FHA Tax Credit Equity Pay-In Requirements for All Low Income Housing Tax Credit Projects Introduction to The New Tax Credit Wheelbarrow Module Validating Compliance with the Requirements 1

PART I: POLICY DEVELOPMENT 2

3 FHA Tax Credit Equity Pay-In Requirements: Policy Development The Ben Metcalf LIHTC memo of January 30, 2015, put new FHA equity installment requirements into effect. The same requirements have been incorporated into the Draft MAP Guide and will likely remain in the final version. The requirements apply to all LIHTC projects. They do not apply to Historic Tax Credit or New Markets Tax Credit equity.

4 Reasons for the Change Page 3 of the January 30, 2015 memo describes the pay-in requirement as clarifying the February 2014 “pari passu” language:

5 FHA Tax Credit Equity Pay-In Requirements Specific, new language in the memo and in the draft MAP Guide establishes predefined benchmarks for minimum cumulative pay-in totals. It ensures that FHA’s and the Owner’s exposure are roughly proportionate to their financial commitments, or “pari passu.”

6 Schedule of Installment Benchmarks Equity Installment Benchmarks % of Total Cum. % On Or Before Closing 20% 20% At 65% Construction Completion 30% 50% At Stabilization45% 95% Delivery of IRS Form 86095% 100% to Investors, or within one year of the Delivery Date

7 Additional Flexibility in FHA Tax Credit Equity Pay-In Requirements The benchmarks and pay-in percentages are not mandates to investors and lenders to use the stated benchmarks or percentages; However Investors may still define their own pay-in benchmarks and amounts, use fewer or more installments, or adjust their timing, as long as the cumulative minimum pay-in percentages are achieved no later than the times noted in FHA’s chart.

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PART II: NEW WHEELBARROW TO INCORPORATE POLICY CHANGE AND SIMPLIFY CALCULATIONS 9

Adaptation of LIHTC Wheelbarrow to New Guidance 10 To ensure and simplify adoption of the new requirements, FHA has added a new section to the LIHTC Wheelbarrow:

The New Equity Pay-In Module 11 The module is a simple addition to lenders’ Tax Credit Wheelbarrows. It substitutes new cells into the pre-set print area in the Comprehensive S&U Tab.

How to Begin Using the New Module 12 The module uses space previously reserved for one of two Notes pages. It can be copied and pasted into lenders’ existing (often linked) Wheelbarrow workbook files: This will minimize changes to lenders’ operations and should cause no technical difficulties. The module will print automatically as a page of the larger printout, and needs only to be put in sequence.

Entry of Equity Pay-In Amounts and Percentages 13 The module simplifies lenders’ effort to validate compliance with new Pay-In Schedule: Lenders categorize the project’s equity pay-in by FHA’s benchmark and the % paid at that benchmark; Space is available for any additional payments needed; and It should take less than ten minutes to complete.

Automatic Calculation of Cumulative Percentages 14 The module automatically calculates cumulative pay-in as payments are entered. Investors may choose their own pay- in %s or benchmarks, or add, delete or vary any of FHA's, as long as the cumulative minimum pay-in percentages are achieved by the times specified in FHA’s benchmarks. Note LIHTC equity may have to be distinguished from other, Historic or New Markets tax credit equity to complete the form.

Comparison of FHA’s and Proposed Schedules 15 The module compares the proposed cumulative pay-ins to the FHA requirements at each benchmark, and answers the question, “Has the above requirement been met?” At each benchmark, displaying YES in a large green font if it does meet the requirement, and NO in a large red font if it does not meet the requirement.

Automatic “Status” Calculation 16 The module indicates clearly if the pay-in meets the overall pay- in requirement by indicating a “Status” as shown below. If all the benchmarks are met: If the module has not been completed or if any one of the benchmarks has not been met:

Error Messages to Support Accurate Input 17 The module also offers the user error messages if the user’s input pay-in percentages do not add up to 100%, and if the calculated total dollar pay-in does not equal the total in the section of the Wheelbarrow that first requires details of the project’s Equity.

Finally, Proposed Equity Payments Visible from Pay-In Input Page 18 To simplify use of the module, the section of the Wheelbarrow that first requires details of the project’s Equity is reproduced in non- printing cells adjacent to the new module.

PART III: INTEGRATING THE NEW EQUITY PAY IN SCHEDULT INTO EXISTING PRO FORMA SPREADSHEETS 19

1.Open the file called “LIHTC Wheelbarrow with Equity Pay-in Module, ” to the “Comprehensive S&U” tab. 2.Copy the section that looks like this: Cells: 20 The New Module Can be Transferred into Existing Tax Credit Wheelbarrow Worksheets

21 3. Paste that copied section into your Tax Credit Wheelbarrow spreadsheet file’s Comprehensive S&U tab after anchoring your cursor on its cell BB92. Adding a Reference to the Module Page on Your Wheelbarrow Index Page

The Index page has been revised to note the addition of the Equity Pay-In requirement as a new page 4.1 (Creating a new page 4.1 instead of repaginating avoids requiring lenders to alter other sections and cells of the spreadsheet) Note: when assembling the printout, insert the new page 4.1 in the appropriate sequence after page Adding a Reference to the Module Page on Your Wheelbarrow Index Page

To make this change most simply, we can replace the cells of the existing worksheet that contain the Index. (Changing the Index is not as important as adding the module, so skip this step if making the changes to the Index proves to be too difficult.) 1.Open the attached file called “Tax Credit Wheelbarrow with Pay-in module, ” to the “Index” tab. 2.Copy the cells that contain the Index section, A1:P35, as indicated here: 3.Paste that copied section into your Tax Credit Wheelbarrow spreadsheet file’s Index tab after anchoring your cursor on its cell A1. 4.Save the file. 5.Cells: 23 Adding a Reference to the Module Page on Your Wheelbarrow Index Page

For questions, please contact John Bell 24 FHA Low Income Housing Tax Credit Project Equity Pay-In Requirements