Notice of Availability of Funding and Requests for Proposals for Guaranteed Loans Under the Section 538 Guaranteed Rural Rental Housing Program

AGENCY:

Rural Housing Service, USDA.

ACTION:

Notice.

SUMMARY:

This Notice of Fund Availability (NOFA or Notice) announces the timeframe and submission requirements and deadlines to submit proposals in the form of “NOFA responses” for the section 538 Guaranteed Rural Rental Housing Program (GRRHP). Eligible lenders, as defined in paragraph VII(D) of this NOFA are invited to submit NOFA proposals for the development of affordable rental housing to serve rural America. Only responses submitted by eligible lenders, on the lender's letterhead, and signed by both the applicant and the lender will be reviewed.

This document describes the overall application process, including the selection and identification of any priorities for selection of proposed applications, and the process by which the Rural Housing Service (RHS or Agency) will score and rank the proposals. Information will also be included concerning the submission requirements. Lenders may submit their application concurrently with their NOFA response.

DATES:

The deadline for receipt of NOFA responses is 4:00 PM, Eastern Daylight Savings Time on September 20, 2000. Lenders intending to mail a NOFA response must provide sufficient time to permit delivery on or before the closing deadline date and time. Acceptance by a post office or private mailer does not constitute delivery. Facsimile (FAX), Cash on Delivery (COD), and postage due NOFA responses or applications will not be accepted. NOFA responses will not be accepted after the deadlines previously mentioned, unless that date and time is extended by another Notice published in the Federal Register.

ADDRESSES:

Responses for participation in the program must be identified as “Section 538 Guaranteed Rural Rental Housing Program” on the envelope and be submitted to: Director, Multi-Family Housing Processing Division, Rural Housing Service, U.S. Department of Agriculture, Room 1263 (STOP 0781), 1400 Independence Ave. SW, Washington, DC 20250-0781.

FOR FURTHER INFORMATION CONTACT:

Joyce Allen, Deputy Director, Guaranteed Loans, Multi-Family Housing Processing Division, U.S. Department of Agriculture, South Agriculture Building, Room 1271, STOP 0781, 1400 Independence Ave. SW., Washington, DC 20250-0781. E-mail: jallen@rdmail.rural.usda.gov. Telephone: (202) 690-4499. 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.

SUPPLEMENTARY INFORMATION:

The GRRHP is operated under 7 CFR part 3565. The Guaranteed Rural Rental Housing Program Origination and Servicing Handbook (HB-1-3565) is available to provide lenders and the general public with the “how to” administrative guidance needed to administer the program. HB-1-3565, which contains a copy of 7 CFR part 3565 in Appendix 1, may be found on the Rural Development Regulation web site internet address of “http://rdinit.usda.gov/regsor copies may be obtained from the Rural Housing Service Multi-Family Housing Processing Division at 202-720-1604. This is not a toll-free number. Hearing-or speech-impaired persons may access that number by calling the Federal Information Relay Service toll-free at (800) 877-8339.

Discussion of Notice

I. Purpose and Program Summary

On March 28, 1996, President Clinton signed the “Housing Opportunity Program Extension Act of 1996,” Public Law 104-120, authorizing the section 538 Guaranteed Rural Rental Housing Program (GRRHP). The program is designed to increase the supply of affordable multifamily housing through partnerships between Rural Housing Service (RHS) and major lending sources, as well as state and local housing finance agencies and bond issuers. Qualified lenders will be authorized to originate, underwrite, and close loans for multifamily housing projects requiring new construction or acquisition with rehabilitation of at least $15,000 per unit, when the acquisition results in the creation of new affordable housing units. RHS may guarantee such loans upon presentation and review of appropriate certifications, project information and satisfactory completion of the appropriate level of environmental review by RHS. Lenders will be responsible for the full range of loan management, servicing, and property disposition activities associated with these projects. The lender will be expected to provide servicing or contract for servicing of each loan it underwrites. In turn, RHS will guarantee the lender's loan up to 90 percent of total development cost and commits to pay up to a maximum of 90 percent of the outstanding principal and interest balance of such loan in the case of default of the loan and filing of a claim. In no event will the Agency pay more than 90 percent of the original principal amount. This means that the Agency will have a risk exposure under the GRRHP of approximately 80 percent of the total development cost. Any losses would be split on a pro-rata basis between the lender and the Agency from the first dollar lost.

II. Allocation

This NOFA announces the availability of approximately $10.44 million in Non-Interest Credit section 538 program dollars for FY 2000. There are no Interest Credit funds remaining for FY 2000. Responses requesting interest credit assistance will not be considered in this NOFA. The Fiscal Year (FY) 2000 budget authority provided approximately $100 million in program dollars. Approximately $89.56 million dollars in NOFA awards have been awarded to date and all interest credit funds have been expended. FY 2000 funds will be held in the National Office. There are no set-asides or demonstration purposes for the GRRHP for FY 2000.

III. Application Process

Lenders should respond to section 538 NOFA's only when they have completed a preliminary underwriting analysis and are willing to make the proposed loan subject only to the issuance of a guarantee by the Agency. Unfortunately, the Agency has found that in some instances, this has not been the case. In an effort to reduce the number of unacceptable NOFA responses and judiciously commit program dollars to projects that demonstrate a readiness to proceed, the Agency will strictly adhere to the submission requirements.

In the interest of time, lenders have the option of submitting a combined NOFA response and application. However, the Agency will not give preference to a submission containing both a NOFA response and an application. Lenders who submit complete applications are encouraged, but not required, to include a checklist and to have their applications indexed and tabbed to facilitate the review process.

Upon notice of selection, lenders with the top ranked NOFA responses will be requested to submit the required application fee of $2,500.00 and full application if not already submitted. When the conditions of the conditional commitment are met, the lender will submit the required information with a separate guarantee fee of 1% of the total guarantee amount.

IV. Submission Requirements

NOFA submission requirements are subject to change and it is important to note that all responses must be submitted in accordance with the terms of this NOFA which are different from the last published NOFA.

Incomplete submissions will not be considered, and the lender will be notified of the reason the response was incomplete. The required information is listed as follows:

A. The Project

(1) A brief description of the proposed location of the project, including town, county, state, and congressional district.

(2) A description of the property and improvements, including lot size, number of units and bids, building type, type of construction, etc., including preliminary drawings, if available.

(3) The proposed development schedule.

(4) Total project development cost.

(5) The proposed rent structure and area median income—(HUD published area median incomes can be found online at http://www.huduser.org).

(6) Evidence of site control by the proposed borrower or a purchase option.

(7) Description of any environmental issues that may affect the project.

(8) Amount of loan to be guaranteed.

B. The Proposed Financing

(1) Proposed loan amount and the proposed borrower's equity.

(2) Estimated development budget (total and cost per unit), and the proposed sources and uses of funds. This information should include all proposed financing sources—the amount, type, rates and terms of loans, tax credits, or grant funds. Letters of application and commitment letters should be included, if available.

(3) Estimated loan-to-value ratio for guaranteed loan.

(4) Proposed Agency guarantee percentage for guaranteed loan (under no condition can the percentage exceed 90 percent of the loan amount).

(5) Collateral—all security, in addition to the real property, proposed to secure the loan.

C. The Proposed Borrower

(1) The name of the borrower and the type of ownership entity—list the general partners if a limited partnership, officers if a corporation or members of an LLC.

(2) Borrower's contact name, mailing address, phone and fax numbers, and e-mail address.

(3) Statement of borrower's housing development experience.

D. Lender Eligibility and Approval Status

Evidence that the lender is either an approved lender for the purposes of the GRRHP or that the lender is eligible to apply for approved lender status as defined in paragraph VII(D) of this NOFA. The application for lender approval must be made at the same time as the first loan application.

E. Competitive Criteria

Information that shows how the proposal is responsive to the selection criteria specified in the NOFA. (See paragraph V of this NOFA).

F. Lender Certification

A commitment letter or certification by the lender that will make a loan to the borrower for the proposed project, under specified terms and conditions subject only to the issuance of a guarantee by the Agency. The lender certification must be on the lender's letterhead, and be signed by both the lender and the applicant, and be submitted by the lender to the Agency.

V. Competitive Criteria

In order to expedite the review of the applications, RHS suggests using the following sample NOFA response checklist to ensure that you have addressed all the submission requirements and competitive criteria of this NOFA.

VI. Selection Criteria

NOFA proposals will be reviewed as received. Priorities will be assigned to eligible proposals on the basis of the following criteria as contained in 7 CFR 3565.5(b), and points will be assigned as follows:

(A) Projects located in rural communities with the smallest population will receive priority. All proposals will be ranked in order of their population. The proposals will be given a point score starting with the project located in the area with the lowest population receiving 20 points, the next 19 points and so forth, until up to 20 projects have received points.

(B) The most needy communities as determined by the median income from the most recently available census data. The proposals will be given a point score starting with the community having the lowest median income receiving 20 points, the next 19 points and so forth until up to 20 proposals have received points.

(C) Partnering and leveraging in order to develop the maximum number of housing units and promote partnerships with state and local communities, including other partners with similar housing goals. Leveraging points will be awarded as follows:

(D) Loans with interest rates less than the maximum allowable 250 basis points over the 30 Year Treasury Rate will be awarded points as follows (fractional basis points will be rounded to the nearest whole basis point):

(E) Preference will be given to proposals having a higher percentage of 3-5 bedroom units to total units. The proposals will be ranked in order of this percentage with the proposal with the highest percent receiving 20 points, the next 19 points and so forth until up to 20 projects have received points.

(F) Proposals to be developed in a colonia, on tribal land, in an Empowerment Zone or Enterprise Community, or in a place identified in the State consolidated plan or State needs assessment as a high need community for multifamily housing (20 points).

(G) Projects will be ranked by the length of the amortization period, with the longest receiving priority as follows:

VII. Additional Information

A. Maximum Interest Rate

The maximum allowable interest rate on a loan submitted for a guarantee is 250 basis points over the 30-year Treasury Bond Yield as published in the Wall Street Journal as of the business day prior to the business day the rate is set.

B. Surcharges for Guarantee of Construction Advances

There is no surcharge for guarantee of construction advances for FY 2000.

C. Program Fees for FY 2000

(1) There is an initial guarantee fee for 1% of the total guarantee amount which will be due when the loan 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% of the guaranteed outstanding principal balance charged each year or portion of the year that the guarantee is in effect. This fee will be collected prospectively on January 1, of the calendar year.

(3) There is no fee for site assessment and market analysis for preliminary feasibility in FY 2000.

(4) There is a non-refundable application fee of $2,500 when the application is submitted following proposal selection under the NOFA.

(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 reopen 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 applicant.

D. Eligible Lenders for Section 538 Approval

The application for lender approval must be made at the same time as the first loan application. The first loan application means: (1) The first application for a loan guarantee for a new loan; or (2) The first application before ownership of any GRRHP loan is transferred to that lender. A lender must be approved before a loan guarantee is issued or a guaranteed loan is acquired.

An eligible lender must be a licensed business entity or Housing Finance Authority (HFA) in good standing in the state or states where it conducts business; be approved by the Agency; and meet at least one of the criteria contained below. Lenders who are not eligible may participate in the program if they maintain a correspondent relationship with a lender who is eligible. An eligible lender must:

(a) Meet the qualifications of, and be approved by, the Secretary of Housing and Urban Development to make multifamily housing loans that are to be insured under the National Housing Act;

(b) Meet the qualifications and be approved by Fannie Mae or Freddie Mac to make multifamily housing loans that are to be sold to such corporations;

(c) Be a state or local HFA, or a member of the Federal Home Loan Bank system, with a demonstrated ability to underwrite, originate, process, close, service, manage, and dispose of multifamily housing loans in a prudent manner;

(d) Be a lender who meets the requirements for Agency approval contained in 7 CFR part 3565 subpart B and has a demonstrated ability to underwrite, originate, process, close, service, manage, and dispose of multifamily housing loans in a prudent manner; or

(e) Be a lender who meets the following requirements in addition to the other requirements of 7 CFR part 3565 subpart B and of subpart I:

(1) Have qualified staff to perform multifamily housing servicing and asset management;

(2) Have facilities and systems that support servicing and asset management functions; and

(3) Have documented procedures for carrying out servicing and asset management responsibilities.