise levels, floodplains, wetlands, contamination, NFA letters, HEROS and few HUD updates. We welcome questions throughout the presentation. Please interject whenever you have a question. We welcome opportunities to include the audience. At 10:30 we will take a 30 minute break and come back at 11 to cover Chapter 9 MAP guide proposed changes and discuss a few case studies.

Unacceptable Noise Levels
Let’s start our discussion Keith with unacceptable noise levels

What are options when noise levels are over 75 dB?
If the project involves new construction or conversion to residential use: An Environmental Impact Statement (EIS) is required, or An EIS waiver can be requested. If the project involves substantial rehabilitation: HUD strongly encourages conversion of noise-exposed sites to land uses compatible with high noise levels. Consider converting this property (or the impacted buildings) to a non- residential use compatible with high noise levels. However, so long as the project is marketable, the interior noise levels will need to be demonstrated to be below 45 dB (through STC calculations).

EIS Waiver In order for a project to qualify for an EIS waiver, the following conditions must be met: There can be no other unresolved environmental issues associated with the site (i.e. site contamination, wetlands, floodplain, etc.) The interior noise levels must be below 45 dB (demonstrated through STC calculations) No exterior amenities can have unmitigated noise levels above 65 dB Typical timing on the EIS waiver is at least 4 months. This allows the Regional HUD office and CPD enough time to review the submittal for accuracy and compliance. GR to Keith: What are some of the interior retrofitting and design approaches that mitigate the noise to levels accepted by HUD? What exterior design concepts have proven successful in noise reduction? GR to HUD (Mike, John or John): Q: Can you comment on the process involved in obtaining the waiver (why those approvals are needed)

Alternative Ways to Measure Noise
The parameters of any on-site measurements would need to be approved by HUD beforehand so that the data collected portrays what is needed. The Regional HUD Office will need to set these terms and may seek the advice of CPD. HUD may allow on-site measurements to better characterize the noise levels at a site; however, the HUD calculations will still define the acceptability category of the site. On-site measurements may be appropriate when a non- traditional noise source is present that is not able to be characterized with the typical HUD calculations (i.e. rail yard, vicinity racetrack, vicinity industrial facility). Noise levels would typically be measured for at least a 24-hour period utilizing a Level A Sound Meter. There may be multiple locations that require evaluation and several days may be required. GR to HUD (Mike, John or John): 1. Q: What do you find often missing from noise conclusions? GR to Keith: 3. Q: What steps do you take when certain noise data isn’t readily available for the noise analysis? What is the process lenders should go through to seek approval for alternative noise measurements? What are some examples of acceptable methods for alternative measurement you’ve seen in the past? Are there situations in which alternative measurements unacceptable? 2. Q: Any update on potential proposals/changes on noise policy in the future? Does anyone have any questions on noise? If not, let’s move to Floodplains & wetlands.

HUD Floodplain & Wetlands Regulations
Moving on to Floodplain and Wetland regulations…Angelique

HUD Floodplain & Wetlands Regulations
24 CFR Part 55 – Protection of Wetlands: Implements Executive Order for Protection of Wetlands HUD’s floodplain and wetland regulations are derived from the code of federal regulations, 24 CFR Part 55, along with Executive Orders and 11990, respectively. The flood photos is from Houston, Texas, before and right after Hurricane Harvey, which occurred on August 25, 2017 24 CFR Part 55 – Floodplain Management: Implements Executive Order for Floodplain Management

The Basics of Floodplain Regulations
100-year floodplain (§ 55.2(b)(9)) Areas with a 1% chance of flooding each year if maps are functioning perfectly 26% chance over a 30-year mortgage In order to evaluate flood concerns we review flood maps prepared by the Federal Emergency Management Act (FEMA). Keep in mind that current FEMA maps are backward looking. Current studies have predicted that actual risk will increase as current maps age. In addressing the basics of floodplain regulations, we’re going to take a look at a few flood zones that require action by HUD and include the 100-year and 500-year floodplain, floodways and coastal high hazard areas. According to the federal emergency management act, shortened to FEMA, the 100-year floodplain is referred to as a Special Flood Hazard Area (SFHA). The SFHA consists of zone A, AE, AO, V, VE, etc. Basically anything other than X, Shaded or unshaded for multifamily. There is still a misconception that a 100-year flood means flooding occurs once every 100 years. A 100-year is flooding that has a 1 percent chance of happening in any year. According to the U.S. Geological Survey, if you live in a designated floodplain [special flood hazard area], the chances are about 1 in 2 that you will experience a flood during your lifetime ( FEMA refers to floodplain areas along a channel as riverine floodplains. With respect to a 500-year floodplain—what is it and when is it a concern? Per the CFR regulations, it’s a concern for critical action (healthcare) sites. It’s typically identified on FEMA maps as Shaded Zone X or B. As with the misconception of a 100-year flood zone, the same is applicable to a 500-year flood—it is not flooding that happens once every five hundred years. Rather, a 500-year flood is an event that has a 1 in 500 chance of occurring in any given year. “It’s also defined as having a 0.2 percent chance flood risk in 1 year (which is a 6% chance of flooding over a 30-year mortgage.) 500-year isn’t typically addressed as a concern for multifamily projects but is most definitely a concern for critical action sites, or healthcare facilities. 500-year floodplain (§ 55.2(b)(4)) Areas with 0.2% annual chance of flooding (6% chance over a thirty-year mortgage)

Floodway No HUD assistance may be approved for use in a floodway, except: Functionally dependent uses Housing is NEVER a functionally dependent use What is a floodway—it’s the portion of the floodplain which is effective in carrying flow, where the flood hazard is generally the greatest, and where water depths and velocities are the highest. Per HUD guidelines, no improvements are allowed in a floodway—no tennis courts, no paved walking trails, no parking areas and last but not least, no buildings…. No. improvements. While there is an exemption listed for floodways, which is a functionally dependent use (think bridge or marina), the Key Take Away is that Housing is never considered a functionally dependent use In this diagram on the left, the floodway and flood fringe comprise the base floodplain or the special flood hazard area. In most communities, development is allowed within the flood fringe if the development is elevated or otherwise protected to the base flood level (or any higher state or local standards). Outside of HUD regulations, development in the floodway is allowed if it can be demonstrated that no rise in the base flood elevation will occur. With respect to the diagram on the right, a floodway analysis determines the boundaries of the floodway. The floodway analysis is done with a computer program that looks at an entire reach of a channel. The program starts filling in the floodplain, which in turn squeezes the floodwater toward the channel and causes the flood level to rise. At the point where this process reaches a 1-foot rise, the floodway boundaries are drawn. The floodway boundaries at each cross section are transferred to the topographic or contour map and that shows the SFHA boundaries. Not every cross section will show an exact 1-foot rise. There are topographic conditions and the need to smooth out the floodway line will result in some cross sections having increases of less than 1 foot. So for a community, the number of possible floodway configurations is almost limitless. Therefore, in choosing a regulatory configuration, the interests of individual property owners and the community as a whole must be weighted by the regulator agencies. Floodway (§ 55.2(b)(5))

Coastal High Hazard Area
Coastal High Hazard Area (§ 55.2(b)(1)) Critical Actions and New Construction are not allowed Most coastal floods are caused by coastal storms (hurricanes, northeasters) that bring air pressure changes and strong winds that “pile” water up against the shore in what is call a storm surge. As with floodways, a computer simulation of a coastal storm is developed based on historical storm data. The program produces Stillwater flood elevations, which area elevations of coastal floods, not including waves. Speaking of waves, wind-driven waves produt velocities and impact that may ause significant structural damage. The program analysis also looks at how high the wave rest elevation will be above the Stillwater elevation as water is driven onshore. When waves hit the shore, water is moving with such force that it keeps traveling inland—this is called wave reunup. Wave setup is the additional elevation nof the water surface over normal surge elevation—this is a function of deepwater wae height and duratino. What is a coastal high hazard area? It’s a high velocity wave action site designated by FEMA as zone V or VE. Critical action sites, new construction and sub rehab project (for lean and map) are not allowed in this zone.

Critical Actions Critical Action (§ 55.2(b)(3))
Any activity for which even a slight chance of flooding would be too great, because such flooding might result in loss of life, injury to persons, or damage to property Examples: Utilities, roadways providing sole egress from flood- prone areas Hospitals, nursing homes, assisted living All § 232 and § 242 projects But Not housing for independent living for the elderly Critical actions shall not be approved in floodways or coastal high hazard areas We’ve now mentioned critical action sites in the flood zone slide with respect to shaded flood zones and it was mentioned in the coastal high hazard slide. So what is a critical action site? For today’s discussion, a critical action site is a healthcare facility (to name one). The key takeaway with critical action sites is that they can not be located in floodway or a coastal high area. It’s important to note that independent senior living for the elderly is NOT considered a critical action site—it’s multifamily.

A = AVOID Floodways Coastal high hazard areas B = BEWARE Now that we’ve gone over some definitions for flood zones, let’s get back to the basics of floodplain regulations—the ABCs, if you will. We’ll talk about what to avoid, beware of, what to be cautious of and what is discouraged. A is for avoid and what should we Avoid? (1) Improvements (any impervious areas) within a floodway and (2) Existing, proposed development or sub rehab within coastal high hazard areas HUD’s Doctrine of avoidance Avoid adverse impacts associated with the occupancy and modification of floodplains Avoid support of floodplain development whenever there are practicable alternatives The purpose is really to avoid adverse impacts B is for beware and what should we Beware of? (1) Improvements within a SFHA for 223f project requires completion of the abbreviated 8-step (2) new construction that will impact SFHA requires completion of full 8-step process 223(f) improvements + SFHA = Abbreviated 8-Step Process 221(d)(4) new construction + SFHA = 8-Step Process

C = CAUTION Check for preliminary FEMA FIRMs Critical action sites require action in Flood Zone X, SHADED D = DISCOURAGE New construction/major improvements in 100-year floodplain Projects with lowest floor, life support facilities or ingress/egress > 12” below BFE C is for caution and what should we be cautious of? (1) always check for preliminary FIRMS, advisory BFE. As a side, check flood risk maps and flood study information, if needed (2) Critical Actions requires action such as 8-Step Process required in 500- and 100-year floodplains (221d4 sites) or abbreviated 8-step process for 232/223f sites D is for discourage and what should we be discouraged from? (1) HUD strongly discourages New construction/major improvements projects in 100-year floodplain and for (2) Refinances/minor improvements: HUD discourages projects where lowest floor, life support facilities, or egress/ingress are more than 12” below base flood elevation

Floodplain – Preliminary FIRMS
As previously noted, we should be cautious when it comes to preliminary FIRMS. Here we see a comparison between an effective FEMA map, also known as current FEMA map, (on the left side of the slide) and a preliminary FEMA map (on the right side of the slide). In the effective map we see there are areas of Unshaded Zone X (non colored areas) and Zone AE (areas shaded in blue). Note that Zone AE (near the top of the page) is listed with a Base Flood Elevation of 8-feet above mean sea level. In the preliminary map we see the central area is primarily depicted as Flood Zone AE, a special flood hazard area, and the base flood elevation is depicted as 10-feet above mean sea level. In this instance, we clearly have an issue. First, in the scenario on the left, flood insurance is not warranted, if your project was located in the non-colored area. In the preliminary map, flood insurance is warranted. Unshaded Zone X does not require action per the code of federal regulations or the MAP Guide but a SFHA requires action.

Floodplain Regulations
The Basics of Floodplain Regulations: E = EXCEPTIONS Proposed activities do not occupy or modify the floodplain; Provisions are made for site drainage that would not have an adverse effect on any wetland; and A permanent covenant or comparable restriction is placed on the property’s continued use to preserve the floodplain or wetland Last, but not least, E is for exceptions and what is an exception? An exception that most of us have seen on a project at one time or another is the Incidental Exception. The incidental exception would be easier if there was a size associated with “incidental” but there is not. Incidental is where a SFHA is located on the subject property and NO improvements are located within the SFHA! Last but not least, if an incidental portion of the subject property is located within a SFHA, a protective covenant or comparable restriction is required to be placed on the property's continued use.

Incidental Portion of Floodplains
Project may proceed IF all conditions in § 55.12(c)(7) are met Project cannot use the 8-Step Process and will be rejected Project may proceed either: By meeting conditions in § 55.12(c)(7), OR By completing Abbreviated 8-Step Process

Scenario: Incidental Portion?
Project NOT ALLOWED Proposed 221(d)(4) Sub Rehab Property Boundary A real-world applicable of the previous “stick drawings” is shown here. The subject property is the area outlined in yellow. There is a floodway (red hatched area bottom) within the bottom, right side of yellow square). The proposed sub rehab project is located within Zone AE, which is a SFHA. As such, there is an improvement within a SFHA that contains a floodway and as noted in the slide, this is not allowed BUT if the subject property is the property outlined in hatched-red area, the project would be considered acceptable with completion of an abbreviated 8-step process. The floodway is not located on the subject property and does impede ingress/egress. However, per HUD guidelines, “In considering the safety of the residents, offsite floodways and other flood hazards will be evaluated in terms of separation distance, elevation differences, and the nature of the hazard in question. Unacceptable proximity to hazards may result in rejection of the application.” This example is NOT considered incidental Property boundary includes Floodplain (SFHA), and existing improvements (parking) in Floodway.

Part 55 Requirements Projects located in a floodplain must be processed under §55.20 (“The 8-Step Process”) unless an exception applies to the project type Here we see the Part 55 regulations--The code of federal regulations outlines a quick reference table. The table notes information for critical action sites (i.e. healthcare facilities), which is outlined in the 2nd row and the last row outlines information required for multifamily sites. If you’re looking up the information yourself, this table is a great, quick/easy reference on what is required for your project.

Existing Sanitary Sewer
Utilities Existing Sanitary Sewer In discussing the basics and trying to keep things simple. Let’s take a look at utilities and discuss when they are and are not a concern. Here we see the floodway boundary in red hatched. The floodway is offsite The EXISTING sanitary sewer line is in yellow. The PROPOSED sanitary sewer lateral that provides service to the subject building is yellow dashed. The EXISTING water supply line is in blue The PROPOSED water lateral that provides service to the subject building is blue dashed The question is: Is tying into main municipal water and sewer utility systems acceptable in an onsite, 100-year floodplain? We see the proposed sewer lateral is within the 100-year floodplain The 8-step is required in order to determine if the connection through the floodplain is acceptable. The 8-step must show there are no practicable alternatives and there are no floodways on the subject site or off-site floodways being impacted. Subject Property Existing Water Supply

Utilities Existing Sanitary Sewer Subject Property In discussing the basics and trying to keep things simple. Let’s take a look at utilities and discuss when they are and are not a concern. Here we see the floodway boundary in red hatched. The floodway is offsite The EXISTING sanitary sewer line is in yellow. The PROPOSED sanitary sewer lateral that provides service to the subject building is yellow dashed. The EXISTING water supply line is in blue The PROPOSED water lateral that provides service to the subject building is blue dashed The question is: Is tying into the main municipal water and sewer utility systems acceptable in an onsite, floodway? The answer is No, a utility is considered an improvement and therefore not allowed within a floodway. The sanitary sewer later ties into the main line within the floodway. The water supply line ties into the main water line outside of the floodway. HUD is evaluating case-by-case for pipelines running through a floodway. Existing Water Supply

Floodplain Regulations – 223f
“5-Step” does not include: Step 2 Step 3 Step 7 When there is a SFHA adherence to CFR 55 (Executive Order 11988) is required. Here is a decision tree/process outlining the 8-step Step 1 – Determine if proposed action is in floodplain Step 2 – early public notice (new construction) MAKE SURE you find out who the HUD representative is for the project. They must review prior to newspaper submittal Step 3 – Identify and evaluate alternatives Step 4 – Identify impacts of proposed action Step 5 – Minimize harm and note beneficial values Step 6 – Re-evaluate alternatives Step 7 – Findings and public explanation Step 8 – Implement proposed action in compliance with minimization plans and flood insurance requirements 8-steps are not typically a timely action. Information is needed from the engineer and architect in order to complete—the consultant needs information as to why impact could not be avoided, what costs are associated with changing the project or leaving as is. We also need direct and indirect information (i.e. stormwater management system information) As we’ve heard in the past couple of conferences, which is really nothing new, the public notices must be approved by HUD and a HUD contact must be listed in the notice. It’s important to discuss with the environmental officer/appraiser on the 8-step process During ELA in March of this year, HUD was asked for the Northeast Region, when in the process will HUD evaluate/review draft 8-step and/or draft notices for publication? A: HUD may provide consultation review on an 8-step process prior to the Lender’s submission of the Pre- or Firm Application, if needed. and copy with your inquiry. Be sure to attach the draft or final Phase I (10MB or less – may need to be a compressed file) and the draft 8-step documents in question. If the Pre Application or Firm Application has already been submitted to HUD, communicate directly with the HUD Environmental Reviewer (Consult the MAP Lender if needed).

Exceptions to Part 55 §55.12(a)  activities that are not required to complete the full 8-Step Process, and may instead complete the Modified 5-Step Process Steps 2, 3, and 7 do not apply to these activities §55.12(b)  activities that are not required to complete the 8-Step Process §55.12(c)  activities that are not required to comply with Part 55 With Part 55, there are exceptions and in those instances, completion of the 5-Step Process is warranted. The steps removed are the public notices and evaluation of alternative sites. For example, a 5-step process is warranted for a 223f project that has improvements within a SFHA but NO floodway Broad Channel Queens, NY February 2016

At concept, HUD issued the following about this project:
The floodway for Pine Creek cuts through the property. On each side of the creek there are extensive Zone AE Flood Hazard Areas. There are three tennis courts and a parking lot, which serve the amenity and leasing office area, and these improvements are constructed within the 100-year floodplain. Portions of the tennis courts are actually in the designated floodway. These factors preclude HUD from being able to issue mortgage insurance. There cannot be floodway on the property while also having improvements built within the 100-year floodplain. As per 24 CFR 55.12(c)(7), this is regulatory, and a non-starter for HUD. The incidental exceptions do not apply. As evidenced by the MAP Guide, see relevant section attached, HUD interprets the incidental exception at 24 CFR 55.12(c)(7) as not being applicable where any improvements located within either the regulatory floodway or adjacent 100-year floodplain. The MAP Guide clearly indicates, without qualification, that improvements are not incidental. As the relevant HUD action is mortgage insurance, occurring at closing, removing and replacing the tennis courts as part of the transaction will not change the exception’s inapplicability.

WETLANDS Our next environmental topic is wetlands, which are also regulated under CFR Part 55.20 This is wetland is located in Whitetail, Northern South Carolina Wetlands are regulated under Executive Order In CFR Part 50, the definition for New construction in this regulation includes draining, dredging, channelizing, filling, diking, impounding, and related activities (24 CFR 55.2(b)(8))

WETLANDS Typically when discussing wetlands on a project, we review the online National Wetland Inventory (NWI) Map for information. If the subject property is depicted with a wetland on the site, for example new construction site, we typically recommend a wetland delineation so the wetland area is accurately determined prior to development

WETLANDS Cowardin system was established by the USFW, National Wetland Inventory. It’s the official wetland classification system and the federal standard for wetland classification. A wetland MUST have all three listed criteria in order to be considered a wetland. Is Hydrophytic vegetation This is defined as the sum total of macrophytic plant life that occurs in areas where the frequency and duration of inundation or soil saturation produce permanently or periodically saturated soils of sufficient duration to exert a controlling influence on the plant species present! In layman’s terms, hydrophytes are plants that like living in water! (2) Hydric Soil must be present. This is defined as a soil that formed under conditions of saturation, flooding or ponding long enough during the growing season to develop anaerobic conditions in the upper part (top 12-inches), In layman’s terms, soil that has been inundated with water (3) And finally, the hydrology must be present in a wetland area is. Hydrology is saturated to the surface at some time during the growing season, present 14 or more consecutive days of flooding or ponding, water table is 12-inches or less If you suspect a wetland what do you do? In order to determine if the 3 criteria are present, an onsite wetland survey/delineation must be completed. As mentioned, first, we review the online NWI Map for information and if the subject property is depicted with a wetland on the site, we typically recommend a wetland delineation so the wetland area is accurately determined prior to development

The Basics of Wetland Regulations
A = AVOID Long term/short term adverse impacts Direct or indirect impact B = BEWARE 223(f) improvements + wetland = Restrictive Covenant 221(d)(4) new construction + wetland = 8-Step Process along with wetland survey Let’s take a look at the ABCs of wetlands. We’ll talk about what to avoid, beware of, what to be cautious of and what is discouraged. A is for avoid and what should we Avoid? (1) avoid to the extent possible the long and short term adverse impacts associated with the destruction or modification of wetlands and (2) avoid direct or indirect support of new construction in wetlands wherever there is a practicable alternative HUD’s Doctrine of avoidance is to avoid adverse impacts B is for beware and what should we Beware of? (1) Improvements associated with a 223f project that does not impact wetland requires implementation of a restrictive covenant (or comparable restriction) and (2) new construction that includes a wetland on the property requires completion of full 8-step process along with a wetland survey

The Basics of Wetland Regulations
C = CAUTION Only in rare cases will rehab, purchase and refinancing be permitted to involve wetlands impacts. Functions and Values needed for 8-Step D = DISCOURAGE New construction/major improvements in wetland Compensatory mitigation may not be substitute for the requirement to avoid and minimize impact C is for caution and what should we be cautious of? (1) always check the online FWS “National Wetlands Inventory—this is a screening tool (2) wetland delineations are conducted by a wetland professional. During these assessment, the wetland professional DOES NOT obtain or provide functions and values for a wetland delineation. However, for the 8-step HUD requires functions and values information. Be aware that you may be asking your wetland professional for additional information if the 8-step is needed due to wetlands on your project. The wetland survey is conducted using the 1989 Federal Manual for Identifying and Delineating Jurisdictional Wetlands. D is for discourage and what should we be discouraged from? (1) HUD strongly discourages New construction/major improvements projects in wetland area and for (2) Appropriate and practicable compensatory mitigation is recommended for unavoidable adverse impacts to more than one acre of wetland. Compensatory mitigation includes, but is not limited to: permitee-responsible mitigation, mitigation banking, in-lieu fee mitigation, the use of preservation easements or protective covenants, and any form of mitigation promoted by state or Federal agencies.

Wetlands New Construction? Yes New Construction in a wetland? No
Project may proceed w/out an 8-step if: no construction or landscaping activities in the wetland appropriate provision made for site drainage that will not have an adverse effect on the wetland and a permanent covenant or comparable restriction placed on property to preserve the wetland In this Scenario we have a New Construction project with a wetland on the project site. What is required? The project is the box. The development is depicted by the building. No improvements are depicted within the wetland and in this diagram, we are assuming no indirect improvements will impact the wetland. As such, completion of the 8-step is not warranted. BUT, a covenant or comparable restriction is required.

Wetlands New Construction? Yes New Construction in wetland? Yes
Project may Proceed if: Avoid wetland, or HUD determines no practicable alternative via 8-step process * * Individual 404 permit can replace steps 1-5 of 8-step but only if no construction in floodplain In Scenario 2: Building is in the wetland First priority for new construction is to avoid the wetland. If not possible the 8-step is warranted. And if corps permitting was obtained, the permit will replace steps 1-5. but ONLY if no construction is in a special flood hazard

Wetland Some wetland projects may require permitting from the US Army Corps of Engineers. In this slide we see what impacts are allowed by the Army Corps of Engineers but require permitting: Most of the time, the action involved with wetlands is a request to place fill material related to the construction in the wetland. Nationwide Permits are for things like bank stabilization, minor discharges, minor dredging, maintenance on channel, You often hear of Section 401 permitting. Section 401 is the Clean Water Act for States and Tribes Sometimes you’ll hear it referred to as 401/404 permitting, which is discharge of dredged or fill material into navigable waters, wetlands, etc.

E = Exception 8-step process for wetlands that are permitted, Individually-permitted 404 sites, the first 5 steps can be eliminated (24 CFR 55.28) As with floodplains, there are exceptions to the “rule”. In this case, the exception for wetlands is not all of the 8-step may be warranted. Now, some of you may be reading this slide and think “I’ve still had to do an 8-step even when my wetland had a USACE permit”. The key word here is INDIVIDUALLY PERMITTED SITE Not to get too technical with the USACE permitting process, but a nationwide permit is for activities that range from placing culverts for road crossing to putting in rip rap on shorelines to placing fill for residential construction. The nationwide authorization is generally issued within 45 days and most of our projects fall in to this category. The individual process is much more involved and typically takes 120 days to complete. It has a public interest review and follows NEPA guidelines and related laws such as coastal zone management action, SHPO, endangered species, etc. Because this process has the public involvement and addresses the reasonable alternatives action, the first 5-steps of the 8-step process is eliminated (to quickly recap, step 1 is determine if project is in wetland; step 2 is initial public notice, step 3 is identify and evaluate alternative sites, step 4 is identify impacts and step 5 addressing minimization to harm and restore/preserving natural and beneficial values. The only steps left from HUD perspective is step 6: re-evaluate alternative sites, step 7 is final public notice and step 8 is implement proposed action. The easiest thing to remember on the wetland ABCs is that impacts to wetlands are tricky. Get in front of HUD as soon as possible.

Utilities Existing Sanitary Sewer Now that everyone is overwhelmed, let’s get back to the basics again and try to keep things simple. Let’s take a look at utilities and discuss when they are and are not a concern. The EXISTING sanitary sewer line is in yellow. The PROPOSED sanitary sewer lateral that provides service to the subject building is yellow dashed. The EXISTING water supply line is in blue The PROPOSED water lateral that provides service to the subject building is blue dashed Is an US Army Corps of Engineers permitted stream impact allowed on a project without an 8-step? Yes, as long as there are no onsite or offsite wetlands directly or indirectly affected. If the Corps has issued a 404 permit and the project in no way will directly or indirectly impact the wetland, then no 8-step is required provided the project has a permanent covenant to protect the wetlands. See 24 CFR 55.12(c)(3) and (c)(7). It should be noted that new construction as defined by the Executive Order includes actions, such as draining or shading, that are not covered under the Clean Water Act. Is a utility crossing a stream that contains wetlands allowed? This depends on the location of the stream associated wetland relative to the crossing and the crossing design. If the crossing impacts directly or indirectly both the stream and wetland, the project is allowed if an 8-step is completed that shows there is no practicable alternative and there is no floodway impact. If the crossing only impacts the stream the 8-step process does not have to be completed. It should be noted that Executive Order applies to both jurisdictional and non-jurisdictional (isolated) wetlands [See 24 CFR 55.2(b)(11)]. Subject Property Existing Water Supply

You can’t be too early to ask HUD to evaluate or review drafts of the 8-step or the public notices. You are welcomed to submit them prior to the Lender’s submission of the Pre-Application or Firm Application, if needed. and copy with your inquiry. Be sure to attach the draft or final Phase I (compressed file) and the draft 8-step documents in question. Is HUD willing to evaluate/review my draft 8-step and/or draft notices for publication prior to application submission? GR to Mike: Is it acceptable to submit the draft 8 step for HUD’s review, prior to the submitting application?

In all cases, the environmental review must be complete and signed off in HEROS before HUD issues a FIRM. The environmental review and FIRM can be conditioned, only for but only for issues that have already been reviewed and approved. Here are some examples of what can and cannot be a condition. If you have any questions about what can be a condition, Chapter 7 of the 232 guide has some good guidance, or contact the REO or FEO where your project is located.

Contamination Analysis
Contamination is anything from an industrial site to a dry cleaner to a gas station

No Information under or in building Vapor can be addressed based on (1) soil/groundwater analytical results, (2) sub-slab vapor testing or (3) interior testing Subsurface Investigation in 2010 When addressing contamination, HUD looks to see if information was collected at the site, which includes the whole property, is there a data gap of information and can we considered the assessment activities to be a comprehensive site assessment? The requirements are outlined within Chapter 9.3 No Information Is this a complete site characterization? Is there a data gap? Subsurface Investigation in 2007

What to do about offsite contamination? Per Chapter 9 in the MAP Guide, Site contamination is not a cut and dry action. For example, if there is an offsite concern, in this example the concern is a dry cleaner, what are the next steps? The MAP Guide states the site is not acceptable unless such off-site contamination is subject to Risk-Based Corrective Action meeting all of the requirements of the MAP Guide, Sections 9.3 C and E.

The Basics of Contamination Analysis
A = AVOID Site has no control over the off-site contamination Sites over formed solid waste landfill/dump or Superfund (National Priorities Listing) B = BEWARE Make sure there are no data gaps in subsurface work The total nature and distribution of the identified contamination along with exposure pathways and potential receptors is warranted Let’s take a look at the ABCs of contamination analysis. We’ll talk about what to avoid, beware of, what to be cautious of and what is discouraged. A is for avoid and what should we Avoid? When the existence of off-site contamination presents a risk to the site or the residents of the project and the sponsor has no control over the off-site locations of the contamination, the site is not acceptable unless such off-site contamination is subject to a RBCA meeting all of the requirements of Sections 9.3.C and E. (2) A site over a former solid waste landfill/dump and/or Superfund (National Priorities List (NPL)) site is not acceptable for development unless the hazardous substances, petroleum, and petroleum products are completely removed or remediated to restricted residential standards and the site is delisted, or for an NPL site only, the Federal Agency with management authority over the site gives written approval of the site for residential usage. Beware: (1) no data gaps as discussed in previous slide and (2) total nature and distribution as discussed in previous slide

C = CAUTION Phase II submitted with pre-application or Firm Commitment Elevated levels of contaminants confirmed then a complete site characterization required D = DISCOURAGE Monitoring well for off-site contamination requires Engineering or Institutional Controls put in place Non-operating wells must be capped and closed C is for caution and what should we be cautious of? (1) Be cautious of the timing for your phase II: Timing. The Phase II ESA shall be submitted with the pre-application or, if the pre-application stage is omitted, with the application for Firm Commitment. It is recommended that lenders consult with HUD before a Phase II ESA is prepared. (2) Nature and Extent of the Study. The Phase II ESA need not necessarily be a complete site characterization (total nature and distribution) of contamination, but must proceed to a point where it indicates the location of greatest concentration and risk. However, when the existence of elevated levels of contaminants is confirmed, a complete site characterization will be required as a first step in remediation What is generally discouraged: (1) If monitoring well is required to determine if off-site contamination is a concern, the site is generally not acceptable unless Engineering or Institutional Controls are put in place (2) Non-operating wells must not be left as is but should be capped and closed out per Local, State, Tribal and Federal authorities

E is for…. Escrow MAP Guide, Chapter 9.3, Section E, Incomplete Removal of Contamination E is for Escrow - Any monitoring wells and engineering controls, such as caps or slurry walls, may warrant an escrow account to be established by the lender at Endorsement to offset the cost of any ongoing maintenance Part E of Chapter 9.3 allows for incomplete removal of contamination. Part D is complete removal and that’s pretty self explanatory and easier of the 2 sections to address. But when leaving contamination in place requires more. There’s a cost analysis for why leaving contamination in place is warranted; a Risk Based Correction Action assessment is warranted; requirements of meeting residential criteria levels is warranted; what engineering and institutional controls will be put in place; if the EC/IC are in place then an O&M Plan is warranted (Typically a soils management plan); remediation may continue beyond initial endorsement provided the LSTF has determined IN WRITING that proposed undertakings present no threat to health, safety or the environment.

In all cases, the environmental review must be complete and signed off in HEROS before HUD issues a FIRM. The environmental review and FIRM can be conditioned, only for but only for issues that have already been reviewed and approved. Here are some examples of what can and cannot be a condition. If you have any questions about what can be a condition, Chapter 7 of the 232 guide has some good guidance, or contact the REO or FEO where your project is located.

Most, if not all, states offer some sort of liability protection and official closure for environmental issues It is sound policy for a regulating entity to offer completeness assurances and liability protections for environmental investigation and cleanups. An NFA, or its equivalent, represents a win-win for both the environment and progress As discussed in previous conferences this year, the question has been asked about what happens in situations in which a NFA cannot be obtained because the state does not issue NFA letters? The answer was If a state does not issue a formal NFA letter, a state-issued clearance letter must be submitted for HUD’s consideration. In keeping things simple, I thought the goldilocks principle would be applicable. The goldilocks principle sounds simple in theory—HUD doesn’t want something that’s too little or too much, but they want something that’s just right. With respect to contamination analysis, the question is often when is the project getting an No Further Action and what does it mean when the state doesn’t offer letters of No Further Action (or NFA). The answer to this question is “it depends”. When dealing with Contamination analysis we are always trying to balance the often conflicting concepts of environmental protection and economic development. The “answer” is outlined in the slide with the key takeaway that we are trying to go for a win-win.

Nomenclature, and associated acronyms, vary.
Some states may not offer an official closure letter. The program within the agency can matter. Not all NFAs are equal. The available product may depend on the transactional party. In explaining the goldilocks principle, when trying to figure out what is just right, the devil is in the details. The analysis cannot be neatly compartmentalized into a two-column table of “Yes NFA” or “No NFA.” While one state may offer a “NFA,” others may provide “Response Action Outcomes” or “RAOs.” For example, within the underground storage tank spill section of the New York State Department of Environmental Conservation, closure is achieved by removal of the spill case number from the Spills Database. That’s it – no NYSDEC letterhead correspondence for the file, unfortunately. As with the example of the NYSDEC above, if the applicant were in the Brownsfield department instead of the UST program, the responsible party could achieve a “Notice to Proceed” – effectively providing a “NFA.” Some NFA letters can cover the entire site, corner to corner, but others can be specific to a particular area of concern. For example, an NFA could be specific to a UST and not cover a potential historic industrial use issue on the same property. Further, NFAs or their equivalents may have continuing obligation stipulations. For example, if groundwater is under a monitored natural attenuation program, periodic sampling may be required. Or, some closure letters may include a permit, that requires periodic cap inspections and reporting. For example, the innocent purchaser or developer may be eligible for protections that do not extend to the responsible party. In Michigan, a program allows a buyer to complete a Baseline Environmental Assessment (BEA), absolving the purchaser of strict liability regarding existing contaminants whereas the past owner may still be on the hook. Even the BEA program has caveats though. The new owner must adhere to “due care” obligations to ensure occupants are safe. Also, if there are issues with PCBs, the federal EPA Toxic Substances Control Act may still be applicable. Ultimately, the question of available NFA products is geographically variable and situation-specific. A qualified consultant can evaluate the angles and guide you through the process. In complex or sensitive cases, consultation with an experienced environmental attorney may also be desired. Click and read from slide KW to HUD: Stacey discussed state by state cheat sheet on states in the NE Region and what they will/will not provide as far as “No Further Action” letters. Is this still a possibility? Q: How does HUD deal with situations in which a NFA cannot be obtained either because the state does not issue NFA’s or will not issue for some reason? Q: A number of Firm Commitments that involve contaminated/previously contaminated sites have been issued with a special condition “to have cost cap and reopener insurance.” Can you explain what this insurance is, in what situations it is being required, and why HUD requires it? Rest assured, there is very likely a means to a liability protection end.

HUD’s guidance on Pursuit of the nfa
Sara Jensen has been working on the NFA issue and has compiled a listing of state voluntary clean-up plans. All six of the Region V states (IL, IN, OH, MI, WI, and MN) have state programs that will issue an NFA equivalents, although the language is confusing in OH and in MI the path is not evident in all cases on how to get to the NFA. Please reach out to HUD if you need clarification on Region V states program guidance on this issue HUD’s guidance on Pursuit of the nfa GR to HUD (Mike): Can you elaborate on some of the variances from state to state? GR to HUD (John): Is Sara’s state program list available or does she have an estimated date of release on the list?

Who is your hero? Keith is our hero today and will now lead the discussion…
Heros

HUD’s Take: HEROS Preparation – Partner Worksheets
Step 1 The Consultant compiles the HEROs Partner Worksheets and supporting maps and provides these to the Lender. The Worksheets are submitted by the Lender as part of the overall FHA Pre Application (for two-stage processing) or Firm Application (for 1-stage processing) for review and use by HUD.

HUD’s Take: HEROS Preparation – Partner Worksheets
1. The Consultant-created HEROs file is the preferred method of delivering HEROS data to HUD. It reduces the HEROs component of HUD’s review time by at least half. 2. The Consultant will initiate the HEROs file by inputting all necessary data and attaching all supporting maps and exhibits. 3. The Consultant will then generate the Word-document data extract for the Lender. This also notifies the Lender of the system-generated “ER-ID”. 4. The Consultant shall then “Assign” the HEROs product to HUD contact of the region.

HUD’s Take: ER ID and Generation of the ERR

Environmental Review Reporting Process
There is still no formal requirement to generate Environmental Reviews in the HEROS platform. Consultants should still be utilizing HEROS worksheets: HEROS-compatible worksheets provide the full narrative view of the actual HEROS platform, where the HEROS Partner worksheets limit the narrative to Partner-specific fields review-record-related-federal-laws-and-authorities-worksheets/ Utilizing the HEROS-compatible worksheets helps streamline the lender review once the Environmental Review is input into HEROS.

D3G’s Environmental Review Reporting Process
D3G provides the Environmental Review outside of the HEROS platform, prior to HUD submittal, utilizing HEROS-compatible worksheets. Most lenders still do not have HEROS access, so operating in HEROS during initial reporting creates limitations. This allows lenders and consultants to work through project- specific issues in the traditional reporting format, rather than being locked down to HEROS functionality. Utilizing HEROS-compatible worksheets should help streamline the lender review once the Environmental Review is input into HEROS. KW to HUD: Q: What is the status on fixing lenders access to the HEROS platform?

Is there any update on getting lenders access to HEROS?
Lender Access to HEROS: There is no firm timetable on when the Lender Access glitch will be addressed. When Lenders are granted access, it will be “read only.” Lenders would be able to “Assign” a review to a Consultant and HUD Staff only. Is there any update on getting lenders access to HEROS?

D3G’s Environmental Review Reporting Process
Prior to HUD submission, the lender advises D3G to input the Environmental Review into HEROS, which requires a few additional data points: FHA Number Lender Point of Contact HUD Preparer (ie, Appraiser, Underwriter, etc.) Information

HEROS Input Process HUD created “Using HEROS as an FHA Partner” as a guidance document for the HEROS input process: fha-partners/Using-HEROS-as-an-FHA-Partner.pdf

HEROS Input Process

HEROS Input Process Once logged in, and the Environmental Review is initially created, the following tabs will define the remainder of the HEROS input process: Initial Screen Note “Yes” triggers ECO involvement

HEROS Input Process Project Summary Helps define the Level of Review

HEROS Input Process Level of Review Substantial Rehabilitation
Thresholds Refinance New Construction

HEROS Input Process The remaining HEROS screens will be generated, depending on the Level of Review assigned to the Environmental Review: CEST EA It is very important to setup the Level of Review accurately. If adjustments in Level of Review are required, any data input in the subsequent screens will be erased.

HEROS Input Process If the consultant utilized HEROS-compatible worksheets, the HEROS input process should be a true data transfer from the worksheets into the corresponding HEROS Related Federal Laws and Authorities screens, which will feed the Compliance Determinations: Consultants are not allowed to mark whether formal compliance steps or mitigation are required: Completed as part of HUD’s review process

HEROS Input Process Although consultants are not allowed to mark whether formal compliance steps or mitigation are required, they can provide suggestive formal compliance steps and/or mitigation measures, which will be generated in the Mitigation Measures and Conditions screen:

HEROS Input Process Once the HEROS input process is complete, a read-only HEROS- generated Word output can be produced via the Final HEROS Screen, which should be submitted to the lender:

HEROS Input Process Once the HUD Preparer (ie, Appraiser, Underwriter, etc.) information is known, the consultant should utilize the Assign Review feature to assign the Environmental Review to HUD: Once assigned, HEROS will generate an to the consultant and HUD Preparer

Heros contact table Region Contact Email Phone Midwest
John Schneider or Eric Golicz West Larry Fergison or Tim Sovold Southwest Michael Buis Southeast Jon Bonner Northeast Wendy Santiago Be sure to the contact above and notify them of the submitted report.

HUD Review Process Lender Submits Application to HUD, with “ER ID” noted on the Application’s “Cover Sheet” and also within the “Environmental” section of the Lender’s Narrative. Lender s or calls HUD Region contact on prior slide. HUD conducts Intake Review. HUD Underwriter is assigned. Technical staff may also be assigned. The HEROs file will be re-assigned to the HUD Reviewer. Single Underwriter Model: HUD Underwriter reviews Environmental Reports and preliminarily approves HEROS. Technical assistance: HUD Appraiser reviews Environmental Reports and preliminarily approves HEROs. HEROs is escalated for final ECO and/or Housing supervisory approval. The HUD Underwriter generates the ERR for the audit file. Remediation or mitigation requirements are noted on the Special Conditions to the Firm Commitment or the Firm Invitation Letter. HUD notes compliance with remediation or mitigation requirements in HEROs once complete.

HEROS Common Mistakes Most mistakes with Environmental Reviews in HEROS consist of insufficient or lack of supporting documentation. FEMA FIRM provided w/o property boundaries delineated: In addition, HUD will want to also see a survey depicting floodplain areas.

HEROS Common Mistakes Only on-site wetland impacts identified, when off-site impacts also need to be evaluated. Site plans should include off-site impacts from connecting utilities, stormwater management features, etc. Noise survey defaults to nearby traffic studies, estimating percentages, rather than obtaining more accurate counts. Contact the municipality to obtain more accurate counts, as opposed to simply utilizing readily available online information. Noise surveys not providing appropriate projections. For example, if the nearby interstate is expanding, which should be completed within 12 years, HUD will want to see projects further out than 10 years. In addition to the regulatory requirements outlined in HEROS, the MAP Guide requires HUD to substantively evaluate the risk associated with proximity to hazardous facilities for projects to be purchased or refinanced. This requirement is not included on the Explosive and Flammable Hazards HEROS screen, but must be evaluated. GR ask HUD: What other common mistakes are you seeing in HEROS?

HUD’s Take: Areas for Improvement
Fully-detailed description in the “Impact Evaluation” column of the “Environmental Assessment Factors” screen, such as: Approximate distances between the Subject and amenities (Schools, parks, hospitals) rather than simply stating “nearby”. Approximate response time for emergency providers to the Subject site. Level of medical facilities (Specialized trauma centers, Urgent Cares, General hospital care). Well water / Septic / private trash disposal vs municipal services.

HUD’s Take: Areas for Improvement
Clear understanding of whether ground disturbance will be present due to nature of repairs on a 223(f) transaction. Wetlands and Floodplain impact. Information given to Historic / Coastal Zone authorities must clearly outline this nature to the repair, as the State’s determination may change. 2nd stage processing applications are missing Environmental reports. Although the reports from the Pre-Application stage may still be applicable at the Firm Submission, the documents should be re-submitted to ensure a complete Firm Application file.

HEROS Process Issues/Fixes
Consultants are providing Environmental Reviews in a variety of reporting formats, since there is no formal requirement to generate Environmental Reviews in the HEROS platform. In the meantime, consultants are completing the input to HEROS as requested by the lender. This has created some issues at application submission, due to the lack of notification as to whether the consultant will handle the input to HEROS. In some cases, HUD has completed the input to HEROS, only to find out that the consultant already started and/or completed the input. HUD is working on providing SPOC’s for each region, rather than waiting for the HUD Preparer (ie, Appraiser, Underwriter, etc.) to be assigned. Lenders should provide a statement in the Lender Narrative specifically stating that the HEROS input will be completed by the consultant once the HUD Preparer is assigned. HUD is working on a fix to the lender HEROS access issue. In the meantime, lender access is limited to a read-only HEROS-generated Word output with hyperlinks to supporting documentation throughout, which requires lenders to at least have HEROS access codes.

Environmental updates

Proposed ASD Rule HUD released the proposed rule “Conforming the Acceptable Separation Distance (ASD) Standards for Residential Propane Tanks to Industry” in December The main takeaway is that the rule would allow HUD-assisted projects near stationary propane ASTs with a capacity of 250 gallons or less. Heavy reliance on National Fire Protection Association (NFPA) Code 58 (Liquefied Petroleum Gas Code) (2017): A voluntary consensus standard for public safety that establishes standards used by the propane industry and operators regarding storage, handling, transportation, and use of propane. The comment period closed on February 8, 2019

Proposed ASD Rule HUD recognizes that mitigation measures can be costly and limit choices for siting HUD-assisted projects. Tank Burial: Costly design, permitting, registration, and construction fees, especially in urban areas Blast Wall: Similarly, this route can be cost-prohibitive. Typically very burdensome due to most propane ASTs being located off-site, greatly hindering the likelihood of an agreement between property owners. The comment period closed on February 8, 2019 Keith to discuss this: Explain that this along with DBWs is one of Lamar Seats top two initiatives What changes are being looked at? Tom mentioned that HUD is working on having the HUD regulations make more sense and also working with CPD on potential administrative changes to the process. Tom also mentioned that HUD is working on consistency in treatment of environmental issues around the country by CPD. Not sure what you are able to discuss but this would be really interesting and helpful to folks

Questions? Thank you panel participants!
We appreciate you sharing your knowledge and experience!

“THIS IS THE FIGHT OF OUR LIVES” HUD Environmental Topics

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