Rural Housing Service Multi-Family Housing Program Overview NCSHA’s HFA Institute Conference Washington, DC January 15, 2015

What we do Rural Development provides affordable rental housing to low and very-low income rural Americans through: – About 14,700 properties with USDA as the direct lender, housing over 420,000 families and elderly. – More than 650 guaranteed loans for housing of nearly 35,000 families. – Deep subsidies to support tenants with insufficient income to afford to pay rents on their own. 2

Section 515 Direct- Direct Loan Section 538 Rural Rental Housing- Loan Guarantee Section 521- Rental Assistance Multi-Family Housing Preservation and Revitalization Restructuring Program- Direct Loans and Grants Main MFH Programs

Section 515 Direct Loan Program Section 515 loan funds may be used for the financing of new construction properties; rehabilitation of existing program properties; or purchase and rehabilitation of multi-family and other related non-program properties in rural areas. Loans offer reduced interest rate of 1% through interest credit, to help keep the housing affordable. Loans are for 30 years with up to 40 year amortizations.

Section 538 Guaranteed Rural Rental Housing Program Under Section 538, MFH provides a guarantee of up to 90% of a loan to construct or rehab affordable rental property in rural areas. Tenant incomes may be up to 115% of the area median income upon initial occupancy. Loans may be amortized up to 40 years, lowering debt service payments to make the property affordable. Qualifies for Ginnie Mae securitization and CRA credit which doesn’t count against lender’s legal lending limit.

Section 521 Rental Assistance (RA) Program The RA program provides rental subsidy to assist very low- to low-income tenant households paying more than 30% of their Adjusted Annual Income. MFH pays the owner of a multi-family housing complex the difference between the tenant's contribution (30 percent of adjusted income) and the monthly rental rate.

Multi-Family Housing Preservation and Revitalization Restructuring (MPR) Program The MPR Program provides a flexible mix of tools to invest in the preservation of Section 515 properties. The available financing tools include: – Debt Deferral – Revitalization Zero Percent or “soft second” Loans – Revitalization Grant – Section 515 Direct Loans 7

MFH Challenge - Current Portfolio Aging properties Insufficient property reserves for rehabilitation and modernization Federal budgetary limitations Leveraging third party funds (tax credits)

Solution - Rehab existing portfolio through tax credits, MPR and Section 538 Example: Alabama’s 12 Property Portfolio financing structure included: $4.5 million of debt deferral $8.1 million of Section 515 loans; $0.5 million of Zero Percent loans; $2.5 million of Section 538 Guaranteed loans to help with seller’s equity and other costs; and $7,215,638 million of 4% tax credit with bonds. Result: MFH was able to rehab 336 units of affordable housing!

MFH Challenge- Transfer of Properties Delay in processing transfers Inconsistent underwriting Lack of transparency in transfer process

Solution – Process Improvement Engage MFH team and stakeholders to streamline the transfer process to reduce processing times and transaction costs Update MFH’s handbooks and underwriting tools to ensure consistent, transparent policies First step: Create a preliminary assessment tool to allow buyers and sellers to structure their transfer transactions based on clear agency guidelines. Revise our underwriting requirements to better reflect industry standards. Reduce uncertainty and speed approval process!

Any Questions? Contact: Bryan Hooper, Deputy Administrator of RHS- Multi-Family Housing at (202) , or