1. Community Programs Division 1

2. 2014 HOME Program  Applications submission deadline is Friday March 6, 2015 by 4:30 PM CST for:  2014 Urban – Rural Round  2014 CHDO Round 2

3. HOME Allocation FY 2014  $10.1 million FY 2015  Estimated $9 million 3

4. Allocation of Funding  10% for Administration. 4% THDA 6% Grantee  05% CHDO Operating Expenses.  15% CHDO Set-aside.  70% Eligible Urban-Rural Projects. 44% of the 70% to eligible projects in Urban areas as defined in Low Income Housing Tax Credit Program. 56% of the 70% to eligible projects in Rural areas. 4

5. CHDO Operating Expenses  Up to 5% of the PJ annual HOME allocation may be set-aside for CHDO operating expenses. A PJ is not required to allocate the entire 5% to CHDO operating expenses.  THDA allows 7% of the total grant to the CHDO to be used for CHDO Operating Expenses. 5

6. Funding by Program Year  FY 2014 $1,514,486 CHDO’s $7,067,604 for Urban-Rural $3,109,745 Urban $3,957,859 Rural  Approximately 20 grants  FY 2013 $1,421,220 CHDO’s $947,480 for Supportive Housing $6,158,618 for Urban-Rural $2,709,792 Urban $3,448,826 Rural  Approximately 14 grants 6

7. Highlights for 2014  CHDO’s: New construction of single family residence. Soft second mortgage up to $14,999. Proceeds must be used on a second qualifying home before HOME requirements are met.  Homeowner Rehabilitation Programs: Rehabilitation hard costs are capped at $40,000. Reconstruction is no longer an eligible activity. Manufactured and mobile homes are no longer eligible. 7

8. New 2013 HOME Final Rule  Published July 24, 2013 and effective August 23, 2013.  Establishes new requirements that:  Enhance accountability and performance.  Achieve more timely production of housing.  Improve monitoring and oversight.  Addresses CHDO capacity/performance issues. 8

9. Key Changes  Program and Project Timeframes  CHDO Reservation  Written Agreements  Subsidy Layering and Underwriting  Written Policies and Procedures  Definition of Project Completion  Property Standards  Match  Homebuyer Program Design  Oversight of Projects Activities  New and Revised CHDO roles  CHDO Capacity Requirements 9

10. 2014 Application Dates  Applications will be due by 4:30PM (CST) on March 6, 2015.  Successful applicants will be notified at the end of May 2015.  Contracts will be effective July 1, 2015 through June 30, 2018. 10

11. Cure Period  THE CURE PERIOD HAS BEEN ELIMINATED  Submission of a complete application is a threshold requirement.  THDA staff will not contact you for missing documentation.  Review the application before you send it in. 11

12. Per County Maximum  The maximum amount of HOME funds that can be awarded in any one county is $750,000. 12

13. Per County Minimum  To keep within the $750,000 county maximum, multiple successful applications from the same county may be reduced to a minimum of $250,000.  The THDA Board of Directors may opt to award less than the $250,000 minimum grant. 13

14. Minimum and Maximum Grants  Applicants must apply for at least $100,000.  The maximum grant is $500,000. 14

15. HOME Draw Down Requirements  2013 CHDO’s (Not Eligible)  2012-2013 Regular Rounds25%  2012 CHDO’s50%  1992-2011 Grants100% 15

16. Draw Down Deadline  All pay requests must be submitted to THDA by February 27, 2015.  Pay requests must be complete and include all supporting documentation. 16

17. Local Participating Jurisdictions (PJs)  Receive own HOME funds directly from HUD.  Non-CHDO projects in Local PJs are not eligible to apply for THDA HOME funds. 17

18. CHDO’s in Local PJs  For 2014 HOME, CHDOs with projects in the Local PJs are eligible to apply for THDA HOME funding.  Funding from the Local PJ and the State cannot exceed $500,000. 18

19. Tennessee’s Local PJs  Clarksville  Chattanooga  Jackson  Knoxville  Memphis  Nashville-Davidson County  Knox County  Shelby County  NE Consortium (Bristol, Kingsport, Johnson City, Bluff City, Sullivan County and Washington County, excluding the town of Jonesborough 19

20. Eligible Applicants  Cities  Counties  501(c)(3) Non-profit Agencies  501(c)(4) Non-profit Agencies 501 (c) designation must demonstrate proof from IRS of their status or designation. 20

21. Eligible Non-profit Agencies  Organized under Tennessee law with a current Certificate of Existence.  Have the provision of housing to low-income households as one of its purposes.  Have standards of financial accountability.  Have IRS 501(c)(3) or 501 (c)(4) designation.  Additional requirements as noted in Attachment One: Non-profit Checklist/CHDO Designation. 21

22. Eligible Activities  Urban and Rural Rounds  Homeowner Rehabilitation Programs.  Down Payment Assistance Programs.  CHDO Round  Development of units for Homeownership. 22

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24. Housing Rehabilitation  NO RECONSTRUCTION IN THE 2014 HOME PROGRAM.  The use of HOME funds will be limited to the rehabilitation of existing structures.  A maximum of $40,000 per unit for rehabilitation hard costs will be allowed.  At project completion, the entire unit must be in compliance with applicable local, State code, UPCS and THDA Design Standards. 24

25. Rehabilitation of Manufactured Housing  Not an eligible activity for 2014 HOME. 25

26. Rehabilitation and Lead-based Paint  All units built after 1978, rehabilitation are subject to the $40,000 cap on rehabilitation hard costs.  All units built before 1978 will require a risk assessment by a qualified lead inspector.  If no lead, rehabilitation hard costs are limited to the $40,000 cap.  If lead and rehabilitation costs are less than $25,000, then standard treatments apply.  If lead and rehabilitation costs are greater than $25,0000, abatement is required. 26

27. Rehabilitation and Lead-based Paint  ABATEMENT requires the contractor to be a certified abatement contractor.  Certified abatement contractors can be found on the TDEC website under the Division of Solid Waste Management at: http://tn.gov/environment/solid-waste/solid- waste_leadsafetn.shtml 27

28. Inspections and Work Write-ups  The maximum charge for preparing work write-ups and conducting inspections is $2,100.  The costs of inspections and work write-ups remains 7% of the hard cost the rehabilitation.  There is a minimum charge of $500 if 7% of the rehabilitation hard cost is below $500. 28

29.  Rental Housing activities are no longer eligible for funding through the State HOME program. 29

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31. Eligible Activities  CHDO Round  CHDOs will be funded only as developer of units for homeownership.  New construction of units  Acquisition/Rehabilitation/Resale  Urban and Rural Rounds  Non-CHDO non-profit agencies and local communities will be limited to soft second mortgages for down payment assistance programs. 31

32. Soft Second Mortgages  CHDOS will be required to leave an amount with the unit as a soft second mortgages necessary to qualify the household for the permanent financing.  The soft second mortgages are limited to an amount equal to the lesser of $14,999 in HOME funds or the amount of HOME funds necessary to qualify the household for permanent financing. 32

33. Soft Second Mortgages  The soft second mortgage are forgiven at the end of five years if the unit remains the permanent residence of the initial buyer and is not leased.  If the unit remains in compliance but is sold during the affordability period, the amount of HOME funds subject to recapture can be reduced by 20% per year.  Recaptured funds must be repaid to THDA. 33

34. Sales Price Limits  The Property Value Limits are the sales price limits for homeownership programs.  Attachment Two: Property Value Limits Existing Homes HOME Purchase Price and New Homes HOME Purchase Price.  Any unit completed within the previous 12 months is considered new construction. 34

35. Underwriting  Front end ratios may not exceed 29%.  Back end ratios may not exceed 41%.  Lower ratios are encouraged.  Use of the new Underwriting Calculator is required. 35

36. Permanent Financing  Use THDA mortgage products whenever possible.  If not a THDA loan, the first mortgage is comparable to a THDA loan if the interest rate does not exceed the prevailing Great Choice interest rate by more than one percentage point (1%).  The permanent loan must have a fixed rate, fully amortizing over the 30 year term of the loan.  No pre-payment penalty for early pay-offs.  Always use the loan product that are in the best interests of your homebuyer. 36

37. Homebuyer Contribution  The homebuyer must make a contribution from their own funds equal to one percent (1%) of the purchase price of the property.  If buyer has liquid assets over $20,000, the homebuyer contribution must be 10% of the liquid assets instead of 1% of the sales price. 37

38. Homebuyer Education  ALL buyers must complete a homeownership education program from a THDA qualified homebuyer education trainer prior to purchase. 38

39. Neighborhood Market Conditions  Applicants will need to document that neighborhood market conditions demonstrate a demand for the project. 39

40. Unit Occupancy Deadline  CHDOs have 9 months to complete the sale of the unit once construction is finished. Lease-Purchase only allowable if the CHDO has an existing lease-purchase program. THDA will continue to require that the CHDO has a buyer pre-approved for the permanent mortgage before staring construction.  Units that are not sold by the 9 month deadline must convert to rental housing. 40

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42. Income Limits  HOME funds may only be used to benefit low- income households, that is, households below 80% of area median income.  Attachment Three: Income Limits 42

43. Compliance Period  HOMEOWNER REHABILITATION  Five year compliance period.  20% annual forgiveness feature.  If unit remains in compliance but is sold during the affordability period, the amount of HOME funds subject to recapture can be reduced by 20% per year.  Recaptured funds are repaid to THDA. 43

44. Affordability Period  HOMEOWNERSHIP PROGRAMS  Five year affordability period.  Forgiven at end of five years IF the unit remains the principal residence of the initial homebuyer and is not leased.  If the unit does not remain in compliance (i.e. is leased or rented), the entire HOME investment must be repaid to THDA.  Secured by a Grant Note and recorded Deed of Trust. 44

45. Subsidy Levels Minimum HOME$1,000 Maximum HOME$55,3390-Bedroom Limit $63,4381-Bedroom Limit $77,1402-Bedroom Limit $99,7943-Bedroom Limit $109,5434-Bedroom or more Limit 45

46. Property Standards  The new HOME rule makes significant revisions to property standards section 24 CFR 92.251 and anticipating HUD to provide additional guidance on a new version of UPCS as amended for the program.  The State has written rehabilitation standards for all HOME-assisted rehabilitation that must be met.  The new property standards requirement is adopted into THDA’s Operation Manual in effect for 2014 round. 46

47. Property Standards  LOCAL CODES  Any housing built or rehabilitated with HOME funds must meet all applicable local and Sate codes and rehabilitation standards at the time of project completion. 47

48. Property Standards  IN THE ABSENCE OF LOCAL CODES  Housing assisted with HOME funds must meet State current adopted code editions of the International Code Council.  THDA has a modified Uniform Physical Condition Standards (UPCS) for HOME, which units must, at minimum meet at project completion and maintain through-out the affordability period. 48

49. Property Standards  New construction must also meet accessibility requirements and mitigate disaster impact as applicable per State and local codes, ordinances, and THDA Design standards.  THDA must review and approve work write-ups, written cost estimates, plans, specifications, and UPCS Checklist before putting the project out to bid. 49

50. Property Standards  ENERGY CONSERVATION  In addition to the current edition of the International Energy Conservation Code, new construction projects must be Energy Star, Version 3.0 qualified, or achieve a HERS index score of 85 or less, as certified by an independent HERS rater.  New construction projects must also meet the current edition of the International Energy Conservation Code. 50

51. Property Standards  HOME-assisted new construction projects must:  Meet State and local residential and building codes, ordinances, and zoning requirements; or  If none exist, new construction of single-family units or duplexes must meet the current, State-adopted edition of the International Residential Code for One- and Two-Family Dwellings.  Conform to THDA Design Standards for New Construction and Rehabilitation of Single-Family Housing Units.  Mitigate disaster impact as applicable per State and local codes, ordinances, etc. 51

52. Property Standards  Upon completion, rehabilitation of HOME-assisted housing must at a minimum:  Meet State or local codes, ordinances, requirements; or  Absent such codes, rehabilitation of existing single-family units or duplexes must meet the current, State approved edition of the International Existing Building Code; and  Conform to THDA Design Standards for New Construction and Rehabilitation of Single-Family Housing Units. 52

53. Property Standards  Rehabilitation must also address the useful life of major systems:  Structural support  Roofing  Cladding and weatherproofing  Plumbing, electrical and HVAC  If the remaining useful life of a component is less than the affordability period, the rehabilitation will need to address the deficiency. 53

54. Property Standards  The work write-up is the basis on which contractors will bid on the project.  Work write-ups must be approved by THDA prior to putting the project out to bid. 54

55. Inspections  HOME Final rule includes a more stringent oversight provision for the PJ to conduct a minimum of 3 inspections per unit through-out the process.  THDA staff or third party contractor will conduct the 3 inspections at strategic points in the schedule.  Initial Inspection  Progress Inspection  Final Inspection  The cost of the third party inspections will be charged as a project delivery cost. 55

56. After Rehabilitation Property Value  HOMEOWNER REHABILITATION PROJECTS  The value of the rehabilitation cannot exceed 95% of the median purchase price established by HUD for existing units.  Attachment Two: Property Value Limits Existing Homes HOME Purchase Price. 56

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58. Limited English Proficiency  Each CHDO must have policies and procedures to assist non-English speaking applicants and staff should be knowledgeable of the procedures.  Each CHDO should also have a process that notifies LEP persons of language assistance available (i.e. notices, signs). 58

59. Relocation  Contact THDA prior to submitting a HOME application if individuals may be displaced or relocated due to your project.  Relocation has the potential for significant financial impact on a project. 59

60. Equal Opportunity & Fair Housing  No person can be excluded from participation in the HOME program on the basis of race, color, religion, sex, familial status, national origin, or disability. 60

61. Environmental Review  HOME funds cannot be committed to a project prior to the completion of the environmental review.  The applicability of the environmental review is based on the project as a whole and not the type of costs paid with HOME funds.  No commitment of non-federal funds in the project before completion of the environmental review. 61

62. Lead-Based Paint  HOME-assisted housing is subject to the requirements of the Lead-Based Paint Poisoning Prevention Act. 62

63. Labor Standards  Davis-Bacon wage compliance and regulations apply to any contract for the rehabilitation or construction of 12 or more HOME-assisted units.  Davis-Bacon does not apply to owner-occupied rehabilitation projects. 63

64. Debarment & Suspension  Grantees must verify that contractors are not presently debarred or suspended from participating in federal programs.  A list of debarred contractors can be found on the HUD website. 64

65. Flood Plains  THDA does not fund HOME projects in a flood plain. 65

66. Conflict of Interest  Applies to the procurement of property and services.  The new HOME rule has been expanded to define immediate family ties. 66

67. Conflict of Interest  The HOME conflict of interest has been revised to clarify that the covered conflict involves a financial benefit or interest, and that covered familial relationships are limited to immediate family members.  Immediate family ties include (whether by blood, marriage or adoption) the spouse (including a step- parent), child, sister, brother (including step-brother or step-sister), grandparent, grandchild, and in-laws of a covered person. 67

68. Procurement  Open and competitive solicitation by communities and non-profit agencies applies to:  Goods and services  Professional service contracts  Obtain minimum 3 bids  Written procedures selecting successful bid 68

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70. Submission Instructions  ONE original application and supporting documentation.  NO faxed or e-mailed applications.  NO Binders or Report Covers!  NO Cover Page! 70

71. All Applicants  Complete pages 3 – 13.  Answer all questions. If not applicable to your project, mark N/A.  Attach copy of most recent Financial Audit.  Attachment Twelve: Growth Plan Certification.  If multi-county project, a certification from each county. 71

72. Non-Profit Checklist/CHDO Designation  Current Certificate of Existence (within recent 6 months).  Copy of 501(c)(3) or (4) letter from IRS.  Copy of Charter and By-Laws.  Resolution authorizing submission of HOME application.  Part V: Non-profit Board signed by each member.  One page explanation of how Board in involved in the operation of the organization.  List of organization’s staff members and experience.  Copy of business plan or strategic management plan. 72

73. Non-Profit Checklist/CHDO Designation  Documentation of operating funds from other sources and the amounts.  Explanation of any other programs operated by the organization.  One page explanation of the organization’s experience in housing. 73

74. Non-Profit Checklist/CHDO Designation  Attachment Ten: Individual Disclosure Form  Completed by Board Chair, Executive Director AND any staff directly involved in decision-making for the HOME project.  Attachment Eleven: Corporate Disclosure Form  Completed by Board Chair or Executive Director on behalf of the organization. 74

75. Eligible CHDOs  CHDOs must complete Part II of the Non-Profit Checklist/CHDO Designation. CHDO Organizational Requirements CHDO Legal Structure CHDO Independence CHDO Accountability of the Low Income Community CHDO Capacity CHDO Role as Developer of homebuyer projects CHDO Operating Expenses CHDO Certification  Must be signed by the CHDOs attorney. 75

76. Neighborhood Market Study  Applicants proposing homebuyer assistance programs must demonstrate a market demand for the project.  Complete Attachment Thirteen: Market Study.  Be honest in the conclusions the study demonstrates. There may not be a demand for the project. 76

77. Financial Analysis of Non-Profits  The asset and liability information in the audits will be used to evaluate the financial capacity of the non-profit organization by reviewing financial ratios, including:  Current Ratios  Working Capital  Cash to Working Capital  Current to Non-Current Liabilities  Debt Ratio 77

78. Financial Ratio Calculator 78

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80. HOME Funding Matrices  Urban Matrix  Rural Matrix  CHDO Matrix 80

81. Threshold Criteria  Application is complete when submitted.  All required attachments are included. (Attachment 1)  No cure period to submit missing documentation!  Proposed project is HOME-eligible.  Project meets the requirements of the HOME rules.  Project is financially and administratively feasible.  Non-profits document their capacity to provide affordable housing to low-income households. 81

82. Urban-Rural Scoring - 170 Points  Program Design – Up to 35 Points  Planning, readiness and administrative capacity  Qualifications and experience of the administrator, applicant and inspector(s). Ability of the administrator to follow the Implementation Plan in the Working Agreement. Ability to draw down funds in a timely manner. Lack of monitoring findings; and Appropriate response to client concerns or complaints; contractor concerns or complaints, and  All necessary components to accomplish the project are identified 82

83.  County Need Score – Up to 50 Points  Attachment Four  Not-Proportionately Served Score – Up to 50 Points  Attachment Five  Disaster Areas – 10 Points  Attachment Six. 83 Urban-Rural Scoring

84.  Leverage – Up to 10 Points  Points awarded based on the actual percentage of other funds in the project.  Energy Conservation – Up to 5 Points  Rehabilitation programs that include an independent energy audit and, to the extent feasible, incorporate the recommendations of the audit report in the rehabilitation work write-up. 84 Urban-Rural Scoring

85. Consideration Factors  Grantees & Administrators  Have the benchmarks identified in the implementation plan (i.e. submittal of the Environmental Review Record, etc.) been met? In general, how closely have implantation plans been followed?  Have there been any monitoring findings within the last three years? If so, how many and what is the nature of the findings? What procedural changes have been made to ensure there is not a repeat of the finding?  Has the requested “Dashboard” information been supplied on or before the 20th of each month?

86. Consideration Factors  Grantees & Administrators  Is required documentation submitted on time and is it complete? Is there a pattern of incomplete documentation or lack of promptness?  Are there complaints that have been determined to be justified and is there an identifiable pattern?  Has there been good and open communication among all parties, i.e. THDA, the city or county government, beneficiaries, inspectors, etc.?  How many active contracts does the administrator have? What is the status of each?

87. Consideration Factors  Inspectors  Have work write-ups/plans and specifications consistently adhered to the THDA Design Guidelines and the UPCS?  Has the work itself been accomplished as agreed upon?  Are deficiencies or inconsistencies resolved or clarified promptly?  Have inspections been completed in a timely manner as requested by the administrator?

88. Consideration Factors  Inspectors  Has the information necessary to complete the Dashboard requirement been submitted to the administrator in a timely manner?  Has there been good and open communication among all parties, i.e. THDA, the city or county government, beneficiaries, administrator, etc.?  How many active contracts does the inspector manage and what is the status of each?  Are there complaints that have been determined to be justified and is there an identifiable pattern?

89. CHDO Scoring Criteria 170 Points  Capability  Project planning and readinessUp to 25 Points Sites identified Pool of potential homebuyers Market study shows need for the housing  CHDO capacityUp to 25 Points CHDO has produced successful affordable housing CHDO has paid staff with housing development experience CHDO budget shows multiple sources of funding Previous experience under HOME was successful 89

90. CHDO Scoring Criteria  NeedUp to 50 Points  Not Proportionately ServedUp to 50 Points  Disaster Areas10 Points  LeverageUp to 10 Points 90

91. Find Us on the Internet The Program Description, Application and Attachments are available on the THDA website under the Community Programs tab: www.thda.org 91

92. Contact THDA Community Programs staff can answer your questions about the HOME application until the March 6, 2015 deadline. 615-815-2030 CALL US 92

93. Address for THDA Community Programs Division Tennessee Housing Development Agency 502 Deaderick Street, Third Floor Nashville, TN 37243 THDA is in a State Office building which only uses the 37243 zip code. 93

94. Application Deadline March 6, 2015 4:30 PM CST Late applications will not be considered. 94

95. Questions 95