[Federal Register Volume 76, Number 130 (Thursday, July 7, 2011)]
[Notices]
[Pages 39820-39836]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17107]



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DEPARTMENT OF AGRICULTURE



Rural Housing Service




Notice of Funding Availability: Sections 514, 515 and 516 Multi-

Family Housing Revitalization Demonstration Program for Fiscal Year 

2011



AGENCY: Rural Housing Service, USDA.



ACTION: Notice.



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SUMMARY: United States Department of Agriculture (USDA) Rural 

Development (Agency), which administers the programs of the Rural 

Housing Service (RHS), announces the timeframe to submit applications 

to participate in a demonstration program to preserve and revitalize 

existing Multi-Family Housing (MFH) projects financed by Rural 

Development under Section 515, Section 514 and Section 516 of the 

Housing Act of 1949, as amended. The intended effect is to restructure 

selected existing Section 515 Rural Rental Housing (RRH) loans and 

Section 514/516 Off-Farm Labor Housing loans (FLH) and to provide 

grants for the purpose of ensuring that sufficient resources are 

available to preserve the rental projects for the purpose of providing 

safe and affordable housing for very low-, low-, or moderate-income 

residents. Expectations are that properties participating in this 

program will be revitalized and the affordable use will be extended 

without displacing tenants because of increased rents. No additional 

Agency Rental Assistance (RA) units will be made available under this 

program.



DATES: The deadline for receipt of all pre-applications in response to 

this Notice is 5 p.m., Eastern Time, August 22, 2011. The pre-

application closing deadline is firm as to date and hour. The Agency 

will not consider any pre-applications that are received after the 

closing deadline. Applicants intending to mail pre-applications must 

allow sufficient time to permit delivery on or before the closing 

deadline. Acceptance by a post office or private mailer does not 

constitute delivery. Facsimile (FAX) and postage-due pre-applications 

will not be accepted.



FOR FURTHER INFORMATION CONTACT: Cynthia L. Johnson, 

[email protected], (202) 720-1940, Finance and Loan 

Analyst, Multi-Family Housing Preservation and Direct Loan Division, 

STOP 0782, (Room 1263-S), U.S. Department of Agriculture, Rural Housing 

Service, 1400 Independence Avenue, SW., Washington, DC 20250-0782. All 

hard copy pre-applications and required documents (attachments) must be 

submitted to this address. (Please note this telephone number is not a 

toll-free number.)



SUPPLEMENTARY INFORMATION:



Paperwork Reduction Act



    The information collection requirements contained in this Notice 

have received approval from the Office of Management and Budget (OMB) 

under Control Number 0570-0190.



Overview



    Announcement Type: Inviting applications from eligible applicants 

for 2011 funding.



Catalog of Federal Domestic Assistance Number (CFDA): 10.447.



    The Agriculture, Rural Development, Food and Drug Administration, 

and Related Agencies Appropriations Act, 2011 (Pub. L. 111-80) October 

16, 2009, authorized the Agency to conduct a demonstration program for 

the preservation and revitalization of the Section 515 RRH portfolio 

and Section 514/516 FLH portfolio. The Department of Defense and Full 

Year Continuing Appropriations Act, 2011 (Pub. L. 112-10) April 15, 

2011, continues the Agency's authority and provides funding for this 

demonstration program until expended. Sections 514, 515 and 516 MFH 

programs are authorized by the Housing Act of 1949, as amended (42 

U.S.C. Sections 1484, 1485, 1486) and provide Rural Development with 

the authority to make loans for low-income MFH and FLH and related 

facilities. All funding for MPR are subject to the availability of 

funds for this purpose.



I. Funding Opportunities Description



    This Notice solicits pre-applications from eligible borrowers/

applicants to restructure existing MFH properties within the Agency's 

Section 515 MFH portfolio and Section 514/516 FLH portfolio for the 

purpose of revitalization and preservation. The demonstration program 

shall be referred to in this Notice as the Multi-Family Housing 

Revitalization Demonstration



[[Page 39821]]



program (MPR). Agency regulations for the Section 515 MFH program and 

for Section 514/516 FLH program are published at 7 CFR Part 3560.

    Applications which were selected for further processing under 

previous Notices (Fiscal Years 2007-2009), must be submitted to the 

Multi-Family Housing Preservation and Direct Loan Division (MPDL) for 

approval by the Loan Review Committee (LRC), prior to August 31, 2011. 

Previous applications which are submitted prior to August 31, 2011, to 

MPDL will be funded on a first-come-first-served basis based on the 

date submitted to MPDL and do not have to be rescored under this 

Notice. The Agency will not maintain nor fund applications for FY 2007-

2009 that have not been submitted to MPDL prior to August 31, 2011, but 

applicants may reapply under future Notices. After August 31, 2011, 

applicants will then be selected for funding from the FY 2011 NOFA 

pursuant to this Notice. All funding for MPR transactions are subject 

to the availability of funds for this purpose.

    The MPR's intent is to ensure that existing rental projects will 

continue to deliver decent, safe and sanitary affordable rental housing 

for 20 years or the remaining term of any Agency loan whichever ends 

later. Once an applicant has been confirmed eligible and the project 

has been selected by the Agency in the process described in this Notice 

and the applicant agrees to participate in the MPR demonstration 

program by written notification to the Agency, an independent third-

party Capital Needs Assessment (CNA) will be conducted to provide a 

fair and objective review of projected capital needs. The Agency shall 

implement this Notice through an MPR Conditional Commitment (MPRCC) 

Letter of Conditions with the eligible borrower, which will include all 

the terms and conditions under this Notice.

    The primary restructuring tool to be used in this program is debt 

deferral for up to 20 years of the existing Section 514 and 515 loans 

obligated prior to October 1, 1991. The cash flow from the deferred 

payment will be deposited, as directed by the Agency, to the reserve 

account to help meet the future physical needs of the property or to 

reduce rents. Debt deferral is described as follows:

    Debt Deferral: A deferral of the existing Agency debt for the 

lesser of the remaining term of the loan or 20 years. All terms and 

conditions of the deferral will be described in the MPR Debt Deferral 

Agreement. A balloon payment of principal and accrued interest will be 

due at the end of the deferral period. Interest will accrue at the 

promissory note rate and subsidy will be applied as set out in the 

Agency's Interest Credit Agreement. Interest will not be charged on the 

deferred interest.

    If the resulting cash flow is not adequate to address the long-term 

needs of the project, the Agency may use the following sources of 

funds:

    (1) Other Agency restructuring tools as follows:

    (i) MPR Revitalization Grant: A revitalization grant (for non-

profit applicants/borrowers only) is limited to the cost of correcting 

health and safety violations as identified by the CNA. The grant 

administration will be in accordance with applicable provisions of 7 

CFR Parts 3015 or 3019, as applicable.

    (ii) MPR Revitalization Zero Percent Loan: A revitalization loan at 

zero percent interest that will have a term of 30 years and be 

amortized over 50 years.

    (iii) MPR Soft-Second Loan: A loan with a 1 percent interest rate 

that will have its accrued interest and principal deferred, to a 

balloon payment, due at the time the latest maturing Section 514 or 

Section 515 loan already in place at the time of closing becomes due. 

The term of the soft-second loan will not be timed to match the term of 

any new Section 515 loan added during the transaction. New Section 515 

loans can be made; however, the applicant will have to go through the 

regular Section 515 application process.

    (iv) Increased Return to Owner (RTO) for Stay-in-Owners: Stay-in-

owners, namely existing borrowers who will retain their property and 

contribute cash to fund any hard costs of construction to meet 

immediate needs identified by the CNA, may receive a Return on 

Investment (ROI) on those funds provided the Agency determines an 

increased ROI is financially feasible, and the Agency approves such a 

return in the revitalization plan. The Agency also may offer that the 

RTO be included in a ``cash flow split'' agreement as outlined in a 

MPRCC/Letter of Conditions. The cash flow split will allow up to 50 

percent of excess cash, generated by the owner's fiscal year end, to be 

split equally between paying down any outstanding deferred Agency loan 

balances, and 50 percent to be returned to the borrower as an increased 

RTO, subject to the provisions of 7 CFR 3560.68.

    MPR funds cannot be used to add new units, community rooms, 

playgrounds, and/or laundry rooms; however, other funding sources as 

outlined below in (2) through (6) can be used either for revitalization 

or for improvements listed above to the projects.

    (2) Rural Development Section 515 Rehabilitation loan funds;

    (3) Rural Development Section 514/516 off-farm rehabilitation loan 

and grant funds;

    (4) Rural Development Section 538 Guaranteed Rural Rental Housing 

Program financing;

    (5) Rural Development Multi-Family Housing Re-lending Demonstration 

Program Funds;

    (6) Third-party loans with below market rates (below the Applicable 

Federal Rate (AFR)), grants, tax credits, and tax-exempt financing; and

    (7) Owner-provided capital contributions in the form of a cash 

infusion. A cash infusion is not a loan.

    Transfers, subordinations, and consolidations may be approved as 

part of a MPR transaction in accordance with 7 CFR Part 3560. If a 

transfer is part of the MPR transaction, the transfer must meet the 

requirements of 7 CFR 3560.406 before the MPR transaction is processed.

    For the purposes of the MPR, the restructuring transactions will be 

identified in three categories: (Applicants may only apply under one 

category.)

    (1) Simple transactions that involve no change in ownership.

    (2) Complex transactions which consist of a property transfer to 

new ownership processed in accordance with 7 CFR 3560.406 or 

transactions requiring a subordination agreement as a result of third-

party funds.

    (3) Portfolio transactions that are defined as multiple project 

sale transactions with a common purchaser or multiple MPR transactions 

with one stay-in owner all within one State closed on or after 

September 30, 2010. The common purchaser or stay-in owner must have at 

least one general partner in common. If the owner chooses to remove one 

or more properties, at least two properties must remain in order to be 

deemed a portfolio transaction.

    Each transactional category may utilize any or all restructuring 

tools. MPR Restructuring tools that may be available to address capital 

needs are based on the CNA process and the underwriting feasibility 

determination.

    While all non-deferred Agency debt, either in first lien position 

or a subordinated lien position must be secured within market value, 

deferred debt may exceed the market value of the security. Payment of 

such deferred debt will not be required from normal project operation 

income, but from excess cash from project operations and the value of 

the property after all other secured debts are satisfied.



[[Page 39822]]



    The following lays out the general steps of the MPR application 

process:

    (1) Pre-application: Applicants must submit a pre-application 

described in Section VI. This pre-application process is designed to 

lessen the cost burden on all applicants including those who may not 

meet eligibility requirements or whose proposals may not be feasible. 

Applicants are encouraged, but not required, to provide an electronic 

copy of all hard copy forms and documents submitted in the pre-

application/application package as requested by this Notice. The forms 

and documents must be submitted as read-only PDF Adobe Acrobat files on 

an electronic media such as CDs, DVDs or USB drives. For each 

electronic device that you submit, you must include a Table of Contents 

of all documents and forms on that device. The electronic medium must 

be submitted to the local State Office.



    Note: If you receive a loan or grant award under this Notice, 

USDA reserves the right to post all information submitted as part of 

the pre-application/application package which is not protected under 

the Privacy Act on a public Web site with free and open access to 

any member of the public.



    (2) Eligible Properties: Using criteria described below in Section 

III, USDA will conduct an initial screening for eligibility. As 

described in Section VIII, USDA will conduct additional eligibility 

screening later in the selection process.

    (3) Scoring and Ranking: All eligible, complete and timely-filed 

pre-applications submitted this fiscal year will be scored, ranked and 

put in funding categories as discussed in Sections VI and VII.

    (4) Formal Applications: Top ranked pre-applicants will receive a 

letter from the Agency and will be invited to submit a formal 

application. As discussed in Section VIII paragraph (2) of this Notice, 

USDA will require the owner to provide a CNA in order to determine the 

proper combination of tools to be offered to the applicant, to perform 

additional eligibility review, and to underwrite the proposal to 

determine financial feasibility. Where proposals are found to be 

ineligible or financially infeasible, owners will be informed and lower 

scoring applicants will be considered as set-forth in Section VIII.

    (5) Financial Feasibility: Using the results of the CNA to help 

identify the need for resources and applicant-provided information 

regarding anticipated or available third-party financing, the Agency 

will determine the financial feasibility of each potential transaction, 

using restructuring tools available either through existing regulatory 

authorities or specifically authorized through this demonstration 

program. A project is financially feasible when a property can provide 

affordable, safe, decent, and sanitary housing for 20 years or the 

remaining term of any Agency loan whichever ends later. By using the 

authorities of this program while minimizing the cost to the Agency, 

and without increasing rents for tenants and farm laborers, except when 

necessary to meet normal and necessary operating expenses. If the 

transaction is determined financially feasible by the Agency, the 

borrower will be offered a restructuring proposal, which will include 

the requirement that the borrower will execute, for recordation, a 

Restrictive-Use Covenant (RUC) for a period of 20 years, the remaining 

term of any existing loans, or the remaining term of any existing 

Restrictive-Use Provisions (RUP), whichever ends later. The 

restructuring proposal will be established in the form of the MPRCC.

    (6) MPR Agreements: If the offer is accepted by the applicant, the 

Agency and applicant will enter into a MPRCC. The applicant must also 

agree to restrict the property use when the MPR transaction is closed. 

Any third-party lender will be required to subordinate to the Agency's 

RUC unless the Agency determines on a case-by-case basis that the 

lender refuses to subordinate and such refusal will not compromise the 

purpose of the MPR. The Agency may also request that the applicant sign 

an agreement that would require the owner to escrow reserve, tax, and 

insurance payments in accordance with all pertinent current and future 

Agency regulations. In addition, the Agency may also request that the 

applicant agree to accept future rent increases based on an Annual 

Adjustment Factor (AAF). The AAF allows rents to be adjusted by the 

annual inflation factor as determined by the United States Office of 

Management and Budget (OMB). The exact AAF will be established in the 

MPR Agreement.

    (7) General Requirements: The MPR transactions may be conducted 

with a stay-in owner (simple or portfolio) or may involve a change in 

ownership (complex or portfolio). Any housing or related facilities 

that are constructed or repaired must meet the Agency design and 

construction standards and the development standards contained in 7 CFR 

Part 1924, subparts A and C, respectively. Once constructed, Section 

515 MFH and Section 514/516 FLH must be managed in accordance with 7 

CFR Part 3560. Tenant eligibility will be limited to persons who 

qualify as an eligible household under Agency regulations or who are 

eligible under the requirements established to qualify for housing 

benefits provided by sources other than the Agency, such as the U.S. 

Department of Housing and Urban Development (HUD) Section 8 assistance 

or Low Income Housing Tax Credits (LIHTC) assistance. Additional tenant 

eligibility requirements are contained in 7 CFR 3560.152.

    (8) Voluntary ``community market rent'' Demonstration (available 

for Section 515 properties only): In conjunction with this 

demonstration, Rural Development announces the opportunity for all 

successful Section 515 applicants to participate on a voluntary basis 

in a viability test of a 30 percent limitation on tenant rents, for 

post-restructured properties. Owners of properties in the Section 515 

restructuring program may elect to participate in the ``community 

market rent'' demonstration which will allow an owner to set a rent 

above the approved basic rent for any unit not currently occupied by a 

tenant receiving Agency RA.

    Eligible tenants for these units must have adjusted annual incomes 

sufficient to allow them to pay the ``community market rent'' using 

less than 30 percent of their adjusted income. Tenants would be allowed 

to occupy without paying overage, additional sums that would otherwise 

be required to bring their rent payment up to 30 percent of income. 

With the Agency's consent, up to 50 percent of the difference between 

the basic rent and the new ``community market rent'' could be retained 

by the owner as an increased return.

    For example, if the basic rent is $350, the owner could create a 

``community market rent'' at $410, and market the unit to tenants who 

could pay that rent at less than 30 percent of adjusted income. A 

percentage of the difference, $60 could be retained by the owner, as 

negotiated with Rural Development, up to $30.

    Prior to implementation of the ``community market rent'' 

demonstrations, the Agency will issue guidance to successful applicants 

who have indicated an interest in participating in the demonstration 

providing further details with respect to the program.



II. Award Information



    The Department of Defense and Full Year Continuing Appropriations 

Act, 2011 (Pub. L. 112-20), April 15, 2011, appropriated $14,970,000 in 

new budget authority, to the Agency for the MPR Demonstration Program. 

For FY 2011, up to $51,335,131.69 in Section 515



[[Page 39823]]



loan funds may be made available thru this NOFA.

    All funding must be obligated, by the Agency, not later than 

September 30, 2011.



III. Eligibility Information



    Applicants (and the principals associated with each applicant) must 

meet the following requirements:

    (1) Eligibility under 7 CFR 3560.55; however, the requirements 

described in 7 CFR 3560.55(a)(5) pertaining to required borrower 

contributions and 7 CFR 3560.55(a)(6) pertaining to required 

contributions of initial operating capital are waived for all MPR 

proposals.

    (2) For Section 515 MFH projects where the average physical vacancy 

rate over the 12 months preceding the filing of the pre-application 

will be no more than 10 percent for projects of 16 units or more and no 

more than 15 percent for projects under 16 units unless an exception 

applies under Section VI paragraph (2) (ii) of this Notice. If a 

project consolidation is involved, the consolidation will remain 

eligible so long as the average vacancy rate for all the projects 

involved meets the occupancy standard of this paragraph. Property(s) 

that do not meet the consolidation threshold may be withdrawn by the 

owner from the application process without jeopardizing the entire 

deal.

    (3) For Sections 514 and 516 FLH projects, the property must have 

positive cash flow for the previous full three years of operation 

unless an exception applies under Section VI paragraph (2) (ii) of this 

Notice.

    (4) Ownership of, and ability to operate, the facility after the 

transaction is completed. In the event of a transfer, the proposed 

transferee with an executed purchase agreement or other evidence of 

site control will be the applicant. Purchase agreements that have not 

been executed Will Not be accepted.

    (5) A CNA and Agency financial evaluation must be conducted to 

ensure that utilization of the restructuring tools of the MPR program 

is financially feasible and necessary for the revitalization and 

preservation of the property as affordable housing. Initial eligibility 

for processing will be determined as of the date of the pre-application 

filing deadline. The Agency reserves the right to discontinue 

processing any application due to material changes in the applicant's 

status occurring at any time after the initial eligibility 

determination.

    (6) Please note that all grant applicants must obtain a Dun and 

Bradstreet Data Universal Numbering System (DUNS) number and register 

in the Central Contractor Registration (CCR) prior to submitting a pre-

application pursuant to 2 CFR 25.200(b). In addition, an entity 

applicant must maintain registration in the CCR database at all times 

during which it has an active Federal award or an application or plan 

under construction by the Agency. Similarly, all recipients of Federal 

Financial Assistance are required to report information about first-

tier sub-awards and executive compensation, in accordance with 2 CFR 

Part 17 a. So long as an entity applicant does not have an exception 

under 2 CFR 170.110(b), the applicant must have the necessary processes 

and systems in place to comply with the reporting requirements should 

the applicant receive funding. See 2 CFR 170.200(b).



IV. Equal Opportunity and Nondiscrimination Requirements



    USDA is an equal opportunity provider, employer, and lender.

    (1) Borrowers and applicants will comply with the provisions of 7 

CFR 3560.2.

    (2) All housing must meet the accessibility requirements found at 7 

CFR 3560.60 (d).

    (3) All MPR participants must submit or have on file a valid Form 

RD 400-1, ``Equal Opportunity Agreement'' and Form RD 400-4, 

``Assurance Agreement.''

    USDA prohibits discrimination in all its programs and activities on 

the basis of race, color, national origin, age, disability, sex, 

marital status, familial status, religion, or because all or part of an 

individual's income is derived from any public assistance program. (Not 

all prohibited bases apply to all programs.) Persons with disabilities 

who require alternative means for communication of program information 

(Braille, large print, audiotape, etc.) should contact USDA's TARGET 

Center at (202) 720-2600 (Voice and TDD). To file a complaint of 

discrimination, write to USDA, Director, Office of Adjudication and 

Compliance, 1400 Independence Avenue, SW., Washington, DC 20250-9410, 

or call (800) 795-3272 (Voice) or (202) 720-6382 (TDD).

    The policies and regulations contained in 7 CFR Part 1901, subpart 

E, apply to this program.

    This Federal Register Notice pertains to announcing the 

availability of funds and the timeframe for submitting applications to 

participate in a demonstration program to preserve and revitalize 

existing rural rental housing projects financed by Rural Development 

under Section 515, Section 514, and Section 516 of the Housing Act of 

1949, as amended. This Notice does not have an adverse impact on 

minority/low-income populations.



V. Authorities Available for MPR



    MPR tools will be used in accordance with 7 CFR Part 3560 and its 

associated handbooks (available in any Rural Development office or at 

http://www.rurdev.usda.gov/handbooks.html). The program will be 

administered within the resources available to the Agency through 

Public Law 112-10 for the preservation and revitalization of Section 

514/516 off-farm and Section 515 financed properties. In the event that 

any provisions of 7 CFR Part 3560 conflict with this demonstration 

program, the provisions of the MPR will take precedence.



VI. Application and Submission Information



    Application Submission Information. Pre-applications can be 

submitted either electronically or in hard copy using the MPR pre-

application form. The form to be used for the pre-application is 

attached at the end of this Notice and available at any State Office. A 

link to the electronic version of this form may be found on the 

Internet at the MPR homepage http://www.rurdev.usda.gov/rhs/mfh/MPR/MPRHome.htm. Applicants are strongly encouraged, but not required, to 

submit the pre-application electronically. The Agency will record pre-

applications received electronically by the actual date and time 

received in the MPR Web site mail box. Hard copy pre-applications 

received on or before the deadline date will receive the close of 

business time of the day received as the receipt time. Hard copy pre-

applications must be mailed in time to meet the submission deadline of 

5 p.m., Eastern Time, August 22, 2011. Assistance for filing electronic 

and hard copy pre-applications can be obtained from any Rural 

Development State Office. For assistance in attaching files to e-mails 

for electronic submission, please contact Cynthia L. Johnson at (202) 

720-1940 or e-mail at [email protected] or Anita Kapoor at 

(202) 690-1337 or e-mail at [email protected]. Sufficient time 

must be allowed to ensure the MPR pre-application arrives either 

electronically or by mail Before the submission deadline.



    Note: For electronic submissions, there is a time delay between 

the time the pre-application is sent and the time it is received by 

the Agency, depending on network traffic. As a result, last-minute 

submissions sent before the deadline date and time could well



[[Page 39824]]



be received after the deadline date and time because of the 

increased network traffic. Applicants are reminded that all 

submissions received after the deadline date and time will be 

rejected, regardless of when they were sent. An auto-reply 

acknowledgement will be sent when the application is received 

electronically via e-mail; unless you have software blocking the 

receipt of the auto-reply e-mail.



    Hard copy pre-applications and additional materials should be 

mailed to the attention of Cynthia L. Johnson, Finance and Loan 

Analyst, Multi-Family Housing Preservation and Direct Loan Division, 

STOP 0782 (Room 1263-S), U. S. Department of Agriculture, Rural Housing 

Service, 1400 Independence Avenue, SW., Washington, DC 20250-0782.

    The electronic pre-application is stored as an Adobe Acrobat 

fillable form. The form contains a button labeled ``Send Form.'' 

Clicking on the button will result in an e-mail with an attachment that 

includes the electronic pre-application form. The form will be sent via 

e-mail to the Multi-Family Housing Preservation and Direct Loan 

Division in Washington, DC for consideration. Please click this button 

only once, as multiple clicks result in multiple filings.



    Note: If a purchase agreement or market survey is required, 

these additional documents are to be attached to the resulting e-

mail prior to submission. This means all material must come to the 

National Office. A purchase agreement submitted to the State or Area 

Office and the pre-application sent electronically or via mail to 

the MPDL would not constitute a complete pre-application. The pre-

application, purchase agreement, market survey and all associated 

documents required for submission under this Notice, must be 

received electronically or by mail, as one package, by MPDL to be 

considered.





    Note:  There is a limitation on the size of attachments that can 

be sent electronically. If you are not successful in submitting your 

attachments electronically, please submit the complete package to 

the National Office on an electronic device or in hardcopy form by 

the closing deadline of this Notice.



    (2) The application submission and scoring process will be 

completed in two phases in order to avoid unnecessary effort and 

expense on the part of interested borrowers/applicants and to allow 

additional points for applicants that propose a transfer of a troubled 

project to an eligible owner.

    Phase I--Pre-application Completeness. Phase I is the pre-

application process. The applicant must submit a complete pre-

application by the deadline date under the DATES section of this 

Notice. The applicant's submission will be classified as ``complete'' 

when a pre-application is received in the format and place as described 

in this Notice by the MPDL for each MPR proposal the applicant wishes 

to be considered for the demonstration. In the event the MPR proposal 

involves a project consolidation, the actual consolidation will be 

completed in accordance with 7 CFR 3560.410. One pre-application for 

the proposed consolidated project is required and must clearly identify 

each project included in the consolidation. If the MPR proposal 

involves a portfolio, one pre-application for each project in the 

portfolio is required and each pre-application must identify all 

projects to be purchased as part of the portfolio.

    In order for the pre-application to be considered complete, all 

applicable information requested on the MPR Pre-application form must 

be included with the pre-application.

    Additional information that must be provided with the pre-

application, when applicable, includes:

    (i) A copy of an executed purchase agreement if a transfer or sale 

is being considered must be attached and submitted to MPDL.

    (ii) A current market survey (completed within the previous 12 

months of the filing of an MPR application) if the project's occupancy 

standards cited in Section II or if the FLH project does not have a 

positive cash flow as cited in Section III and there is an overwhelming 

market demand evidenced by waiting lists and a housing shortage 

confirmed by local housing agencies and real estate professionals. The 

market survey must show a clear need and demand for the project once a 

restructuring transaction is completed. The results of the survey of 

existing and any other proposed rental or labor housing, including 

complex name, location, number of units, bedroom mix, family or elderly 

type, year built, rent charges must be provided as well as the existing 

vacancy rates of all available rental units in the community, their 

waiting lists and amenities, and the availability of RA or other 

subsidies. For proposals where the applicant is requesting LIHTC, the 

number of LIHTC units and the maximum LIHTC incomes and rents by unit 

size must be provided. The Rural Development State Director will 

determine whether or not the proposal has market feasibility based on 

the data provided by the applicant. Any costs associated with the 

completion of the market survey will Not be considered a project 

expense.

    iii. Market Survey for section 515 projects that do not meet the 

occupancy standards of Section III, paragraph (2) & (3) of this Notice 

or if applicable, the requirements for the exception in Section VI, 

paragraph (1)(ii) of this Notice.

    iv. Executed Purchase Agreement for transfer and sales to 

nonprofit/public housing authorities proposals.

    v. Certification by the applicant to achieve participation in the 

Greens Community Program.

    vi. Certification by the applicant to achieve participation in 

Local Green Energy-Efficient Building Standards.

    vii. Energy Analysis of preliminary or rehabilitation building 

plans using industry recognized simulation software to document 

projected energy consumption of the building, the portion of building 

consumption that will be satisfied through on-site generation, and the 

Buildings Home Energy Rating System (HERS) score.

    viii. Resumes of the designated property management companies or 

individuals responsible for maintenance operations that have 

credentials for Green Property Management.

    ix. Documentation substantiating Green Energy requirements.

    x. Documentation on tenant services provided.

    xi. Evidence of commitment and sources of funds.

    xii. Evidence of owner contribution of funds for transaction costs.

    xiii. Evidence of owner contribution of funds for hard costs of 

construction.

    Unless an exception under this section applies, the requirements 

stated in Section III, paragraph (2) and (3) of this Notice must be 

met.

    Phase II--Eligibility Review. This phase of the application process 

will be completed by the Agency based on Agency records and the pre-

application information.

    All eligible, complete, and timely-filed pre-applications will then 

be scored and ranked based on points received during this process as 

part of the selection process outlined in Section VII.

    Further, the Agency will categorize each MPR proposal as being 

potentially Simple, Complex, or Portfolio based on the information 

submitted on the pre-application and in accordance with the category 

description provided in Section I.



VII. Selection Process



    Application scoring points will be based on information provided 

during the submission process and in Agency records. Points will be 

awarded as follows:

    (1) Contribution of funds from other sources. Other funds are those 

discussed in items (2) through (7) of Section I ``Funding Opportunities 

Description.''



[[Page 39825]]



Points awarded are to be based on documented written evidence that the 

funds are committed. The maximum points awarded for this criterion is 

25 points. These points will be awarded in the following manner:

    (i) Evidence of a commitment of at least $3,000 to $5,000 per unit 

per property from other sources. 15 points.

    (ii) Evidence of a commitment greater than $5,000 per unit per 

property from other sources. 20 points.

    (iii) Evidence of a commitment greater than $5,000 per unit per 

property from other sources and a binding written commitment by a third 

party to contribute 25 percent or more of any allowable developer fee 

to the hard costs of construction. 25 points.

    (2) Owner contribution. The maximum points awarded for this 

criterion is 15 points. These points will be awarded in the following 

manner:

    (i) Owner contribution sufficient to pay transaction costs. (These 

funds cannot be from the project reserve account or project general 

operating account or in the form of a loan.) Transaction costs are 

defined as those costs required for completing the transaction and 

include, but are not limited to, the CNA, legal and closing costs, 

appraisal costs and filing/recording fees. The minimum contribution 

required to receive these points is $5,000 per project and will be 

required to be deposited in the property reserve account prior to 

closing. 5 points.

    (ii) Owner contribution for the hard costs of construction. (These 

funds cannot be from the project reserve account or project general 

operating account or in the form of a loan.) Hard costs of construction 

are defined as materials, inventory, equipment, property or machinery. 

Hard costs are itemized on Form RD 1924-13 ``Estimate and Certificate 

of Actual Cost.'' Form RD 1924-13 can be found at http://www.rurdev.usda.gov/regs/Forms/1924-13.pdf. The minimum contribution 

required to receive these points is $1,000 per unit per project which 

will be required to be deposited in the property reserve account prior 

to closing. An increased RTO may be budgeted and allowed for funds 

committed in accordance with 7 CFR 3560.406(d)(14)(ii). 10 points.

    (3) Age of project. For project consolidation proposals, the 

project with the earliest operational date will be used in calculating 

the age of the project. Since the age of the project and the date that 

the loan was made are directly related to physical needs, a maximum of 

25 points will be awarded on the following criteria:

    (i) Projects with initial operational dates prior to December 21, 

1979. 25 points.

    (ii) Projects with initial operational dates on or after December 

21, 1979, but before December 15, 1989. 20 points.

    (iii) Projects with initial operational dates on or after December 

15, 1989, but before October 1, 1991. 15 points.

    (4) Troubled project points. The Agency may award up to 25 

additional points to facilitate the transfer and revitalization of 

projects the Agency considers as troubled due to an act of nature or 

where physical and/or financial deterioration or management 

deficiencies exist. Projects with an Agency classification of ``C'' or 

``D'' according to Agency HB-2-3560, Chapter 9, Paragraph 9.7 

(available at http://www.rurdev.usda.gov/regs/hblist.html) will be 

considered troubled. Projects that are classified ``B'' and do not 

involve a transfer will also receive consideration. The Handbook 

definition of Agency classification takes precedence over Multifamily 

Housing Information System (MFIS) status. Points will be awarded in the 

following manner:

    (i) For Stay-in Owners only: If the Agency servicing classification 

is ``B'' as a result of a workout plan approved by the Agency prior to 

January 1, 2011. 25 points.

    (ii) If the Agency servicing classification is ``C'' or ``D'' for 

24 months or more. 20 points.

    (iii) If the Agency servicing classification is ``C'' or ``D'' for 

less than 24 months. 15 points.

    (5) Prior Approved CNAs. In the interest of ensuring timely 

application processing and underwriting, the Agency will award up to 20 

points for properties with CNAs already approved by the Agency. 

``Approved'' means either after the initial CNA has been reviewed and 

approved or after an updated CNA has been reviewed and approved by the 

Agency. CNAs over 12 months old may not be used for MPR underwriting 

without an update approved by the Agency. Points will be awarded for:

    (i) CNAs approved on or after October 1, 2009, and prior to October 

1, 2010. 10 points.

    (ii) CNAs approved on or after October 1, 2010, but before the 

publication of the Fiscal Year (FY) 2011 MPR Notice. 20 points.

    (6) Energy Conservation Energy, Generation, and Green Property 

Management. Under the MPR Energy Initiatives, properties may receive a 

maximum of 68 points under three categories: Energy Conservation, 

Energy Generation, and Green Property Management.

    (i) Energy Conservation. Maximum 48 points.

    Pre-applications for rehabilitation and preservation of properties 

may be eligible to receive a maximum of 48 points for the following 

energy conservation measures.

    a. Participation in the Green Communities program by the Enterprise 

Community Partners (http://www.enterprisecommunity.org) will be awarded 

45 points for any project that qualifies for the program. At least 30 

percent of the minimum optional points needed to qualify for the Green 

Communities program must be earned under the Energy Efficiency section 

of the Green Communities qualification program.

    b. If you are not enrolling in the Green Communities program then 

points can be accumulated for each of the following items up to a total 

of 30 points. Provide documentation to substantiate your answers below:

    i. This proposal includes the replacement of heating, ventilation 

and air conditioning (HVAC) equipment with Energy Star qualified 

heating, ventilation and air conditioning equipment. 4 points.

    ii. This proposal includes the replacement of windows and doors 

with Energy Star qualified windows and doors. 4 points.

    iii. This proposal includes additional attic and wall insulation 

that exceeds the required R-Value of these building elements for your 

area as per the International Energy Conservation Code 2009. Two points 

will be awarded if all exterior walls exceed insulation code and two 

points will be awarded if attic insulation exceeds code, for a maximum 

of 4 points.

    All exterior walls exceed insulation code. 2 points.

    Attic insulation exceeds code. 2 points.

    iv. This proposal includes the reduction in building shell air 

leakage by at least 15 percent as determined by pre- and post-rehab 

blower door testing on a sample of units. Building shell air leakage 

may be reduced through materials such as caulk, spray foam, gaskets, 

and house-wrap. Sealing of duct work with mastic, foil-backed tape, or 

aerosolized duct sealants can also help reduce air leakage. 4 points.

    v. This proposal includes 100 percent of installed appliances and 

exhaust fans that are Energy Star qualified. 3 points.

    vi. This proposal includes 100 percent of installed water heaters 

that are Energy Star qualified. 3 points.



[[Page 39826]]



    vii. This proposal includes replacement of 100 percent of toilets 

with flush capacity of more than 1.6 gallon flush capacity with new 

toilets having 1.6 gallon flush capacity or less, and with 

Environmental Protection Agency (EPA) Water Sense label. 2 points.

    viii. This proposal includes 100 percent of new showerheads with 

EPA Water Sense label. 2 points.

    ix. Does this proposal include 100 percent of new faucets with EPA 

Water Sense label? 2 points.

    x. Does this proposal include 100 percent energy-efficient lighting 

including Energy Star qualified fixtures, compact fluorescent 

replacement bulbs in standard incandescent fixtures and Energy Star 

ceiling fans? 2 points.

    c. Participation in local green/energy efficient building 

standards. Applicants who participate in a city, county or municipality 

program will receive an additional 3 points. The applicant should be 

aware that most of the requirements are embedded in the third-party 

programs' rating and verification systems; the applicant should look at 

the requirements for each program for details.

    (ii) Energy Generation. Maximum 10 points.

    Rehabilitation and Preservation projects that participate in the 

Green Communities program by the Enterprise Community Partners, or 

those projects that accumulated at least 24 points for Energy 

Conservation, are eligible to earn additional points for installation 

of on-site renewable energy sources. Renewable, on-site energy 

generation will complement a weathertight, well insulated building 

envelope with highly efficient mechanical systems. Possible renewable 

energy generation technologies include: Wind turbines and micro-

turbines, micro-hydro power, photovoltaics (capable of producing a 

voltage when exposed to radiant energy, especially light), solar hot 

water systems, and biomass/biofuel systems that do not use fossil fuels 

in production. Geo-exchange systems are highly encouraged as they 

lessen the total demand for energy and, if supplemented with other 

renewable energy sources, can achieve zero energy consumption more 

easily. Points under this section will be awarded as follows:

    a. Projects whose preliminary building plans project they will have 

a 10 percent to 100 percent energy generation commitment (where 

generation is considered to be the total amount of energy needed to be 

generated on-site to make the building a net-zero consumer of energy), 

will be awarded points corresponding to their percent of commitment as 

follows:

     At least 10-29 percent commitment to energy generation--2 

points;

     At least 30-49 percent commitment to energy generation--4 

points;

     At least 50-69 percent commitment to energy generation--6 

points;

     At least 70-89 percent commitment to energy generation--8 

points;

     At least 90 percent or more commitment to energy 

generation--10 points.

    In order to receive more than 2 points for this section (Energy 

Generation) accurate energy analysis prepared by an engineer will need 

to be submitted with the pre-application. Energy analysis of 

preliminary building plans using industry-recognized simulation 

software must document the projected total energy consumption of the 

building, the portion of building consumption which will be satisfied 

through on-site generation, and the building's HERS score.

    (iii). Green Property Management Credentials. Maximum 10 points.

    Projects will be awarded an additional 10 points if the designated 

property management company or individuals that will assume maintenance 

and operations responsibilities upon completion of rehabilitation or 

repair have a Credential for Green Property Management. Credentialing 

can be obtained from the National Apartment Association (NAA), National 

Affordable Housing Management Association, the Institute for Real 

Estate Management, US Green Building Council's Leadership in Energy and 

Environmental Design for Operations and Maintenance (LEED OM), or 

another source with a certifiable credentialing program. This must be 

illustrated in the resume(s) of the property management team and 

submitted with the application.

    (7) Tenant service provision. The Agency will award 5 points for 

applications that include new services provided by a non-profit 

organization, which may include a faith-based organization, or by a 

Government agency for one year; 10 points for multiple years. Such 

services shall be provided at no cost to the project and shall be made 

available to all tenants. Examples of such services are transportation 

for the elderly, after-school day care services or after-school 

tutoring. 5 or 10 Points.

    (8) Consolidation of project operations. To encourage post-

transaction operational cost savings and management efficiencies, the 

Agency will award 5 points for applications that include at least two 

and up to four properties that will consolidate project budget and 

management operations and 10 points for applicants that include at 

least five or more properties that will consolidate project budget and 

management operations. Consolidations must meet the requirements of 7 

CFR 3560.410. 5 or 10 points.

    (9) Proposed Sale to Non-profit/Public Housing Authority for 

properties sold to non-profit organizations under the prepayment 

process, as explained in 7 CFR Part 3560, subpart N. To receive points 

for the sale, the borrower must have an executed purchase agreement in 

place and submitted with the pre-application. 20 points.



    Note:  For projects within a portfolio transaction or group of 

consolidated projects within a portfolio transaction, the Agency 

will calculate the average score for each project and each 

consolidation project group within the sale or consolidation.



    The Agency will total the points awarded to each pre-application 

received within the timeframes of this Notice and rank each pre-

application according to total score. If point totals are equal, the 

earliest time and date the pre-application was received by the Agency 

will determine the ranking. In the event pre-applications are still 

tied, they will be further ranked by giving priority to those 

properties with the earliest Rural Development operational date.

    Eligibility will then be confirmed on the 10 highest-scoring and 

complete pre-applications per State. If one or more of the 10 highest-

scoring pre-applications is determined ineligible, (i.e. the applicant 

is a borrower that is not in good standing with the Agency or has been 

debarred or suspended by the Agency, etc.) the next highest-scoring 

pre-application will be confirmed for eligibility.

    If one or more of the 10 highest-ranking pre-applications is a 

portfolio transaction, then eligibility determinations will be 

conducted on all of the pre-applications associated with the portfolio 

transaction. Should any of the pre-applications associated with the 

portfolio transaction be determined ineligible, the ineligible pre-

application will be removed from consideration, but the overall 

eligibility of the portfolio transaction will not be affected as long 

as the requirements in Section I are met.

    Once ranking has been established, the Agency will conduct a four-

step process to select pre-applications for submission of formal 

applications. This process is needed to ensure that the Agency can 

process the proposed transactions within available staffing resources, 

develop a representative sampling of revitalization transaction



[[Page 39827]]



types, ensure geographic distribution, and ensure an adequate pipeline 

of transactions to use all available funding.

    Step One: The Agency will review the eligible pre-applications 

nationwide, identify pre-applications as either RRH or FLH projects and 

then as Simple, Complex, or Portfolio and separate them by State.

    Step Two: The Agency will select, for further processing, the 

nationally top-ranked portfolio sale transactions until a total of 

$50,000,000 in potential debt deferral is reached. Portfolio 

transactions will be limited to one per State (either RRH or FLH) and 

will count as one MPR transaction. Portfolio sale transactions will be 

limited to a maximum of 10 properties.

    Step Three: The highest ranked RRH complex transactions in each 

State will be selected for further processing, not to exceed one per 

State. The highest ranked FLH complex transactions in each State will 

be selected for further processing, not to exceed one per State.

    Step Four: The highest ranked RRH simple transactions in each State 

will be selected for further processing, not to exceed one per State. 

If a FLH complex transaction has not been selected in Step Three above, 

one (1) additional FLH project will be selected from the highest ranked 

eligible pre-applications involving FLH simple transactions, in that 

State, until a total of three transactions per State is reached.



VIII. Processing for Selected Pre-Applications



    Those proposals that are ranked and then selected for further 

processing will be invited to submit a formal application on SF 424, 

``Application for Federal Assistance.'' Those pre-applications that are 

rejected by the Agency will be returned to the applicant and the 

applicant will be given appeal rights pursuant to 7 CFR Part 11. Those 

proposals that are not selected due to low scores will be retained by 

the Agency until all selections have been made for the MPR, unless they 

are withdrawn by the applicant. Once all the selections have been made 

the low score proposals will be notified that the application was not 

selected and provided with appeal rights. In the event that a pre-

application is selected for further processing and the pre-applicant 

declines, the next highest ranked pre-application of the same 

transaction type in that State will be selected provided there is no 

change in the Phase I requirements.

    If there are no other pre-applications of the same transaction 

type, then the next highest-ranked pre-application regardless of 

transaction type will be selected.

    Applications (SF 424s) can be obtained in hard copy by contacting 

the State Office in the State where the project is located or at http://www.grants.gov/techlib/SF424-V2.0.pdf. The SF 424 can be submitted 

either electronically or in hard copy to the State Office.

    If a pre-application is accepted for further processing, the 

applicant will be expected to submit additional information needed to 

demonstrate eligibility and feasibility (such as a CNA), consistent 

with this Notice and the appropriate sections of 7 CFR Part 3560, prior 

to the issuance of a restructuring offer.

    Rural Development will work with pre-applicants selected for 

further processing in accordance with the following steps:

    (1) Based on the feasibility of the type of transaction that will 

best suit the project and the availability of funds, further 

eligibility confirmation determinations will be conducted by the 

designated Multi-Family Housing Revitalization Coordinators assigned by 

each Rural Development State Director with the assistance of the Multi-

Family Housing Preservation and Direct Loan Division.

    (2) If one is not already available to the Agency, a CNA will be 

required and conducted in accordance with the requirements of 7 CFR 

3560.103(c), HB-3-3560, Chapter 7, and the CNA Statement of Work 

together with any non-conflicting amendments (suggested formats for 

CNAs are available in any Rural Development State Office.) A CNA is 

prepared by a qualified independent contractor and is obtained to 

determine needed repairs and any necessary adjustments to the reserve 

account for long-term project viability. While the requirements of the 

CNA are described in the materials referenced above, at a minimum, to 

be considered acceptable, a CNA must include:

    (i) A physical inspection of the site, architectural features, 

common areas and all electrical and mechanical systems;

    (ii) An inspection of a sample of dwelling units;

    (iii) Identify repair or replacement needs;

    (iv) Provide a cost estimate of the repair and replacement 

expenses; and

    (v) Provide at least a 20-year analysis of the timing and funding 

for identified needs which includes reasonable assumptions regarding 

inflation. The cost of the CNA will be considered a part of the project 

expense and may be paid from the ``project reserve'' with prior 

approval of the Agency. The Agency approval for participation in this 

program will be contingent upon the Agency's final approval of the CNA 

and concurrence in the scope of work by the owner. The Agency, in its 

sole discretion, may choose to obtain a CNA, at its expense, if it 

determines that doing so is in the best interest of the Government.

    It is important to note that all applicants will be required to 

submit an ``As Is'' CNA based on the existing conditions at the 

property.

    (3) Loan underwriting will be conducted by the designated Multi-

Family Housing Revitalization Coordinator assigned by each Rural 

Development State Director with the assistance of the MPDL. The 

feasibility and structure of each revitalization proposal will be 

determined using this underwriting process to determine the 

restructuring tools that will minimize the cost to the Government 

consistent with the purposes of this Notice. To help ensure a balanced 

utilization of revitalization tools and the long-term economic 

viability of revitalized projects, the MPR underwriting guidelines 

include, but are not limited to the following:

    (i) The maximum soft-second loan is limited to no more than $5,000 

per unit,

    (ii) The total assistance provided from a revitalization grant, 

revitalization zero percent loan, and/or revitalization soft-second 

loan is limited to $10,000 per unit,

    (iii) The maximum Section 515 loan or Section 514/516 off-farm loan 

and grant is limited to no more than $20,000 per unit, and

    (iv) Properties receiving tax credits are expected to have 

sufficient third-party funding resources and generally will receive 

debt deferral only.

    (v) Properties with more than 75 percent of the units receiving 

significant subsidy such as Rural Development rental assistance or HUD-

funded subsidy will be supplemented with Sections 514, 515 and 516 

loans and grants before revitalization grants and revitalization soft-

second loans are considered.

    (vi) MPR revitalization grants will be limited to $5,000 per unit.

    (vii) Any rent increases that may be necessary will not exceed 10 

percent in any one project operating year.

    (viii) The approved MPR transaction will include projected revenue 

sufficient to cover a 10 percent Operations and Maintenance increase in 

the second year after the transaction.

    (ix) Full RTO will be budgeted pursuant to the Loan Agreement.



[[Page 39828]]



    (x) Budgeted increases to reserve deposit will not exceed three 

percent per annum.

    (xi) The remaining reserve balance at the end of the 20-year 

analysis period should be at least 2.0 times the average annual needs, 

including inflation, over the 20-year analysis period.

    These loan underwriting guidelines have been developed based on 

experience in the FY 2005-2009 MPR Demonstrations. The Agency believes 

that these guidelines will be appropriate for typical transactions. 

However, the Agency reserves the right to re-calculate which MPR 

demonstration tools should be used, when in the Agency's judgment, 

doing so would further the objectives of the MPR and is in the best 

interest of the Government.

    The Agency expects that some of the transactions proposed by 

selected pre-applicants will prove to be infeasible. The applicant 

entity may be determined to be ineligible under Section III of this 

Notice. If a proposed transaction is determined infeasible or the 

applicant determined ineligible, the Agency will then select the next 

highest-ranked project for processing regardless of transaction type.

    Each MPR offer will be approved by the Revitalization Review 

Committee chaired by the Deputy Administrator for Multi-Family Housing 

or an agency-authorized delegate. Approved MPR offers will be presented 

to applicants who will then have up to 15 calendar days to accept or 

reject the offer in writing. Offers will expire after 15 days. The 

Agency will replace expired applications by selecting the next highest-

ranked project. Closing of MPR offers will occur within 90 days of 

acceptance by the applicant unless extended by the Agency.



IX. Funding Restrictions



    Applicants which were selected for further processing under 

previous Notices, and are timely submitted to MPDL, will be funded on a 

first-come-first-served basis on the date submitted to MPDL and do not 

have to be rescored under this Notice. After which, applicants under 

this Notice will be selected in accordance with selection criteria and 

the four-step process identified in Section VII of this Notice. Once 

selected to proceed, the Agency will provide additional guidance to the 

applicant and request any other information and documents necessary to 

complete the underwriting and review process. Since the character of 

each application may vary substantially depending on the type of 

transactions proposed, information requirements will be provided as 

appropriate. Complete project information must be submitted as soon as 

possible but in no case later than 45 days from the date of Agency 

notification of the applicant's selection for further processing or 

September 1, 2011, whichever occurs first. Failure to submit the 

required information in a timely manner may result in the Agency 

discontinuing the processing of the request.

    Funding under this Notice will be obligated to selectees that 

finish the processing steps outlined above first within each of the 

three funding categories described in Section VII of this Notice and 

that result in a ratio as close as possible to 30 percent portfolio 

transactions, 50 percent complex transactions, and 20 percent simple 

transactions, subject to funding availability.



X. Application Review



    The Revitalization Review Committee will notify the appropriate 

Rural Development State Director of its approval for funding of an 

application based on the selection criteria contained in this Notice.



XI. Appeal Process



    All adverse determinations regarding applicant eligibility and the 

awarding of points as a part of the selection process are appealable, 

in accordance with 7 CFR Part 11 procedures. Instructions on the appeal 

process will be provided at the time an applicant is notified of the 

adverse action.



    Dated: June 30, 2011.

Tammye Trevi[ntilde]o,

Administrator, Rural Housing Service.



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[FR Doc. 2011-17107 Filed 7-6-11; 8:45 am]

BILLING CODE 3410-XV-C