HOME Homebuyer Development Underwriting Template Webinar. May 24, 2017

Transcription

1 HOME Homebuyer Development Underwriting Template Webinar May 24, 2017

2 Speaker Anker Heegaard, Compass Group Les Warner, ICF International

3 Agenda HOME Underwriting/Subsidy Layering Requirements Related HOME Requirements Using the Homebuyer Development Underwriting Tool Case Study Slide 3

4 Purpose of Underwriting and Subsidy Layering HOME underwriting is the analysis of project assumptions and risks to ensure the project will meet affordability requirements Subsidy Layering is completed to determine the level of HOME assistance is necessary and reasonable Analysis of Market assessment and Developer Capacity ensure viable and sustainable projects Slide 4

5 Applicability Applies to all rental and homebuyer development projects, direct homebuyer assistance, and homeowner rehabilitation assistance loans for which funds are committed on or after August 23, Applies to projects funded in part or in whole with HOME funds CPD Notice HOME Underwriting and Subsidy Layering Guidelines published on December 22, 2015 Slide 5

6 Regulatory Requirements (b) requires a PJ to adopt and evaluate HOME projects according to written underwriting and subsidy layering guidelines (f) requires a PJ to adopt and follow written underwriting standards for assistance to homebuyers Slide 6

7 Related HOME Requirements Maximum per unit subsidy limits Maximum Sale price Cost Allocation - must perform cost allocation for a projects if less than 100% of the units are HOME-assisted. HOME Deadlines - Construction must be expected to start within 12 months after acquisition/demolition - 4-year project completion deadline - Homebuyer units must be under sales contract within 9 months of construction completion or be converted to rental Affordability period Slide 7

8 Underwriting and Subsidy Layering Guidelines A PJ must have written HOME underwriting & subsidy layering guidelines that describe PJ s process for: Assessment of market demand for the project Review of developer experience & financial capacity Examining cost reasonableness Ensuring HOME funds invested are no more than necessary to provide quality, financially viable affordable housing Determining reasonable level of profit/return to owner/developer for size, type, complexity of project Ensuring financial viability for the entire affordability period Verifying financial commitments are firm Slide 8

9 Coordination with Other Funders A PJ must evaluate a project against its HOME underwriting standards and cannot simply accept underwriting done for other lenders A PJ can review other lenders underwriting but the PJ must make and document its own determination that the project meets HOME requirements The PJ must certify in IDIS to the use of its underwriting guidelines. Slide 9

10 Homebuyer Underwriting Template Template provides a tool for reviewing the development of HOME homebuyer units; the template incorporates both the development and buyer affordability subsidy underwriting process Template standards will be set up by the PJ based on Underwriting/Subsidy Layering policies and procedures Assists PJ to calculate the development gap requiring HOME funding Assists PJ to calculate needed buyer affordability subsidies Slide 10

11 Sales Plan for Homebuyer Projects PJ must request a sales plan from the developer outlining their efforts to market and sell the units Sales plan should include cash flow and timing of when and how units will be sold PJ s evaluation: Is cash flow from sales needed to complete the project? Are timelines achievable given the market? Slide 11

12 Introduction Set view to appropriate worksheets and designate the number of columns Input the project name and address Designate the total units and the # of HOME units Slide 12

13 Project Sales Prices Unit: input unit details including address, # of bedroom, HOME max subsidy limits; Construction and sales schedules projected on a unit basis to allow projection of sales revenue Slide 13

14 Project Sales Prices (cont) Input estimate FMV; if the developer plans to discount sales below FMV indicate to allow calculation of net sales price Input closing cost to calculate net sales proceeds Slide 14

15 Project Monthly Cash Flow To track project cash flow on a monthly basis input projected project costs on a monthly basis may use Unit projection tab as an alternative approach Input projected use of funding broken down between HOME and non-home sources to track available funding or gaps over time Slide 15

16 Project Cash Flow Units Tracks the use of sources on a unit by unit basis Slide 16

17 HOME Assistance Summary HOME Assistance Summary will provide tracking of the project level of HOME assistance and the timing on use of HOME funds Summary provides a total uses and monthly Slide 17

18 Sources and Uses Use the drop down at 1F to set to track based on months of the project or on a per unit basis Slide 18

19 Case Study: Sales Prices Sales price entered along with HOME unit designation and developer paid discounts Slide 19

20 Case Study: Sales Prices (cont) Slide 20

21 Project Cash Flow (months) Costs entered into template based on month of projected expense Slide 21

22 Project Cash Flow (months) (cont) Monthly cash flow tracks needs for additional subsidy per month Slide 22

23 Cash Flow (Units) Costs entered based on a unit by unit basis; shared costs prorated by the user Slide 23

24 Cash Flow (Units) (cont) Projected cash flow or need for subsidy on unit by unit basis Slide 24

25 Project HOME Assistance Home Assistance needed for project and revised sources and uses Slide 25

26 Project Sources and Uses Revised sources and uses balanced after cash flow study and subsidy adjustments Slide 26

27 HOME Assistance Summary Compliance check and alerts for needed updates Slide 27

28 Buyer Underwriting Once the buyer is identified the PJ must complete underwriting to review the household s ability to afford the unit based on the PJ s Underwriting standards Underwriting will determine if affordability assistance is required and the level of HOME assistance that is necessary and reasonable PJ s affordability standards set the criteria for establishing what is considered affordable Slide 28

29 Buyer Underwriting (cont) Downpayment Assistance Template webinar will provide a detailed review of the buyer assistance underwriting portion of the template webinar to be posted along with Homebuyer Development webinar on the HUD Exchange. Buyer portion determines the maximum affordable mortgage on a per household basis to set the level of assistance PJ will need to document the completion of underwriting for all HOME assisted units Slide 29

30 Conclusion Final version of the Homebuyer Development Assistance Underwriting Template will be posted on the HUD Exchange along with recording and transcript of this webinar A companion Underwriting Template including screens to underwriting Homebuyer projects including development will also be available Slide 30