Florida Housing Coalition Annual Conference Preservation of - PowerPoint PPT Presentation

Florida Housing Coalition Annual Conference Preservation of Affordable Housing September 27, 2011

Fannie Mae and Freddie Mac  Preservation Programs - Expiring Section 8 HAP Contracts - Less than 10 Years of Restrictions  Bond Credit Enhancement – 4% LIHTC  9% LIHTC Mortgages  Green Refinance Plus – Fannie Mae

Preservation Programs – Immediate Funding  Debt Service Coverage Ratio – 1.20x – 1.25x - HUD Risk Share – 5 basis point reduction  Loan to Value – 80% - HUD Risk Share – increase LTV by 5%  Amortization – 30 to 35 years  Term – typically a minimum of 10 years  Minimum Occupancy – 85% Physical & 80% Economic  Recourse – Non-recourse except for standard carve-out provisions  Supplemental Loans - Available

Bond Credit Enhancement – 4% LIHTC  Immediate and Forward Commitment - Forward requires LOC from “A” – “AA” Rated Bank until construction/rehab and stabilization  General Underwriting - Debt Service Coverage Ratio – minimum of 1.15x (1.20x for VRB) - Loan to Value – maximum of 85% adjusted value or 90% of market value - Minimum Term – 15 years - Amortization – 30 to 35 years - Fixed or Variable Rate Bonds (Fannie Mae – only Fixed)  Processing Time – 90 days or less  Supplemental Loans – Available  HUD Risk Share – Normally available and may improve terms

9% LIHTC Mortgages  Immediate and Forward Commitment - Same LOC Requirement if Forward Commitment  General Underwriting - Debt Service Coverage Ratio – 1.15x - Loan to Value – 90% - Minimum Term – 15 years - Amortization – 30 to 35 years - Fixed or Variable Interest Rate  Processing Time – 75 days or less  Supplemental Loans – Available  HUD Risk Share – Normally available and may improve terms

Fannie Mae Green Refinance Plus  Benefits - 4%-5% more proceeds for energy retro-fitting - One Stop Customer Service – Fannie Mae Lender interacts with HUD/FHA  General Underwriting - Loan to Value – 85% - Minimum Debt Service Coverage Ratio – 1.15x - Term – 10 years or more - Amortization – 30 years - Fixed Interest Rate with no I/O period  Other Terms - Affordability Restrictions must remain for Term of Loan - Subsidy Layering Review may be required - Green PNA is required - Standard Appraisal and Phase I ESA required

Case Study #1 – Bonds with 4% LIHTC Forward Commitment Acquisition/Rehab  CWCapital LLC served as the Freddie Mac TAH Seller/Servicer on $6,400,000 of NIBP bonds purchased by Treasury.  Bond proceeds were used to rehabilitate a 14- $6,400,000 story, 200 unit elderly housing development.  Principal and interest on the mortgage loan Florida Housing Finance Corporation was secured by a direct pay Credit Enhancement Agreement issued by Freddie Mac. New Issue Bond Program  Initial Bond Issuance was split between Gap CWCapital was Bond amount of $2,850,000 and Permanent Seller/Servicer Bond amount of $6,400,000 and both were credit enhanced by Freddie Mac.  The all-in cost of capital for the financing was 4.638%.  Freddie Mac HUD Risk Share program utilized to improve terms.

Case Study #1 – Bonds with 4% LIHTC (continued) SOURCES OF FUNDS - Permanent  Originally constructed in 1971 and consists NIBP Bond Proceeds $ 6,400,000 of an existing 200-unit elderly housing Tax Credit Equity $ 5,488,000 development. Home Loan $ 3,923,000  The Project includes 81 efficiency units and 119 1B/1B units and was affiliated with the Seller Subordinate Loan $ 2,500,000 Methodist Church. Borrower Contribution $ 350,000  The cost of the rehab was $6,418,000 or Total Sources $18,661,000 $32,090 per unit. The Project will receive a new 20-year, Section 8 HAP contract for USES OF FUNDS - Permanent 84% of the units upon expiration of the Purchase Price – Land and Building $ 4,600,000 existing contract in 2012. Hard Construction Costs - Rehab $ 6,418,000  Rehabilitation will be floor-by-floor, and is expected to be completed within 15 Soft Construction Costs / Financing $ 7,267,000 months. Transition Reserve/Contingency $ 376,000 Total Uses $18,661,000

Case Study #1 – Bonds with 4% LIHTC (continued) Interest Rate Stack 0.400% 0.960% 0.208% All-In Cost 4.638% FRE Guaranty Servcing Fee 3.070% Estimated Bond Rate Issuer / Trustee

Case Study #1 – Bonds with 4% LIHTC (continued) Flow of Funds Treasury Bonds Issuer Bond Proceeds Principal and Interest Bond Bond Mortgage Proceeds Loan Trustee Borrower Loan Payment CWCapital LLC Proceeds used to rehabilitate Revenue Credit Enhancement Agreement Project

Case Study – Rehab with Tenants in Place – 9% LIHTC Immediate Delivery Acquisition/Rehab  CWCapital LLC served as the Fannie Mae DUS Lender on an immediate delivery loan of $7,800,000.  Loan proceeds plus tax credit equity were $7,800,000 used to rehabilitate a 180-unit garden apartment property with residents in place. Fannie Mae Immediate Delivery  Tax Credit Equity Installments plus loan proceeds to fund the renovations. Fixed Rate in Place Rehab with 9% LIHTC  Completion and Operating Deficits Guaranty required. CWCapital was  Fannie Mae HUD Risk Share program Fannie Mae DUS Lender utilized to improve terms.

Case Study – Rehab with Tenants in Place – 9% LIHTC (continued) SOURCES OF FUNDS - Permanent  Originally constructed in 1981 and consists Loan Proceeds $ 7,800,000 of an existing 180-unit family and seniors Tax Credit Equity $10,786,000 development. Existing Reserves $ 303,000  The Project includes 148 family units and 32 age-restricted units. Total Sources $18,889,000  USES OF FUNDS - Permanent The cost of the rehab was $7,920,000 or $44,000per unit. The Project received a Purchase Price – Land and Building $ 7,000,000 new 20-year, Section 8 HAP contract for 100% of the units in 2011. Hard Construction Costs - Rehab $ 7,920,000  Soft Costs / Financing $ 2,981,000 Rehabilitation is expected to be completed within 15 months and the borrower Reserve/Contingency $ 988,000 provided an interim bridge loan to fund the timing gap from tax credit equity Total Uses $18,889,000 installments.