Credit underwriting is a de novo review of all information
supplied, received or discovered during or after any competitive solicitation
scoring and funding preference process, prior to the closing on funding,
including the issuance of IRS Forms 8609 for Housing Credits. The success of an
Applicant in being selected for funding is not an indication that the Applicant
will receive a positive recommendation from the Credit Underwriter or that the
Development team's experience, past performance or financial capacity is
satisfactory. The credit underwriting review shall include a comprehensive
analysis of the Applicant, the real estate, the economics of the Development,
the ability of the Applicant and the Development team to proceed, the evidence
of need for affordable housing in order to determine that the Development meets
the program requirements and determine a recommended SAIL, or HOME loan amount,
Housing Credit allocation amount or a combined SAIL or HOME loan amount and
Housing Credit Allocation amount, if any; and for any Development that has
rehabilitation with or without acquisition, a capital needs assessment ('CNA')
prepared in accordance with generally accepted industry investment grade
standards as reflected in a competitive solicitation shall be ordered by the
Credit Underwriter from a Corporation-approved CNA provider, and its findings
shall be used to determine rehabilitation that will be carried out, including
applicable energy, green, universal design and visitability features, and to
set replacement reserves as outlined in paragraph (13)(b), below. Corporation
funding will be based on appraisals of comparable developments, cost benefit
analysis, and other documents evidencing justification of costs. As part of the
credit underwriting review, the Credit Underwriter will consider the applicable
provisions of rule Chapter 67-48, F.A.C.
(1) After the Board's decision to select
Applicants for funding as a result of a competitive solicitation process has
become final action, the Corporation shall offer such Applicants an invitation
to enter credit underwriting. The Corporation shall select the Credit
Underwriter for each Development. For purposes of this section, a decision
regarding an Applicant will become final action:
(a) If none of the Board's selections of
Applicants for funding are challenged pursuant to Section
120.57(3),
F.S.;
(b) If some of the Board's
selections of other Applicants for funding are challenged pursuant to Section
120.57(3),
F.S., but none of the challenges could impact the decision to select the
Applicant for funding, or
(c) When
the Board or Corporation issues a final order as a result of a challenge
pursuant to Section 120.57(3),
F.S.
(2) For SAIL and
HOME Applicants, the invitation to enter credit underwriting constitutes a
preliminary commitment.
(3) A
response to the invitation to enter credit underwriting must be received by the
Corporation and the Credit Underwriter not later than seven (7) Calendar Days
after the date of the invitation. For any invitation to enter credit
underwriting that is offered to an Applicant after Board approval of the list
of eligible Applications that is sorted from highest funding preference to
lowest, where the Applicant's response is to decline to enter credit
underwriting, the result shall be the removal of the Application from the list
of eligible Applications for the applicable competitive solicitation and any
other funding where that list of eligible Applications will be used.
(4) If the invitation to enter credit
underwriting is accepted:
(a) All Applicants
shall submit the credit underwriting fee to the Credit Underwriter within seven
(7) Calendar Days of the date of the invitation to enter credit underwriting.
In addition:
1. Within seven (7) Calendar Days
of the date of the invitation, Competitive HC Applicants shall submit the
Preliminary Recommendation Letter (PRL) fee to the Credit Underwriter;
and,
2. If requested by the
Corporation, within 14 Calendar Days of the date of the invitation, Competitive
HC, SAIL, and HOME Applicants shall submit IRS Tax Information Authorization
Form 8821 for all Financial Beneficiaries to the
Corporation.
(b) For
Competitive HC, SAIL, and HOME Applicants, failure to submit the required
credit underwriting fee or the HC PRL fee, as applicable, by the specified
deadline shall result in withdrawal of the invitation. For HOME Applicants that
apply and qualify as a Non-Profit entity, the Corporation shall bear the cost
of the credit underwriting review, environmental review, and legal counsel.
However, if the HOME commitment is canceled for failure to adhere to rule
deadlines or for reasons within the Applicant's control, the Development will
be responsible for reimbursing the Corporation for fees incurred for credit
underwriting, environmental review processing, and legal counsel.
(c) For SAIL and HOME, the credit
underwriting process must be completed within the time frame outlined in
subsection
67-48.0072(21),
F.A.C., below and the loan must close within the time frame outlined in
subsection
67-48.0072(26),
F.A.C., below.
(5) The
Credit Underwriter shall review all information in the Application and
subsequently provided during the credit underwriting process, including
information relative to the Applicant, Developer, Housing Credit Syndicator,
General Contractor, and, if an ALF, the service provider(s), as well as other
members of the Development team. The Credit Underwriter shall also request and
review such other information as it deems appropriate to determine whether or
not to provide a positive recommendation in connection with a proposed
Development.
(6) In determining
whether or not to provide a positive recommendation in connection with a
proposed Development, the Credit Underwriter will consider the prior and recent
performance history of the Applicant, Developer, any Financial Beneficiary of
the Applicant or Developer, and the General Contractor in connection with any
other affordable housing development. The performance history shall consider
instances involving a foreclosure, deed in lieu of foreclosure, financial
arrearage, or other event of material default in connection with any affordable
housing development or the documents governing financing or operation of any
such development.
(a) Unless the Credit
Underwriter determines that mitigating factors exist, or that underwriting
conditions can be imposed, sufficient to mitigate or offset the risk, the
existence of the following shall result in a negative recommendation of the
proposed Development by the Credit Underwriter:
1. Considering all affordable housing
developments in which any party named above has been involved, if:
a. During the period prior to August 1, 2010,
5 percent or more of that party's developments have been the subject of a
foreclosure or deed in lieu of foreclosure, or in financial arrearage or other
material default and such arrearage or material default remained uncured for a
period of 60 days or more, or
b.
During the period beginning on or after August 1, 2010, any of that party's
developments have been the subject of a foreclosure or deed in lieu of
foreclosure, or in financial arrearage or other material default and such
arrearage or material default is uncured at the present or, if cured, remained
uncured for a period of 60 days or more.
2. Mitigating factors to be considered by the
Credit Underwriter, to the extent such information is reasonably available and
verifiable, shall include the extent to which the party funded the operations
of the development from that party's own funds in an attempt to keep the
development afloat, the election by a party to forego financial participation
in a development in an attempt to keep the development afloat, the party's
satisfactory performance history over the last 10 years in connection with that
party's affordable housing developments, and any other extenuating
circumstances deemed relevant by the Credit Underwriter in connection with the
party's involvement in a development.
(b) A negative recommendation may also result
from the review of:
1. Financial capacity of
an Applicant, Developer, any Financial Beneficiary of the Applicant or
Developer, the General Contractor, and, for SAIL and HOME Applicants that have
Housing Credits, the Housing Credit Syndicator, or
2. Any other relevant matters relating to an
Applicant, Developer, any Financial Beneficiary of the Applicant or Developer,
and the General Contractor if, in the Credit Underwriter's opinion, one or more
members of the Development team do not possess the ability to
proceed.
(7)
The Credit Underwriter shall report any inconsistencies or discrepancies or
changes made to the Applicant's Application during credit
underwriting.
(8) The Applicant
will be responsible for all fees in connection with the documentation submitted
to the Credit Underwriter.
(9) If
the Credit Underwriter determines that special expertise is required to review
information submitted to the Credit Underwriter which is beyond the scope of
the Credit Underwriter's expertise, the fee for such services shall be borne by
the Applicant.
(10) For Competitive
HC, SAIL, and HOME Applicants, an appraisal report conforming to the Uniform
Standards of Professional Appraisal Practice in effect at the time of the
appraisal and reported in a comprehensive format, and a separate market study
shall be ordered by the Credit Underwriter, at the Applicant's expense, from an
appraiser qualified for the geographic area and development type not later than
completion of credit underwriting. The Credit Underwriter shall review the
appraisal to properly evaluate the development property's financial
feasibility. Appraisals which have been ordered and submitted by third-party
credit enhancers, first mortgagors or Housing Credit Syndicators and which meet
the above requirements and are acceptable to the Credit Underwriter may be used
instead of the appraisal referenced above. The market study must be completed
by a disinterested party who is approved by the Credit Underwriter. The Credit
Underwriter shall consider the market study, the Development's financial impact
on Developments in the area previously funded by the Corporation, and other
documentation when making its recommendation of whether to approve or
disapprove a SAIL or HOME loan, a Housing Credit Allocation, or a combined SAIL
loan and Housing Credit Allocation or Housing Credit Allocation and HOME loan.
The Credit Underwriter shall also review the appraisal and other market
documentation to determine if the market exists to support both the demographic
and income restriction set-asides committed to within the Application. For the
Credit Underwriter to make a favorable recommendation, the submarket of the
proposed Development must have:
(a) An average
physical occupancy rate of 92 percent or greater; and,
(b) For Developments with new construction
units, an average market rental rate, based on unit mix and annualized rent
concessions, of 110 percent or greater of a 60 percent of Area Median Income
rental rate.
(11) The
proposed Development must demonstrate, based on current rates, that it can meet
minimum 1.10x debt service coverage (DSC) requirements with all first and
second mortgages for Housing Credits. If during the credit underwriting it is
determined that there is no need for a first mortgage or any debt service
payments then the proposed Development shall demonstrate the ability to achieve
breakeven. In the case where an operating deficit reserve (ODR) is approved
during credit underwriting, then the ODR can be used as income for purposes of
this test. For SAIL and HOME, the minimum debt service coverage shall be 1.10x
for the loan, including all superior mortgages. However, if the Applicant
defers at least 35 percent of its Developer Fee following the last disbursement
of all permanent sources of funding identified in the final credit underwriting
report and, in the case of a Housing Credit Development, the final cost
certification documentation, and when the primary expected source of repayment
has been identified as projected cash flow, the minimum debt service coverage
shall be 1.00, for the SAIL or HOME loan, including all superior mortgages. For
SAIL and HOME, the maximum debt service coverage shall be 1.50x for the SAIL or
HOME loan, including all superior mortgages. In extenuating circumstances, such
as when the Development has deep or short term subsidy, the debt service
coverage may exceed 1.50x if the Credit Underwriter's favorable recommendation
is supported by the projected cash flow analysis. Developments receiving first
mortgage funding from the United States Department of Agriculture Rural
Development (RD) are not required to meet the debt service coverage standards
if RD is providing rental assistance and has acknowledged that rents will be
set at an amount sufficient to pay all operating expenses, replacement reserve
requirements and debt service on the first and second mortgages.
(12) For Competitive HC, SAIL, and HOME, the
Corporation's assigned Credit Underwriter shall require a guaranteed maximum
price construction contract, which may include change orders for changes in
cost or changes in the scope of work, or both, if all parties agree, and shall
order, at the Applicant's sole expense, and review a pre-construction analysis
for all new construction units and a CNA for rehabilitation units and review
the Development's costs.
(13) For
Competitive HC, SAIL, and HOME, in addition to operating expenses, the Credit
Underwriter must include an estimate for replacement reserves and operating
expense reserves deemed appropriate by the Credit Underwriter when calculating
the final net operating income available to service the debt. A minimum amount
of $300 per unit per annum must be used for all Developments. In the case of
rehabilitation, with or without acquisition, the greater of $300 per unit per
annum or the amount identified in the plan and cost review ordered by the
Credit Underwriter will be used.
(a) The
initial replacement reserve will have limitations on the ability to be drawn
upon during the following time periods:
1. New
construction or Redevelopment Developments shall not be allowed to draw during
the first five (5) years or until the establishment of a minimum balance equal
to the accumulation of five (5) years of replacement reserves per unit,
or
2. Preservation or
Rehabilitation Developments (with or without acquisition) shall not be allowed
to draw until the start of the scheduled replacement activities as outlined in
the pre-construction CNA report subject to the activities completed in the
scope of rehabilitation, but not sooner than the 3rd year.
(b) The amount established as a replacement
reserve shall be adjusted based on a CNA prepared by an independent
third-party, ordered by a first mortgage lender, third-party credit enhancer or
a Housing Credit Syndicator, received by the Corporation or its servicers, and
acceptable to the Corporation and its servicers at the time the CNA is
required, beginning no later than the 10th year after the first residential
building in the Development receives a certificate of occupancy, a temporary
certificate of occupancy, or is placed in service, whichever is earlier
('Initial Replacement Reserve Date'). A subsequent CNA, meeting the parameters
of this section, is required no later than the 15th year after the Initial
Replacement Reserve Date and subsequently every five (5) years thereafter. If
the Applicant does not provide a copy of a CNA to the Corporation or its
servicers, prepared by an independent third-party and acceptable to the
Corporation and its servicers within the stated time frames, then one shall be
ordered by the Corporation or its servicers at the Applicant's expense. The
only events allowed to drop the balance below the minimum are items related to
life safety, structural and systems as approved by the Corporation and its
servicers. In the event the first mortgage lender or a Housing Credit
Syndicator requires replacement reserves with replacement reserve deposit
requirements that include the same or higher deposits, the Corporation's rights
to hold replacement reserves and to disburse such funds shall be subject to the
first mortgage lender or the Housing Credit Syndicator, as applicable. The
replacement reserve funds are not to be used by the Applicant for normal
maintenance and repairs, but shall be used for structural building repairs,
major building systems replacements and other eligible items which can be
identified in a competitive solicitation and/or such items that can be
capitalized and depreciated over multiple years. An Applicant may choose to
fund a portion of the replacement reserves at closing. Unless approved by the
Corporation and the Credit Underwriter, the amount cannot exceed 50 percent of
the required replacement reserves for two (2) years and must be placed in
escrow at closing.
(14)
For SAIL, HOME, and Competitive HC, the Credit Underwriter may request
additional information, but at a minimum for SAIL and HOME, the following will
be required during the underwriting process:
(a) For credit enhancers, audited financial
statements for their most recent fiscal year ended, if published; otherwise the
previous year's audited statements will be provided until the current
statements are published or credit underwriting is complete. The audited
statements may be waived if the credit enhancer's senior long term debt rating
is at least "A3" by Moody's, or "A-" by Standard and Poor's or Fitch.
(b) For the Applicant, general partner(s),
and guarantors, audited financial statements or financial statements compiled
or reviewed by a licensed Certified Public Accountant for the most recent
fiscal year ended, credit check, banking and trade references, and deposit
verifications. If financial statements that are either audited, compiled or
reviewed by a licensed Certified Public Accountant are not available, unaudited
financial statements prepared within the last 90 days and reviewed by the
Credit Underwriter and the two most recent years' tax returns. If any of the
applicable entities are newly formed (less than 18 months in existence as of
the date that credit underwriting information is requested), a copy of any and
all tax returns with related supporting notes and schedules. The financial
statements and information provided for review should be in satisfactory form
and shall be reviewed in accordance with the terms and conditions of this rule
chapter and any applicable competitive solicitation.
(c) For the General Contractor, audited
financial statements or financial statements compiled or reviewed by a licensed
Certified Public Accountant for the most recent fiscal year ended, credit
check, banking and trade references, and deposit verifications. The audited or
compiled statements may be waived if a payment and performance bond equal to
100 percent of the total construction cost whose terms do not adversely affect
the Corporation's interest, and is issued in the name of the General Contractor
by a company rated at least "A-" by AMBest & Co.
(15) For SAIL and HOME, each general partner
(whether individual or entity) or each manager/managing member (whether
individual or entity), as applicable, of the Applicant shall provide a
guarantee for completion of construction. In addition, one or more entities or
individuals (other than a general partner or manager/managing member) having an
ownership interest, either directly or indirectly, in the Applicant or in the
general partner or managing member of the Applicant shall be required to
provide guarantees or personal guarantees, as applicable, for completion of
construction as recommended by the Credit Underwriter or as otherwise required
by the Corporation. The Corporation shall consider the following when
determining the need for additional construction completion guarantees based on
the recommendations of the Credit underwriter:
(a) Liquidity of any guarantee
provider.
(b) Applicant's,
Developer's and General Contractor's history in successfully completing
Developments of similar nature.
(c)
The past performance of the Applicant, Developer, General Contractor or any
other guarantee provider in developing or constructing Developments financed by
the Corporation or its predecessor.
(d) Percentage of the Corporation's funds
utilized compared to Total Development Costs.
If, after evaluation of paragraphs (a)-(d), above, by the
Corporation and the Credit Underwriter, it is determined that additional surety
is needed, the Applicant will be required to provide a letter of credit or
payment and performance bond.
(16) For all Developments, the Developer Fee
and General Contractor's fee shall be limited to:
(a) Unless otherwise provided in a
competitive solicitation process, the Developer Fee shall be limited to 16
percent of Development Cost, excluding land, operating deficit reserves, and
any cash reserves/deposits associated with the acquisition of a Development,
except that, based upon criteria outlined in a competitive solicitation, a
Developer Fee of up to 21 percent of Development Cost, excluding land and
operating deficit reserves, shall be allowed if the proposed Development is
qualified for Competitive Housing Credits with a demographic commitment of
Homeless or Persons with Special Needs. When the Developer Fee is limited to 21
percent of the Development Cost, an amount equal to up to 5 percent of
Development Cost, inclusive of any amount in excess of 16 percent, must be
placed in an operating subsidy reserve account to be held by the Corporation or
its servicer. Any disbursements from said operating subsidy reserve account
shall be reviewed and approved by the Corporation or its servicer. Upon the
expiration of the Compliance Period, any remaining balance in any operating
deficit reserve (or similarly purposed) account may be drawn to pay down any
outstanding Corporation loan debt, including loan fees, on the Development
administered by the Corporation or its servicer. If there is no Corporation
loan debt on the Development at the end of the Compliance Period, then any
remaining balance in said operating subsidy reserve account shall be placed
into either an operating subsidy reserve account or a replacement reserve
account for the Development, which will have similar distribution restrictions
as stated herein or in paragraph (b), below. In no event shall the remaining
balance in said operating subsidy reserve account be paid to the Developer or
General Contractor in an amount that would cause the Developer Fee or General
Contractor fee to exceed the applicable percentage limitations provided herein
and in paragraph (b), below. Amounts withdrawn from the reserve account will
not be considered Development Cash Flow. In the event amounts withdrawn are to
pay any deferred Development Costs, it can be done prior to the end of the
Compliance Period, but no sooner than the end of the 13th year of the
Compliance Period and only after the Corporation's Credit Underwriter confirms
that said withdrawal does not negatively impact the Development through the
remainder of the Compliance Period. Consulting fees, if any, and any financial
or other guarantees required for the financing must be paid out of the
Developer Fee. Consulting fees include payments for Application consultants,
construction management or supervision, Local Government consultants and
property acquisition brokerage fees when in excess of the appropriate limit.
The maximum brokerage fees shall be limited to the lesser of $300,000 or the
applicable percent of the acquisition price, which shall be set at 4 percent
when the acquisition price is $5 million or less, 3 percent when the
acquisition price is $10 million or less, and 2 percent when the acquisition
price is in excess of $10 million. Brokerage fees paid to an Affiliate of the
Applicant or Developer or to employees on the Developer's payroll will be
considered part of the Developer Fee.
To the extent there are any Housing Credits that are not
sold to an investor(s) (and at the minimum price referenced in paragraph
67-48.0072(28)(h),
F.A.C.), in excess of 0.01 percent of the Applicant's Housing Credit
Allocation, then it will be assumed those unsold Housing Credits are valued at
the same price as those Housing Credits sold to an investor(s) and that total
value will be considered to be part of the Developer Fee.
(b) The General Contractor's fee shall be
limited to a maximum of 14 percent of the actual construction
cost.
(17) The General
Contractor must meet the following conditions:
(a) Employ a Development superintendent and
charge the costs of such employment to the general requirements line item of
the General Contractor's budget;
(b) Charge the costs of the Development
construction trailer, if needed, and other overhead to the general requirements
line item of the General Contractor's budget inclusive of the general
requirement items related to construction costs identified in the final cost
certification documentation;
(c)
Secure building permits, issued in the name of the General
Contractor;
(d) If deemed necessary
by the Corporation and the Credit Underwriter in their evaluation of
construction completion guarantees in subsection (15), above, secure a payment
and performance bond whose terms do not adversely affect the Corporation's
interest, issued in the name of the General Contractor, from a company rated at
least "A-" by AMBest & Co., or a Corporation-approved alternate security
for the General Contractor's performance such as a letter of credit issued by a
financial institution with a senior long term (or equivalent) credit rating of
at least "Baa3" by Moody's, or at least "BBB-" by Standard & Poor's or
Fitch, or a financial rating of at least 175 by IDC Financial
Publishing;
(e) Ensure that none of
the General Contractor duties to manage and control the construction of the
Development are subcontracted;
(f)
Ensure that no construction or inspection work is performed by the General
Contractor, with the following exceptions:
1.
The General Contractor may perform its duties to manage and control the
construction of the Development; and
2. The General Contractor may self-perform
work of a de minimis amount, defined for purposes of this subparagraph as the
lesser of $350,000 or 5 percent of the construction
contract;
(g) For
Developments with a Development category of new construction, unless otherwise
approved by the Corporation for a specific Development, ensure that not more
than 20 percent of the construction cost, not to include the General Contractor
fee or pass-through fees paid by the General Contractor, is subcontracted to
any one entity or any group of entities that have common ownership or are
Affiliates of any other subcontractor, with the exception of a subcontractor
(or any group of entities that have common ownership or are Affiliates of any
other subcontractor):
1. Contracted to deliver
the building shell of a building less than five (5) stories which may not have
more than 25 percent of the construction cost in a subcontract, unless
otherwise approved by the Corporation for a specific Development; or
2. Contracted to deliver the building shell
of a building of at least five (5) stories which may not have more than 31
percent of the construction cost in a subcontract, unless otherwise approved by
the Corporation for a specific Development; or
3. Contracted to deliver the building shell
of a Development located in the Florida Keys Area, which may not have more than
31 percent of the construction cost in a subcontract, unless otherwise approved
by the Corporation for a specific Development.
With regard to said approval, the Corporation shall require
an analysis from the Credit Underwriter and consider the facts and
circumstances of each Applicant's request, inclusive of construction costs and
the General Contractor's fees. For purposes of paragraph (g), "Affiliate" has
the meaning given in subsection
67-48.002(5),
F.A.C., except that the term "Applicant" therein shall mean
"subcontractor";
(h) For Developments with a Development
category of Rehabilitation or Substantial Rehabilitation, unless otherwise
approved by the Corporation for a specific Development, ensure that not more
than 20 percent of the construction cost, not to include the General Contractor
fee or pass-through fees paid by the General Contractor, is subcontracted to
any one entity or any group of entities that have common ownership or are
Affiliates of any other subcontractor, with the exception of a subcontractor
(or any group of entities that have common ownership or are Affiliates of any
other subcontractor) contracted to perform work on both the HVAC and electrical
components of a building of at least seven (7) stories which may not have more
than 31 percent of the construction cost in a subcontract, unless otherwise
approved by the Corporation for a specific Development. With regard to said
approval, the Corporation shall require an analysis from the Credit Underwriter
and consider the facts and circumstances of each Applicant's request, inclusive
of construction costs and the General Contractor's fees. For purposes of this
paragraph, "Affiliate" has the meaning given in subsection
67-48.002(5),
F.A.C., except that the term "Applicant" therein shall mean "subcontractor";
and,
(i) Ensure that no
construction cost is subcontracted to any entity that has common ownership or
is an Affiliate of the General Contractor, Developer, or Applicant. For
purposes of this paragraph, "Affiliate" has the meaning given it in subsection
67-48.002(5),
F.A.C., except that the term "Applicant" therein shall mean "General
Contractor."
(18) For
SAIL and HOME, the Credit Underwriter shall require an operating deficit
guarantee. Upon written request of the guarantor(s) to the Corporation or its
agent, the operating deficit guarantee will be released upon achievement of a
1.15x debt service coverage ratio for the combined permanent first mortgage and
SAIL or HOME loan, as determined by the Corporation or its agent, and 90
percent occupancy, and 90 percent of the gross potential rental income, net of
utility allowances, if applicable, all for a period equal to 12 consecutive
months, all as certified by an independent Certified Public Accountant. The
calculation of the debt service coverage ratio shall be made by the Corporation
or its agent. The Credit Underwriter or servicer will determine whether all of
the requirements described above have been met, including receipt, acceptance
and verification of the documentation provided by the Certified Public
Accountant, and will then submit a letter to the Corporation containing a
positive or negative recommendation concerning the release of the operating
deficit guarantee. If the Corporation's decision is to deny the release of the
operating deficit guarantee, the Board shall consider the facts and
circumstances of the Applicant's request and the Corporation's denial, and make
a determination of whether to grant the requested release. Notwithstanding the
above, the operating deficit guarantee shall not be released earlier than three
(3) years following the issuance of a final certificate of occupancy or, in the
event a final certificate of occupancy is not routinely provided by the
applicable jurisdiction, such other information evidencing completion of the
Development which is deemed acceptable to the Corporation. An operating deficit
guarantee, to be released upon achievement of 1.00x debt service coverage for a
minimum of six (6) consecutive months for the combined permanent first mortgage
and SAIL or HOME loan will be required for Developments receiving first
mortgage funding from the United States Department of Agriculture Rural
Development (RD) if RD is providing rental assistance and has acknowledged that
rents will be set at an amount sufficient to pay all operating expenses,
replacement reserve requirements and debt service on the SAIL or HOME loan and
all superior mortgages.
(19)
Contingency reserves which total no more than 5 percent of total actual
construction costs (hard costs) and total general development costs (soft
costs) for Redevelopment and Developments where 50 percent or more of the units
are new construction may be included within the Total Development Cost for
Application and underwriting purposes, unless otherwise recommended by the
Credit Underwriter. Contingency reserves which total no more than 15 percent of
total actual construction costs (hard costs) and no more than 5 percent of
total general development costs (soft costs) for Rehabilitation, Moderate
Rehabilitation, Substantial Rehabilitation, and Preservation may be included
within the Total Development Cost for Application and underwriting purposes,
unless otherwise recommended by the Credit Underwriter; however, in the event
financing is obtained through a federal government rehabilitation program, a
contingency reserve up to 20 percent may be utilized if required by the
program. Contingency reserves shall not be paid from SAIL or HOME
funds.
(20) The Credit Underwriter
will review and determine if the number of loans and construction commitments
of the Applicant and its Principals will impede its ability to proceed with the
successful development of each proposed Corporation-funded
Development.
(21) Information
required by the Credit Underwriter shall be provided as follows:
(a) For SAIL and HOME Developments, the
Corporation shall issue a firm loan commitment after approval of the Credit
Underwriter's recommendation for funding by the Board.
(b) For SAIL and HOME, unless stated
otherwise in a competitive solicitation, the firm loan commitment must be
issued by the date of the Board of Directors meeting immediately following
twelve (12) months after the Applicant is invited to enter credit underwriting.
Unless an extension is approved by the Board, failure to achieve issuance of a
firm loan commitment by the specified deadline shall result in withdrawal of
the preliminary commitment. Applicants may request one (1) extension of up to
six (6) months to secure a firm loan commitment. All extension requests must be
submitted in writing to the program administrator and contain the specific
reasons for requesting the extension and shall detail the time frame to achieve
a firm loan commitment. In determining whether to grant an extension, the Board
shall consider the facts and circumstances of the Applicant's request,
inclusive of the responsiveness of the Development team and its ability to
deliver the Development timely. The Corporation shall charge a non-refundable
extension fee of one (1) percent of each loan amount if the request to extend
the credit underwriting and firm loan commitment process beyond the initial
deadline is approved. If an approved extension is utilized, Applicants must pay
the extension fee not later than seven (7) Calendar Days after the Board
approves the extension of the original deadline. If, by the end of the
extension period, the Applicant has not received a firm loan commitment, then
the preliminary commitment shall be withdrawn.
(c) For Competitive HC Developments,
regardless of whether the HC is in conjunction with SAIL or HOME, all
preliminary items required for the Credit Underwriter's preliminary HC
allocation recommendation must be provided to the Credit Underwriter within 21
Calendar Days of the date of the invitation to enter credit underwriting.
Unless an extension is approved by the Corporation in writing, failure to
submit the required credit underwriting information by the specified deadline
shall result in withdrawal of the invitation to enter credit underwriting. In
determining whether to grant an extension, the Corporation shall consider the
facts and circumstances of the Applicant's request, inclusive of the
responsiveness of the Development team and its ability to deliver the
Development timely. If the Corporation's decision is to deny the Applicant's
request for an extension, then prior to the withdrawal of the invitation, the
Board shall consider the facts and circumstances of the Applicant's request,
the Corporation's denial, and any credit underwriting report, if available, and
make a determination of whether to grant the requested
extension.
(22) If the
Credit Underwriter requires additional clarifying materials in the course of
the underwriting process, the Credit Underwriter shall request same from the
Applicant and shall specify deadlines for the submission of same. Failure to
submit required information by the specified deadline, unless a written
extension of time has been approved by the Corporation, shall result in
withdrawal of the preliminary commitment or the invitation to enter credit
underwriting, or both, as applicable. In determining whether to grant an
extension, the Corporation shall consider the facts and circumstances of the
Applicant's request, inclusive of the responsiveness of the Development team
and its ability to deliver the Development timely. If the Corporation's
decision is to deny the Applicant's request for an extension, then prior to the
withdrawal of the preliminary commitment or the invitation to enter credit
underwriting, or both, as applicable, the Board shall consider the facts and
circumstances of the Applicant's request, the Corporation's denial, and any
credit underwriting report, if available, and make a determination of whether
to grant the requested extension.
(23) The Credit Underwriter shall complete
its analysis and submit a written draft report and recommendation to the
Corporation. Upon receipt, the Corporation shall provide to the Applicant the
section of the written draft report consisting of supporting information and
schedules. The Applicant shall review and provide written comments to the
Corporation and Credit Underwriter within 48 hours of receipt. After the 48
hour period, the Corporation shall provide to the Credit Underwriter comments
on the draft report and, as applicable, on the Applicant's comments. Then, the
Credit Underwriter shall review and incorporate, if deemed appropriate, the
Corporation's and Applicant's comments and release the revised report to the
Corporation and the Applicant. Any additional comments from the Applicant shall
be received by the Corporation and the Credit Underwriter within 72 hours of
receipt of the revised report. Then, the Credit Underwriter will provide a
final report, which will address comments made by the Applicant, to the
Corporation.
(24) For SAIL and
HOME, the Credit Underwriter's loan recommendations will be sent to the Board
for approval.
(25) For SAIL and
HOME, the Corporation shall issue a firm loan commitment within seven (7)
Calendar Days after approval of the Credit Underwriter's recommendation for
funding by the Board.
(26) For SAIL
and HOME, unless stated otherwise in a competitive solicitation, these
Corporation loans and other mortgage loans related to the Development must
close by the date of the Board of Directors meeting immediately following 180
Calendar Days of the firm loan commitment(s). Unless an extension is approved
by the Board, failure to close the loan(s) by the specified deadline outlined
above shall result in the firm loan commitment(s) being deemed void and the
funds shall be de-obligated. Applicants may request one (1) extension of the
loan closing deadline outlined above for a term of up to 90 Calendar Days. All
extension requests must be submitted in writing to the program administrator
and contain the specific reasons for requesting an extension and shall detail
the time frame to close the loan. The Board shall consider the facts and
circumstances of each Applicant's request, inclusive of the Applicant's ability
to close within the extension term and any credit underwriting report, prior to
determining whether to grant the requested extension. The Corporation shall
charge an extension fee of one (1) percent of each Corporation loan amount if
the Board approves the request to extend the loan closing deadline beyond the
applicable period outlined above. If an approved extension is utilized,
Applicants must pay the extension fee not later than seven (7) Calendar Days
after the Board approves the request to extend the original loan closing
deadline. In the event the Corporation loan(s) does not close by the end of the
extension period, the firm loan commitment(s) shall be deemed void and the
funds shall be de-obligated.
(27)
Prior to any loan closing:
(a) The Applicant
must provide evidence of all necessary consents or required signatures from
first mortgagees or subordinate mortgagees to the Corporation and its counsel;
and,
(b) The Credit Underwriter
must have received all items necessary to release its letter confirming that
all closing contingencies have been met, including the finalized sources and
uses of funds and Draw schedule.
(28) For Competitive Housing Credits, the
Credit Underwriter shall use the following procedures during the credit
underwriting evaluation:
(a) The Credit
Underwriter, in determining the amount of Housing Credits a Development is
eligible for when using the qualified basis calculation, shall use a Housing
Credit percentage of:
1. Unless otherwise
stated in a competitive solicitation, twenty (20) basis points over the
percentage as of the date of invitation to enter credit underwriting when the
actual percentage exceeds the minimum of 9 percent for 9 percent credits for
new construction and Rehabilitation Developments unless the Applicant has
previously locked-in the percentage at a different rate, in which case the
Credit Underwriter shall use the locked-in Housing Credit percentage,
2. Fifteen (15) basis points over the
percentage as of the date of invitation to enter credit underwriting when the
actual percentage exceeds the minimum of 4 percent for 4 percent credits for
acquisition and federally subsidized Developments, unless the Applicant has
previously locked-in the percentage at a different rate, in which case the
Credit Underwriter shall use the locked-in Housing Credit
percentage.
(b) Costs
such as syndication fees cannot be included in eligible basis. All consulting
fees and any financial or other guarantees required for the financing must be
paid out of the Developer Fee. Consulting fees cannot cause the Developer Fee
to exceed the maximum allowable fee as set forth in subsection
67-48.0072(16),
F.A.C.
(c) All contracts for hard
or soft Development Costs must be itemized for each cost component.
(d) The allocation amount for acquisition
Housing Credits shall be limited to the lesser of the sale price or the
appraised value of the building(s).
(e) If the Credit Underwriter is to recommend
a Competitive Housing Credit Allocation, the recommendation will be the lesser
of:
1. The qualified basis calculation
result,
2. The gap calculation
result, or
3. The Housing Credit
award considered in the Application.
During the credit underwriting process and as a part of the
final cost certification process, the Development will be subjected to the
Total Development Cost per unit limitation test as outlined in a competitive
solicitation.
(f)
As part of the process the Corporation uses to determine financial feasibility
as set forth in Section 42(m)(2) of the IRC, the Corporation will base all
calculations of the minimum net Housing Credit equity contribution available to
the Development on the assumption that a minimum of 99.99 percent of the
Housing Credit Allocation is being sold in exchange for Housing Credit equity
contribution at the greater of the syndication rate or market rate pricing, as
depicted by the price per dollar of Housing Credit Allocation available to the
Development, as determined by using sales of comparable Housing Credit
Allocations and the Corporation's evaluation of market trends. In determining
the financial feasibility set forth above, the Corporation will utilize the
calculated Housing Credit equity contribution based on the criteria provided
above.
(g) When utilizing the gap
calculation in determining a recommendation for the amount of the Housing
Credit Allocation as part of the process the Corporation uses to determine
financial feasibility as set forth in Section 42(m)(2) of the IRC, the Credit
Underwriter shall assume a first mortgage loan amount from a non-governmental
agency (i.e., a traditional first mortgage lender) to be the greater of:
1. The actual amount committed to the
Development, or
2. The amount of
the proposed Development's minimum qualifying first mortgage as determined
herein. The Development's minimum qualifying first mortgage shall be the lesser
of a. or b. as follows:
a. An amount that
yields a debt service coverage ratio of 1.25x based on the pro forma for the
proposed Development's 15th year given an annual rate of increase for revenues
of the lesser of 2 percent or the annual rate of increase utilized in credit
underwriting, along with an annual rate of increase for operating expenses of
the greater of 3 percent or the annual rate of increase utilized in credit
underwriting, or
b. The greater of
either:
(I) An amount that yields a debt
service coverage ratio of 1.50x, or
(II) An amount that yields a net cash flow
after debt service of $1,000 per unit.
Both sub-sub-subparagraphs (I) and (II), above, are based
on the pro forma for the proposed Development's initial year as presented in
the final credit underwriting report.
With regard to subparagraph 2., above, unless otherwise
stated in a competitive solicitation, the first mortgage shall be sized based
on an interest rate equal to the actual interest rate of the actual first
mortgage of the proposed Development, but no less than an interest rate floor
of the greater of 7.0 percent or 325 basis points over the 10-year Treasury
Rate as of the submission deadline for the applicable competitive solicitation
and an interest rate ceiling of no greater than 100 basis points over said
interest rate floor. The first mortgage shall be sized based on an amortization
term equal to the greater of the actual amortization term of the actual first
mortgage of the proposed Development or 30 years. The vacancy and collection
factor for this calculation shall be the vacancy and collection factor in the
credit underwriting report, but no less than 7 percent. If the resulting
calculated minimum qualifying first mortgage is less than $500,000, then the
Development shall assume to have no minimum qualified first mortgage. This
determination applies to any Development that did not qualify as a Homeless or
Persons with Special Needs Demographic Development, which said Homeless or
Persons with Special Needs Demographic Developments would only use its actual
committed debt.
(h) Any Housing Credit Allocation that is not
necessary for the financial feasibility of the Development and its viability as
a qualified Housing Credit Development throughout the Housing Credit Period, as
determined by the Corporation, will be withheld from being allocated to the
Applicant.
(i) As part of the final
cost certification process set forth in subsection
67-48.023(5),
F.A.C., the Applicant shall have documentation provided to the Corporation by
the Housing Credit Syndicator (for Housing Credits that are syndicated) or by
the Applicant (for any Housing Credits that are not syndicated) that details,
for each source of Housing Credit equity, the following information:
1. The net dollar amount of funding provided
to the Housing Credit Syndicator or the Applicant, as applicable, that will be
passed along to the Applicant as Housing Credit equity for the benefit of
paying Total Development Costs; and,
2. The annual dollar amount of Housing Credit
Allocation sold to each investor in exchange for the funding
provided.
(29)
If the Credit Underwriter recommends that Housing Credits be allocated to the
Development, the Corporation shall determine the credit amount, if any,
necessary to make the Development financially feasible and viable throughout
the Housing Credit Extended Use Period and shall issue a Preliminary Allocation
certificate. If the Credit Underwriter recommends that no credits be allocated
to the Development and the Executive Director accepts the recommendation, the
Applicant shall be notified that no Housing Credits will be allocated to the
Development. All contingencies required in the Preliminary Allocation shall be
met or satisfied by the Applicant within 45 Calendar Days from the date of
issuance or as otherwise indicated on the certificate.
(30) For Competitive HC, the credit
underwriting report must be finalized no later than the deadline provided in
the Carryover Allocation Agreement, unless extended as provided in the
Carryover Allocation Agreement, or the Housing Credits will be deemed to be
returned to the Corporation.