florida housing coalition annual conference
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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 - PowerPoint PPT PresentationTRANSCRIPT
Florida Housing Coalition Annual Conference Preservation of Affordable HousingSeptember 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
$6,400,000
Florida Housing Finance Corporation
New Issue Bond Program
CWCapital wasSeller/Servicer
Forward CommitmentAcquisition/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-story, 200 unit elderly housing development.
Principal and interest on the mortgage loan was secured by a direct pay Credit Enhancement Agreement issued by Freddie Mac.
Initial Bond Issuance was split between Gap Bond amount of $2,850,000 and Permanent 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)
Originally constructed in 1971 and consists of an existing 200-unit elderly housing development.
The Project includes 81 efficiency units and 119 1B/1B units and was affiliated with the Methodist Church.
The cost of the rehab was $6,418,000 or $32,090 per unit. The Project will receive a new 20-year, Section 8 HAP contract for 84% of the units upon expiration of the existing contract in 2012.
Rehabilitation will be floor-by-floor, and is expected to be completed within 15 months.
SOURCES OF FUNDS - Permanent
NIBP Bond Proceeds $ 6,400,000
Tax Credit Equity $ 5,488,000
Home Loan $ 3,923,000
Seller Subordinate Loan $ 2,500,000
Borrower Contribution $ 350,000
Total Sources $18,661,000
USES OF FUNDS - Permanent
Purchase Price – Land and Building $ 4,600,000
Hard Construction Costs - Rehab $ 6,418,000
Soft Construction Costs / Financing $ 7,267,000
Transition Reserve/Contingency $ 376,000
Total Uses $18,661,000
Case Study #1 – Bonds with 4% LIHTC (continued)
Interest Rate Stack
0.960%
0.208%
3.070%
0.400%
FRE Guaranty
Servcing Fee
Estimated Bond Rate
Issuer / Trustee
All-In Cost4.638%
Case Study #1 – Bonds with 4% LIHTC (continued)
Flow of Funds
Issuer
Borrower
Project
Trustee
CWCapital LLC
Bond Proceeds Bond Mortgage
Loan
Proceeds used to rehabilitate
Revenue
Bonds
Bond Proceeds
Treasury
Principal and Interest
Loan Payment
Credit EnhancementAgreement
Case Study – Rehab with Tenants in Place – 9% LIHTC
$7,800,000
Fannie Mae Immediate Delivery
Fixed Rate in Place Rehab with 9% LIHTC
CWCapital wasFannie Mae DUS Lender
Immediate DeliveryAcquisition/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 used to rehabilitate a 180-unit garden apartment property with residents in place.
Tax Credit Equity Installments plus loan proceeds to fund the renovations.
Completion and Operating Deficits Guaranty required.
Fannie Mae HUD Risk Share program utilized to improve terms.
Case Study – Rehab with Tenants in Place – 9% LIHTC (continued)
Originally constructed in 1981 and consists of an existing 180-unit family and seniors development.
The Project includes 148 family units and 32 age-restricted units.
The cost of the rehab was $7,920,000 or $44,000per unit. The Project received a new 20-year, Section 8 HAP contract for 100% of the units in 2011.
Rehabilitation is expected to be completed within 15 months and the borrower provided an interim bridge loan to fund the timing gap from tax credit equity installments.
SOURCES OF FUNDS - Permanent
Loan Proceeds $ 7,800,000
Tax Credit Equity $10,786,000
Existing Reserves $ 303,000
Total Sources $18,889,000
USES OF FUNDS - Permanent
Purchase Price – Land and Building $ 7,000,000
Hard Construction Costs - Rehab $ 7,920,000
Soft Costs / Financing $ 2,981,000
Reserve/Contingency $ 988,000
Total Uses $18,889,000