Classification: Public AHP Next Steps

Transcription

1 2018 AHP Next Steps

2 Congratulations 2018 Awardees! 47 approved initiatives across New England, Missouri and Pennsylvania totaling 2,550 for-sale homes and rental apartments Over $46.6 million in grants, loans, and interest-rate subsidies awarded 75 applications received Our partnership between sponsors, members, and FHLBank Boston works well! 1

3 Federal Home Loan Bank of Boston Wholesale bank, regional funder, cooperatively owned Provides liquidity and services to assist members in serving their communities HCI Programs include: Affordable Housing Program, Equity Builder Program, Community Development Advance, Jobs for New England, Helping to House New England AHP since 1990: Over $603 million in subsidy and loans awarded to 1,133 initiatives, including over 32,300 forsale on homes and rental apartments 2

4 Media Relations/Community Impact We would like to help you with any press releases and/or ground-breaking or ribbon-cutting events. Please follow up with your Community Investment Manager at FHLBank Boston. Construction signs? Please list the member and FHLBank Boston. 3

5 Agenda 1. AHP Overview, Member s and Sponsor s Role 2. AHP Award Letter and AHP Agreement 3. Timing and Use of Subsidy 4. Qualifying Characteristics and Project Modifications (online) 5. Retention 6. Disbursement (online) 7. Monitoring (online) 8. Contact Us! 4

6 What is AHP? (A Refresher)

7 Housing & Community Investment Staff Kathleen Amonte, Community Investment Manager, , Connecticut, Rhode Island, and Southeastern Massachusetts, including Barnstable, Bristol, Dukes, Nantucket, Norfolk, and Plymouth counties Tobi Goldberg, Senior Community Investment Manager, , Maine and Essex, Middlesex and Suffolk Counties in Massachusetts Michael Pingpank, Senior Community Investment Manager, , New Hampshire, Vermont, and Central and Western Massachusetts, including Berkshire, Franklin, Hampden, Hampshire, and Worcester counties; as well as initiatives outside of New England Theo Noell, Manager of Programs and Outreach, , 6

8 What is the AHP? Grants and subsidized loans Flexible funding to pay for capital costs AHP is regulated (12 CFR 1291) AHP is competitive A partnership between members, sponsors, and FHLBank Boston A core benefit of membership CRA consideration 7

9 A quick note about the AHP Regulation The Federal Housing Finance Agency published the final rule with 12/28/2018 effective date Phased implementation to be conducted over 2019 and 2020 Full implementation required by 1/1/2021 New rule offer some additional program flexibility including some streamlining of AHP monitoring and reporting requirements Stay tuned for more information over time 8

10 CRA Consideration Regulated members using the Bank s Housing and Community Investment Programs for community development projects may qualify for favorable CRA consideration. Program characteristics and priorities complement CRA and are designed to assist financial institutions in meeting the credit needs of their communities. CRA credit is possible under the Service Test for applying for AHP. May also receive additional consideration under the Lending and Investment Tests for providing financing (construction/permanent loans) or investing (LIHTC) for affordable housing. 9

11 What is the Member s Role? The Member is Essential for AHP! Active applicant Underwriting/Analysis Financial responsibility for subsidy Agent for FHLBank Disbursement gatekeeper No arbitrage Secure AHP subsidy to project/property Lender/Investor Reporter/Compliance Reporting Help ensure compliance Fraud notification Watch List Recapture (unlikely) Maintain records 10

12 What is the Sponsor s Role? Applicant/Developer Borrower/Owner Initiator of information for member Financial responsibility for AHP subsidy Compliance with AHP Agreement and qualifying Characteristics Reporting Project management Long-term monitoring (if applicable) 11

13 AHP Funding Types As a grant (AHP Direct Subsidy) As a loan (AHP Subsidized Advance) A reduced interest rate loan made to the member to reduce the interest rate on the project s permanent debt As a combination using both an AHP Direct Subsidy and AHP Subsidized Advance 12

14 What is an AHP Subsidized Advance? A reduced interest rate loan from FHLBank Boston to member AHP subsidy is used to reduce the interest rate The member adds its spread to the AHP interest rate The member loans funds to the sponsor for the project The AHP Subsidized Advance must match the term and amortization of the loan to the project Funds must clearly flow through to the project. Individual loans or combined loans may not exceed the standard market rate for interest, points, fees or spreads for similar loans. 13

15 What is an AHP Subsidized Advance? Terms of 10 to 20 years, with up to a 30-year amortization Interest subsidy is calculated based on an 18-month forward rate cost of funds and is a fixed amount which can not be increased. Interest rate is not guaranteed. However, the rate, principal and term may be adjusted, if warranted. Optional forward rate commitments are available with a mandatory take down. Member uses its standard mortgage and note with the Bank s AHP Subsidized Advance Rider added to the member s mortgage. 14

16 AHP Subsidized Advance Example The sponsor is in need of the following loan: Loan Amount - $1,550,000 Term - 20 years Amortization - 30 years Desired fixed rate for the project 3.5% 15

17 AHP Subsidized Advance Example Requested Rate to Project 3.5% Member s Spread 2.5% Member s Requested Subsidized Rate (Rate to project minus member s spread) FHLB Boston Cost of Funds (not guaranteed) (18-month forward look) 1.0% 2.93% AHP Subsidy Needed $332,111 16

18 Use of AHP Funds Eligible Uses: Acquisition, hard and soft construction costs, and rehabilitation Down-payment and closing-cost assistance, interest rate buydown, developer fee, and certain home-buying counseling costs for AHP units Ineligible Uses: Nonresidential space, capitalized or other reserves, supportive services, operating costs Nonresidential items, such as: furniture, social services, and bank fees Predevelopment 17

19 Use of AHP Funds Refinancing of Existing Single or Multi-family Mortgage Loan: Is only permitted when the refinancing generates equity proceeds equal to the total AHP Subsidy (AHP interest rate subsidy and direct subsidies/grant) and these proceeds must only be used for purchase, construction, or rehabilitation of the AHP housing units See AHP Implementation Plan Your project-specific use was identified in the AHP Application and will be incorporated into your AHP Agreement 18

20 AHP Nuts and Bolts

21 AHP Nuts and Bolts AHP Award Letter and AHP Agreement Fraud Reporting Typical Timeline (12/18/36 months) Disbursement Modifications, Extensions AHP Monitoring and Reporting Affordability Retention Contact Us 20

22 AHP Award Letter FHLBank Bank approvals made on 12/14/2018 Award letters mailed in December Must be signed by the Member indicating award acceptance. Accepted letters are due 2/1/2019. FYI: The notification may also contain Award Conditions, as applicable. 21

23 AHP Program Agreement Must be executed by 12/14/2019. Parties to the Agreement include: Member(s), Sponsor and/or Owner, Co-Sponsors, FHLBank Boston Member: Authorized Officer according to the User Entitlements on file with the FHLBank Boston Unsure who can sign? Check with your CIM (that s us!) Sets the terms and conditions governing approval, funding, AHP regulatory compliance, and may differ depending on type of project (rental, homeownership). The Qualifying Characteristics is part of the AHP Agreement and identifies all scoring commitments made in the AHP Application. Standard AHP Agreement. No changes permitted. 22

24 Qualifying Characteristics (AHP Scoring Summary) Please review and become familiar with each category you received points. These are binding commitments to be fulfilled. Any proposed change to one of these scoring categories must be discussed with your Community Investment Manager first. A change in one of the scoring categories at any time could necessitate a project modification. Project modifications require a re-scoring of your project and could affect your funding and ongoing eligibility. 23

25 Fraud Reporting Fraud Reporting Requirements Provide prompt written notice to the Bank Includes suspected fraudulent activities, material misstatements, misrepresentations, or omissions Provide additional information as requested See language in AHP Agreement, Mortgage and Note templates Members, Sponsors, and/or Project Owners each agree to comply with these requirements when signing the AHP Agreement, Mortgage, and Note 24

26 Typical Timeline (12/18/36 months) Approved for AHP funding Execute AHP Award Letter, then AHP Agreement Semiannual Progress Reporting (until project completion) Submit disbursement request AHP funds disbursed Construction completed (rental)/homes sold (ownership) AHP Closeout Monitoring Review initiated AHP Closeout Monitoring Review completed Long-term monitoring (rental only) 25

27 Disbursement of the AHP Direct Subsidy Funds Member is responsible for the AHP funds. Timing All funding is committed; site control established Rental - generally at start of, or during construction or acquisition Homeownership after homebuyers identified and income-qualified; other project-specific considerations Online process similar to the AHP Application and reporting. We rely on the sponsor for the information/project status. Member review of information/project status FHLBank Boston reserves 15 business days to process once all materials are received; includes three Bank review steps: Recommendation, Manager Approval, Compliance Review. 26

28 Disbursement of the AHP Direct Subsidy Funds Expect awardees to use some or all of the AHP funds within 12 months of AHP Award date. Direct Subsidy is deposited in Member s Ideal Way Account. Members must disburse the funds to the project/project account within 90 days. Members document the disbursement to the sponsor. Requires the executed AHP Mortgage and Note (recorded is preferable). Collateral Assignment of Mortgage may be required if the sponsor is the lender (recorded is preferable). Changes must be reviewed and approved by FHLBank Boston prior to execution and recording. 27

29 Disbursement of AHP Direct Subsidy Funds Preconditions to disbursement: Zoning approved All sources of funding committed AHP Award Conditions satisfied (if any) AHP Award Letter and AHP Agreement executed All reporting is current No issues affecting the project or AHP regulatory compliance Executed AHP standard mortgage and note, including collateral assignment of mortgage if applicable- must have the correct AHP Agreement Effective Date 28

30 Common Issues at Disbursement Missing AHP Agreement incomplete, wrong signatories Incomplete or unclear disbursement documentation or other reporting Unexecuted, incomplete AHP Mortgages and Notes or Documents with unapproved changes (date of AHP Agreement is required) Variances in names of parties between AHP Agreement and the AHP Mortgage/Note Please do not execute or attach the AHP Subsidized Advance Rider to the AHP Mortgage for the Direct Subsidy Members and FHLBank Boston have ability to unsign disbursement requests in the online system so that sponsor can make corrections 29

31 Disbursement of the AHP Subsidized Advance AHP Subsidized Advance supports the member s permanent loan to the project (not available during construction) Two corresponding, matching loans (term, amortization) Can request forward rate commitment for future disbursement or real-time disbursement Members continue to earn the appropriate spread negotiated with their customer. AHP Subsidy is used to lower the overall borrowing cost to the project; it is not to subsidize the member s spread. No partial prepayments allowed. AHP Subsidized Advance includes FHLB Boston s standard prepayment fee requirements. 30

32 Disbursement of the AHP Subsidized Advance Same online disbursement request process as Direct Subsidy Same documentation and AHP retention requirements required AHP Subsidized Advance Rider must be executed and recorded with the member s mortgage Time Sensitive: Once HCI approved, FHLBank Boston Money Desk waits for your treasury staff to call. FHLBank Boston uses allocated AHP Subsidy to pay down the fixed-interest rate charged to the member, below CDA Extra cost of funds. 31

33 AHP Subsidized Advances Considerations for 2019 We are unable to guarantee any interest rate unless member and sponsor agree to a binding forward rate commitment with mandatory take-down. We are in a rising rate environment which means the project does bear potentially more interest rate risk. We have reserved a fixed dollar amount of AHP interest rate subsidy to reduce the borrowing cost to the member. Forward rate commitments can be complicated in terms of lien priority, loan documents, execution, and timing. Talk with us first! 32

34 AHP Retention Retention for Affordability (5 years Homeownership/15 years Rental) Standardized AHP Retention Documents on FHLBank Boston Website AHP Mortgage and Note templates for both homeownership and rental initiatives; plus collateral assignment of mortgage if applicable. Includes separate AHP Subsidized Advance Rider (Rental/Subsidized Advances only) Make sure you are using our current templates from our website; these are under review for Expect to be published in the immediate future. 33

35 AHP Monitoring Overview Online, similar to AHP Application process Report information initiated by Sponsor, reviewed and submitted by member Semiannual Progress Report (SAPR) AHP Closeout Monitoring Review Long-Term Monitoring (rental only) Annual Compliance Certifications (ACC) Periodic Monitoring Reports (ACCPMR) Income Calculation Guidelines See the AHP Implementation Plan for details 34

36 Sponsor/Property Manager s Role in AHP Monitoring and Reporting Ensures eligibility of all residents/homebuyers Income calculations done in accordance with AHP Income Calculation Guidelines for all residents/homebuyers Maintains initial occupancy files with required documentation for all residents, including initial third party income verifications Completes AHP Rent roll and updates this rent roll for future reporting Obtains release of information documentation and has access to all AHP resident documentation held by a third party/property manager 35

37 Member s Role in AHP Monitoring and Reporting Members have an active role monitoring the sponsor s progress, and making certain certifications when various reports are completed. Both Member and FHLBank Boston rely on the sponsor for the information and documentation. Sponsors calculate income and maintain households documentation. It is the member s business decision how much to rely on the sponsors, their certifications, and documentation when you do your due diligence for reporting. FHLBank Boston is here to help members and sponsors access AHP successfully. 36

38 AHP Income Calculation Guidelines Income eligibility for households determined at move-in (rental) and initial program eligibility (homeownership) Used in conjunction with HUD Income Limits Annual, prospective, total household income Follows HUD/Section 8 methodology AHP Rental Income Calculation Guidelines AHP Homeownership Income Calculation Guidelines 37

39 AHP Income Calculation Guidelines Must use a coversheet/intake form to show all household members sources of income and how you are calculating income Certificate of Zero-income (for adult household members with no income) Guidelines, coversheet, certificate on our website: _forms.jsp We have a recorded webinar on Income calculation on our website 38

40 Rental Initiatives: What are Eligible, Affordable Rents? Regulatory definition (12 CFR ) Maximum rent is equal to 30 percent of the gross monthly income for the HUD targeted income level Based on household size calculated at 1.5 persons per bedroom or 1.0 persons per SRO Tenant payment for rent (not the total rent if subsidized) AHP has no utility allowance standards; we defer to you and other funders Definition includes exemption for Section 8 rents (or other comparable subsidy), at the time of initial occupancy and provided that the household/unit continues to receive assistance 39

41 Homeownership: Income Eligibility and Housing Payments Income eligibility based on household meeting the HUD income limit for the targeted income group Income eligibility and calculation is based on household size calculated at 1.5 persons per bedroom We are consistent with other funders and expect to see that AHPassisted homebuyers have affordable housing payments (front end ratio) Generally this is 30 percent of income similar to rental standards, but the AHP Regulation is more specific regarding rental initiatives 40

42 AHP Rating System (Ratings of 1-4) 1: Full compliance with AHP Regulation, HCI policies and procedures 2: Site visit/other monitoring required 3: Not physically completed after 36 months from AHP Award Missing required reporting or documentation (e.g. SAPR, ACCPMR) Closeout Monitoring not finished within 12 (ownership) or 16 (rental) months (from physical completion) Overdue documentation Other circumstances 4: Watch List Will require additional monitoring, workout/cure 41

43 Reminders and Q&A

44 Items to Remember Submit your AHP Award Letter by 2/1/2019 AHP Agreement-signed by an authorized officer for the member Funding Disbursement-call your CIM before starting the request AHP Retention Mortgages, Notes, AHP Subsidized Advance Rider Look at the Bank s website for current documents AHP Reporting and Monitoring - Member and sponsor work together Be familiar with your Qualifying Characteristics - proposed changes could affect your funding Housing and Community Investment staff are here to help 43

45 AHP Resources AHP Implementation Plan AHP Regulation: 12 CFR AHP Next Steps Guide All AHP transactions: 44

46 AHP Resources AHP Forms and Applications: s.jsp HUD income limits: AHP Rental and Homeownership Income Calculation Guidelines: /ebp/income_calculations_guidelines.pdf /ahp/ahp_rental_income_calculation_guidelines.pdf 45

47 Additional Resources HUD: Online fair housing resources Nationally recognized housing development and management training resources including: Housing finance, Asset/property management, and occupancy training, etc. Several listed in our AHP Next Steps Guide. 46

48 Housing & Community Investment Staff Michelle Chisholm, HCI Analyst, Mary Ellen Jutras, Vice President/Deputy Director, Jenni Mickool, HCI Analyst, Kaitlyn Mulhern, Equity Builder Program Manager, Kevin Ryan, HCI Analyst, Paulette Vass, Community Development Advance Manager, Kenneth Willis, First Vice President/Director,

49 Thank You! If you need any assistance, please contact us! 48