[Federal Register Volume 69, Number 25 (Friday, February 6, 2004)]
[Notices]
[Pages 5826-5831]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-2595]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service


Notice for Requests for Proposals for Guaranteed Loans Under the 
Section 538 Guaranteed Rural Rental Housing Program (GRRHP) for Fiscal 
Year 2004

AGENCY: Rural Housing Service, USDA.

ACTION: Notice.

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SUMMARY: This is a request for proposals for guaranteed loans under the 
section 538 Guaranteed Rural Rental Housing Program (GRRHP) pursuant to 
7 CFR 3565.4 for Fiscal Year (FY) 2004 subject to the availability of 
funding. FY 2003 funding for the section 538 program was $99.350 
million. This notice is being issued prior to passage of a final 
appropriations bill to allow applicants sufficient time to leverage 
financing and submit proposals in the form of ``RESPONSES'', and give 
the Agency maximum time to process applications within the current 
fiscal year. A Notice of Funding Availability will be published 
announcing the funding level for the GRRHP for FY 2004 once an 
appropriation act has been enacted. The commitment of program dollars 
will be made to applicants of selected responses that have fulfilled 
the necessary requirements for obligation, to the extent an 
appropriation act provides funding for GRRHP for FY 2004. Expenses 
incurred in developing applications will be at the applicant's risk. 
The following paragraphs outline the timeframes, eligibility 
requirements, lender responsibilities, and the overall response and 
application processes.
    The GRRHP operates under 7 CFR part 3565. The GRRHP Origination and 
Servicing Handbook (HB-1-3565) is available to provide lenders and the 
general public with guidance on program administration. HB-1-3565, 
which contains a copy of 7 CFR part 3565 in Appendix 1, can be found at 
the Rural Development Instructions Web site at http://rdinit.usda.gov/regs.
    Eligible lenders are invited to submit responses for the 
development of affordable rental housing to serve rural America. The 
Rural Housing Service (RHS) will review responses submitted by eligible 
lenders, on the lender's letterhead, and signed by both the prospective 
borrower and lender. Although a complete application is not required in 
response to this notice, eligible lenders may submit a complete 
application concurrently with the response. The submission of a 
complete application will not affect the scoring process.

DATES: Program dollars will be allocated through a continuous selection 
process to the extent and when an appropriation act provides funding 
for GRRHP for FY 2004. The RHS will review all responses on an on-going 
basis through May 14, 2004. Those responses that are selected that 
subsequently submit complete applications and meet all Federal 
environmental requirements will receive commitments to the extent an 
appropriation act provides funding for

[[Page 5827]]

GRRHP for FY 2004 until all funds are expended. If any FY 2004 funds 
have not been exhausted by May 14, 2004, the Agency will continue 
receiving and reviewing responses until all funds are expended. A 
notice will be published in the Federal Register when all funds are 
committed for FY 2004.
    Eligible lenders intending to mail a response or application must 
provide sufficient time to permit delivery to the submission address on 
or before the closing deadline date. Acceptance by a U.S. Post Office 
or private mailer does not constitute delivery. Postage due responses 
and applications will not be accepted.

FOR FURTHER INFORMATION CONTACT: Arlene Nunes, Senior Loan Specialist, 
Guaranteed Loans, Multi-Family Housing Processing Division, U.S. 
Department of Agriculture, South Agriculture Building, Room 1271, STOP 
0781, 1400 Independence Avenue, SW., Washington, DC 20250-0781. E-mail: 
[email protected]. Telephone: (202) 401-2307. This number is not 
toll-free. Hearing or speech-impaired persons may access that number by 
calling the Federal Information Relay Service toll-free at (800) 877-
8339.
    Eligiblity of Prior Year Selected NOFA Responses: NOFA responses 
selected in prior years, but not yet funded, are eligible for FY 2004 
program dollars subject to the availability of funds. Prior year NOFA 
responses selected by RHS for submission of a complete application may 
submit an application for competition for FY 2004 funding without 
completing a FY 2004 response. All qualified applications will be 
funded on a first come basis until all program funds are exhausted. RHS 
will commit and obligate funds only to lenders that submit a complete 
application, including all Federal environmental documents required by 
7 CFR part 1940, subpart G, Form RD 3565-1, and the $2,500 application 
fee.

General Program Information

    Program Purpose: The section 538 Guaranteed Rural Rental Housing 
Program is designed to increase the supply of affordable multi-family 
housing through partnerships between the RHS and major lending sources, 
as well as state and local housing finance agencies and bond issuers.
    Responses Must be Submitted By: The Agency will only accept 
responses from GRRHP eligible or approved lenders as described in 7 CFR 
3565.102 and 3565.103 respectively.
    Qualifying Properties: Qualifying properties include new 
construction for multi-family housing units or acquisition of existing 
structures with minimum per unit rehabilitation expenditure 
requirements in accordance with 7 CFR 3565.252. The portion of 
guaranteed funds for acquisition with rehabilitation is limited to 25 
percent of the program authority.
    Eligible Financing Sources: Any form of Federal, State, and 
conventional sources of financing can be used in conjunction with the 
loan guarantee, including Home Investment Partnership Program (HOME) 
grant funds, tax exempt bonds, and low income housing tax credits.
    Maximum Guarantee: The maximum guarantee for a permanent loan will 
be 90 percent of the unpaid balance and interest on the loan. The 
maximum guarantee on a construction loan will be 90 percent of the work 
in place, which have credit enhancements, or up to 90 percent of the 
amount actually advanced by the lender, whichever is less.
    Reimbursement of Losses: Any losses will be split on a pro-rata 
basis between the lender and the RHS from the first dollar lost.
    Interest Rate: RHS will accept the best rate negotiated between the 
lender and prospective borrower. The lender is not required to provide 
the interest rate in the response unless interest credit assistance is 
requested for the project. Priority points will be given for interest 
rates less than 250 basis points above the monthly Applicable Federal 
Rate (AFR), on the day of closing, when interest credit assistance is 
requested. In all cases, interest rates must be fixed over the term of 
the loan.
    Interest Credit: RHS will award interest credit to at least 20 
percent of the loans made under the program. If 20 percent of the loans 
have not received interest credit by May 14, 2004, then RHS will award 
interest credit to those loans that initially requested interest credit 
and have the highest interest credit priority score until at least 20% 
of the loans have received interest credit. Requests for interest 
credit must be made in the response. Lenders are not permitted to make 
requests for interest credit after the selection process has taken 
place.
    Due to limited funding and in order to distribute interest credit 
assistance as broadly as possible, the Agency has decided to limit the 
interest credit to $1.5 million per project. For example, if an 
eligible request were made for interest credit on a loan of $2.5 
million, up to $1.5 million of the loan would receive interest credit. 
Interest credit is not available for construction loans. Interest 
credit is only available for permanent loans. Lenders with projects 
that are viable with or without interest credit are encouraged to 
submit a response reflecting financial and market feasibility under 
both funding options. Responses requesting consideration under both 
options will not affect interest credit selection. However, once the 
interest credit funds are exhausted, only those responses requesting 
consideration under both funding options or the Non-Interest Credit 
option will be further considered.
    Due to limited interest credit funds and the responsibility of RHS 
to target and give priority to rural areas most in need, responses 
requesting interest credit must score a minimum of 65 points under the 
criteria established in this notice. In the event of ties, selection 
between responses will be by lot.
    Surcharges for Guarantee of Construction Advances: There is no 
surcharge for the guarantee of construction advances for FY 2004.
    Program Fees for FY 2004: The following information stipulates the 
program fees.
    (1) There is an initial guarantee fee of 1 percent of the total 
guarantee amount, which will be due when the loan guarantee is issued. 
In the case of a combination construction and permanent loan guarantee, 
the 1 percent initial fee will be paid when the construction loan note 
guarantee is issued. For purposes of calculating this fee, the 
guarantee amount is the product of the percentage of the guarantee 
times the initial principal amount of the guaranteed loan.
    (2) There is an annual renewal fee of 0.5 percent of the 
outstanding principal and interest of the loan. This fee will be 
collected annually on January 1st of each calendar year.
    (3) There is no fee for site assessment and market analysis or 
preliminary feasibility in FY 2004.
    (4) There is a non-refundable application fee of $2,500 when the 
application is submitted.
    (5) There is a flat fee of $500 when a lender requests RHS to 
extend the term of a guarantee commitment.
    (6) There is a flat fee of $500 when a lender requests RHS to 
extend a guarantee commitment after the period of the commitment 
lapses.
    (7) There is a flat fee of $1,250 when a lender requests RHS to 
approve the transfer of property and assumption of the loan to an 
eligible prospective borrower.
    (8) There is no lender application fee for lender approval in FY 
2004.
    Eligible Lenders: An eligible lender for the section 538 GRRHP as 
required by 7 CFR 3565.102 must be a licensed business entity or 
Housing Finance Agency (HFA) in good standing in the

[[Page 5828]]

state or states where it conducts business. Lender eligibility 
requirements are contained in 7 CFR 3565.102. Below is a list of some 
of the eligible lender criteria under 7 CFR 3565.102:
    (1) Licensed business entity that meets the qualifications and has 
the approval of the Secretary of Housing and Urban Development (HUD) to 
make multi-family housing loans that are insured under the National 
Housing Act. A complete list of HUD approved lenders can be found on 
the HUD Web site at http://www.hud.gov.
    (2) A licensed business entity that meets the qualifications and 
has the approval of the Freddie Mac or Fannie Mae corporations to make 
multi-family housing loans that are sold to the same corporations. A 
complete list of Freddie Mac approved lenders can be found on the 
Freddie Mac Web site at http://www.freddiemac.com. Fannie Mae approved 
lenders are found at http://www.fanniemae.com.
    (3) A state or local HFA with a top-tier rating from Moody's or 
Standard & Poors, or member of the Federal Home Loan Bank system, and 
the demonstrated ability to underwrite, originate, process, close, 
service, manage, and dispose of multi-family housing loans in a prudent 
manner.
    (4) Be a GRRHP approved lender, defined as an entity with an 
executed multi-family housing Lender's Agreement with RHS.
    (5) Lenders that can demonstrate the capacity to underwrite, 
originate, process, close, service, manage, and dispose of multi-family 
housing loans in a prudent manner. In order to be approved the lender 
will have to have an acceptable level of financial soundness as 
determined by a lender rating service. The submission of materials 
demonstrating capacity will be required if the lender's response is 
selected.
    Lenders who are otherwise ineligible may become eligible if they 
maintain a correspondent relationship with an eligible lender that does 
have the capacity to underwrite, originate, process, close, service, 
manage, and dispose of multi-family housing loans in a prudent manner. 
In this case, the eligible lender must submit the response and 
application. All contractual and legal documentation will be signed 
between RHS and the lender that submitted the response and application.
    RHS Lender Approval Application: Lenders whose responses are 
selected will be notified by the RHS to submit a request for RHS lender 
approval application within 30 days of notification. Lenders that have 
received RHS lender approval in the past and are in good standing do 
not need to reapply for RHS lender approval.
    Submission of Documentation for RHS Lender Approval: All lenders 
that have not yet received RHS lender approval must submit a complete 
application for RHS lender approval to the Director of the Multi-Family 
Housing Processing Division at the address provided in the ``NOTICE 
SUBMISSION ADDRESS'' section of this notice. As RHS does not have a 
formal application form, a complete application will consist of a cover 
letter requesting RHS lender approval and the following documentation:
    (1) Request for RHS lender approval on the lender's letterhead;
    (2) Lenders who are HUD, Freddie Mac or Fannie Mae multi-family 
approved lenders are required to show evidence of this status, such as 
a copy of a letter designating the distinction;
    (3) The lender's Loan Origination, Loan Servicing and Portfolio 
Management Handbooks. These handbooks should detail the lender's 
policies and procedures on loan origination through termination for 
multi-family loans;
    (4) Portfolio performance data;
    (5) Copies of standard documents that will be used in processing 
GRRHP loans;
    (6) Resumes and qualifications of key personnel that will be 
involved in the GRRHP;
    (7) Identification of standards and processes that deviate from 
those outlined in the GRRHP Origination and Servicing Handbook (HB-1-
3565) found at http://rdinit.usda.gov/regs;
    (8) A copy of the most recent audited financial statements;
    (9) Lender specific information including: (a) Legal name and 
address, (b) list of principal officers and their responsibilities, (c) 
certification that the officers and principals of the lender have not 
been debarred or suspended from Federal programs, (d) Form AD 1047, (e) 
certification that the lender is not in default or delinquent on any 
Federal debt or loan, or possess an outstanding finding of deficiency 
in a Federal housing program, and (f) certification of the lender's 
credit rating; and
    (10) Documentation on bonding and insurance.
    RHS Lender Approval Requirements: Lenders who request RHS lender 
approval must meet the standards stipulated in the 7 CFR 3565.103.
    Lender Responsibilities: Lenders will be responsible for the full 
range of loan origination, underwriting, management, servicing, 
compliance issues and property disposition activities associated with 
their projects. The lender will be expected to provide guidance to the 
prospective borrower on the RHS requirements during the application 
phase. Once the guarantee is issued, the lender is expected to service 
each loan it underwrites or contract these services to another capable 
entity.

Discussion of Notice

    Content of Notice Responses: All responses require lender 
information and project specific data. Incomplete responses will not be 
considered for funding. Lenders will be notified of incomplete 
responses. Complete responses are to include a signed cover letter from 
the lender on the lender's letterhead and the following information:
    (1) Lender certification--The lender must certify that the lender 
will make a loan to the prospective borrower for the proposed project, 
under specified terms and conditions subject to the issuance of the RHS 
guarantee. Lender certification must be on the lender's letterhead and 
signed by both the lender and the prospective borrower.
    (2) Project specific data--The lender must submit the project 
specific data below on the lender's letterhead, signed by both the 
lender and the prospective borrower.

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Lender Name......................  Insert the lender's name.
----------------------------------
Lender Tax ID ..........  Insert lender's tax ID .
----------------------------------
Lender Contact Name..............  Name of the lender contact for loan
----------------------------------
Mailing Address..................  Lender's complete mailing address
----------------------------------
Phone ..................  Phone  for lender contact.
----------------------------------

[[Page 5829]]

 
Fax ....................  Insert lender's fax .
----------------------------------
E-mail Address...................  Insert lender contact e-mail address.
----------------------------------
Borrower Name and Organization     State whether borrower is a Limited
 Type.                              Partnership, Corporation, Indian
                                    Tribe, etc.
----------------------------------
Tax Classification Type..........  State whether borrower is for profit,
                                    not for profit, etc.
----------------------------------
Borrower Tax ID ........  Insert borrower's tax ID .
----------------------------------
Borrower Address, including        Insert borrower's address and county.
 County.
----------------------------------
Borrower Phone .........  Insert borrower's phone .
----------------------------------
Principal or Key Member for the    Insert name and title.
 Borrower.
----------------------------------
Borrower Information and           Attach relevant information.
 Statement of Housing Development
 Experience.
----------------------------------
New Construction or Acquisition    State whether the project is new
 or Repair or Rehabilitation.       construction or acquisition or
                                    repair or rehabilitation.
----------------------------------
Project Location Town or City....  Town or city in which the project is
                                    located.
----------------------------------
Project County...................  County in which the project is
                                    located.
----------------------------------
Project State....................  State in which the project is
                                    located.
----------------------------------
Project Zip Code.................  Insert zip code.
----------------------------------
Project Congressional District...  Congressional District for project
                                    location.
----------------------------------
Project Name.....................  Insert project name.
----------------------------------
Project Type.....................  Family, senior (all residents over
                                    55), or mixed.
----------------------------------
Property Description and Proposed  Provide as an attachment.
 Development Schedule.
----------------------------------
Total Project Development Cost...  Enter amount for total project.
----------------------------------
 of Units...............  Insert the  of units in the
                                    project.
----------------------------------
Cost Per Unit....................  Total development cost divided by
                                     of units.
----------------------------------
Bedroom Mix......................   of units by  of
                                    bedrooms.
----------------------------------
Rent.............................  Proposed rent structure.
----------------------------------
Median Income for Community......  Provide median income for the
                                    community.
----------------------------------
Evidence of Site Control.........  Attach relevant information.
----------------------------------
Description of Any Environmental   Attach relevant information.
 Issues.
----------------------------------
Loan Amount......................  Insert the loan amount.
----------------------------------
Interest Credit (IC).............  Is interest credit requested for this
                                    loan? (Yes or No)
----------------------------------
Interest Rate (for interest        Lenders seeking interest credit must
 credit requests only).             provide the interest rate. Priority
                                    points will be awarded to projects
                                    requesting interest credit for
                                    interest rates less than 250 basis
                                    points over the monthly applicable
                                    federal rate on the day of closing.
----------------------------------
If Above Is Yes, Should Proposal   If Yes, proposal must show financial
 Be Considered Under Non-IC         feasibility for Non-IC
 Selection if IC Funds Are          consideration.
 Exhausted?.
----------------------------------
Borrower's Proposed Equity.......  Insert amount.
----------------------------------
Tax Credits......................  Will the project be allocated tax
                                    credits? How much? What is the
                                    estimated value of the tax credits
                                    awarded?
----------------------------------
Other Sources of Funds...........  List all funding sources.
----------------------------------
Loan to Value....................  Guaranteed loan divided by value of
                                    project.
----------------------------------
Debt Coverage Ratio..............  Net Operating Income divided by debt
                                    service payments.
----------------------------------

[[Page 5830]]

 
Percentage of Guarantee..........  Percentage guarantee requested.
----------------------------------
Collateral.......................  Attach relevant information.
----------------------------------
Empowerment Zone (EZ) or           Yes or No. Is the project in a
 Enterprise Community (EC).         recognized EZ or EC?
----------------------------------
Colonia or Tribal Land...........  Is the project in a Colonia or on an
                                    Indian Reservation? (Yes or No)
----------------------------------
Population.......................  Must be within the 20,000 population
                                    limit set for the program.
----------------------------------
Is a Guarantee for Construction    State yes or no. The Agency will
 Being Requested? Are Advances      guarantee construction advances,
 Being Requested?.                  only as part of a combination
                                    construction and permanent loan.
----------------------------------
Loan Term........................  Up to a 40-year amortized loan.
                                    Balloon mortgages with a minimum 25-
                                    year term are eligible.
------------------------------------------------------------------------

    Scoring of Priority Criteria for Selection of Projects with 
Interest Credit Requests: RHS will allocate points to projects with 
requests for interest credit. Projects with no interest credit request 
will be reviewed for eligibility and viability on a continuous basis 
and without any priority selection criteria.
    The seven priority criteria for projects with requests for interest 
credit are listed below.
    Priority 1--Projects located in eligible rural communities with the 
lowest populations will receive the highest points.

------------------------------------------------------------------------
                        Population size                          Points
------------------------------------------------------------------------
0-5,000 people................................................        15
5,001-10,000 people...........................................        10
10,001-15,000 people..........................................         5
15,001-20,000 people..........................................         0
------------------------------------------------------------------------

    Priority 2--The RHS will award points for projects with 3-5 bedroom 
units as follows:

------------------------------------------------------------------------
                  Number of 3-5 bedroom units                    Points
------------------------------------------------------------------------
more than 15..................................................        20
10-15.........................................................        15
5-9...........................................................        10
1-4...........................................................         5
------------------------------------------------------------------------

    Priority 3--The most needy communities as determined by the median 
income from the most recent census data will receive points. The RHS 
will allocate points to projects located in communities having the 
lowest median income. Points for median income will be awarded as 
follows:

------------------------------------------------------------------------
                   Median income  (dollars)                      Points
------------------------------------------------------------------------
Less than $35,000.............................................        20
$35,001-$45,000...............................................        15
$45,001-$55,000...............................................        10
$55,001-$65,000...............................................         5
More than $65,000.............................................         0
------------------------------------------------------------------------

    Priority 4--Projects that demonstrate partnering and leveraging in 
order to develop the maximum number of units and promote partnerships 
with state and local communities will also receive points. Points will 
awarded as follows:

------------------------------------------------------------------------
              Loan to value ratio  (percentage %)                Points
------------------------------------------------------------------------
More than 75..................................................        10
70-75.........................................................        15
Less than 70..................................................        20
------------------------------------------------------------------------

    Priority 5--The development of projects on Tribal Lands, or in an 
Empowerment Zone or Enterprise Community will receive points. The RHS 
will attribute 20 points to projects that are developed in any of the 
locations described in this priority.
    Priority 6--The development of projects in a Colonia or in a place 
identified in the State's Consolidated Plan or State Needs Assessment 
as a high need community for multi-family housing will receive points. 
The RHS will attribute 20 points to projects that are developed in any 
of the locations described in this priority.
    Priority 7--RHS will award points for interest rates above the 
applicable Federal rate at the time of loan closing as follows:

------------------------------------------------------------------------
                         Interest rate                           Points
------------------------------------------------------------------------
More than 250 basis points....................................      (20)
200 to 250 basis points, inclusive............................         5
100 to 199 basis points, inclusive............................        10
0 to 99 basis points, inclusive...............................        15
------------------------------------------------------------------------

    Notice Submission Address: Eligible lenders will send responses to: 
Director, Multi-Family Housing Processing Division, Rural Housing 
Service, U.S. Department of Agriculture, Room 1263, STOP 0781, 1400 
Independence Avenue, SW., Washington, DC 20250-0781. Responses for 
participation in the program must be identified as ``Section 538 
Guaranteed Rural Rental Housing Program'' on the envelope.
    Notifications: Responses will be reviewed for completeness and 
eligibility. The RHS will notify those lenders whose responses are 
selected via letter. The RHS will request lenders without RHS lender 
approval to apply for RHS lender approval within 30 days of receipt of 
the notification of selection. For information regarding RHS lender 
approval, please refer to the section entitled ``Submission of 
Documentation for RHS Lender Approval'' in this notice. Requests for 
RHS lender approval should be sent to the person and address listed in 
the ``Notice Submission Address'' section in this notice.
    Lenders will also be invited to submit a complete application and 
the required application fee of $2,500 to the Rural Development State 
Office where the project is located.
    Submission of GRRHP Applications: Notification letters will 
instruct lenders to contact the Rural Development State Office 
immediately following notification of selection to schedule required 
agency reviews. Rural Development State Office addresses can be found 
on the Rural Development Web site, http://www.rurdev.usda.gov, under 
``State Offices''.
    Rural Development State Office staff will work with lenders in the 
development of an application package. Required documentation for a 
complete application package is stated in Chapter 3 of HB-1-3565.
    The deadline for the submission of a complete application and 
application fee is 90 days from the date of notification of response 
selection. If the application and fee are not submitted within 90 days 
from the date of notification, the selection is subject to 
cancellation, thereby allowing another response that is ready to 
proceed with processing to be selected.
    Obligation of Program Funds: The RHS will only obligate funds to 
projects that meet the requirements for obligation, including 
undergoing a satisfactory environmental review in accordance with the 
National Environmental Protection Act (NEPA) and lenders who have 
submitted the $2,500 application fee and completed

[[Page 5831]]

Form RD 3565-1 for the selected project.
    Conditional Commitment: Once required documents for obligation and 
the application fee are received and all NEPA requirements have been 
met, the Rural Development State Office will issue a conditional 
commitment, which stipulates the conditions that must be fulfilled 
before the issuance of a guarantee, in accordance with 7 CFR 3565.303.
    Issuance of Guarantee: The RHS will issue a guarantee to the lender 
for a project in accordance with 7 CFR 3565.303. No guarantee can be 
issued without a complete application, review of appropriate 
certifications, satisfactory assessment of the appropriate level of 
environmental review, and the completion of any conditional 
requirements.

    Dated: February 2, 2004.
Arthur A. Garcia,
Administrator, Rural Housing Service.
[FR Doc. 04-2595 Filed 2-5-04; 8:45 am]
BILLING CODE 3410-XV-P