[Federal Register Volume 59, Number 153 (Wednesday, August 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19514]


[[Page Unknown]]

[Federal Register: August 10, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner
[Docket No. N-94-3802; FR-3741-N-01]

 

Availability of Mid-Course Correction for Low-Income Housing 
Preservation and Resident Homeownership (LIHPRHA) and Emergency Low-
Income Housing Preservation Act (ELIHPA) Programs

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Notice of amended processing instructions.

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SUMMARY: This notice provides a summary of HUD Notice 94-42, which 
provides amended processing instructions for the Low-Income Housing 
Preservation and Resident Homeownership (LIHPRHA) and Emergency Low-
Income Housing Preservation Act (ELIHPA) Programs (jointly referred to 
as the ``Preservation Program''). These processing instructions result 
from interim changes to the Preservation Program. Additional background 
information for the changes is provided in this summary.

DATES: The notice was signed by the FHA Commissioner on June 6, 1994.

ADDRESSES: To obtain copies of Notice H94-42, please call HUD's On 
Demand Printing Center at 1-800-767-7468, or the Multifamily 
Preservation Division in HUD Headquarters at (202) 708-2300 or (202) 
708-0035. Hearing- or speech-impaired persons may use the 
Telecommunications Device for the Deaf (TDD) by calling (202) 708-4594 
(other than the ``800'' number, telephone numbers are not toll-free).

FOR FURTHER INFORMATION CONTACT:
Frank Malone, Director, Office of Preservation and Property 
Disposition, Department of Housing and Urban Development, Room 6284, 
451 Seventh Street, SW, Washington, DC 20410; telephone (202) 708-3555. 
To provide service for persons who are hearing- or speech-impaired, 
this number may be reached via TDD by dialing the Federal Information 
Relay Service on 1-800-877-TDDY (1-800-877-8339) or 202-708-9300. 
(Except for the TDD number, telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION: Accordingly, the following summarizes Notice 
H94-42):

Regional Directors of Housing
Field Office Directors of Housing Development, Field Office Directors 
of Housing Management
Chief Loan Management Officers
Chief Property Officers
NOTICE H94-42 (HUD)
ISS'D 6/6/94
EXP. 6/30/95
Cross References: 4360.6, 4465.1, 4350.1, H 91-29, H 92-11, H 92-54, 
4185.1, H 93-21, H 93-94

Subject: Mid-Course Correction II (MCCII)--For Low Income Housing 
Preservation and Resident Homeownership (LIHPRHA) and Emergency Low 
Income Housing Preservation Act (ELIHPA) Programs

    This Notice sets forth amended processing instructions for Title II 
and Title VI.
    Title II has over 4 years of operating experience and Title VI has 
over a year and a half of operating experience. During this time, we 
have received numerous suggestions and comments from the Field as well 
as the industry regarding program changes. After reviewing these 
suggestions and comments, we have determined that a number of policies 
and instructions set forth in the current Notices and HUD Handbook 
4350.6 should be revised to speed the delivery of the programs and 
better serve our clientele.
    In preparing these instructions, we were aware of the problems some 
Offices were experiencing coordinating the different review functions, 
which has in some cases made the program more difficult to administer. 
We have assembled a combined Housing Management-Housing Development 
preservation unit to work exclusively on this program. This unit has 
proven beneficial in understanding and providing solutions to the 
different review functions. This Notice contains instructions for both 
the Production and Asset Management Branches. It is hoped that 
combining these instructions will eliminate some of the coordination 
problems, provide additional processing tools and the administrative 
flexibility needed to better administer the program.

Applicability

    The following language replaces that published in this part of 
MCCII, because some public commenters claim that the language was 
ambiguous:
    These instructions apply to all Title II and Title VI processing 
stages not already completed by June 6, 1994, the issuance date of this 
notice.
    If an owner or purchaser made a submission prior to June 6, 1994, 
or the HUD Field Office did an analysis or issued a decision prior to 
June 6, 1994, the submission, analysis, or decision need not be 
revised. The owner or purchaser may, at its option, request that it be 
allowed to make a new submission or that HUD staff do a new analysis or 
make a new decision based on MCCII. If an owner requests further 
processing by HUD staff, it should include with the request 
authorization to extend the processing period sufficiently, if 
applicable. All reasonable requests should be honored by the HUD Field 
Office staff. In no case will HUD staff require a new submission; nor 
will it unilaterally reanalyze or make a new decision where such action 
has already been completed.

    (Note: In no case will the department grant a waiver to sue pre-
MCCII guidance if the owner submitted the Initial Notice of Intent 
after June 6, 1994.)

Summary of Notice

    This Notice describes interim changes to the Preservation Program: 
Title II and Title VI, Development and Management issues. These changes 
will eventually be integrated into permanent formats such as Handbooks 
and Guidelines. For purposes of brevity, this Notice is being referred 
to on ``Mid-Course Correction Notice II'' (MCCII). A synopsis of the 
changes follow.

I. Preservation Manager will be Appointed in Each Office Processing 
Preservation Cases

II. Title II Processing will More Closely Approximate Title VI 
Processing

--Greater stress is being placed on tenant notification and input.
--PCNAs will be conducted after submission of Notice of Intent on 
projects that have submitted a 9608B.
--Owner may choose to appraise the project and have the appraisal 
reviewed prior to submission of POA.

III. Changes to Both Title II and Title VI Processing

Tenant Notification
--CFS/TRACS must be accessed for information upon receipt of NOI.
--Increased emphasis is being placed on tenant notification and input.
--Revised and additional letters to tenants are being provided.
PCNAs, Repairs, and Reserve for Replacement Accounts
--PCNAs will be done in a prescribed format and will include a summary 
of the PCNA analysis.
--Required Repair requirements are amended:
    (i) Operational and functional items may be repaired, but not 
replaced.

    (ii) Inconsistent items must be corrected.
    (iii) Definitions of terms used in the PCNA notice are provided.

--There is a revised method for computing the initial deposit to the 
reserve for replacement account.

    (i) The initial deposit will provide for items whose anticipated 
useful life will expire within 5 years and for major items in years 6 
through 10.
    (ii) A 100 percent replacement cost estimate is made for items 
whose useful life is anticipated to expire within 5 years.

--There is a revised method for determining the adequacy of the 
existing replacement reserve account.

    (i) The determination will be made by Asset Management staff and 
the Director of Multifamily Housing.
    (ii) Owners are required to do on-going assessments of the reserve 
for replacement account.

--An Owner may begin making repairs once HUD's PCNA is received. Prior 
to making repairs, the Owner must:

    (i) Inform HUD of its intent to start.
    (ii) Request a pre-construction conference.
    (iii) Provide a written plan for completing repairs.

--When repairs are completed before submission of the POA application:

    (i) No inspection and modifications will be made to the PCNA until 
the POA application is received by HUD.
    (ii) The provisions of Davis-Bacon may or may not be applicable to 
the completed repairs depending on compliance with the written plan.

--Existing project replacement reserve funds may be used to replace 
items scheduled to be replaced or repaired in the PCNA work write-up. 
They must be completed before submission of the POA application.
--Inspection fee requirements have been revised.
Section 241(f) Loan Processing
--An owner may propose improvements to the property that exceed the 
scope of repairs in the PCNA work write-up.

    (i) Types of items that may or may not be included are listed.
    (ii) Valuation technical staff will develop a list of acceptable 
amenities for each market area.
    (iii) HUD technical staff will evaluate proposed improvements and 
estimated costs.

--Contingency Reserve.

    (i) A 10 percent contingency will be established for all repairs 
and improvements in nonprofit transfer projects.
    (ii) A contingency reserve will be established for substantial 
rehabilitation projects.

--Owners are required to submit an Estimate of Progress Schedule.

IV. Changes Made to Title VI Processing Only

--Clarification of negotiation option before third appraisal.
--The definition of multifamily rental housing under extension 
preservation value has been expanded to include some types of elderly 
housing.
--The concept of Project Specific Rents (PSR) is introduced and is 
distinguished from Prevailing Market Rents (PMR).

    (i) PMR reflects prevailing market amenities.
    (ii) PSR reflects the subject project characteristics and is the 
rent non-subsidized tenants would be willing to pay.
    (iii) PSR is the cap on Total Tenant Payment that the owner 
requests to use at the project if it is lower than FMR.
    (iv) PSR must be updated each year if it is to be used.
    (v) PSR is the maximum Section 8 Contract rents to be used at POA 
approval in Title II projects.

--Federal Cost Limit is being frozen at the amount determined on Form 
HUD-9607 at the appraisal stage.
--Field Offices will submit all Form HUD-9607s to Preservation 
Division.
--Newspapers and newsletters without significant circulation will not 
be used to advertise sale of Preservation projects.
--Credit approval for nonprofit purchasers is moved to the receipt of a 
bona fide offer.
--Consultant fees will be approved simultaneously with nonprofit 
purchaser credit approval.
--A combined checklist is provided for TPA/241(f)/POA applications.

V. Preservation Technical Assistance Grants.

--Expedited processing is encouraged.
--Nonprofit purchasers may request Section 241(f) application fees in 
their PTAG applications.
--Revision of Exhibits 3, 6, and 7 to be substituted in the application 
package.

VI. Section 241(f) Loan Processing.

--The requirement for a Section 241(f) equity loan escrow is not 
changed.
--A construction escrow to be funded by the owner is required for all 
Section 241(f) loans. However, a nonprofit mortgagor may use the 10 
percent contingency reserve to meet this requirement.
--Transaction expenses eligible for a Section 241(f) loan are 
described.
--Debt Service Coverage requirements.

    (i) 90 percent for equity portion of loan in Title II and VI.
    (ii) 95 percent for rehabilitation portion of any loan and for 
Title VI acquisition loans.
    (iii) Amortization period for Section 241(f) equity loans ranges 
from 20 to 40 years.
    (iv) Amortization period for Section 241(f) acquisition loan 
remains 40 years.

VII. POA Implementation Changes

--Requirements are provided for the summary of the POA to be given to 
tenants.
--Allowable oversight costs for nonprofit organizations are provided.
--Basic costs are described.
--Owner options for tenant rent phase-in are described.
--Tenants may change designations on the tenant profile if income 
changes.

VIII. Office Program Monitoring

--An individual must be designated in each Office to enter and access 
MPPS to retrieve project information.
--Any information HUD provides to an owner is available through the 
Freedom of Information Act.
--A log must be maintained of disseminated information.
--Liaisons should be set up with State and local governments for 
assistance in disseminating information.

    Authority: 42 U.S.C. 4101 et seq.; 42 U.S.C. 3535(d).

    Dated: August 3, 1994.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 94-19514 Filed 8-9-94; 8:45 am]
BILLING CODE 4210-27-M