1. Affordable Housing & the 223(f) Low- Income Housing Tax Credit (LIHTC) Pilot Program Recent Updates and Highlights Prepared by Laura Stutzman, Senior Underwriter Office of Multifamily Production – Denver Hub

2. DAS Memo – Issued January 30, 2015 “Affordable Housing Clarifications” Organizational changes to support Underwriting of Affordable Housing 1.Single Underwriter Model across the FHA platform 2.Dedicated RAD Teams in (4) Hubs - Atlanta, Chicago, Fort Worth, and Seattle 3.Expansion of the TC Pilot to Include 221(d)(4) projects 2

3. DAS Memo – Issued January 30, 2015 “Affordable Housing Clarifications” Tax Credit Related changes to Policy 1.Tax Credit Equity Pay-In Schedule 2.Temporary Bridge Loans can be used to Fund Equity Borrower cannot be the FHA Loan’s Single Asset Mortgagor Loan cannot be Secured with the Project Term limited to (1) year following issuance of Form 8609 3.Lenders approved by HQ to hold Equity Interest > 25% in Projects for which they are FHA Lender Increased Projects allowed from (5) deals per year to (10) deals per year. 3

4. DAS Memo – Issued January 30, 2015 “Affordable Housing Clarifications” Tax Credit Related changes to Policy (Continued) 4.Subordinate Debt in amounts up to 100% of Total Project Cost can be used and secured by TC Projects HUD’s standard form of Subordination Agreement must be in place Payments only from available Surplus Cash Payments from all Secondary Debt combined not to exceed 75% of Surplus Cash Must be documented w/ signed Promissory Note Simple Interest used – Compound interest could be allowed via a HUD waiver with consideration 4

5. DAS Memo – Issued January 30, 2015 “Affordable Housing Clarifications” Tax Credit Related changes to Policy (Continued) 5.Minimum Vacancy/Collection Loss Rate *Underwritten Vacancy will be at the greater of the minimums below and actual levels 5 Maximum Vacancy and Collection Loss Rate Property Type 3% HUD-assisted property with HAP Contract on 90% or more of the units; or In-place rehab with greater than 90% occupancy and greater than 90% of the units set aside as LIHTC units, with attainable tax credit rents at least 10% below market (i.e. a “discount to market”). 5% 80% of the units are set aside as LIHTC units, with attainable tax credit rents at a 10% discount to market. 7% LIHTC without a 10% discount to market; or 20% or more of the units are Market Rate.

6. DAS Memo – Issued January 30, 2015 “Affordable Housing Clarifications” Tax Credit Related changes to Policy (Continued) 6.Broadened Underwriting of Developer Fees We will now underwrite any developer fees up to 15% of Total Development Costs that comply w/ IRS Regulations for the LIHTC Program and the prevailing Qualified Allocation Plan (QAP) for any project not claiming BSPRA or SPRA. The Developer Fee now may also be treated as a Mortgageable Cost. (Note – Waivers of the MAP Guide will be required to implement these changes until published in the New MAP Guide.) 6

7. 223(f) LIHTC Pilot Program FHA Insured LIHTC Projects more than doubled from 2013 to 2014 – Roughly $0.9 to $1.8 billion in mortgages Very Low TC Pilot Processing Times – Less than (100 ) days from Firm Application to Closing Denver Hub – 223(f) Pilot Projects – Increase in requests for Concept Meetings – Increase in 3-Year Rule Waiver Projects 7

8. 223(f) LIHTC Pilot Program Pilot Hub Jurisdictions 8

9. 223(f) LIHTC Pilot Program Avoid Processing Delays/Possible Application Rejection Total Construction Costs cannot exceed $40,000/Unit – Includes any Contingency amounts utilized Project-Based Section 8 (PBS8) HAP Contract – Submit 20-Year PBS8 HAP Renewal Requests, Rent Increase Requests, and Prepayment Requests (if applicable) a minimum of 60 days prior to submitting your TC Pilot Application M2M Waiver Requests – Initiate well in advance of your TC Pilot Application 9

10. 223(f) LIHTC Pilot Program Avoid Processing Delays/Possible Application Rejection Fixed LIHTC Equity Pay-In Schedule 10 Benchmarks for Equity Installments Minimum Equity Installment (Percent of Total Equity) Cumulative Equity Paid In On or Before Initial Closing20% At 65% Construction30%50% At Stabilization45%95% At Delivery of IRS Form 8609 or, Within (1) year of the Date of Delivery of the Form to Investors 5%100%

11. 223(f) LIHTC Pilot Program Avoid Processing Delays /Possible Application Rejection 3-Year Rule Waivers – Include all Supporting Documentation – Must meet required Occupancy Standards Always discuss nuances and potential waivers before or at the “Most Essential” Concept Meeting 11