U.S. Department of Housing and Urban Development

H O U S I N G

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Special Attention of: Notice H 95-56 (HUD)

Secretary\'s Representatives Issued: June 19, 1995

State and Area Office Directors

of Housing Development, State Expires: June 30, 1996

and Area Office Directors of
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Housing Management Cross References:

Chief Loan Management Officers 4360.6, 4465.1, 4350.1,

Chief Property Officers H 91-29, H 92-11, H 92-54

H 93-21, H 93-93, H 94-42, 4185.1

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Subject: Revisions to Notice 94-42 , MCCII - For Low Income Housing

Preservation and Resident Homeownership (LIHPRHA) and

Emergency Low Income Housing Preservation Act (ELIHPA)

Programs

This Notice clarifies and revises the processing instructions

for Title II and Title VI.

1.Explanation of Revision:

a.Provide changes in policy and procedures established

in Notice H 94-42 (MCCII).

b.Provide clarification to other preservation matters.

c.Provide new policy and procedures.

2.Effective Date: Upon receipt

3.An asterisk (\*) in the left margin of the Notice

introduces a new instruction, change or clarification.

4.Purpose: This Notice sets forth amended processing

instructions for Title II and Title VI.

Title II has over 4 years of operating experience and

Title VI has over a year and a half of operating

experience. During this time, we have received numerous

suggestions and comments from the Field as well as the

industry regarding program changes. After reviewing

these suggestions and comments, we have determined that a

number of policies and instructions set forth in the

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HMIT : Distribution:
W-3-1,W-2(H),W-3(A)(H)(OGC)(ZAS),W-4(H),R-1,R-2,R-3,

R-3-1,R-3-2,R-3-3,R-6,R-6-2,R-7,R-7-2,R-8

Previous Editions Are Obsolete HUD 21B (3-80)

GPO 871 902

current Notices and HUD Handbook 4350.6 should be revised to

speed the delivery of the programs and better serve our

clientele.

In preparing these instructions, we were aware of the problems

some Offices were experiencing coordinating the different review

functions, which has in some cases made the program more

difficult to administer. We have assembled a combined Housing

Management-Housing Development preservation unit to work

exclusively on this program. This unit has proven beneficial in

understanding and providing solutions to the different review

functions. This Notice contains instructions for both the

Production and Asset Management Branches. It is hoped that

combining these instructions will eliminate some of the

coordination problems, provide additional processing tools and

the administrative flexibility needed to better administer the

program.

\* APPLICABILITY - These instructions apply to all Title II and

Title VI processing stages that have not been completed by June

6, 1994. Hence, if an owner or purchaser made any submissions

prior to June 6, 1994, or the Field Office did an analysis or

issued a decision prior to June 6, 1994, they need not revise or

reverse their actions. At its option, the owner or purchaser may

request that it be allowed to make a new submission or that HUD

staff do a new analysis or make a new decision based on changes

in MCCII. However, if an owner requests a change that requires

HUD staff to perform further processing, the owner should provide

authorization for HUD staff to extend the time sufficiently for

such processing, if applicable. All reasonable requests should

be honored by the Field Office staff. In no case will HUD staff

require a new submission nor unilaterally reanalyze or make a new

decision where this has already been completed.

In no case, will the Department grant a waiver to use pre-MCCII

guidance if the owner submitted the Initial Notice of Intent

after June 6, 1994.

When an owner or purchaser can document that the change in

guidelines is creating a hardship, it has the option to request

that it be allowed to proceed under the pre-MCCII guidelines. A

hardship would be defined as the owner or purchaser having made

one or both of the following prior to June 6, 1994: (1) an

investment of considerable money or effort; or (2) a long-range

decision on how to proceed. The request to use pre-MCCII

guidelines for a specific stage or stages of processing should be

submitted by the owner or purchaser to the Field Office along

with documentation showing why the change caused a hardship. The

Field Office staff may never unilaterally impose such a

requirement; however. all reasonable request should be granted.

2

Summary of Notice

This Notice describes interim changes to the Preservation Program: Title

II and Title VI, Development and Management issues. These changes will

eventually be integrated into permanent formats such as Handbooks and

Guidelines. For purposes of brevity, this Notice is being referred to on

\"Mid-Course Correction Notice II\" (MCCII). A synopsis of the changes

follow.

I.Preservation Manager will be appointed in each office processing

Preservation cases.

II.Title II Processing will more closely approximate Title VI

processing.

-Greater stress is being placed on tenant notification and

input.

-PCNAs will be conducted after submission of Notice of Intent

on projects that have submitted a 9608B.

-Owner may choose to appraise the project and have the

appraisal reviewed prior to submission of POA.

III\. Changes to both Title II and Title VI Processing.

Tenant Notification.

-CFS/TRACS must be accessed for information upon receipt of

NOI.

-Increased emphasis is being placed on tenant notification

and input.

-Revised and additional letters to tenants are being

provided.

\* Appraisal Process.

-Section 8 vouchers/certificates are not considered in

estimating preservation values (clarification).

-Hypothetical \"energy related\" upgrades should be considered

PCNA required repairs (new instruction).

PCNAs, Repairs, and Reserve for Replacement Accounts.

-PCNAs will be done in a prescribed format and will include a

summary of the PCNA analysis.

3

\* - The number of units required to be inspected have increased.

\- Required Repair requirements are amended:

-Operational and functional items may be repaired, but

not replaced.

\- Inconsistent items must be corrected.

-Definitions of terms used in the PCNA notice are

provided.

\* - Revised definitions for Deferred and Routine Maintenance

have been provided.

-There is a revised method for computing the initial deposit

to the reserve for replacement account.

-The initial deposit will provide for items whose

anticipated useful life will expire within 5 years and

for major items in years 6 through 10.

-A 100 percent replacement cost estimate is made for

items whose useful life is anticipated to expire within

5 years.

-There is a revised method for determining the adequacy of

the existing replacement reserve account.

-The determination will be made by Asset Management

staff and the Director of Multifamily Housing.

-Owners are required to do on-going assessments of the

reserve for replacement account.

\* - Owners are required to review the PCNA scope of repairs and

provide a certification to HUD that there are or are no

additional code violations and other vital repairs that may

threaten or endanger the successful operation of the project

and safety and welfare of the residents.

-An Owner may begin making repairs once HUD\'s PCNA is

received. Prior to making repairs, the Owner must:

\- Inform HUD of its intent to start.

\- Request a pre-construction conference.

4

\- Provide a written plan for completing repairs.

-When repairs are completed before submission of the POA

application:

-No inspection and modifications will be made to the

PCNA until the POA application is received by HUD.

-The provisions of Davis Bacon may or may not be

applicable to the completed repairs depending on

compliance with the written plan.

-Existing project replacement reserve funds may be used to

replace items scheduled to be replaced or repaired in the

PCNA work write-up. They must be completed before

submission of the POA application.

\- Inspection fee requirements have been revised.

Section 241(f) Loan Processing.

\* - Title II, 241(f) processing instructions are revised to

permit AE/C to process 241(f) applications when submitted

with a POA prior to preliminary approval.

-An owner may propose improvements to the property that

exceed the scope of repairs in the PCNA work write-up.

-Types of items that may or may not be included are

listed.

-Valuation technical staff will develop a list of

acceptable amenities for each market area.

\* -HUD technical staff will evaluate proposed improvements

and estimated costs and use discretion in approving

items.

\- Contingency Reserve.

-A 10 percent contingency will be established for all

repairs and improvements in nonprofit transfer

projects.

-A contingency reserve will be established for

substantial rehabilitation projects.

-Owners are required to submit an Estimate of Progress

Schedule.

5

\* - The minimum inspection fee of \$500 for equity loans with

repairs may not be waived by the commissioner.

\* - Adjustment of preservation values at the POA stage

(revision).

\* - Determination of Section 241(f) loan amount for partially

assisted projects (revision).

\* - The existing replacement reserve balance under a transfer or

TPA request remains with the project (new instruction).

\* - Note discussion of PSRs under section IV. below. Applies to

Title II also (revision).

IV\. Changes made to Title VI Processing Only.

\* - Unacceptable appraisals (clarification).

\* - Clarification of negotiation option before third appraisal

(further clarification).

-The definition of multifamily rental housing under extension

preservation value has been expanded to include some types

of elderly housing.

-The concept of Project Specific Rents (PSR) is introduced

and is distinguished from Prevailing Market Rents (PMR).

\- PMR reflects prevailing market amenities.

-PSR reflects the subject project characteristics and is

the rent non-subsidized tenants would be willing to

pay.

-PSR is the cap on Total Tenant Payment that the owner

requests to use at the project if it is lower than FMR.

-PSR must be updated each year if it is to be used.

\* - PSRs are determined at POA stage at owner\'s request

(revision)

6

-PSR is the maximum Section 8 Contract rents to be used

at POA approval in Title II projects.

-Federal Cost Limit is being frozen at the amount determined

on Form HUD-9607 at the appraisal stage.

-Field Offices will submit all Form HUD-9607s to Preservation

Division.

-Newspapers and newsletters without significant circulation

will not be used to advertise sale of Preservation projects.

-Credit approval for nonprofit purchasers is moved to the

receipt of a bona fide offer.

-Consultant fees will be approved simultaneously with

nonprofit purchaser credit approval.

-A combined checklist is provided for TPA/241(f)/POA

applications.

V.Preservation Technical Assistance Grants.

\- Expedited processing is encouraged.

-Nonprofit purchasers may request Section 241(f) application

fees in their PTAG applications.

-Revision of Exhibits 3, 6 and 7 to be substituted in the

application package.

VI\. Section 241(f) Loan Processing.

-The requirement for a Section 241(f) equity loan escrow is

not changed.

-A construction escrow to be funded by the owner is required

for all Section 241(f) loans. However, a nonprofit

mortgagor may use the 10 percent contingency reserve to meet

this requirement.

-Transaction expenses eligible for a Section 241(f) loan are

described.

\- Debt Service Coverage requirements.

-90 percent for equity portion of loan in Title II and

VI\.

6a

-95 percent for rehabilitation portion of any loan and

for Title VI acquisition loans.

-Amortization period for Section 241(f) equity loans

ranges from 20 to 40 years.

\* - Unacceptable of appraisal (clarification).

\* - Clarification of negotiation option before third appraisal

(further clarification).

-Amortization period for Section 241(f) acquisition loan

remains 40 years.

VII\. POA Implementation Changes.

-Requirements are provided for the summary of the POA to be

given to tenants.

-Allowable oversight costs for nonprofit organizations are

provided.

\- Basic costs are described.

\- Owner options for tenant rent phase-in are described.

-Tenants may change designations on the tenant profile if

income changes.

VIII\. Office Program Monitoring.

-An individual must be designated in each Office to enter and

access MPPS to retrieve project information.

-Any information HUD provides to an owner is available

through the Freedom of Information Act.

\- A log must be maintained of disseminated information.

-Liaisons should be set up with State and local governments

for assistance in disseminating information.

6b

I.FIELD OFFICE (FO) PRESERVATION PROGRAM MANAGER. As of October 1,

1993, there were a total of 643 Title II and Title VI projects being

processed. Because of the significant workload it is important that a

clear chain of command exists to facilitate the accurate and expedient

review of each application. It is particularly important because of

the multi-disciplinary review process that is necessary to meet the

statutory requirements. The Director of Multifamily Housing, under

the reorganized structure, will have the primary responsibility for

the preservation program. Asset Management (AM), Architectural

Engineering and Cost (AE/C), Valuation and Mortgage Credit (MC) will

conduct their respective reviews following the instructions provided

by the Director of Multifamily Housing.

While the procedure and the participant\'s role in the review of

applications is spelled out in Handbook 4350.6 and Notice H92-54, a

specific person in the Multifamily Housing Division should be given

responsibility for overseeing the Title II and Title VI Preservation

program process. The Director of Multifamily Housing will appoint a

Preservation Manager, so that current and expanding workload can be

properly managed. Attachment F provides suggestions for establishing

the position.

II\. TITLE II PROCESSING CHANGES.

The following instructions provide an option to complete the PCNA and

establish the preservation value before submitting the Plan of Action

(POA).

A.TENANT NOTIFICATION.

Title III of the Housing and Community Development Act of 1992

requires tenants to be notified when owners exercise their option

to proceed with Title II in the same manner as Title VI. The

following instructions to process Form HUD-9608B (9608B), Notice

of Intent (NOI), Attachment A, implements this requirement.

1.Submission of the 9608B. The owner submits a 9608B to HUD,

tenants, and State and local governments in the same manner

as required for Title VI projects in HUD Handbook 4350.6,

Paragraphs 3-4 and 3-5, with the exceptions noted below.

a.The owner notifies tenants and governments of its

election of Title II.

7

b.The 9608B only allows the options to retain or sell the

project. If the owner wishes to prepay the mortgage,

he/she must follow the Title VI process.

2.Modification of tenant letter. We modified the letter to

tenants on the reverse of the 9608B to reflect differences

in the Title II program.

a.HUD is not supplying translations of the letter.

b.The Director of Multifamily Housing will urge owners,

tenant advocates, and government entities to find ways

to provide these translations to tenants in projects

where they are needed. One good source is bilingual

tenants living at the project.

3.Check for Tenant Representatives. The AM will check with

the Resident Initiatives Specialist (RIS) to assure that all

known tenant representatives have been notified.

4.Tenant Notification. The owner must give any tenant

occupying the project after submission of the NOI all

information given to existing tenants.

5.Preservation Capital Needs Assessment (PCNA) Tenant

Notification.

a.Tenant Notification of PCNA requirements are described

in:

1.HUD Handbook 4350.6, Paragraph 5-4.A, 5-5, 5-6,

5-7 A through 5-7 C, and 5-7 E; and

2.Paragraph III. A. of this Notice.

b.Modify the \"Notice to Tenants,\" Attachment B, deleting

references to the Resident Homeownership Program that

is only available under Title VI.

B.COMPLETING PCNA.

Notice H94-22 requested FOs initiate PCNAs on all Title II

eligible projects in lieu of waiting for POAs to be submitted.

In this way potential PCNA backlogs could be avoided and the

completed PCNA would be readily available to incorporate in the

appraisal process that begins with the POA submission. However,

Title II legislation does

8

not require a POA to be submitted within a specific time frame,

accordingly, there cannot be any absolute assurance that a PCNA

completed before the POA submission will not have to be revised.

In the interest of trying to reach a more cost effective

approach, Title II PCNAs should now only be commenced on projects

whose owners have initiated participation in the program by

submitting a Form HUD-9607B which we believe indicates a

commitment to complete the process in a timely manner. Upon

completion of the PCNA it is forwarded to the owner.

C.APPRAISAL OPTIONS.

To further parallel Title VI and provide the capability to

establish a preservation value prior to the POA submission, upon

receipt of the PCNA, the owner has two options regarding the

submission of the appraisal:

1.An owner may submit an appraisal within 60 days.

a.Valuation then has 60 days to:

1\) Review the appraisal;

2)Make any necessary adjustments or perform its own

appraisal; and

3\) Provide the value determination to the owner.

b.The owner then has an additional 6 months from the date

of the HUD value determination to submit a POA.

2.An owner may submit the appraisal along with the POA within

6 months. All tenant notification requirements of Title VI

apply.

D.MAXIMUM TITLE II SECTION 8 CONTRACT RENTS.

At POA approval, Section 8 Contract Rents will be limited to the

lower of Fair Market Rent (FMR) or Project Specific Rent (PSR).

The PSR is described in Paragraph IV.C.2. This term is being

substituted for the term, Comparable Market Rent, used in Notice

H91-29, for purposes of clarity.

9

III\. TITLE II AND VI PROCESSING CHANGES.

A.ACCESS TO CFS/TRACS.

Upon receipt of an initial NOI Form HUD-9608, or 9608B, the AM

should access the CFS\\TRACS system to inquire about the

following:

1.All Section 8 Contracts outstanding and closed for the

project.

2.Number of LMSA units associated with the project.

3.Number of 236 or BMIR units associated with the property as

appropriate.

4.Current tenant profile information.

Use CFS/TRACS if there are conflicts with other sources of

information.

AM should record this information, and use it to initiate the

preservation processing file for the project.

B.PCNA TENANT NOTIFICATION.

1.Tenant input. Throughout the process tenant input is

mandated by Statute.

2.Failure to Notify Tenants. If tenant notification

requirements are not followed when scheduling the PCNA, it

may cause substantial delay in the completion of the PCNA.

A revised PCNA could require revisions to the appraisal and

the entire process may be prolonged for a period of months.

3.New Tenant Notification Forms. Attachments B, C, and D of

this Notice will help make sure there is adequate tenant

input.

a.Attachment B is a revision to HUD Handbook 4350.6,

Appendix 5-1A. The owner must post it to notify

tenants of the PCNA and other issues.

b.Attachment C is a PCNA survey form which tenants may

voluntarily complete and submit to HUD or a tenant

representative for consideration by the PCNA

contractor.

10

c.Attachment D is the Notice advising tenants of the date

and time of the PCNA and Exit Conference.

4.Translations. Translations of Attachments B, C and D.

a.Copies of Attachment C translated into Spanish and

Russian will be forwarded to all FOs by HUD

Headquarters.

b.Send to Preservation Division in Headquarters copies of

any translation of the attachments prepared by the FO,

the owner, the tenant advocacy group or a tenant.

c.If you need a translation, check with the Preservation

Division to see if it is available.

C.ARCHITECTURAL, ENGINEERING AND COST (AE/C) PROCESSING.

1.Procedural Change. Title II PCNAs, will be performed as

indicated in paragraph II. B. above, when a Form HUD-9608B,

NOI is received by the FO at the NOI stage. Title II

instructions for performing PCNAs shall be used.

\*Unit Inspection. To fulfill the need for a more

comprehensive PCNA the decision was made to increase the

number of units required to be inspected. This change shall

serve to amend previous instructions. The units to be

surveyed to determine the level of repairs in each project

shall range from 100 percent of the units in smaller

projects to 40 percent of units in larger projects. Where

applicable, units shall be randomly sampled, except that all

vacant units must be examined. The following schedule

reflects the minimum number of units to be surveyed in each

project:

Units in Units to be

Project Inspected

1 to 125 \...\...\...\...\...\...\....100 percent

126 to 225 \...\...\...\...\...\...\.... 70 percent (88-158)

226 to 325 \...\...\...\...\...\...\.... 65 percent (147-211)

326 to 425 \...\...\...\...\...\...\.... 60 percent (196-255)

426 to 525 \...\...\...\...\...\...\.... 55 percent (234-289)

11

526 to 625 \...\...\...\...\...\...\.... 50 percent (263-313)

626 to 725 \...\...\...\...\...\...\.... 45 percent (281-326)

726 and up \...\...\...\...\...\...\.... 40 percent (290+)

All other project and Unit Inspection requirements of

Notices H 92-54 and 93-21 apply.

2.PCNA Format. Instructions for Titles II and VI do not

require PCNAs be presented in a uniform format or a summary

of the PCNA analysis. As a result, Valuation and AM waste

significant time looking for vital information to complete

their portion of the processing.

To speed up processing, PCNAs prepared by HUD AE/C as of the

effective date of this notice, must include a summary of the

PCNA analysis and provide the results deliverable in the

uniform format prescribed below. For PCNAs performed by

Contractors as of the effective date, AE/C will prepare a

summary, only.

Until instructions (Titles II and VI) and contract exhibits

are revised, AE/C will request contractors performing PCNAs

for HUD to provide summary data and the deliverable in the

same format.

a.Cover Sheet must include:

1\) The project name, number and location.

2)Name, address, and telephone number of the

preparer(s)

b.Table of Contents.

c.Summary of PCNA Analysis. See Attachment E for

required information and format.

d.Project Description.

e.Project Inspection Report(s)

f.PCNA Work Write-Up.

g.PCNA Cost Estimate(s).

h.Computation of Initial Deposit to the Reserve for

Replacement Account.

i.Engineering and Specialty Reports.

11a

j.Correspondence and Documentation relevant to PCNA

findings and conclusions.

k.Copy of Local Government Code Officials Report.

l.AE/C Processor\'s Log.

m.Required Statements and Determinations.

\* 3. Required Repairs. The required repairs portions of the work

write-up instructions of Notices H 93-21 (Attachment 1) and

H 92-54 (Attachment 4), prohibit including new amenities,

facilities and equipment in the property, unless it is

determined by HUD to be an operational/energy upgrade.

These instructions are revised to also prohibit the

replacement of items that are operational and functional and

to provide that inconsistent items be corrected.

a.Operational and functional items may be repaired as

needed, but are not to be replaced, unless, repair of

the item is not possible. The only exception to this

rule is replacing items that are operational and

functional, but inconsistent with other existing

materials, surfaces, etc.

b.An inconsistent item may be a material, surface,

appliance or piece of equipment that is incompatible

with the same or corresponding item. They typically

have a negative impact on the marketability of the

project.

1)AE/C is responsible for making determinations of

inconsistent items.

2)The Owner/Purchaser must correct inconsistent

items. AE/C will include in the scope of

repair(s) and/or replacement(s) to correct the

item(s) in the required repairs list of the PCNA

work write-up. These items must be categorized

separately and labeled Inconsistent Items.

3)Before making the work write-up requirements, give

consideration to proposing the most cost effective

and efficient method of correction.

4\) Examples of inconsistent items are:

a\) Tile floors containing an abundance of

12

mismatched or non-conforming (style or color)

tiles.

b)Kitchen appliances with mismatched colors.

c)Non-conforming or dissimilar (i.e., material,

size, style, etc.,) kitchen cabinets.

4.PCNA Definitions. Many inquiries and questions have been

raised relative to terminology used in PCNA instructions.

The intent of the definitions provided below is to

facilitate a more consistent approach to making PCNA work

write-up requirements.

a.Required Repairs are repairs, corrections, and

replacements needed to restore a property back to its

original physical standards.

b.Original Physical Standards mean that the property is

in \"good\" condition and that it is functional and

operational. It does not mean that the property is in

a \"new\" or mint condition.

c.Good Condition means that the property meets local

codes and Housing Quality Standards and there are no

inconsistent conditions.

d.Operational/Energy Upgrades are defensible improvements

that will elevate the efficiency of how a property

functions and/or its energy usage. Energy upgrades

generally result in cost savings to a project due to

reduced energy consumption.

\* e. Deferred Maintenance items are minor repetitive repair

items that have been postponed which may result in

physical damage, lack of efficiency, decline in

production, and other negative effects. These items

require repair, replacement, or correction with other

Required Repairs.

\* f. Routine Maintenance Items are minor non repetitive

repairs made by management during its normal operation.

They are not eligible to be included in the scope of

Required Repairs.

g.Regulatory Repairs are repairs resulting from lead

based paint and asbestos hazard abatement,

13

and Section 504 compliance requirements. Repairs

required by the local jurisdiction, which are a local

appraisal practice and repairs valuation determines

must be marketed conventionally are also categorized as

a Required Repair.

5.Revised Method for Computing the Initial Deposit to the

Replacement Reserve (IDRR) Account. AE/C prepares an

analysis of the remaining useful life of short lived

building components and systems, and other project features.

AM uses this to evaluate the adequacy of the replacement

reserve account and any necessary initial deposit to that

account.

a.Eligible items that may be included in the schedule

are:

1)Replacement of refrigerators, ranges, and other

major appliances in the dwelling units.

2)Replacement of kitchen and bathroom sinks and

counter tops, bathroom tubs, water closets and

kitchen cabinets.

3)Replacement of roofing systems, including

replacement of gutters, downspouts, and related

eaves or soffits.

14

4)Replacement of major plumbing and sanitary systems

or components.

5)Replacement of central air conditioning and

heating systems or components including cooling

towers, water chilling units, water heaters,

furnaces, boilers, exhaust fans, and fuel storage

tanks.

6\) Overhaul of elevators.

7)Major repaving/resurfacing/seal coating

(sidewalks, parking lots, and driveways).

8\) Repainting of the entire building exterior.

9)Replacement of exterior (lawn) sprinkler systems

when already included in a project.

b.Ineligible items that may not be included in the

schedule are, but are not limited to:

1)Items proposed to be replaced as part of the PCNA

work write-up.

2)Items whose estimated remaining useful life

exceeds 1/2 the original (first) mortgage term.

3\) Painting of interior spaces.

4)Replacement of individual dwelling unit air

conditioning components such as fan motors and

window unit compressors.

5\) Caulking and sealing.

6\) Window screens.

7)Replacement or purchase of maintenance tools and

equipment such as lawn mowers or snow blowers.

8\) Office equipment.

9\) Replacement of fire extinguishers.

10)Items generally considered routine maintenance.

15

c.Prepare a schedule to estimate the remaining useful

life of all eligible short lived building components

equipment, etc., included in the project.

1)To derive the remaining useful life of an item

subtract the actual age of the item from the

estimated economic life of the item.

2)The schedule shall provide a description of the

item, actual age and estimated economic life of

the item using the format shown below.

Sample #1:

Est.

Est. Remain.

Econ. Actual Useful

Description Life Age Life

Refrigerators 15 5 10

3)Rearrange the items in the schedule in ascending

order of groups of items in increments of 5-year

periods based on the estimate of remaining useful

life of items. The group whose useful life is

estimated to expire within the first 5-year period

will be listed first.

4)Estimates of economic life for items are to be

developed and updated annually by each FO. Data

should be obtained from material manufacturers and

suppliers and should be adjusted based on

performance under local conditions.

d.Prepare a 100 percent replacement cost estimate (less

salvage) for each item in the group whose estimated

remaining useful life is expected to expire within 5

years.

1)Include the sum of the costs of labor/

installation, materials, and appropriate fees,

when applicable. Using a cost adjustment factor

for time, project the cost of each item from the

date (month and year) of the estimate to the

expected expiration date. The sum of the

estimated cost is the total initial deposit.

16

2)Davis Bacon Requirements are not applicable,

therefore, the costs of labor shall not include

the provisions of Davis Bacon.

3)Identify the location of items, if required for

clarification.

6.Evaluation of 10 Year Group. The total initial deposit

amount established in 5d above should be satisfactory to

provide for any anticipated replacements which may occur

within the first 5-year period. However, to assure that

adequate funds are maintained to replace items whose cost

may be considered weighty in years 6 through 10, an

additional evaluation must be made to determine whether

annual deposits to the reserve account are sufficient.

a.Review the 10 year group (2nd) to determine if there

are notable items whose replacement costs raises

concerns that there may not be ample funds available to

cover years 6 through 10.

b.Prepare a separate list of notable items and estimated

costs to replace them using the instructions of 5d

above. This is only required when notable items that

raise concern have been identified.

c.The list and cost estimate of notable items must be

forwarded to AM.

7.AM Determination of Adequacy of Reserve Account Funds.

a.AM determines the adequacy of the funds in the existing

reserve account. Compare the total initial deposit

provided by AE/C with the minimum amounts derived using

the method described in HUD Handbook 4350.1 REV-1,

paragraph 4-11. It should be noted that the minimum

threshold of 144 (12 years) times the initially

established monthly deposit prescribed in 4350.1 has

been modified to use 60 months (5 years). This is more

agreeable with the new methodology. Use the greater of

the following to determine the adequacy of the existing

reserve account.

17

1\) The initial deposit determined in 5d above.

2)The initially established monthly deposit times 60

(5 years); or

3\) At least \$1,000 per unit.

b.The amount established in 7a above should provide for

any anticipated replacements which may occur within the

first 5 year period. To assure that adequate funds are

maintained for the replacement of high cost notable

items in years 6 through 10, an additional evaluation

must be made to determine whether annual deposits to

the reserve account are sufficient.

1)Use the information included in the list of noted

items and the cost estimate provided by AE/C to

determine what amount, if any, should be

considered when determining adequacy of the

account.

2)Derive the sum of annual deposits to the reserve

account made in years 1 through 5 and add them to

the amount determined in 7a above.

3)Derive the sum of the total estimated costs of

notable items and the amount determined in 7a.

\* 4) Compare the amounts derived in 2) and 3) above.

If the amount derived in 2) exceeds the amount

derived in 3), the amount derived in 2) above (7a

and annual deposits) shall be used to determine if

there is a shortfall.

\*If the amount of 2) does not exceed the amount of

3\) above (7a and costs of notable items) the

amount of 3) shall be used to determine if there

is a shortfall.

5)The Director of MF Housing must evaluate the

decision to increase the amount determined in 7a

based on the costs of notable items.

c.The Director of MF Housing must evaluate the

determinations made in 7a and b above and be

responsible for determining the adequacy of the reserve

account including the shortfall amount. if any.

18

d.Owners must analyze the amounts in their reserve fund

in light of anticipated needs on an annual basis for

the first 7 years following closing of the approved

structure of the POA and request appropriate increases

to assure that adequate reserve funds are available.

Thereafter, owners must perform needs assessments

bi-annually. This analysis must also be submitted with

any subsequent rent increase request.

1)The owner follows the requirements of paragraphs

4-10, 11 and 12 of Handbook 4350.1, and provide

the results of the analysis to HUD with:

a)A request for appropriate increases, such as

annual deposits and/or rental rates, if

required.

b)Updated information regarding replacements of

eligible reserve for replacement items. The

information shall include the name and number

of items, when they were replaced, and an

estimate of their remaining useful life.

c\) Any other information required by HUD.

2)AM reviews the information provided by an owner

and recompute the annual deposit to the reserve

account to determine the adequacy of reserve

funds.

a)Decides what action is necessary following

its review of all pertinent data including

but not limited to project condition, Section

8 amendment availability, resident input,

resident affordability, owner/agent past

actions, etc.

b)May request, if needed, the services of AE/C

and Valuation.

\*Owner\'s Certification of Repairs. Once an owner has

received the results of a PCNA (Titles II and VI), the owner

shall be responsible for reviewing the scope of repairs to

determine if all known code violations and other repairs

that inevitably must be made to correct a condition that

threaten or endanger the successful operation of a project

and/or safety

19

and welfare of the residents have been addressed. Examples

of such conditions might be removal of underground tanks or

repair of underground leaks. When the review is completed,

the owner shall certify in writing to the HUD Field Office

that there are no additional violations and/or other vital

repairs needed. Certifications which indicate there are

additional code violations and conditions shall include a

list of the items and their locations. The owner\'s

certification shall be submitted to the HUD Field Office

within 10 working days from receipt of the PCNA.

a.The Architectural, Engineering and Costs (AE/C) staff

shall be responsible for:

1\) reviewing the certification and attachments;

2)preparing a scope of repair(s) and cost estimate

to correct the condition(s);

3)revising the results of the PCNA when applicable;

and

4)forwarding the revised PCNA to Valuation to send

to the contract appraisers.

b.Failure to divulge information regarding code

violations and other conditions will result in

revisions to the PCNA during subsequent processing.

8.Commencement of Repairs.

a.The owner may start the repairs following receipt of

HUD\'s list of PCNA repair items. However, prior to

making repairs, the owner must inform HUD of its intent

to start, request a Preconstruction Conference (see

paragraph 10 below), and provide to HUD a written plan

for such repairs.

b.No inspection of completed repairs will be made until

subsequent processing and no modifications will be made

to the PCNA until the POA is received.

c.AE/C and Valuation POA processing must adjust the

results of previous PCNA processing to exclude the

scope and cost of work successfully completed.

19a

9.Applicability of Federal Labor Standards Provisions.

Federal labor standards provisions, including the payment of

Davis-Bacon prevailing wage rates, are applicable to

construction work undertaken with assistance provided

through the Section 241(f) loan program. Owners and HUD

staff shall follow the procedures contained in HUD Handbook

1344.1, Rev 1, Federal Labor Standards Compliance in Housing

and Community Development Programs in carrying out their

responsibilities relating to these provisions. Owners shall

request a wage rate determination from HUD Labor Relations

staff and incorporate the wage determination and the Form

HUD-2554, Supplementary Conditions of the Contract for

Construction into any contracts awarded for such work.

Note: Construction work performed by force account (workers

employed directly by the owner) is not exempt from labor

standards provisions.

a.Repair Items Completed Before Submission of the POA.

1)When all PCNA repair items are completed before

submission of the application, labor standards

provisions are not applicable.

2)When a portion of the PCNA repairs are completed

before submission of the POA application, labor

standards shall apply to the work as of the date

construction started. Distinct and separate work

items completed before submission of the

application may be excluded from labor standards

coverage when:

a)They were identified for advance completion

in the owner\'s repair plan.

b)They were identified in the plan and

completed under a contract(s) separate from

any contracts awarded for covered work, or by

force account.

3)Owners must receive prior approval from HUD Labor

Relations staff concerning work items intended for

exclusion from labor standards coverage.

4)Work items that were intended for advance

completion but which were not completed before

submission can not be excluded from labor

standards coverage.

20

b.Definitions.

1)Distinct means the scope of the repair item(s) has

been clearly identified.

2)Separate refers to a distinguishable item(s) which

may include more than one type of related or

non-related repairs.

3)Complete means that 100 percent of the work

involved with the item(s) has been done.

10.Preconstruction Conference. An owner must request a

preconstruction conference with HUD prior to undertaking any

repairs.

a.HUD\'s AE/C and Labor Relations staff shall conduct the

conference. The owner and any contractors who will

perform the construction work must attend.

b.AE/C will discuss HUD\'s role and requirements during

construction, and construction standards.

c.The Labor Relations staff will discuss prevailing wage

requirements and the procedure for submitting weekly

certified payroll reports.

d.AE/C and Labor Relations staff will review the owner\'s

written plan for completing repairs, especially those

repairs intended for completion in advance of the POA

application, and ensure that the plan is acceptable to

the owner and HUD.

11.Existing Project Replacement Reserve Funds.

a.The owner may use funds from a project\'s existing

reserve account to replace items scheduled to be

replaced or repaired in the PCNA work write-up.

1)Limit repair of items to the types of repairs

deemed eligible according to HUD Handbook 4350.1

REV-1, paragraph 4-9.

2)Replacements made using these funds must be

completed before the owner submits the POA

application.

3)Any replacements not completed before the owner

submits the POA application are subject to the

provisions of Davis Bacon.

21

b.Later AE/C and Valuation POA processing must adjust the

results of previous PCNA processing to exclude the

scope and cost of work completed using reserve funds.

C.SECTION 241(f) LOAN PROCESSING.

AE/C will review the submission exhibits to determine if there

are significant differences (e.g., PCNA repairs and estimated

costs) proposed by the owner/purchaser that require modifying or

reprocessing the PCNA. Generally, processing will be limited to

making modifications. There were no development provisions that

an owner submit a list of proposed items that were intended to

improve the project beyond PCNA standards. The following

instructions describe the procedure for requesting changes.

\*Procedural Change. 241(f) processing instructions of Notice

93-21 indicates that AE/C shall not begin processing a 241(f)

application until there has been preliminary approval of the POA.

This is revised to permit AE/C processing of a 241(f) application

when submitted with a POA as encouraged in Notice H 94-22, Policy

and Processing Adjustments to the Title II and Title VI

Preservation Programs.

1.HUD Handbook 4350.6, chapter 8, provides a method for

funding a federal incentives requested by an owner. HUD may

approve insured rehabilitation loans up to the cost of the

improvements. The intent of the Department is to permit an

owner or purchaser to propose improvements to improve the

economic life of the project and its livability for the

tenants.

2.Proposals to improve a property are required to contain a

List of Proposed Improvements and estimated cost with the

POA application.

a.This list may include items that:

1\) Enhance living conditions,

2\) Make a property more marketable,

3\) Extend the life of material,

4\) Enhance security, and

5\) Reduce maintenance cost.

22

b.Examples of the types of items and improvements that

may appear on the list and should be considered are as

follows:

1)Amenities that do not exist in the project that

are acceptable to HUD.

a)Items included in HUD\'s List of Acceptable

Amenities are eligible and will be approved.

b)Valuation must review items not included in

the preapproved list for acceptability.

\* 2) Replacing required repair items that are

operational/functional and reserve for replacement

items that are nearing the end of their useful

life.

3)Upgrading items that currently exist in the

project such as lighting to enhance project

security.

4)Modernization of unit space, i.e., common areas,

kitchens, bathrooms and new flooring are

permitted.

5)Energy upgrades not proposed as a required repair,

i.e., utility conversions, energy efficient

windows, boilers, etc.

\* 6) Repair items inadvertently missed in the NOI PCNA

by HUD or a contractor who performed the PCNA,

except code violations and other vital repairs

that were known by the owner, but not divulged in

the Owner\'s Certification.

c.The list of proposed improvements may not include:

1)Items required by local codes or Housing Quality

Standards. They must be included in PCNA required

and regulatory repair lists.

2)Critical repairs and code violations. Repair

items that were known by an owner or tenant

purchaser, not disclosed at the time of the PCNA.

These items are not to be approved as

improvements.

23

3)Items completed prior to submitting an application

for a NOI including items completed using existing

project reserve account funds.

4)New buildings and structural additions to existing

buildings.

5\) New wallpaper in units.

\* d. AE/C is responsible for reviewing and approving the

items included in the list of improvements. Approval

will be made at the discretion of the processor based

on, 1) eligibility, 2) benefit to the project, tenants

and HUD, 3) cost effectiveness, and availability of

funds.

e.AE/C determines the reasonableness of the cost estimate

submitted for HUD approval.

1)Estimated cost of approved improvements including

Davis Bacon.

2\) Re-estimate and modify unreasonable costs.

f.Give Valuation the determination of reasonableness

including other PCNA modifications:

\* 1) Cost of new required repairs with Davis Bacon wage

rates not covered in the original PCNA.

2)Cost of repairs, required and regulatory completed

by the owner at the submission of the POA.

\* g. Valuation will not recalculate the value and equity

based on improvements proposed in this paragraph.

h.AE/C will also provide to Valuation the cost, with

Davis Bacon, of all the work that is included in the

repair/rehabilitation portion of the Section 241 loan.

24

3.Development of List of Acceptable Amenities. Valuation will

develop a List of Acceptable Amenities for each market area

within the FO\'s jurisdiction. The POA submission may

include a proposed list of such amenities.

a)Valuation prepares the list of acceptable amenities.

1)Using data obtained from comparables listed on

Form HUD-9184, Income and Market Absorption Record

or other sources, for moderate income unsubsidized

projects.

2)Comparable projects are those constructed or

substantially rehabilitated in the last 15 years.

b)Items selected for inclusion on the approved list:

1)Data must show that approximately three-fourths

(3/4) of the unsubsidized projects surveyed

contain each amenity.

2)The Director of MF Housing may approve an item if

it can be justified in some other manner.

c)In some cases, it may be appropriate to indicate that

certain amenities are acceptable only for certain unit

sizes, or structure types. For example, additional

storage may be acceptable in units with 3 or more

bedrooms, but not in smaller units.

However, in most eligible projects, space in the units

will limit additional amenities, such as half baths in

three bedroom units, bathroom vanities, etc.

d)The list may include solar energy systems which meet

HUD standards. Justification, even though their use in

the market may not be sufficient to meet the 3/4 rule,

can be submitted to show energy savings.

e)Administratively it has been determined that certain

items shall not be included in the list

25

of acceptable amenities for any market area.

Ineligible items are,

o Swimming pools;

o Jacuzzi;

o Saunas

o Bowling alleys;

o Decks;

o Dishwashers

o Trash compactors; and

o Washers and dryers in individual units.

\* 4. Prepare Forms HUD-92264, Rental Housing and Project Income

Analysis and Appraisal and FHA-2326, Project Cost Estimate

for each cost estimate (with and without Davis Bacon when

applicable), except Section M, in accordance with

outstanding instructions. Section G of the 92264 shall

include the cost of PCNA required and regulatory repairs

including appropriate fees for repair and substantial

rehabilitation projects.

\* 5. The results of processing shall be forwarded to Valuation

thru the Preservation Coordinator.

a\) Forms 92264 and 2326.

b)Summary of PCNA repairs including processing

modifications.

c)Revised scope of repairs and estimated costs (with

Davis Bacon) of required and regulatory repairs, when

applicable.

d)Separate list of required and regulatory repairs

completed by the owner prior to submitting POA.

Identify those completed using existing reserve for

replacement funds.

e)Revised analysis of reserve for replacement building

components and systems, when applicable.

f)List of proposed improvements and estimated costs.

\* 6. Contingency Reserve.

a)When preparing PCNA and HUD approved improvement

estimates include:

26

1)Substantial Rehabilitation Projects (including

nonprofit transfer cases). Estimate a percentage

of 0 to 10 percent in accordance with the

provisions of HUD Handbook 4450.1 REV 1.

2)Repair Projects. A 10 percent contingency for all

repairs and improvements in nonprofit transfer

projects (Titles II and VI).

b)Compute the contingency reserve using the cost of PCNA

repairs, the HUD approved Owner\'s List of Improvements,

and appropriate fees. Do not include the reserve for

replacement estimate in the computation.

7.Estimate of Progress Schedule. The owner submits an

Estimate of Progress Schedule as part of the submission

requirements. AE/C evaluates the schedule to serve the

needs of the project regarding construction planning.

a\) The schedule shows:

1\) The anticipated start of construction;

2\) The estimated construction time; and

3)Whether construction will be performed by a

contractor or project maintenance staff.

b)Owners choosing to start repairs before submitting an

application for a POA must provide the Estimate of

Progress Schedule with the letter to HUD requesting a

preconstruction conference.

8.Inspection Fees. Due to comments received from private

industry and field office staff regarding high inspection

fees to repair cost ratios, outstanding inspection fee

requirements for repair projects are revised as follows.

a\) Equity Loan with No PCNA Repairs is \$0.

\* b) Equity Loan with PCNA Repairs is 1 percent of total

repairs, except the minimum fee shall not be less than

\$500. The minimum fee amount will be reviewed

periodically and may be adjusted upward or downward as

necessary.

27

\* D. Existing Replacement Reserve Balance

Under a Title VI POA to transfer only a shortfall in the

replacement reserve may be funded under Section 241(f). Any

existing replacement reserve cash will remain with the project

under a transfer transaction. Additionally, in accordance with

the Preservation Appraisal Guidelines, items of personalty like

the replacement reserve cash account, cannot be considered in

estimating the transfer preservation value. This transfer

preservation instruction is consistent with the treatment of

replacement reserve under extension preservation processing.

This policy also applies to Title II POAs in which a property is

sold under a Transfer of Physical Assets.

\* E. Effect of Tenant-Based Section 8 Assistance in the Appraisal

Process

Section 302 of the Housing and Community Development Act of 1992

amended Section 213(c) of LIHPRHA to require that the guidelines

for the appraisals of preservation value be amended to add the

requirement that the appraiser shall assume the \"simultaneous

termination of any Federal rental assistance.\" As a result

LIHPRHA appraisers were instructed to assume that upon prepayment

of the HUD mortgage and termination of low income affordability

restrictions, that any federal rental assistance would also

terminate.

Any federal rental assistance includes project based Section 8

and Section 8 vouchers or certificates. LIHPRHA appraisers are

not to assume that Section 8 vouchers or certificates will be

available to existing tenants or potential tenants upon

prepayment and during the conversion process to a market rate

use. The primary reason for this determination is that it would

be almost impossible to project, with a level of comfort, the

percentage of tenants that would desire to remain at the property

or choose to apply their voucher or certificate at a competing

property. To permit the inclusion of such a speculatively based

assumption in the preservation appraisal process would (1) be

inconsistent with all other preservation appraisal determinations

which are based on market data trends; (2) question the integrity

of the preservation value determination since the inability to

achieve market income during the conversion period is a major

conversion cost, and conversion cost has significant impact on

the preservation value.

27a

The determination not to assume vouchers or certificates in the

appraisal process has also been made for the reason that this

would impose an impractical requirement on contract appraisers.

The availability of vouchers or certificates are subject to the

availability of Section 8 budget authority for this purpose. To

defensibly estimate the availability of vouchers or certificates

for the property being appraised, an appraiser would have to know

the current funding status and the number of eligible units in

HUD\'s portfolio at the time of appraisal. There may be other

factors that effect the availability of certificates and

vouchers.

IV\. TITLE VI PROCESSING CHANGES.

\* A. CLARIFICATION OF NEGOTIATION OPTION BEFORE THIRD APPRAISAL.

The discussion in HUD Notice 94-22 (MCCI), paragraph F.,4., about

the appraisal reconciliation and negotiation processes has lead

to some confusion. The Department\'s policy of appraisal

reconciliation pertains solely to the initial receipt and review

of the contract appraisals.

Reconciliation is a process conducted by the HUD review appraiser

that entails the review of the contract appraisals and the back

and forth communication with the contract appraisers about any

concerns or disagreements the HUD review appraiser has with the

appraisal report. If for example, a HUD review appraiser

believes the occupancy percentage in the appraisal report is

within the range of market data but should be adjusted downward

within the range based on his/her knowledge of the local market,

in accordance with USPAP the HUD review appraiser must bring this

to the contract appraiser\'s attention. Under such a circumstance

the contract appraiser is not obligated to amend the appraisal

report because the conclusion is within the range of data or in

strict compliance with USPAP. Since only the contract appraiser

can modify the appraisal under the reconciliation phase the Field

Office would have to pay the contract appraiser for an acceptable

product. To complete the Form HUD-9607 the HUD review appraiser

must increase the HUD contract appraiser\'s preservation value by

10 percent. This adjustment applies to the reconciliation

process only.

Some offices have negotiated preservation values while others

have altogether by-passed the process. The inclusion of this

discussion is intended to clarify this option and remind FOs to

explore it when appropriate.

27b

Negotiation will alleviate the staff time required to contract

and review third appraisals and may reduce program costs.

Negotiation should be given consideration ONLY when the HUD

review appraiser believes that market data will support a value

greater than 110 percent of HUD appraisal.

Negotiation should not be construed as modifying either contract

appraisal. The HUD review appraiser derives an independent

estimate of value that must be supported by market data. How

values are derived must be fully documented in accordance with

the Appraisal Guidelines and the Uniform Standards of

Professional Appraisal Practice (USPAP). The review appraiser

takes full responsibility for his/her value conclusion but not

the contractor\'s except to the extent that the appraisal meets

USPAP.

The certified general HUD review appraiser does not assume any

more responsibility under the preservation program than would be

encountered under any other program acting in the same capacity.

In all cases, the contract appraiser is given the opportunity to

decide whether to change the appraisal report based on the review

appraiser\'s comments. If the contract appraiser disagrees, the

review appraiser has the option to derive an independent estimate

of value. If the HUD review appraiser elects to use some portion

of either contract appraiser\'s work to support his/her

independent value, the HUD review appraiser must ascertain that

it complies with USPAP.

The negotiation process is clearly permitted under Standard 3

(Review Appraisal and Reporting) of USPAP which anticipates

review appraisers may want to express a different estimate of

value from that in the report under review. Standard 3 provides

a flexible and reasonable means to accomplish this. Standard 3

essentially requires the review appraiser to:

1.explain the precise extent of the review process;

2.determine what items in the contract appraisal are deemed to

be in compliance with Standard 1 that can be extended to the

review appraiser\'s report;

3.determine items not deemed to be in compliance. These items

must be explained and handled in conformity with Standard 1

(Real Property Appraisal)

27c

to produce a credible valuation estimate by the review

appraiser (encourages the review appraiser to perform

original work where warranted).

The objective of negotiation, in the context of the preservation

program, is not to achieve a conciliatory midpoint between values

as in arbitration, but rather a value which the Department can

support and is in compliance with the Appraisal Guidelines and

USPAP. The aforementioned adjustment of 10 percent to the HUD

contract preservation value does not apply to negotiation

process. The Director of Multifamily Housing or designate may

conduct the negotiations within the frame work of the appraised

value documented by the HUD review appraiser. The Director of

Multifamily Housing Development must ultimately approve the

negotiated value. Negotiated values should be reported on Form

HUD-9607 by penciling in a line item under Section I and II.

If the reconciliation process concluded with the owner\'s

preservation value greater than HUD\'s value adjusted by more than

10 percent, and if the HUD review appraiser can not support a

value greater than the 10 percent add on, the owner would have

the option to pursue a third appraisal. LIHPRHA states that, \"If

the two appraisers fail to agree on the preservation value, and

the Secretary and the owner fail to agree on the preservation

value, the Secretary and the owner shall jointly select and

jointly compensate a third appraiser, whose appraisal shall be

binding on the parties\" (emphasis added).

\* B. Unacceptable Appraisals.

If the review appraiser determines that the appraisal conclusions

are outside the range of market data and the contract appraiser

is unable to provide documentation to the contrary, the contract

appraiser would be obliged to amend the appraisal to comply with

USPAP or not be paid. Again, as explained under A. above, the

HUD review appraiser cannot change the contract appraisals under

the reconciliation phase. The reason for this Department policy

is to comply with one requirement of LIHPRHA which requires that

\"The preservation value shall be determined by two independent

appraisers, one be selected by the Secretary and the other

selected by the owner.\"

On a related matter, Standard 3 gives the licensed HUD review

appraiser or licensed contract review appraiser the option to

personally inspect the subject property, comparables, etc. We

strongly recommend that the Department\'s policy (per HUD Notices

91-39 and 93-21) be

27d

followed which requires a field review to be conducted as a part

of the appraisal review process on all preservation appraisals.

Where contract review appraisers are used and negotiation is

involved, the HUD review appraiser deriving the independent

estimate of value should also make a field review.

All HUD multifamily appraisers should be thoroughly familiar with

USPAP and know the USPAP requirements for each HUD assignment.

Each Field Office should subscribe to the annual edition

(January) and Mid-year Supplement (July) of USPAP.

C.DEFINITION CHANGE. Definition of Multifamily Rental Housing

under Title VI Extension Preservation Value has been expanded to

include some types of Elderly Housing.

1.Qualified project types which do not require state

licensing, such as:

a\) Congregate Elderly

b)Retirement Service Center, excluding health care

services

2.Elderly projects which will not qualify:

a\) Nursing Homes - Skilled and Intermediate Care

b\) Board and Care or Assisted Living Facility

3.The appraisers when determining value in these cases will

have to provide a market analysis which documents that there

is market for these units. The market analysis shall

include the monthly rate that the units can be expected to

be absorbed based on the market rents developed in the

appraisal. Typically, these congregate or retirement

service center type projects have a narrow band of

prospective tenants that are willing and able to pay such

charges, thus an analysis documenting that a market exists

is very important.

4.The appraisals used to support the values issued on the Form

HUD-9607 are deemed good for the purpose of approving the

POA for a period of 30 months from the date the Form

HUD-9607 is issued by the Department to the Owner.

28

\* D. REVISING CURRENT INSTRUCTIONS TO INCLUDE PREVAILING LOCAL MARKET

AMENITIES IN ESTIMATING THE PREVAILING MARKET RENTS (PMRs) AND

INTRODUCING PROJECT SPECIFIC RENTS (PSRs)

Previous Title VI instructions required two rent analyses under

the NOI stage. The contract appraiser estimated one set of rents

to derive preservation values and another to derive the PMRs.

The greater of the aggregate project rents based on PMRs or FMRs

becomes the preservation Federal Costs Limit (FCL). This Notice

modifies the way in which PMRs are estimated and introduces a

third set of rents called PSRs.

PMRs

The purpose of the PMRs is to provide a cross-check of the FMRs

to assure the latter reflects a prevailing unsubsidized rent

required to obtain rental housing of comparable or modest design

within the appraised property\'s market area. Prior instructions

required PMRs to be based on a project\'s specific

characteristics. PMRs must now reflect prevailing comparable

property amenities and features similar to FMRs. Like FMRs, PMRs

must also reflect a full utility allowance (tenant paid charge

for utilities)

The appraisal rents may be used in lieu of a separate PMR

analysis with the exception that the appraisal rents may have to

be adjusted to reflect a full utility allowance. If the HUD

review appraiser believes the appraisal rents are inappropriate

as PMRs (i.e., due to a disagreement over the selection of

comparables), the HUD review appraiser may take the following

approach to estimate the PMRs:

1.Use the List of Acceptable Amenities developed by Valuation

(see pages 23, 24, 24a, 25) to develop a prevailing market

model of a one bedroom unit, etc. Enter this data on the

Form HUD-92273 (92273), under subject property

characteristics.

2.Under columns A through E of the 92273 list the Relevant

Local Market Study comparables provided by the HUD contract

appraiser or comparables independently selected.

3.Adjust for differences in characteristics between the

prevailing market model(s) and comparables. Correlate the

adjusted rents to derive PMRs for each unit type.

29

The PMRs and FMRs used to complete the Form HUD-9607 FCL analysis

at the NOI stage will also be used at the POA stage.

PSRs

Paragraph G., of Notice H94-22, Policy and Processing Adjustments

to the Title II and Title VI Preservation Programs, issued April

4, 1994, states, the Total Tenant Payments (TTP) in preservation

projects are limited to the lower of the FMR or an amount

determined by income. However, the Department is finding in

several markets that rents determined on this basis exceed the

market rents for comparable housing. This is leading to

excessive vacancies of moderate income tenants (81 - 95% of

median income) where comparable unassisted units are cheaper,

thus jeopardizing the financial stability of some projects.

To address this problem, Notice H94-22 states wherever

outstanding instructions specify that the FMR be compared to an

income calculation to determine the TTP, the PMR will be

substituted for FMR when applicable. However, due to the above

new requirement that PMRs must reflect prevailing market

amenities, PMRs are no longer appropriate for this use. Instead,

Project Specific Rents (PSRs) based on the appraised property\'s

actual characteristics will be used.

The PSR analysis is initiated, at the POA stage, by the project

owner who advises AM that the market rents for the subject units

are suspected to be lower than the FMRs. The owner must submit

comparables to justify the request. AM will request Valuation

make a determination.

The PSRs are the market rent that non-Section 8 moderate income

tenants would reasonably expect to pay for their subject unit

based on actual project conditions after repair and market

competition. PSRs are derived from market comparables adjusted

to the actual project characteristics including any PCNA/POA

repairs that are to be completed.

The PSRs will be maintained and updated annually during the

annual rent increase process if the PSRs affect the total tenant

rent cap.

E.APPRAISALS SUBMITTED LATE. There have been some inquires by FOs

as to what procedures should be followed when either contract

appraiser is late submitting the appraisal to HUD for review.

Instructions state

30

2.PSRs. The PSRs are the market rent that unsubsidized

tenants would reasonably expect to pay for their subject

unit based on actual project conditions after repair. PSRs

are also derived from a market comparability analysis but

adjusted to the actual project characteristics (as opposed

to prevailing), including any PCNA/POA repairs that are to

be completed.

The review appraiser performs this analysis at the NOI stage

since AM needs a preliminarily estimate of the PSRs at this

time. In lieu of starting this analysis from scratch, the

HUD review appraiser may use the PMR analysis. However,

substitute the prevailing model characteristics for the

subject\'s actual characteristics plus any PCNA improvements.

As described above under PMRs, next make any necessary

adjustments and correlate the individual unit rents. The

rent for the non-Section 8 tenants will be the lowest of (1)

30 percent of the tenant\'s income, (2) FMR, or (3) PSR. The

PSRs should be attached as an addendum to the Form HUD-9607.

The PSRs will be maintained and updated annually during the

annual rent increase process if the PSRs affect the total

tenant rent cap.

3.Federal Cost Limit (FCL). The PMRs and FMRs used to

complete the 9607 FCL analysis at the NOI stage will also be

used at the POA stage. The PSRs will be adjusted at the POA

stage if warranted as a result of changes in market

conditions.

D.APPRAISALS SUBMITTED LATE. There have been some inquires by FOs

as to what procedures should be followed when either contract

appraiser is late submitting the appraisal to HUD for review.

Instructions state appraisers have 120 days to complete the

appraisal. This stipulation is agreed to by the appraisers when

the contract is let and, therefore, the appraisers should be held

to this agreement.

Moreover, since preservation values can be set by comparing the

estimated value of one appraisal to the other, it\'s absolutely

essential that the appraisals be nearly the same date. It has

always been the Department\'s intention that the date of value of

the appraisals would be a date beginning with the date of the NOI

submission up to the point the appraisals are

31

the Section 241(f) loan by 100 percent of the PCNA estimated

costs of the completed work.

2.Downward Value Adjustment.

Since purchasers are not involved in the transfer

preservation processing until the POA stage or after the

initial PCNA is completed, the Department will consider

requests for repairs or improvements by purchasers under the

POA stage. This allowance is principally for purchasers

since tenants and stay-in owners had an opportunity to

review and comment on the NOI PCNA.

Additional required repairs that are introduced or come to

the attention of the FO under the POA will not reduce the

NOI extension and transfer preservation values, unless a FO

has reason to believe that an owner was fully aware of a

required repair condition during the NOI PCNA process and

intentionally did not divulge it. Additional PCNA costs

identified under the POA stage are eligible to be funded

under the rehabilitation component of the Section 241(f)

equity loan.

\* G. Determination of the Amount of Section 241(f) Equity Loan

Incentive for Partially Assisted Projects

A partially assisted project, for the purpose of this procedure,

is a project that HUD does not insure, but typically contracts

with a state agency to provide Section 236 mortgage interest

subsidy and rental assistance under the Rent Supplement or Rental

Assistance Payments programs for a specified number of units.

The tenant or units that benefit from HUD assistance pay the

Section 236 Basic Rent (covers 1 percent of the mortgage interest

rate on the existing loan, operating expenses and return) up to

the Section 236 Market Rent (same as Basic but covers the total

interest rate). If the HUD assisted tenant cannot pay the Basic

Rent HUD rental assistance covers the difference. Rents paid by

HUD assisted tenants in excess of the Basic Rent belong to HUD.

The state agency provides financing for the project and

determines the amount of unassisted unit rents.

While the entire partially assisted project is eligible for a

Section 241(f) equity loan, incentives approved in exchange for

affordability restrictions are awarded proportionately to the

assisted units only. To assure that under LIHPRHA HUD subsidies

do not support a disproportionate share of the operating costs

and

32

Section 241(f) loan debt service, the instructions for processing

partially assisted projects under ELIHPA (Title II) of the

preservation program, as explained in HUD Notice H-93-21 (page 44

through 51), should be followed with these revisions (revisions

also apply to Title II).

1.To establish the income proportionality or \"Assisted Unit

Fair Share Factor\" (top of page 46 H 93-21) divide the

monthly gross residential Section 236 Basic Rent by the

total monthly gross residential rent (a combination of the

Basic Rent plus project the unassisted unit rent).

Proportionality is not based on HUD rents is excess of the

Basic Rents since they are not retained by the owner.

2.Step 4 page 48 of Notice 93-21 is not required. Of the

current portfolio of state agency non-insured projects the

majority receive Section 236 mortgage interest assistance

for 100 percent of the units. In these cases the Section

241(f) mortgage amount should be calculated following the

insured processing instructions. FOs should request

guidance from Headquarters for State agency non-insured

projects that have contractual agreement with HUD other than

described above.

\* H. Utility Conversions and Other Operational/Energy Improvements

Identified as Hypothetical Upgrades

As explained below, the Appraisal Guidelines (Guidelines)

tentatively identify operational/energy improvements as potential

\"hypothetical upgrades.\" Hypothetical upgrades are typically

amenities, such as dishwashers, that are projected to be needed

to compete in an unsubsidized environment to attract tenants.

Normally an operational/energy improvement will not effect an

increase in rents unless it can be demonstrated that such an

improvement would be needed to attract local market rate tenants

upon conversion to an unsubsidized use. As a rule, energy

conservation is a low tenant priority unless they are paying the

utility bills instead of the owner. If either contract appraiser

proposes operational/energy improvements, it will have the effect

of increasing project net income through a reduction of operating

expenses.

Hypothetical operational/energy upgrades that propose to

meaningfully reduce operating expenses must be reconsidered as

required repairs. This idea is reflected in the Appraisal

Guidelines (Guidelines) which state,

33

\"Energy saving measures such as individual metering, thermopane

windows, and increased insulation are classified under

hypothetical upgrades but may be included in the calculation of

preservation rents.\" The Guidelines also caution the appraiser

\"to ensure that any operational energy upgrade is not also

included in the required repair category, least it will be

double-counted\". In fact the Guidelines require the scope of

required repairs to take into consideration \"the same \"good\"

condition standards as competitive projects in the market area\".

Accordingly, if local properties have significantly reduced

expenses by, i.e., individual metering, the PCNA analyst must

determine if the same standards would be in the Department\'s

interest.

The HUD review appraiser should advise the AE/C staff of any

operational/energy upgrades proposed by the contract appraisers.

AE/C will assist the Valuation staff by commenting on the

validity of the contract appraiser\'s operational/energy upgrade

projected cost benefit analysis and whether the upgrade will be

considered a required repair.

I.CHANGES TO THE ADVERTISING PROCESS.

Second NOI starts the required advertising by the Department. We

have found that the current instructions to the FO are misleading

and cause excessive work in the field. Therefore, we are

modifying HUD Handbook 4350.6, Chapter 7-3, B-3 which states:

\"Place notices in the local minority newspapers and newsletters

in the project area at the times and manner shown in Paragraphs

B.1. and 2. above.\" to read \"Place notices in the significant

local minority newspapers and newsletters in the project area . .

.\" FOs should not send lists of media publications in the area

without winnowing out inappropriate publications such as

\"Piscataway Business Journal\" or the \"Washington Teamster.\"

J.CREDIT APPROVAL OF NONPROFIT SPONSOR/MORTGAGOR MOVED TO EARLIER

STEP.

At the receipt of the Bona Fide Offer, Asset Management (AM)

staff, in consultation with the Resident Initiative Specialist

(RIS) and the Multifamily Mortgage Credit Examiner (MCE), will

evaluate the proposed nonprofit sponsor/mortgagor, including

community based organizations and residents (with the exception

of resident homeownership applications). AM will conduct the

review in accordance with outstanding Transfer of Physical Asset

instructions contained in Chapter 13 of

33a

Handbook 4350.1 REV-1 as modified by ATTACHMENT G, which lists

the required documents to be submitted with the Bona Fide Offer.

The submission package to the HUD FO must include all necessary

documents which would normally be submitted with the credit

package when a Section 241(f) loan application is made. Review

and approval of the nonprofit entity will be required at the Bona

Fide Offer submission stage. In reviewing the Section 241(f)

application, the MCE will review financial statements and the

financing plan, if applicable, of the nonprofit and perform a

credit investigation on the nonprofit\'s operating officers

(President, Vice President, Secretary, and Treasurer).

K.CONSULTANT (AND THEIR FEE STRUCTURE) APPROVAL MOVED TO THE

EARLIEST STEP.

At the same time as the credit approval of the nonprofit is

reviewed, if the nonprofit group is using a consultant, the

necessary documentation for approval of the consultant as listed

in HUD Handbook 4500.1 REV-2 must be submitted for approval.

Review the qualifications and fee structure of the proposed

consultant based on the instructions contained in Handbook 4500.1

REV-2. The contract should be a fixed price contract and be

specific in the duties that will be performed, the point at which

a portion of the fee is considered earned and the source of funds

anticipated for the payment of such fees. Care should be taken

that no fee is paid twice from various sources. In addition, the

consultant should not be paid for performing duplicate services

of the lender or other members of the development team.

L.POA SUBMISSION REQUIREMENTS (COMBINING THE POA, TPA AND SECTION

241(f) APPLICATION REQUIREMENTS).

1.COMBINED TPA/241(f)/POA Application. APPENDIX H provides a

check list with the combined documentation for all three

processing steps. This should eliminate the contusion over

documentation requirements that overlap.

2.TPAs in Non-Insured Projects. For sales of non-insured

projects, HUD\'s concern is with the eligibility of the

purchaser.

a.HUD is not concerned with the requirements of the

Transfer of Physical Asset (TPA) application.

33b

b.Lenders set their own standards and have their own

application procedures.

V.PRESERVATION TECHNICAL ASSISTANCE GRANT PROCESSING.

A.PROCESSING PRESERVATION TECHNICAL ASSISTANCE GRANTS.

The September 3, 1992, NOFA for Preservation Technical Assistance

Grants requires approval, deficiency issuance, or rejection

within 30 days of receipt of application.

1.Processing Deadlines. FOs are consistently missing this

30-day deadline. Where FO approved grants, grantees are

seeing significant delays in grant execution and

authorization into the electronic transfer funding system

(LOCCS/VRS). The Department seeks to encourage nonprofit

purchasers under Preservation where possible. Because the

Preservation program is time-sensitive by nature, delays in

grant approval and in subsequent funding has, in some cases,

created problems for purchasers, and may be causing owners

to make alternative sales decisions.

2.Shorten Delays. Please be aware that with prompt PTAG

processing, the time-frames for POA and TPA approvals could

be shortened.

3.Amended Exhibits 3, 6 and 7. Please use the revised

exhibits included with this Notice as Attachment L in lieu

of the exhibits 3, 6 and 7 currently in the PTAG Application

Package. Advise applicants who have not yet received

approval that the new forms should be completed prior to

approval for the grant.

B.FHA APPLICATION FEES IN PRESERVATION TECHNICAL ASSISTANCE GRANTS.

1.FHA Application Fee. The Department is now allowing FHA

application fees as an allowable expense in PTAGs and

Technical Assistance Grant Program to be administered by

Intermediaries.

2.No Duplication of Application Fees. Nonprofit sponsors may

not request reimbursement for such fees in their loan

application. FO staff reviewing Section 241 loan

applications for nonprofit sponsors which request

reimbursement of the fee should determine whether a

Technical Assistance Grant was received by the sponsor and,

if so, request

34

verification that the loan application fee was not paid out

of grant proceeds.

Accordingly the replacement cost will not include the

application fee if it is allowed in the grant. Valuation

must check with the RIS before including this item in

replacement cost estimate.

VI\. SECTION 241(f) LOAN PROCESSING CHANGES.

A.SECTION 241(f) EQUITY LOAN 5 YEAR ESCROW.

Title III of the National Housing Act of 1992 amended Section

241(f) to allow 100 percent of rehabilitation costs to be added

to the equity or acquisition loan. However, the requirement was

not changed that 10 percent of the Section 241(f) equity loan,

including rehabilitation financed under the Section 241(f) loan,

be placed in escrow for a minimum of 5 years to ensure project

compliance with Housing Quality Standards (HQS). No such escrow

requirement exists for Section 241(f) acquisition loans.

35 and 36

Requests were made to allow funds to be placed in the Reserve for

Replacement Account as a substitute for the escrowed funds. This

cannot be allowed since Reserve Account funds must be accessible

for designated purposes while the ten percent reserve must be

escrowed for a minimum of 5 years. Therefore, no change is being

made.

The mortgagor must set up an extension preservation equity 5 year

escrow, in the amount equal to 10 percent of the total Section

241(f) loan for mortgagors/owners who are retaining the project.

1.The Escrow Funding. The escrow will be funded at initial

endorsement by the mortgagor entity, held by the lender and

controlled by the Secretary or a Secretary approved State

Housing Finance Agency.

2.Release of Escrow. The escrow account will be released to

the owner 5 years after final endorsement if the project has

been in compliance with 24 CFR 248.147, Housing Standards.

B.CONSTRUCTION ESCROW UNDER SECTION 241(f) LOANS.

1.Two Options. The Department has considered and rejected the

concept of funding a substantial rehabilitation escrow. The

mortgagor has two options:

a.Insurance of Advances; or

b.Insurance Upon Completion.

2.Work Completed Prior to Submission of POA. If the

repairs/construction work has been completed between

approval of the NOI and the submission of the POA the work

does not come under construction escrow requirement.

3.Uninsured Financing. If the POA proposes uninsured

financing, an escrow format may be used, however, some

guarantee must be present to insure the work will be

completed before receiving Preservation Incentives in the

rent structure.

C.SECTION 241(f) ACQUISITION LOAN PROCESSING.

1.Transactions Costs and Related Expenses Funded Under Section

241(f) Acquisition Loans for Priority Purchasers. HUD will

fund approved transactional expenses (reasonable expenses

associated with the acquisition, loan closing and

implementation of the

37

POA) and soft costs associated with the transactional costs.

Listed below are reasonable transaction costs and how they

are handled:

Reasonable Transactional Costs included in the Section

241(f) Loan but not normally included in HUD Processing.

a.Bond Fees and Discounts Included in the Mortgage

Transaction.

1)Where a project is to be financed through the sale

of either taxable or tax-exempt bonds, the maximum

financing fees allowable in the mortgage

computation and recognizable for cost

certification purposes is 5.5 percent of the

mortgage amount. Any cost beyond the 5.5 percent

must be paid from sources outside the mortgage.

A typical but not inclusive list of bond fees

would contain, Trustee setup, underwriter\'s fee,

underwriter\'s counsel, bond counsel, issuer\'s

initial fee, bond printing expense, rating agency

fee, negative arbitrage and a 1 percent assignment

escrow.

The maximum financing fee the mortgagee may retain

for its own account is 3.5 percent. This 3.5

percent covers the costs of origination,

processing, underwriting, closing and delivery

(including the mortgagee\'s legal fees), escrow

monitoring, permanent placement, etc. The

remaining 2 percent (or such greater percentage as

may result from the lender reducing its maximum

retainable 3.5 percent fee) may be used to offset

the cost of bond fees.

2)Discounts will be recognized only for those actual

costs charged by the permanent lender which are

determined to be eligible.

a)Discounts charged for warehousing a mortgage

for future delivery as well as those which

may be charged by the interim lender are not

eligible for inclusion in the determination

of the maximum insurable mortgage.

38

b)Discounts must be reasonable based on current

market conditions. In some cases, discounts

are used to buy down the permanent rate to a

below market rate. This has the affect of

inflating a project\'s value and mortgage

while placing an undue risk on the insurance

fund. Therefore, do not include in the

mortgage computation discounts incurred in a

buy down situation that exceed reasonable

discounts based on current market interest

rate levels.

b.Environmental studies prepared for the purchaser\'s

benefit.

c.Operating deficit

1\) during construction/repair. 2) during the

approved rent phase-in period.

d.Relocation Allowance. The priority purchaser must

submit a relocation plan. The Community Planning and

Development relocation specialist will review and

analyze the plan. An allowance for relocation costs

(not to exceed a total of \$500 per household to be

relocated) may be included in the loan.

e.Construction manager/clerk of the works where there is

a repair program. The scope of this function is

detailed in AIA Document B352 under \"Duties,

Responsibilities and Limitations of Authority of the

Architect\'s Project Representative.\"

f.Organizational costs incurred in establishing the

nonprofit purchasing organization.

g.Tenant training and education costs incurred by a

priority purchaser which is not a resident council

purchasing the project under a homeowership plan, may

be reimbursed depending on the need for the training

and the reasonableness of the costs.

NOTE: Seller financing is not permitted to cover these

transaction costs.

39

2.Debt-Service Percentages of Net Income For TITLE II AND VI.

The debt-service coverages are revised as follows:

a.Title II - 90 percent of Net Income for the equity

portion of the loan and 95 percent of Net Income for

both the repair/rehabilitation loan and the outstanding

federally assisted mortgages.

b.Title VI.

1)Extension - 90 percent of Annual Authorized Return

and 95 percent of Net Income for both the

Repair/Rehabilitation loan and the Outstanding

Assisted Mortgage(s).

2)Acquisition, Repair/Rehabilitation and Outstanding

Assisted Mortgage(s) - 95 percent of Net Income.

D.AMORTIZATION PERIOD FOR THE SECTION 241(f) LOAN.

1.The amortization period of:

a.An extension loan will not be less than 20 years, nor

more than 40 years, with no term of less than a full

year increment.

b.An acquisition loan under Title VI is 40 years.

2.Remarks. Valuation records the term of amortization in

Section O, \"Remarks,\" of the Form HUD-92264.

E.CLOSING. Projects will be closed using standard closing

procedures (see Handbooks 4430.1 REV-1, and 4440.1), except that

a Surveyor\'s Certificate and survey will be required at the

discretion of the Director of MF Housing.

VII\. POA IMPLEMENTATION CHANGES.

A.POA SUMMARIES.

The owner submits a copy of the POA Summary to HUD and addresses

each component of the POA in accordance with the appropriate

parts of the required submission package. The owner must prepare

the summary in layman\'s language, so that all tenants will

understand its content.

40

After HUD accepts a complete POA, the AM will review the POA

Summary to ensure that it is comprehensive and complete. If AM

determines that the POA is incomplete and/or the POA Summary is

not comprehensive, they will then reject POA and will require the

owner to revise or amend as needed. Language will be added to

Chapter 8 of the HUD Handbook 4350.6 to reflect this position.

Suggested forms for the summaries are contained in attachment K.

B.OVERSIGHT COSTS.

Section 307(b) of the 1992 Housing and Community Development Act

added Oversight Costs as an allowable annual expense for

nonprofit purchasers of Preservation properties. The regulation

published July 13, 1993, defined oversight costs to include

staff, overhead, or third-party contract costs for ensuring

adequate participation by the board of directors, facilitating

long-range planning by the board of directors, and assisting

owners in complying with regulatory, use, loan and grant

agreements. It is the intent of the regulations to provide the

nonprofit sponsor with financial/technical assistance so that the

board of directors can make reasonable, informed, ownership

decisions - primarily as they relate to overseeing the management

company.

The Department believes that oversight staff should not be

duplicating activities that are the responsibility of the

management agent, but acknowledges that owner/board training,

capacity building and expert assistance, as well as supportive

service coordination to the residents are required in these

situations.

Therefore, limitations on oversight costs will be set as follows:

1.The annual oversight costs may not exceed the greater of:

a.\$10,000, or

b.One percent of the project\'s preservation value.

2.Additional expenses may be occasionally allowed, as

required, for maintenance of the nonprofit organization

itself, including changes in organizational documents

(articles and by-law amendments). Tax returns, audits, or

other required annual filings will be allowed as an annual

expense.

41

The Director of Multifamily Housing has the authority to

adjust these standards based on the actual and demonstrated

costs for these services.

The Asset Management Branch will provide Valuation with the

determination of the oversight costs to be included in the

operating expenses on the Form HUD-92264 and Form HUD-9607

(as revised) prior to the completion of the Section 241(f)

Loan Commitment.

Whoever is hired to provide the oversight function may not

have any identity of interest with the seller, the former or

present management agent, nor with any member of the board

of directors of the mortgagor entity.

Upon a 90-Day notice project oversight funds will be

disallowed as an annual expense if there is less than

satisfactory management or maintenance or physical

maintenance of the project.

C.VARIABLE PHASE-IN.

A slower phase-in is sought by some owners who are concerned

about moderate-income tenants abruptly leaving projects due to

increased rents. Other owners want the phase-in of rent

increases to be completed as soon as possible.

The concern with \"moderate-income tenant flight\" has been dealt

with in the instructions in IV.C.2. of this Notice to cap the TTP

at the PSR. In terms of flexibility in respect to the phase-in

of rent increases, Handbook 4350.6, Chapter 11 and Form HUD-90010

allows the owner and the HUD Office several choices:

1.POA Implementation. The owner may choose the rate of

phase-in for each tenant for which phase-in is required.

The range of these choices is limited by the statutory

minimum phase-in period and a maximum period determined

administratively by HUD. If Form HUD-90010 is carefully

followed, the range of choice available to the owner will be

automatically made available. The owner should be aware,

however, that whatever choice is made at POA implementation

for the rate of a specific tenant\'s phase-in of rents, it

may not be changed during the phase-in period.

42

2.General Project Rent Increases. The phase-in form allows

owners to pass through a proportionate share of any general

project rent increases to the tenants during the phase-in

period. While it would not affect the rent paid at the end

of the phase-in, it would have the effect of completing the

phase-in more quickly. If an owner chooses not to pass

through the operating costs to tenants during phase-in, it

may request the HUD FO to allow the phase-in to not include

the pass through. The FO should grant the request unless it

feels that project feasibility would otherwise be

threatened.

D.TENANT PROFILES.

HUD Handbook 4350.6, Chapter 11, discusses the maintenance of

tenant profiles. It states that a tenant will retain its initial

classification on the profile; that is, that its classification

at POA approval or upon initial occupancy after POA approval,

remains the same for as long as the tenant continues to occupy

the project.

This instruction is now clarified. The owner continues to

initially classify each tenant residing in the project at POA

approval as very low-, low- or moderate-income. The owner

similarly classifies tenants moving into the project after POA

approval, upon occupancy. However, the owner will now reclassify

any tenant when an income changes. A moderate-income tenant

whose income decreases to below the low-income limit may,

therefore, be reclassified and be eligible to receive Section 8

assistance, if available. This change in policy will bring

Preservation projects into conformity with non-Preservation

projects.

VIII\. OFFICE PROGRAM MONITORING.

A.PROJECT TRACKING SYSTEM. Using existing data from the MPPS

System, project by project time-frames can be reported to an

individual designated by the Director of Multifamily Housing.

1.Designate an Individual. This person would be responsible

for the preservation process reporting. This individual

will be given a means of accessing the MPPS data which is

appropriate for the LAN set up in the Office where they are

working and is responsible for the monthly MPPS Report.

43

a.This individual may be the same as the current MPPS

contact.

b.The MPPS system must be able to run off this

individual\'s PC either on the hard-drive or through a

designated floppy drive. This is because a LAN based

system will be too inflexible and take much too long to

get approval from IPS. The drawback is that the system

will have to be serviced and maintained by preservation

directly. Given the need to provide quick and flexible

reporting in this dynamic process it is felt that this

is the best possible compromise available.

2.The MPPS Report. The MPPS report provides basic project

information, as well as descriptions for each processing

level of the Title VI preservation process (i.e., Appraisal

Processing Stage, Sales Marketing Stage (Sale Projects

Only), POA Approval Stage, POA Implementation Stage). Each

processing stage will have a report of an expected

time-frame, as well as an elapsed time for which the project

has actually done. Projects that have not completed a

processing stage will be categorized as \"On Target\",

\"Possibly Off Target\" or \"Off Target\". Projects that have

completed the processing stage will be classified as

\"Completed On Target\", or \"Completed Off Target\".

Record processing stages for a project as it reaches that

stage on a daily basis. In that way, the report will also

serve as a graphical gauge of the progress the project has

made in the preservation process.

3.Designate a second individual as a back-up person to operate

this reporting system.

4.In addition, we are attaching a Desk Log System as

Attachment I that can be used with each individual Title VI

Preservation case file to track the processing and determine

when follow-up is required.

B.INFORMATION DISSEMINATION.

1.Freedom of Information. Any information HUD provides to an

owner is available under the Freedom of Information Act

(FOIA). The AM or the respective Freedom of Information

Officer in the FOs should see if a State or local entity is

interested in receiving this information on an on-going

basis.

44

2.Release of Information not covered by FOIA. The appraisal

reports for Title VI and the preservation physical/capital

needs assessments, under both Title II and Title VI, should

be made available to the tenants, units of local government

and the prospective purchasers after they have been reviewed

and forwarded to the owner. The PCNA report should have an

attached cover letter explaining that the PCNA report may be

subject to change, and that the conclusions contained in the

report could be altered at some point in the future.

Additionally, the AM should require the owner to certify

that a copy of the PCNA is delivered to a tenant

representative by the owner if such an entity exists. A log

of those who were sent a copy of the PCNA should be

maintained, so that if material changes are made to the

report, those modifications may be forwarded to those

people.

3.Log of Disseminated Information. Maintain a log of persons

and entities receiving copies of the appraisals and PCNA\'s.

If any material modifications are made to the original

conclusions, they can be forwarded as necessary.

4.Do not make Title II appraisal reports available to anyone

except HUD staff or contractors charged with reviewing these

reports. The reports are made on behalf of the owner for

determining whether a higher or better use exists for the

subject project and its value.

5.AM staff and\\or Freedom of Information Officers should

strive to set up liaisons with State and local entities that

would care to assist us in disseminating any of the

information spoken of above in the manner prescribed.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Assistant Secretary for Housing

\- Federal Housing Commissioner

45

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Notice of Intent (ELIHPA)

To Extend Low-Income

Affordability Restrictions

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form HUD-9608-B(6/94)

ref. Handbook 4350.7

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

form HUD-9608-B(6/94)

ref. Handbook 4350.7

ATTACHMENT B

FIELD OFFICE LETTERHEAD

NOTICE TO TENANTS

On \_\_(date of NOI)\_\_\_\_ you received a Notice which said that there
will be

an inspection to determine what repairs need to be made by the owner or

anyone who buys the project. If there are repairs you would like to have

considered, please submit your list to the Housing and Urban Development

(HUD) Office whose address is shown above. You may also submit your list

to any tenant representative whose name and address is shown on this

letter, or another person or representative who the tenants select to

represent them. That representative can help to see that your requests
are

taken into account. Although it is best that the tenant representative

lives at the project, it is not necessary. You should have confidence in

the person you select and may change the representative whenever you

choose. Instead of writing your own letter, you may complete a copy of
the

survey attached to this Notice. We recommend that tenant representatives

distribute copies of this survey to all tenants in the project. Copies
of

the survey will also be available in the project manager\'s office. You
can

get a copy there. If you have comments on repairs or rehabilitation for
the

project, this is the time to let us know.

You will only be given a few days\' notice of the date on which the

inspection is to be held and you will have to submit your list before
the

inspection, so you may want to be sure to complete it now. The owner
will

post the date and time of the inspection within a day of learning of it.

The tenant representatives listed on the next page or any other tenant

representatives you select, are all invited to attend the inspection.

At the time you are told the date of the inspection, you will also be
told

the date, time, and location for a meeting following the inspection. The

purpose of this meeting will be to discuss the repairs which need to be

done. All tenants are invited to attend the inspection and the meeting,

but if you cannot attend, a tenant representative can represent your

interests.

HUD intends to give incentives to the owners or purchasers of

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, in order
to keep the housing affordable for

you. You will be advised of the steps taken and decisions made during
the

lengthy process and will be given further opportunity to comment.

There are a lot of decisions tenants can make in this process. Tenants
can

apply for a grant to help them organize and explore

48

their options. For instance, if the owner decides to sell the project as
a

result of this process, a Resident Council organized by tenants of the

project may purchase the project. If the tenants buy the project, you
can

either keep it for rental as it is now, or convert it to a Resident

Homeownership Program, which means that tenants can each buy a share of
the

project or buy their own apartments. Even if tenants do not buy the

project, only a purchaser which has tenant support can buy it for the
first

six months after it is offered for sale. You therefore want to be
certain

that any organization whose petition you sign to buy the project, is the

purchaser you want.

For further information about this matter please contact \_\_(Resident

Initiative Specialist)\_\_\_ in your local HUD office at
\_\_\_\_\_(telephone

number)\_\_\_\_\_\_\_\_\_\_\_.

The tenant representatives that we have contacted are:

\(1\)

Name:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Address:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

City and State:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Telephone Number:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(2\)

Name:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Address:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

City and State:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Telephone Number:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

If there are other representatives who should be contacted in the
future,

please let \_\_\_(Resident Initiative Specialist)\_\_\_\_ know.

Attachment: Capital Needs Assessment Survey

49

ATTACHMENT C

BUILDING:

APARTMENT NUMBER:

ADDRESS:

OWNER:

DATE:

CAPITAL NEEDS ASSESSMENT/HABITABILITY SURVEY

Please fill out the Capital Needs Assessment Survey below for your

apartment and the project in general. Your input into this process is

the only way to be sure that your needs are taken into account. The

Capital Needs Assessment Process is a special inspection to determine

the upkeep plan of the building for the next 20 years.

Are there needed repairs or things that need replacing? Please check

the items as needed:

1.KITCHEN:

Windows, Screens or Rubber Seal No \_\_\_ Repair \_\_\_ Replace \_\_\_

Floor No \_\_\_ Repair \_\_\_ Replace \_\_\_

Paint No \_\_\_ Repair \_\_\_ Replace \_\_\_

Base Boards (Broken & Cracked) No \_\_\_ Repair \_\_\_ Replace \_\_\_

Electrical Wiring No \_\_\_ Repair \_\_\_ Replace \_\_\_

Ceiling No \_\_\_ Repair \_\_\_ Replace \_\_\_

Door, Door Knob, Rubber Seal No \_\_\_ Repair \_\_\_ Replace \_\_\_

Air Vent No \_\_\_ Repair \_\_\_ Replace \_\_\_

Holes No \_\_\_ Repair \_\_\_ Replace \_\_\_

Light Fixtures No \_\_\_ Repair \_\_\_ Replace \_\_\_

Walls No \_\_\_ Repair \_\_\_ Replace \_\_\_

Plumbing No \_\_\_ Repair \_\_\_ Replace \_\_\_

Counter Top No \_\_\_ Repair \_\_\_ Replace \_\_\_

Cabinet Doors No \_\_\_ Repair \_\_\_ Replace \_\_\_

Shelves No \_\_\_ Repair \_\_\_ Replace \_\_\_

Stove No \_\_\_ Repair \_\_\_ Replace \_\_\_

Refrigerator No \_\_\_ Repair \_\_\_ Replace \_\_\_

Disposal Unit No \_\_\_ Repair \_\_\_ Replace \_\_\_

Faucet or Faucet Handles No \_\_\_ Repair \_\_\_ Replace \_\_\_

OTHER:

50

2.BEDROOM:

Carpet No \_\_\_ Repair \_\_\_ Replace \_\_\_

Windows, Screens, or Rubber Seal No \_\_\_ Repair \_\_\_ Replace \_\_\_

Floor No \_\_\_ Repair \_\_\_ Replace \_\_\_

Paint No \_\_\_ Repair \_\_\_ Replace \_\_\_

Base Boards No \_\_\_ Repair \_\_\_ Replace \_\_\_

Electrical Wiring No \_\_\_ Repair \_\_\_ Replace \_\_\_

Ceiling No \_\_\_ Repair \_\_\_ Replace \_\_\_

Door, Door Knob, Rubber Seal No \_\_\_ Repair \_\_\_ Replace \_\_\_

Air Vent No \_\_\_ Repair \_\_\_ Replace \_\_\_

Holes No \_\_\_ Repair \_\_\_ Replace \_\_\_

Light Fixtures No \_\_\_ Repair \_\_\_ Replace \_\_\_

Shelves No \_\_\_ Repair \_\_\_ Replace \_\_\_

Closet Doors No \_\_\_ Repair \_\_\_ Replace \_\_\_

OTHER:

51

3.BATHROOM:

Windows, Screens, or Rubber Seal No \_\_\_ Repair \_\_\_ Replace \_\_\_

Floor No \_\_\_ Repair \_\_\_ Replace \_\_\_

Paint No \_\_\_ Repair \_\_\_ Replace \_\_\_

Base Boards No \_\_\_ Repair \_\_\_ Replace \_\_\_

Electrical Wiring No \_\_\_ Repair \_\_\_ Replace \_\_\_

Ceiling No \_\_\_ Repair \_\_\_ Replace \_\_\_

Door, Door Knob, Rubber Seal No \_\_\_ Repair \_\_\_ Replace \_\_\_

Air Vent No \_\_\_ Repair \_\_\_ Replace \_\_\_

Holes No \_\_\_ Repair \_\_\_ Replace \_\_\_

Light Fixtures No \_\_\_ Repair \_\_\_ Replace \_\_\_

Walls No \_\_\_ Repair \_\_\_ Replace \_\_\_

Bath Tub or Seals No \_\_\_ Repair \_\_\_ Replace \_\_\_

Shower or Seals No \_\_\_ Repair \_\_\_ Replace \_\_\_

Shower Head No \_\_\_ Repair \_\_\_ Replace \_\_\_

Shower Door No \_\_\_ Repair \_\_\_ Replace \_\_\_

Sink or Seal Leaks No \_\_\_ Repair \_\_\_ Replace \_\_\_

Faucet or Faucet Handles No \_\_\_ Repair \_\_\_ Replace \_\_\_

Heating System No \_\_\_ Repair \_\_\_ Replace \_\_\_

Toilet or Seals No \_\_\_ Repair \_\_\_ Replace \_\_\_

Toilet Seat or Lid No \_\_\_ Repair \_\_\_ Replace \_\_\_

Toilet Handle No \_\_\_ Repair \_\_\_ Replace \_\_\_

Toilet Leaks No \_\_\_ Repair \_\_\_ Replace \_\_\_

Toilet Noise No \_\_\_ Repair \_\_\_ Replace \_\_\_

Medicine Cabinet (Door) No \_\_\_ Repair \_\_\_ Replace \_\_\_

Cabinet or Cabinet Door No \_\_\_ Repair \_\_\_ Replace \_\_\_

Counter Top No \_\_\_ Repair \_\_\_ Replace \_\_\_

Tile No \_\_\_ Repair \_\_\_ Replace \_\_\_

Towel Bars No \_\_\_ Repair \_\_\_ Replace \_\_\_

Tissue Bar No \_\_\_ Repair \_\_\_ Replace \_\_\_

Pluming No \_\_\_ Repair \_\_\_ Replace \_\_\_

Water Heater No \_\_\_ Repair \_\_\_ Replace \_\_\_

OTHER:

52

4.LIVING ROOM:

Windows, Screens, or Rubber Seal No \_\_\_ Repair \_\_\_ Replace \_\_\_

Floor No \_\_\_ Repair \_\_\_ Replace \_\_\_

Paint No \_\_\_ Repair \_\_\_ Replace \_\_\_

Base Boards No \_\_\_ Repair \_\_\_ Replace \_\_\_

Electrical Wiring No \_\_\_ Repair \_\_\_ Replace \_\_\_

Ceiling No \_\_\_ Repair \_\_\_ Replace \_\_\_

Door, Door Knob, Rubber Seal No \_\_\_ Repair \_\_\_ Replace \_\_\_

Air Vent No \_\_\_ Repair \_\_\_ Replace \_\_\_

Holes No \_\_\_ Repair \_\_\_ Replace \_\_\_

Light Fixtures No \_\_\_ Repair \_\_\_ Replace \_\_\_

Walls No \_\_\_ Repair \_\_\_ Replace \_\_\_

Heating System No \_\_\_ Repair \_\_\_ Replace \_\_\_

Carpet No \_\_\_ Repair \_\_\_ Replace \_\_\_

OTHER:

53

5.COMMON AREAS:

Storage Area No \_\_\_ Repair \_\_\_ Replace \_\_\_

Storage Area Key No \_\_\_ Repair \_\_\_ Replace \_\_\_

Parking Area No \_\_\_ Repair \_\_\_ Replace \_\_\_

Parking Area Poles (Columns) No \_\_\_ Repair \_\_\_ Replace \_\_\_

Security System No \_\_\_ Repair \_\_\_ Replace \_\_\_

Gate No \_\_\_ Repair \_\_\_ Replace \_\_\_

Gate Key No \_\_\_ Repair \_\_\_ Replace \_\_\_

Steps No \_\_\_ Repair \_\_\_ Replace \_\_\_

Laundry Door or Door Knob No \_\_\_ Repair \_\_\_ Replace \_\_\_

Laundry Sink No \_\_\_ Repair \_\_\_ Replace \_\_\_

Laundry Faucet or Faucet Handles No \_\_\_ Repair \_\_\_ Replace \_\_\_

Laundry Window, Screens, or Seals No \_\_\_ Repair \_\_\_ Replace \_\_\_

Laundry Table No \_\_\_ Repair \_\_\_ Replace \_\_\_

Washing Machine No \_\_\_ Repair \_\_\_ Replace \_\_\_

Dryer No \_\_\_ Repair \_\_\_ Replace \_\_\_

Carpeting (Hall) No \_\_\_ Repair \_\_\_ Replace \_\_\_

Carpeting (Lobby) No \_\_\_ Repair \_\_\_ Replace \_\_\_

Door or Door Knob (Lobby) No \_\_\_ Repair \_\_\_ Replace \_\_\_

Door or Door Knob (Hall) No \_\_\_ Repair \_\_\_ Replace \_\_\_

OTHER:

54

6.GENERAL BUILDING:

Roof No \_\_\_ Repair \_\_\_ Replace \_\_\_

Interior Walls No \_\_\_ Repair \_\_\_ Replace \_\_\_

Exterior Walls No \_\_\_ Repair \_\_\_ Replace \_\_\_

Pavement and Walkways No \_\_\_ Repair \_\_\_ Replace \_\_\_

Paint No \_\_\_ Repair \_\_\_ Replace \_\_\_

Termite Extermination No \_\_\_ Repair \_\_\_ Replace \_\_\_

Roach Extermination No \_\_\_ Repair \_\_\_ Replace \_\_\_

Rodent Extermination No \_\_\_ Repair \_\_\_ Replace \_\_\_

Plumbing No \_\_\_ Repair \_\_\_ Replace \_\_\_

Electrical Wiring No \_\_\_ Repair \_\_\_ Replace \_\_\_

Landscaping No \_\_\_ Repair \_\_\_ Replace \_\_\_

Mail Box No \_\_\_ Repair \_\_\_ Replace \_\_\_

Hand Rails No \_\_\_ Repair \_\_\_ Replace \_\_\_

Trash Bins No \_\_\_ Repair \_\_\_ Replace \_\_\_

Fire Door(s) or Door Knob(s) No \_\_\_ Repair \_\_\_ Replace \_\_\_

Fire Escapes No \_\_\_ Repair \_\_\_ Replace \_\_\_

Sprinkler System No \_\_\_ Repair \_\_\_ Replace \_\_\_

Balconies No \_\_\_ Repair \_\_\_ Replace \_\_\_

Elevators No \_\_\_ Repair \_\_\_ Replace \_\_\_

OTHER:

55

Please explain any maintenance problems this survey did not cover.

You may comment on any remodeling you want done to bring your building
up

to safety standards (security, parking area, additional lighting, etc.)
or

other changes to make living here better.

56

ATTACHMENT D

NOTICE OF DATE AND TIME OF CAPITAL NEEDS INSPECTION

The inspection of the property which you were told about, will begin

on \_\_\_(Date/Time)\_\_\_ and will last approximately \_\_\_(no.
hours/days)\_\_\_\_.

During the inspection, the inspector and other people (e.g., owner or

owner\'s agent, HUD staff, tenant representatives, etc.) may need to
visit

your apartment and you should be certain you are prepared for that
visit.

If you are not home during an inspection of your apartment, the owner
will

leave a note advising you that the inspector was there.

\_\_\_(Name of tenant representative(s))\_\_\_ may accompany the
inspector

if he/she/they wish. Any other tenant representative of your choosing
may

also accompany the inspector.

There will be a meeting after the inspection to which all tenants are

invited. It is scheduled to be held on \_\_\_(Date/Time)\_\_ at
\_\_(location)\_\_.

If you cannot be at this meeting, you may be represented by the

\_\_(person/people)\_\_ shown above or any other representative of your
choice.

Please be sure to give your list of required repairs or your answers

to the Capital Needs Assessment survey to your tenant representative or

send it to HUD at the address shown below before the inspection. If you

can\'t get your survey to HUD prior to the inspection, please provide it
to

the inspector at the start of his inspection.

ADDRESS OF LOCAL HUD OFFICE AND NAME AND TELEPHONE NUMBER OF A HUD
CONTACT

PERSON

57

ATTACHMENT E

SUMMARY OF PCNA ANALYSIS

Name of Project:

Project Number:

Prepared By:

COST SUMMARY OF PCNA REPAIRS:

with without

Davis Bacon Davis Bacon

A. Required Repairs\...\...\...\...\...\... \$\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_

B. Regulatory Repairs\...\...\...\...\.... \$\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_

C. Totals\...\...\...\...\...\...\...\...\.... \$\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_

D. Reserve Replacement Est. (without Davis Bacon)\...\.....
\$\_\_\_\_\_\_\_\_\_\_

OTHER REQUIRED SUPPLEMENTAL ESTIMATES:

with without

Davis Bacon Davis Bacon

E. Section 504 Alterations\...\...\..... \$\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_

F. Reas Hypo Upg Improvmts. (if requested)\...\...\...\...\...
\$\_\_\_\_\_\_\_\_\_\_

OTHER DETERMINATIONS: (circle one)

1.Is this a sub rehab project?\...\...\...\...\...\...\.... Yes or No

2.Does the project contain (assumed)

asbestos containing materials\...\...\...\...\...\...\... Yes or No

3.Does the project contain LBP?\...\...\...\...\...\...\... Yes or No

COMMENTS:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

58

ATTACHMENT F

Multifamily Preservation Manager

The Multifamily Preservation Manager will be located in the \_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ and will
report to the Director of

Multifamily Housing or the Director of Housing. They shall coordinate

all activities related to the Preservation program in the Field Office

and will be responsible for:

oBeing the Field Office resource person for preservation

knowledge;

oTimely and accurate reviews of projects involved in the

preservation program;

oCoordinating the team of loan servicers processing the

preservation project applications;

oCoordinating and facilitating teamwork between Loan Management,

Valuation and Architectural & Engineering, as well as Legal, FHEO

and others involved in the review of preservation projects;

oInvolving the Resident Initiative Specialist and keeping others

apprised of Technical Assistance activities;

oProviding technical support to preservation project loan

servicers and others involved in the process;

oProviding proactive program monitoring;

oMaking sure that accurate and timely information is logged into

MPPS;

oPreparing progress reports on current Preservation activity;

oMaking sure that the papers are prepared for funding of the

approved Plan of Action;

oAddressing the project needs after Plan of Action implementation,

such as physical inspection, occupancy issues and others;

oCoordinating the final closing of the Plan of Action and its

ancillary 241(f) loans.

59

ATTACHMENT G

REQUIRED EXHIBITS FROM NONPROFIT SPONSOR/MORTGAGOR

1.Form HUD-3433, Request for Preliminary Determination of

Eligibility as a Nonprofit Sponsor and/or Mortgagor, and

supplemental documentation. Documentation must contain, but is

not limited to:

A.Detailed explanation of motivation for sponsoring the

acquisition of the project.

B.Copy of sponsor/mortgagor\'s charter and bylaws or

constitution as currently amended.

C.Copy of current effective ruling from the Internal Revenue

Service on sponsor/mortgagor\'s tax exempt status.

1\) Copy of any ruling denying tax exemption.

2)If a ruling is pending, explain the application\'s legal

and factual basis and current status.

D.List of officers, directors or trustees of the sponsoring

group/mortgagor including home addresses, titles of

positions and their social security numbers.

E.Resumes on all principals and staff who will actively take

part in acquisition, rehab and management of the project.

F.Current financial statements (balance sheet, profit and loss

statement, and supporting schedules) as well as statements

for the past three years (statements of the

sponsor/mortgagor, not the project). If available, audited

statements should be submitted. (Refer to paragraphs 3-2

and 3-3 of HUD Handbook 4470.1).

60

ATTACHMENT G (PAGE 2)

1)If the sponsoring group/mortgagor has existed less than

three years, the financial statements must be submitted

from the date the group was formed.

2)Statements must identify restricted and unrestricted

assets along with the related liabilities.

3)Financial statements must be signed by an officer of

the sponsoring group.

4)All statements must contain the certification of truth

and accuracy and criminal certification identified in

paragraph 3-2.B.1. of HUD Handbook 4470.1. This

certification must reference the name of the sponsor

and the date of the financial statements.

G.Signed written resolution of its directors or trustees,

acknowledging the responsibilities and obligations of

sponsorship and continuing ownership, and that this position

reflects the will of the membership.

H.Form HUD-92013 SUPP. listing current bank and trade

references for the sponsor; mortgagors, if formed and their

officers (President, Vice President, Secretary and

Treasurer). Refer to paragraph 2-1.B.2.c. of HUD Handbook

4470.1.

I.If the sponsor, mortgagor or any officer of either has a

prior Federal default or claim, the following must be

submitted:

A letter from the affected agency, on agency letterhead and

signed by an officer, stating that the delinquent Federal

debt is current or satisfactory arrangements for repayment

have been made.

J.Detailed statement of arrangements made or proposed for the

following (listing principals involved, their relationship

with the

61

ATTACHMENT G (PAGE 3)

sponsor/mortgagor and/or the present ownership of the

property, the terms of the arrangements and the

circumstances surrounding each):

1\) Legal and consulting services.

2)Project financing, including any discounts, or

arrangements with the seller to take back financing.

3\) Project management.

4\) Resident training.

5)Project repair program, including how the repair work

will be contracted out.

NOTE: A national, State or regional organization acting as a

cosponsor must submit a separate Form HUD-3433 and supplemental

documentation.

62

ATTACHMENT H

CHECKLIST FOR SUBMISSION OF A TRANSFER PLAN OF ACTION

The Preservation process to transfer an eligible project involves the

submission of a Plan of Action (POA), Transfer of Physical Assets (TPAs)

and a Section 241 or other type of financing application. This checklist

identifies all POA submission requirements. Where there is overlap or

identical submission requirements for POAs, TPAs and Section 241 loan

applications, it combines the required exhibits which meet the
requirements

for all applications. In other words, the Department will not require
the

purchaser to submit duplicate exhibits for each application.

The numbers in the ( )s are paragraph references in Handbook 4350.6.

I.Areas of concern at the bona fide offer stage prior to POA submission.

This review should help the Department avoid duplicate funding of an

activity at a later stage of the Preservation process such as

overlapping of a fee payment:

1.Did a resident council or community based nonprofit organization

receive a Preservation Technical Assistance Grant (PTAG) under:

YES NO

A. PTAG Phase I for RCs & CBOs:

to organize? \_\_\_ \_\_\_

to receive training? \_\_\_ \_\_\_

to incorporate? \_\_\_ \_\_\_

to establish accounting

procedures? \_\_\_ \_\_\_

other? \_\_\_ \_\_\_

B.PTAG Phase II for successful applicant to:

submit an expression of interest &

prepare a bona fide offer? \_\_\_ \_\_\_

architectural & engineering

services? \_\_\_ \_\_\_

financial & legal services? \_\_\_ \_\_\_

training for board members? \_\_\_ \_\_\_

C.PTAG Phase III for an eligible applicant to:

prepare a plan of action? \_\_\_ \_\_\_

obtain architectural & engineering

services? \_\_\_ \_\_\_

obtain financial & legal

services? \_\_\_ \_\_\_

training for the board & members

of the purchasing entity? \_\_\_ \_\_\_

63

YES NO

preparation of TPA? \_\_\_ \_\_\_

Other? (explain) \_\_\_ \_\_\_

2\. Did the purchaser submit a form HUD 3433, Request for Preliminary

Determination of Eligibility as a Nonprofit Sponsor and/or

Mortgagor and supplemental documentation at the time it submitted

a bona fide offer or PTAG Phase II?

(see Attachment G for required exhibits) \_\_\_ \_\_\_

If not, then the form HUD 3433 must be submitted with the POA.

II\. Did the owner and purchaser submit:

1.A Plan of Action (POA) within six months:

A.Of accepting a HUD approved bona fide

offer under the voluntary sales process

(8-3.A.1. & 8-16.B)? or \_\_\_ \_\_\_

B.Of receipt of a HUD approved bona fide

offer under the mandatory sale

process? \_\_\_ \_\_\_

2.Six copies of the POA (8-3.A.1) \_\_\_ \_\_\_

3.A POA summary which is the same as posted to

the tenants? \_\_\_ \_\_\_

4.A certification that all requirements

of HUD Handbook 4350.6, Paragraph 8-3.B

through D. have been met as follows:

A.A POA summary was sent to all tenants? \_\_\_ \_\_\_

B.A copy of the POA and POA

summary was sent to the

tenant representative or a

certification stating that

the owner is unaware of a

tenant representative? \_\_\_ \_\_\_

C.A copy of the POA was sent to

the State or local government

official to whom the Initial

NOI was submitted? \_\_\_ \_\_\_

D.Tenants, tenant representatives, and

State and local governments have been

notified in accordance with

Paragraph 8-3.D.? \_\_\_ \_\_\_

5.Evidence that the purchaser can pay for

all applicable out-of-pocket expenses

that will not be paid for through

a loan or grant? \_\_\_ \_\_\_

64

YES NO

III\. Were the following included in the submitted

Plan of Action?

1\. A. Descriptions of outstanding audit

findings or findings of noncompliance

with the Fair Housing Act and documented

resolution of findings or proposed

resolutions(8-5.D.)?

OR

B.A certification of no violations

(8-5.D.)? \_\_\_ \_\_\_

2\. A. Description of proposed changes in

status or terms of the mortgage or

regulatory agreement?

OR

B.A statement of no proposed changes

(8-5.B)? \_\_\_ \_\_\_

3\. A. Description of proposed changes in

low-income affordability restrictions and

a detailed assessment of the effect of

these changes on each tenant?

OR

B.A statement that no changes are proposed

(8-5.C.)? \_\_\_ \_\_\_

4.A. A request for waivers?

OR

B.A statement that no waivers are

requested (8-5.E.)? \_\_\_ \_\_\_

5.List of incentives (assistance) requested

and methods to fund listed incentives

(8-17.A.,B. & 8-21.A.,B.,D.)? \_\_\_ \_\_\_

6.Projected budgets for three years

(8-17 C.)? \_\_\_ \_\_\_

7.Management plan (8-17.D)? \_\_\_ \_\_\_

8.Occupancy policy (8-17.D)? \_\_\_ \_\_\_

9.Requested utility allowances with

documentation (8-17.D.)? \_\_\_ \_\_\_

10.Other information and conditions or

criteria specified by the Loan Management

Branch as necessary for evaluating the

POA (8-17.J.)? \_\_\_ \_\_\_

65

YES NO

11\. A. Description of assistance from State

or local Government Agencies, excluding

LIHTCs, and an analysis of any cost

reduction for HUD?

OR

B.A statement that no assistance will be

received (8-17.E.)? \_\_\_ \_\_\_

12\. A. If LIHTCs are part of the transaction,

has the information required by Notice

H90-17 been included (8-17.E.1.)?

OR

B.If LIHTCs are NOT received by the owner,

has form HUD-9611 been included

(8-17.E.1.)? \_\_\_ \_\_\_

13.Two tenant income profiles (8-17.F.):

A. One as of the date of submission

of the POA? \_\_\_ \_\_\_

AND

B.i. One as of January 1, 1987?

OR

ii.A tenant income profile for a

year other than 1987, along

with a certification that

the January 1, 1987, profile

is unavailable? \_\_\_ \_\_\_

14.Documents related to an application for

preliminary approval of a Transfer

of Physical Assets package as follows:

NOTE: The TPA fee of \$.50 per \$1000 will be waived for a

nonprofit purchaser.

oTPA Application

(form HUD 92266)? \_\_\_ \_\_\_

oExecuted Seller/Purchaser

Affidavit? \_\_\_ \_\_\_

oExecuted but Unrecorded Modification

Agreement? \_\_\_ \_\_\_

oPro-Forma Balance Sheet? \_\_\_ \_\_\_

oProposed But Unrecorded Deed? \_\_\_ \_\_\_

oProposed Bill of Sale and Assignment? \_\_\_ \_\_\_

66

YES NO

o Proposed Management Certification,

and Entity Profile, if applicable,

and form HUD-2530 for Management

Agent? \_\_\_ \_\_\_

oExecuted Organizational Documents

of Purchaser/mortgagor entity? \_\_\_ \_\_\_

oDocumentation that the purchaser

meets all requirements for a purchaser

including those of a single asset

entity and CBO, if applicable

(8-5.A.)? \_\_\_ \_\_\_

oByrd Amendment Certification? \_\_\_ \_\_\_

oA complete description of the proposed

financing of the transaction including:

A.a complete 241 loan application

B.an application for the Gap Grant

C.if uninsured financing is planned,

a preliminary commitment from the

financing agency which includes at

the minimum the face amount of the

debt instrument and the terms for

repayment, i.e., annual debt service

D.evidence of any other grants received

or for which the purchaser has applied

E.certification that no Section 241

loan or other loan(s) is being

requested? \_\_\_ \_\_\_

15.A complete Section 241 loan application if

insured financing is being requested includes:

Note: The purchaser will not have to duplicate documents that

have been included elsewhere in the POA submission, such as in a

TPA application (see item 15 above).

oApplication fee of \$3.00 per thousand of

the requested mortgage amount for a firm

commitment. \_\_\_ \_\_\_

oAnalysis of balance in all project

escrow accounts? \_\_\_ \_\_\_

oWork write-up describing the scope

of repairs and/or rehabilitation.

If different from PCNA performed

by HUD, identify items added and

deleted with justification and

supporting documentation (e.g.,

plans and specifications)? \_\_\_ \_\_\_

oAvailability of Tax Abatement and

details. \_\_\_ \_\_\_

67

YES NO

oFor General contractors or for

purchasers the required exhibits

listed in paragraph 2-1.B.2. of

HUD Handbook 4470.1.? \_\_\_ \_\_\_

16.If the purchaser is using uninsured

financing then the POA submission must

include the following documents which

would otherwise be submitted with

the Section 241(f) loan application:

oAnalysis of balance in all project

escrow accounts? \_\_\_ \_\_\_

oWork write-up describing the scope

of repairs and/or rehabilitation.

If different from PCNA performed

by HUD, identify items added and

deleted with justification and

supporting documentation (e.g.,

plans and specifications)? \_\_\_ \_\_\_

oAvailability of Tax Abatement

and details. \_\_\_ \_\_\_

17.Tabs and a Table of Contents indicating

the tab where each essential item can

be found (8-5.G.)? \_\_\_ \_\_\_

68

ATTACHMENT I

TITLE VI PROCESSING LOG:

Project Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Project No. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

City \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

County \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Notice of Intent (NOI) to Extend or Sell (Circle one)

Day One:

\_\_\_\_\_\_\_Asset Management (AM) receives NOI, checks for
completeness,

accepts for processing. Inputs \[Log date\] into Multifamily

Preservation Processing System (MPPS) which checks eligibility.

\[Log date\]

\_\_\_\_\_\_\_Owner sends NOI to State or local govt, mortgagee, each
occupied

unit, tenant representative, if known. Owner certifies to LM,

this has been done. If AM later finds NOI not distributed, NOI

rejected.

\_\_\_\_\_\_\_If project in default prior to 11/28/90, and now current
under

workout, owner submits letter with NOI, agreeing to recompense

insurance fund. AM contacts Office of MIAS for determination of

losses.

First Week:

\_\_\_\_\_\_\_AM sends owner of previously defaulted project, registered

letter, to recompense insurance fund, (HUD) within 30 days of

receipt. \[Log date\]

\_\_\_\_\_\_\_AM sends 3 NOIs to Housing Programs, att: A&E & Val, along
with;

3 yrs of physical inspection reports, information on project

condition, financial reports, plans/specs, Updated pg 1 of form

92013, Section 8 contract expiration date. \[Log date\]

By 15th day:

\_\_\_\_\_\_\_If AE/C can\'t perform Preservation Capital Needs
Assessment

(PCNA), Regional Contracting Officer (RCO) awards contract.

\_\_\_\_\_\_\_Contractor or A&E staff schedules physical inspection (PI)
of

CNA, tells AM the date. \[Log date\]

By 20th day:

\_\_\_\_\_\_\_AM sends owner Appraisal Guidelines (AG) & Handbook
4350.6\'s

Appendix (App) 5-1, 5-1A & Attachment (Att) 5 of Notice H92-54.

\[Log date\]

69

\_\_\_\_\_\_\_Owner receives AG & App 5-1, 5-1A & posts App 5-1A, Notice
to

Tenants, advising them of appraisal & PCNA.

\_\_\_\_\_\_\_ AM sends state & local govt App 5-1, 5-1A. \[Log date\]

\_\_\_\_\_\_\_ AM notifies owner/St/local date of PCNA, if known.

\_\_\_\_\_\_\_ Val works with RCO to contract for appraisal.

By 30th day:

\_\_\_\_\_\_\_ Owner & Val contract for an appraisal.

By 33rd day:

\_\_\_\_\_\_\_Owner posts notice advising tenants date of PCNA, PI &
exit

conference.

By 35th day:

\_\_\_\_\_\_\_PI (required repairs/costs) site inspection occurs.
Owner\'s rep

& appraiser, HUD\'s appraiser, LM, Tenant rep & local officials

may attend inspection.

By 36th day:

\_\_\_\_\_\_\_PI section of PCNA exit conference occurs. Tenants may
also

attend. Owner given preliminary findings.

By 45th day:

\_\_\_\_\_\_\_A&E receives completed PI of PCNA (processing record) from

contractor.

By 49th day:

\_\_\_\_\_\_\_A&E\'s GTM (Government Technical Monitor) and Branch Chief
reviews

PI for acceptability.

By 50th or 52nd day:

\_\_\_\_\_\_\_GTM accepts or rejects contractor\'s PI within 5 working
days of

receipt.

\_\_\_\_\_\_\_ PI approved, A&E provides to LM & Val. \[Log date\]

\_\_\_\_\_\_\_If PI not approved, deficiencies must be corrected in
order to

send to appraisers by 60th day.

70

By 59th day:

\_\_\_\_\_\_\_ AM sends PI to owner, Val sends PI to HUD appraiser.

By 60th day:

\_\_\_\_\_\_\_ Owner\'s appraiser receives PI of PCNA. \[Log date\]

\_\_\_\_\_\_\_ HUD\'s appraiser receives PI of PCNA. \[Log date\]

By End of 4th Month: 120th day from NOI filing \*

\_\_\_\_\_\_\_ A&E receives completed PCNA. \[Log date\]

\_\_\_\_\_\_\_ Owner sent completed PCNA for review. \[Log date\]

\_\_\_\_\_\_\_ Val receives owner\'s appraisal. \[Log date\]

\_\_\_\_\_\_\_ Val receives HUD\'s appraisal. \[Log date\]

\_\_\_\_\_\_\_Immediately after receipt of both appraisals, Val sends
HUD\'s

appraisal to owner. \[Log date\]

By 5th Month: End of 1st Week

\_\_\_\_\_\_\_Val reviews both appraisals for accuracy, sufficiency and

compliance with AG.

By 5th Month: End of 2nd Week

\_\_\_\_\_\_\_ Val notifies HUD/Owner\'s appraiser if revisions
required.

\_\_\_\_\_\_\_ Val notifies LM if revisions have been requested.

\_\_\_\_\_\_\_Owner reviews HUD\'s appraisal & provides any additional
comments

regarding PCNA.

By 5th Month: End of 4th Week

\_\_\_\_\_\_\_Val receives revisions, if owner & HUD appraiser also
agree to

revisions, appraisal is approved.

\_\_\_\_\_\_\_ Val & owner meet to reconcile differences.

By End of 5th Month: One month after exchanging appraisals \*

\_\_\_\_\_\_\_Val confirms or modifies PCNA based on info from owner &

determines two reconciled preservation values or owner requests

3rd appraisal. \[Log date\]

Note: An asterisk (\*) next to date indicates regulatory deadline.

71

\_\_\_\_\_\_\_If 3rd appraisal needed, val provides appraisal list to LM
who

sends to owner.

By End of 6th Month: 6 Months from submission of NOI

\_\_\_\_\_\_\_ Owner selects appraiser for 3rd appraisal.

\[Log date\]

\_\_\_\_\_\_\_ AM provides appraiser with AG & CNA.

By End of 8th Month: 2 Months from date appraiser accepted

assignment for 3rd appraisal \*

\_\_\_\_\_\_\_ Appraiser submits 3rd Appraisal to Val. \[Log date\]

\_\_\_\_\_\_\_ AM sends appraisal to owner for review. \[Log date\]

\_\_\_\_\_\_\_Owner submits copy of acceptable appraisal and

invoice of full amount to RCO who pays half.

By 9th Month: last week

\_\_\_\_\_\_\_ Val\'s completed HUD-9607 sent to AM. \[Log date\]

\_\_\_\_\_\_\_Val & AM jointly complete letter to

owner transmitting information.

By End of 9th Month: Nine months from receipt of NOI \*

\_\_\_\_\_\_\_AM sends letter, 9607, App 5-3, 5-3A, 5-3B,

5-3C (Notice to Tenants) to owner. \[Log date\]

\_\_\_\_\_\_\_ Owner posts information at all affected buildings.

72

TITLE VI PROCESSING LOG:

Project Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Project No. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

City \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

County \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Notice of Intent to Terminate:

Day 1:

\_\_\_\_\_\_\_Asset Management (AM) receives NOI, checks for
completeness,

accepts for processing. Inputs \[Log date\] into Multifamily

Preservation Processing System (MPPS) which checks eligibility.

\[Log date\]

By 5th day:

\_\_\_\_\_\_\_AM sends NOI to EMAS/FHEO/HsgProg, att: Val, request they
supply

info relevant to market area. \[Log date\]

By 90th day: Within 90 days of receipt of initial NOI

\_\_\_\_\_\_\_ AM receives relevant market data from EMAS/FHEO/Val.

By End of 6th Month: Within 6 months of receipt of NOI \*

\_\_\_\_\_\_\_AM sends owner, criteria, data & App 4, 4-A, 4-B, 4-C &
info on

preparing Plan of Action (POA). \[Log date\]

\_\_\_\_\_\_\_AM sends data & App 4-A, B to tenant representative (TR),
& state

and local government. \[Log date\]

\_\_\_\_\_\_\_ Owner posts the info & App 4-A, 4-B for tenants.

By End of 12th Month: Within 6 months of receiving HUD info. \*

\_\_\_\_\_\_\_ AM receives & reviews for completeness owner\'s POA.

\_\_\_\_\_\_\_Within 10 working days of POA receipt, LM sends owner
letter

indicating if POA is complete or incomplete. If incomplete, POA

returned with list deficiencies to correct so POA complete.

\[Log date\]

\*\_\_\_\_\_\_\*AM determines that owner has submitted complete POA
(CPOA) to

Terminate, 6 copies POA Date Stamped from date of receipt,

processing clocks begins. \[Log date\]

Note: An asterisk (\*) next to date indicates regulatory deadline.

Note: An asterisk (\*) on either side of a check line, indicates an

important date that triggers other action.

73

\_\_\_\_\_\_\_Owner also submits to State or local government & tenant
rep.

and posts summary.

\_\_\_\_\_\_\_If POA not received, NOI expires & process ends & owner
must

wait 6 months from POA filing deadline, before filing a new NOI

to Extend or Sell.

\_\_\_\_\_\_\_Owner provides AM info on tenants for displacement within
30

days of identifying such tenants but not less than 30 days prior

to date they must vacate.

By 13th Month: 2nd week, within 10 working days of complete POA

receipt

\_\_\_\_\_\_\_AM sends POA to State or local government, EMAS, FHEO,
Val, &

Field Counsel, requesting comments within 30 days for HUD

Sections & 50 days for tenants and State or local government.

\[Log date\]

By 14th Month: 2nd Week, Within 30 days from receipt of POA

\_\_\_\_\_\_\_ AM receives comments from all Field Office sections.
\[Log date\]

By 14th Month: 3rd Week, Within 50 days of complete POA \*

\_\_\_\_\_\_\_ AM receives comments from St/local govt. \[Log date\]

\_\_\_\_\_\_\_ AM receives comments from tenants.

By End of 14th Month: Within 60 days of complete POA \*

\_\_\_\_\_\_\_AM sends letter to owner indicating all deficiencies that

prevent POA approval. \[Log date\]

By End of 15th Month: In 30 days from deficiency letter receipt

\_\_\_\_\_\_\_ AM receives revised POA from owner.

\_\_\_\_\_\_\_Or, Owner may submit written request for extension, not
for more

than 305 from CPOA receipt in order for LM to have 60 days to

review POA.

By 18th Month: 4th Week, or 10 days prior to approval of

prepayment or 30 days prior to acceptance.

\_\_\_\_\_\_\_ AM must notify each tenant of protections.

\_\_\_\_\_\_\_Owner must post Notice of Available Protection in each

building.

By End of 18th Month: 180 days from complete POA \*

\_\_\_\_\_\_\_AM has received revised POA & sends letter to owner,
indicating

preliminary approval or disapproval of POA to Terminate.

\[Log date\]

74

\_\_\_\_\_\_\_If disapproved, AM sends owner letter indicating new NOI
(to

extend), may be submitted in 6 months.

By End of 22nd Month: 305th day from CPOA

\_\_\_\_\_\_\_AM receives a complete POA from owner who had requested &

received extension. It must be submitted in 305 days from CPOA

submission, so AM has 60 days to review.

By End of 24th Month: 60 days from receipt of CPOA \*

\_\_\_\_\_\_\_AM sends letter to owner, indicating POA\'s
approval/disapproval

for termination. \[Log date\]

75

TITLE VI PROCESSING LOG: CONTINUATION

Project Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Project No. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

City \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

County \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Notice of Intent to Extend & Receive Incentives

From Beginning of 10th Month

to End of 15th Month:

\_\_\_\_\_\_\_Owner prepares a Plan of Action to Extend with incentives.

Owner should keep in mind that a complete POA must be submitted

within 6 months of receiving information from HUD.

By End of 15th Month: Within 6 months of receiving HUD info.\*

\_\_\_\_\_\_\_ AM receives & reviews for completeness owner\'s POA.

\_\_\_\_\_\_\_Owner must also submit to LM and Housing Programs (HP) any

Sections 241(f) or 241 (a) loan that is to be closed

simultaneously with POA. HP notifies AM if loan applications

are complete or incomplete.

\_\_\_\_\_\_\_Within 10 working days of POA receipt, LM sends owner
letter

indicating if POA is complete or incomplete. If incomplete, POA

returned with list deficiencies to correct so POA complete.

\[Log date\]

\*\_\_\_\_\_\*AM determines that owner has submitted complete POA (CPOA)
to

Extend, 6 copies POA Date Stamped from date of receipt,

processing clock begins. \[Log date\]

\_\_\_\_\_\_\_Owner also submits to State or local government & tenant

representative & posts summary.

\_\_\_\_\_\_\_Owner gives copy POA to Tenant Rep and makes copies
available to

tenants for comment.

\_\_\_\_\_\_\_If complete POA not received, NOI expires & process ends &
owner

must wait 6 months from POA filing deadline before filing a new

Initial NOI.

By 16th Month: 2nd week, In 10 working days after CPOA receipt.

\_\_\_\_\_\_\_AM sends POA to State or local government, EMAS, FHEO,
Field

Counsel, Environmental Officer & Hsg. Br: att Val, requesting

comments within 30 days from HUD sections & 50 days from State or

local government. \[Log date\]

76

Note: An asterisk (\*) on either side of a check line, indicates an

important date that triggers other action.

By 17th Month: 2nd week, Within 30 days from receipt of POA

\_\_\_\_\_\_\_ AM receives comments from all Field Office sections.
\[Log date\]

\_\_\_\_\_\_\_ AM receives comments from tenants.

\_\_\_\_\_\_\_Housing Programs notifies AM that a complete loan
application

Form HUD-2013 and Form HUD-2530 has been submitted.

By 17th Month: 3rd week, Within 50 days of CPOA \*

\_\_\_\_\_\_\_ AM receives comments from St/local govt. \[Log date\]

By End of 17th Month: Within 60 days of CPOA \*

\_\_\_\_\_\_\_AM sends registered letter to owner indicating all
deficiencies

that prevent POA approval. \[Log date\]

By End of 18th Month: Within 90 days of POA receipt.

\_\_\_\_\_\_\_ Housing Development sends form HUD-92264-A to LM.

\_\_\_\_\_\_\_AM Branch confirms acceptability of: repairs, costs,
Sections

241(f) or 241(a) loans, Preservation Rent & initial deposit for

Reserve for Replacement Account.

By End of 18th Month: In 30 days from deficiency letter receipt

\_\_\_\_\_\_\_ AM receives revised POA from owner.

\_\_\_\_\_\_\_Or, Owner may submit written request for extension, but
not for

more than 305 from PDS in order for AM to have 60 days to review

POA.

After the 18th Month:

\_\_\_\_\_\_\_AM, after completion of Form HUD-50061, notifies Valuation

Branch if the loans must be modified to bring the Preservation

Project Rent down to the Federal Cost Limit. ???????????

By End of 21st Month: Within 180 days of CPOA receipt \*

\*\_\_\_\_\_\*AM has reviewed revised POA & sends letter to owner
indicating

preliminary approval or disapproval of Extension POA with

incentives. \[Log date\]

\_\_\_\_\_\_\_If disapproved, LM sends owner letter indicating new NOI
(to

extend), may be submitted in 6 months.

77

\_\_\_\_\_\_\_If HUD fails to approve/disapprove POA within 180 days
other

than owner error or non-compliance, must provide retroactive

incentives & assistance to an entitled owner.

By End of 24 Month: Within 90 days of POA approval

\*\_\_\_\_\_\* The following actions constitute POA final approval:

The closing of all loans, completion of Use Agreement, Amended

Regulatory Agreement & signing of Section 8 contract must all be

completed.

\_\_\_\_\_\_\_At time of POA final approval, appraisal value as issued
on the

original Form HUD-9607 can\'t be more than 30 months old.

By 25th Month: 5th day, Within 5 days of final approval

\_\_\_\_\_\_\_With POA implementation, AM staff notifies Preservation

Division, Headquarters.

By End of 25 Month: 305th day from CPOA

\_\_\_\_\_\_\_AM receives a complete POA from owner who had requested &

received extension. It must be submitted in 305 days from CPOA

submission so AM has 60 days to review.

By End of 27th Month: 365th day from CPOA \*

\_\_\_\_\_\_\_AM sends letter to owner w/ approval/disapproval of POA
with a

submission extension. \[Log date\]

By End of 39th Month: Within 15 months of POA final approval \*

\_\_\_\_\_\_\_If funds requested for POA\'s incentives not provided,
owner may

prepay mortgage and terminate affordability restrictions.

\_\_\_\_\_\_\_Owner provides AM info on tenants for displacement within
30

days of identifying such tenants but not less than 30 days prior

to date they must vacate.

By 40th Month: 10th day, 10 days from prepayment determination

\_\_\_\_\_\_\_If project may prepay, & at least 30 days prior to its

acceptance, AM must notify each tenant of available protections &

owner must post Notice of Available Protection in each building.

78

TITLE VI PROCESSING LOG: CONTINUATION

Project Name \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Project No. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

City \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

County \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Notice of Intent to Sell Project:

Within 5 days of receipt of 2nd NOI:

\_\_\_\_\_\_\_ AM reviews 2nd NOI for accuracy & compliance.

\_\_\_\_\_\_\_If NOI not complete or accurate, AM returns it to owner,

indicating it must be returned within 30 day deadline (end 10th

month) & distributed. \[Log date\]

By End of 10th Month: Within 30 days of receipt of information \*

\_\_\_\_\_\_\_ AM receives complete/accurate 2nd NOI from owner. \[Log
date\]

\_\_\_\_\_\_\_Owner must also send to St/local govt & Tenant
Representative &

mortgagee.

\_\_\_\_\_\_\_ If 2nd NOI not filed, process ends.

\_\_\_\_\_\_\_or, if owner changes mind, may submit POA for incentives
by the

end of the 15th month.

\_\_\_\_\_\_\_If NOI acceptable AM notifies potential purchasers, that

property is available for sale & provide with necessary

information to make an offer. \[Log date\]

\_\_\_\_\_\_\_AM provides Preservation Division with same info & names
of and

minority newspapers in area.

\_\_\_\_\_\_\_AM provides Resident Initiative Specialist (RIS) w/info
sent to

buyers and Preservation Division.

Within 5 days of receipt of info from AM:

\_\_\_\_\_\_\_Preservation Division will place notices in major
newspapers in

area and major minority newspapers. Ads shall be placed within

25 days, 6 months & 12 months after receipt of 2nd NOI.

\_\_\_\_\_\_\_RIS mails notice, App 7-2 to resident council (RC) &
community

based non-profit organizations (CBO).

79

From End of 10th Month

To End of 16th Month: \*

\_\_\_\_\_\_\_Resident Council or Community-based nonprofit organization
may

make a bona-fide offer (BFO) to the owner & submits a copy to AM.

From End of 16th Month

To End of 22nd Month: \*

\_\_\_\_\_\_\_Local housing agencies & all other priority purchasers may
make

BFO if no BFO received or accepted from BFO or CBO.

\_\_\_\_\_\_\_Any priority purchaser, intending to make offer to
purchase

submits Expression of Interest (EOI) to AM.

\_\_\_\_\_\_\_Within 30 days of receipt of EOI, AM determines if EOI is

acceptable & notifies owner of potential purchaser\'s EOI.

\_\_\_\_\_\_\_Once notified of EOI, owner must provide potential
purchaser

with information needed to purchase.

\_\_\_\_\_\_\_AM provides purchaser with necessary information,
including

App7-1 & info provided to owner. \[Log date\]

From End of 22nd Month

To End of 25th Month: \*

\_\_\_\_\_\_\_ Qualified purchasers may make a bona-fide offer.

\*\_\_\_\_\_\* Owner receives bona-fide offer from purchaser.

\_\_\_\_\_\_\_If no bona fide offer received, owner may prepay mortgage
&

eliminate affordability restrictions.

By End of 26th Month: Within 30 days of owner\'s receipt of BFO \*

\_\_\_\_\_\_\_Owner must reject or accept an offer conditioned upon
HUD\'s

certification it is bona-fide.

\*\_\_\_\_\_\* Owner notifies AM it has accepted BFO. \[Log date\]

\_\_\_\_\_\_\_ AM reviews offer, once it is accepted by owner.

\_\_\_\_\_\_\_AM must determine level Earnest Money Deposit (EMD), using

worksheet App 7-1, if it has not been waived.

Note:An asterisk (\*) on either side of a checkline, indicates

an important date that triggers other action.

\_\_\_\_\_\_\_If offer not bona-fide or accepted, EMD must be

returned by owner.

80

\_\_\_\_\_\_\_If offer is rejected & later accepted, AM notifies
purchaser

they have 60 days to resubmit EMD.

By End of 27th Month: Within 30 days owner\'s acceptance of BFO \*

\_\_\_\_\_\_\_ AM reviews offer to determine if it is bona-fide.

\_\_\_\_\_\_\_ AM notifies owner in writing if it is BFO. \[Log date\]

By 28th Month: 10th day, Within 10 days of AM\'s determination

that offer is acceptable.

\_\_\_\_\_\_\_Owner sends purchaser letter indicating final acceptance
of

offer (Contract for Sale), contingent upon completion POA

requirements. \[Log date\]

\_\_\_\_\_\_\_ Owner sends AM copy of this letter.

\_\_\_\_\_\_\_ If Contract for Sale is terminated owner must notify AM.

Starting 28th Month: 2nd Week

\_\_\_\_\_\_\_Owner and priority purchaser prepare a Plan of Action to

Transfer property. Owner/purchaser should keep in mind that in

no case may 30 month limit on use of appraisal from the date of

the original Form HUD-9607 be waived & complete POA must be

submitted within the appropriate 6-months period.

By End of 31st Month: Within 6 months of date offer is made.

\_\_\_\_\_\_\_If sale is mandatory, Owner/purchaser submit POA.

\[Time-line follows voluntary sale POA example\]

By End of 32nd Month: Within 6 months of owner\'s acceptance BFO \*

\_\_\_\_\_\_\_Under voluntary sale, AM receives & review for
completeness

owner\'s POA.

\_\_\_\_\_\_\_A complete POA includes all loans & grant applications and

documentation for TPA (see exhibit H). Owner submits loan

applications to both AM and HP. HP reviews loan applications and

notifies AM if they are complete or incomplete.

\_\_\_\_\_\_\_Within 10 working days of POA receipt, AM sends owner
letter

indicating if POA complete or incomplete. If incomplete, POA

returned with list deficiencies to correct so POA complete.

\[Log date\]

\*\_\_\_\_\_\*Under voluntary sale, AM determines that owner/purchaser
have

submitted complete POA (CPOA) to Sell, 6 copies POA Date Stamped

from date of receipt, processing clock begins. \[Log date\]

81

\_\_\_\_\_\_\_Owner/purchaser also submits to State or local govt &
tenant

rep. and posts summary.

\_\_\_\_\_\_\_Owner gives copy POA to Tenant Rep and makes copies
available to

tenants for comment.

\_\_\_\_\_\_\_If complete POA not received, NOI expires & process ends &
owner

must wait 6 months from POA filing deadline, before filing a new

Initial NOI.

By 33rd Month: 2nd week, Within 10 working days of CPOA receipt

\_\_\_\_\_\_\_AM sends POA to State or local government, EMAS, FHEO,
Val,

Field Counsel, Environmental Officer & Hsg Br: att Val,

requesting comments within 30 days from HUD sections & 50 days

for State or local government. \[Log date\]

By 34th Month: 2nd week, Within 30 days from receipt of POA

\_\_\_\_\_\_\_ AM receives POA comments from Field Office sections.
\[Log date\]

\_\_\_\_\_\_\_ AM receives POA comments from Tenants.

\_\_\_\_\_\_\_Housing Programs notifies AM that a complete loan
application

Form HUD-2013 and Form HUD-2530 has been submitted.

By 34th Month: 3rd week, Within 50 days of CPOA receipt \*

\_\_\_\_\_\_\_ AM receives comments from St/local govt. \[Log date\]

By End of 34th Month: Within 60 days of PDS \*

\_\_\_\_\_\_\_AM sends registered letter to owner indicating all
deficiencies

that prevent POA approval. \[Log date\]

By End of 18th Month: Within 90 days of POA receipt

\_\_\_\_\_\_\_ Housing Development sends Form HUD-92264-A to AM.

\_\_\_\_\_\_\_AM Branch confirms acceptability of: repairs & costs,
Sections

241(f) or 241(a) loans, Preservation Project Rent and initial

deposit for Reserve for Replacement account.

By 36th Month: 1st week, 30 days from deficiency letter receipt

\_\_\_\_\_\_\_ AM receives revised POA from owner.

\_\_\_\_\_\_\_Or, Owner may submit written request for extension, but
not for

more than 305 from PDS in order for AM to have 60 days to review

POA.

82

After 36th Month:

\_\_\_\_\_\_\_AM, after completion of Form HUD-50061, notifies Valuation

Branch if the loans must be modified to bring the Preservation

Project Rent within the Federal Cost Limit.

By End of 38th Month: Within 180 days of CPOA receipt \*

\*\_\_\_\_\_\*AM has reviewed revised POA & sends letter to owner
indicating

preliminary approval or disapproval of POA to Sell. \[Log date\]

\_\_\_\_\_\_\_If disapproved, letter from AM indicates new NOI (to
extend),

may be submitted in 6 months.

\_\_\_\_\_\_\_If HUD fails to approve/disapprove POA within 180 days
other

than owner error or non-compliance, must provide retroactive

incentives & assistance to an entitled owner.

\_\_\_\_\_\_\_If owner changes mind & decides to retain project, must
submit

POA for incentives. \[Log date\]

By End of 41st Month: Within 90 days from POA approval

\*\_\_\_\_\_\* The following actions constitute POA final approval:

The closing of contract; including the Transfer of Physical

Assets, closing of all loans, completion of Use Agreement &

Amended Regulatory Agreement & signing of Section 8 contract

must all be completed.

\_\_\_\_\_\_\_At time of POA final approval, appraisal can\'t be more
than 30

months from the date of the original HUD Form 9607.

\_\_\_\_\_\_\_If contract to purchase falls through w/in 15 month sale
period,

or does not close within 90 days after POA approval, owner may

offer it for sale to qualified purchaser for remainder of 15

month period or 60 days, whichever is longer. If sales

transaction ended after 15 month offering period, owner makes

property available for sale for a 60-day period.

By 42nd Month: 5th day, Within 5 days of final approval

\_\_\_\_\_\_\_With POA implementation, AM staff notifies Preservation

Division, Headquarters.

By End of 42nd Month: Within 305th day of CPOA receipt

\_\_\_\_\_\_\_AM receives a complete POA from owner who had requested &

received extension. It must be submitted no later than 305 days

from CPOA submission so AM has 60 days to review.

83

By End of 44th Month: Within 365 days of CPOA receipt \*

\_\_\_\_\_\_\_AM sends letter to owner with approval/disapproval of POA
w/

submission extension. \[Log date\]

By End of 50th Month: 9 months from POA final approval \*

\_\_\_\_\_\_\_Owner may prepay mortgage of funds requested in POA not
provided

within earlier of; 2 months after 1st fiscal year of date of

final approval, or 6 months from POA final approval date of

project that would have been eligible to prepay & 9 months, if

not yet eligible to prepay.

\_\_\_\_\_\_\_Owner provides AM info on tenants for displacement within
30

days of identifying such tenants but not less than 30 days prior

to date they must vacate.

By 51st Month: 10th day,

\_\_\_\_\_\_\_Within 10 days of determining project may prepay or 30
days

prior to prepayment, AM must notify each tenant of the

prepayment.

84

ATTACHMENT J

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Calculation of Information

to be Returned to Owner

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85

ATTACHMENT J (Continued)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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86

ATTACHMENT K

NOTE:This is for guidance only. It must be adapted for the specific

circumstances of the POA being submitted.

SUMMARY OF PLAN OF ACTION TO RETAIN A PROJECT

To: Tenants of \_\_\_(Name of Project)\_\_\_

\_\_(Name of owners)\_\_\_, the owners of \_\_\_(name of project)\_\_\_
have submitted

a Plan of Action (POA) to HUD requesting incentives to keep this project

affordable for you. A summary of this POA is below.

A copy of the complete POA is available for inspection and copying at
the

locations and times shown at the end of the summary. All documentation
to

support the POA, except proprietary (private) information is available
from

the owner and HUD at the addresses shown at the end of the Notice. You

have 60 days to review this summary, the POA and supporting material and
to

send your comments to the HUD Office.

OWNER\'S ADDRESS AND PHONE NUMBER

NAME, ADDRESS, AND PHONE NUMBER FOR MANAGEMENT AGENT

The following incentives are requested:

1.A loan of \$\_\_\_\_\_\_\_\_\_\_ at \_\_\_\_\_ percent interest which
will be

repaid over a period (amortized) of \_\_\_\_\_ years.

The total loan is composed of \$\_\_\_\_ for the owner\'s equity and

\$\_\_\_\_\_ for rehabilitation of the project. The payments (debt

service) on this loan will be \$\_\_\_\_\_\_: \$\_\_\_\_\_\_ for the
equity

portion and \$\_\_\_\_\_\_ for the rehabilitation portion of the loan.

The list of rehabilitation items are attached. The owner is

contributing \$\_\_\_\_\_\_\_\_\_\_ over and above the loan towards this

rehabilitation. Of the amount set aside for rehabilitation,

\$\_\_\_\_\_\_\_ will be used to deposit into an account set aside for

doing future repairs (a reserve for replacement account). At

loan closing, an additional \$\_\_\_\_\_\_\_\_ will be put into a
special

account for a period of at least five years or until the project

meets HUD\'s Housing Quality Standards.

2.An Annual Authorized Return of up to \$\_\_\_\_\_\_\_\_\_\_\_. This is
the

return on investment which the owner can take each year, in

addition to the debt service on the loan, if all expenses are

paid and there is money remaining in project funds.

The following requirements will affect tenants:

1)All very low- and low-income tenants at the project who do

not have Section 8 vouchers or certificates will receive a

Section 8 rental subsidy which will be given to the project.

We are requesting Section 8 for \_\_\_\_\_\_ tenants. Any family

whose current income is below the following limits would

qualify at this time:

INSERT CURRENT LOW-INCOME LIMITS

87

Section 8 Contract Rents are the amounts HUD guarantees after the

tenants have paid their share. We are requesting the following

Section 8 rents and utility allowances for the project:

TYPE GROSS RENT UTILITY ALLOWANCE CONTRACT RENT

1 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

2 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

3 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

Other

(specify) \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

The rent plus utility allowance for tenants with Section 8

subsidy will be set as are all Section 8 rents. For tenants not

receiving the subsidy, rent plus utility allowance will be set at

the lowest of 30 percent of the family\'s adjusted monthly income

(AMI) or HUD\'s fair market rent (FMR) for the area. (If

applicable: We feel that if project specific rents (PSR) were

calculated for this project, they would be lower than FMR. We

are therefore requesting that PSRs be used instead of FMR. We

will request use of PSRs in any year in which they are lower than

FMR in order to keep your rent lower.) A Minimum Rent will also

be set each year for tenants whose income goes down when there is

no Section 8 subsidy available. Initial FMRs or PSRs we are

requesting for this project are:

TYPE FMR or PSR UTILITY ALLOWANCE TENANT RENT

1 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

2 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

3 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

Other

(specify) \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

However, no current moderate-income tenant\'s rent will be reduced

because of POA approval.

With these rents, the project should receive gross rents (Gross Rent

Potential) of \$\_\_\_\_\_\_\_. (For Section 236 projects: If more than

\$\_\_\_\_\_ is collected in rents each month, the excess will be
returned

to the Government.) With the utility allowances for all apartments,

the total will be (Preservation Project Rents) \$\_\_\_\_\_\_\_\_\_\_.

Tenants will be selected to fill vacancies in order to meet the

following income profile:

\_\_\_\_\_ Very Low-Income

\_\_\_\_\_ Low-Income

\_\_\_\_\_ Moderate Income

88

The rent for any tenant whose rent will be increasing more than 10% must
be

phased in. We are requesting that the phase in take place at the
following

rate:

INSERT PROPOSED RATE OF PHASE-IN, INCLUDING PASS THROUGH OF OPERATING

EXPENSE INCREASES

Since rents will vary based on your income, all increases in rent plus

utility allowances will be based upon an increase in the percentage of

income you are paying, rather than an increase in the total dollar
amount

paid. Therefore, you and your neighbor may be paying different rents in

any one year.

In exchange for the incentives we agree to keep the housing affordable
and

follow these and other HUD rules for 50 years or for the remaining
useful

life of the project, whichever is longer.

NAMES, ADDRESS AND TIMES AVAILABLE FOR INSPECTION FOR:

TENANT REPRESENTATIVES

HUD OFFICE

ON-SITE OFFICE

ATTACHMENT: List of Rehabilitation Items

89

NOTE:This is for guidance only. It must be adapted for the specific

circumstances of the POA being submitted.

SUMMARY OF PLAN OF ACTION TO PURCHASE A PROJECT

To: Tenants of \_\_\_(Name of Project)\_\_\_

\_\_(Name of owners)\_\_, the owners of \_\_(name of Project)\_\_ AND
\_\_(Name of

Purchaser)\_\_\_, who will be purchasing the project, have submitted a
Plan of

Action (POA) to HUD requesting incentives to keep this project
affordable

for you. A summary of this POA is below.

A copy of the complete POA is available for inspection and copying at
the

locations and times shown at the end of the summary. All documentation
to

support the POA, except proprietary (private) information is available
from

the owner and HUD at the addresses shown at the end of the Notice. You

have 60 days to review this summary, the POA and supporting material and
to

send your comments to the HUD Office.

PURCHASER\'S ADDRESS AND PHONE NUMBER

NAME, ADDRESS, AND PHONE NUMBER FOR MANAGEMENT AGENT

The following incentives are requested:

1.\$\_\_\_\_\_ in HUD-Insured (or non-insured) loans and grants for the

project:

A loan of \$\_\_\_\_\_\_\_\_\_\_\_ at \_\_\_\_ percent interest to be
paid back

(amortized) for a period of 40 years. The payments (debt

service) on this loan will be \$\_\_\_\_\_\_\_\_\_ paid monthly.

\$\_\_\_\_\_\_\_\_ in a grant from HUD.

The total funds are arrived at as follows:

\$\_\_\_\_\_\_\_\_ to buy the project from the present owners

\$\_\_\_\_\_\_\_\_ for expected rehabilitation costs. \$\_\_\_\_\_\_\_
of this

amount must be placed in a special reserve for replacement

account to be used for future repairs on the project. A list of

repairs, we are expecting to make are attached to this summary.

\$\_\_\_\_\_\_\_\_ for transaction costs (other costs involved in buying

the project. The major costs in this category include:

Consultant Fees

Legal Fees

Organizational Costs of the Purchaser

Training Costs for the Purchaser\'s Board Members

Operating Deficit for the repair period and the phase-in

period.

(List any others being requested).

The purchaser is contributing \$\_\_\_\_\_\_\_\_\_ towards the cost of

purchase and repairs.

2\. An annual owner\'s distribution of up to \$\_\_\_\_\_\_\_\_\_\_\_.
The

purchaser/new owner can only take this distribution in any year

in which there are funds left over after all project expenses

have been met.

90

3.\$\_\_\_\_\_\_\_\_\_ for oversight costs to be added to the budget.
These

costs will be phased out as the Board of Directors gain

management experience and the help is no longer required.

The following requirements will affect tenants:

1.All very low- and low-income tenants at the project who do not

have Section 8 vouchers or certificates will receive a Section 8

rental subsidy which will be given to the project. We are

requesting Section 8 for \_\_\_\_\_ tenants. Any family whose current

income is below the following limits would qualify at this time:

INSERT CURRENT LOW-INCOME LIMITS

Section 8 Contract Rents are the amounts HUD guarantees after the

tenants have paid their share. We are requesting the following

Section 8 rents and utility allowances for the project:

TYPE GROSS RENT UTILITY ALLOWANCE CONTRACT RENT

1 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

2 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

3 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

Other

(specify) \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

The rent plus utility allowance for tenants with Section 8 subsidy

will be set as are all Section 8 rents. For tenants not receiving the

subsidy, rent plus utility allowance will be set at the lowest of 30

percent of the family\'s adjusted monthly income (AMI) or HUD\'s fair

market rent (FMR) for the area. (If applicable: We feel that if

project specific rents (PSR) were calculated for this project, they

would be lower than FMR. We are therefore requesting that PSRs be

used instead of FMR. We will request use of PSRs in any year in which

they are lower than FMR in order to keep your rent lower.) A Minimum

Rent will also be set each year for tenants whose income goes down

when there is no Section 8 subsidy available. Initial FMRs or PSRs we

are requesting for this project are:

TYPE FMR or PSR UTILITY ALLOWANCE TENANT RENT

1 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

2 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

3 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

Other

(specify) \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

However, no current moderate-income tenant\'s rent will be reduced

because of POA approval.

With these rents, the project should receive gross rents (Gross Rent

Potential) of \$\_\_\_\_\_\_\_\_\_\_. (For Section 236 projects: If more
than

\$\_\_\_\_\_\_ is collected in rents each month, the excess will be
returned

to the Government.) With the utility allowances for all apartments,

the total will be (Preservation Project Rents) \$\_\_\_\_\_\_\_\_\_\_.

91

Tenants will be selected to fill vacancies in order to meet the
following

income profile:

\_\_\_\_\_ Very Low-Income

\_\_\_\_\_ Low-Income

\_\_\_\_\_ Moderate Income

The rent for any tenant whose rent will be increasing more than 10% must
be

phased in. We are requesting that the phase in take place at the
following

rate:

INSERT PROPOSED RATE OF PHASE-IN, INCLUDING PASS THROUGH OF OPERATING

EXPENSE INCREASES

Since rents will vary based on your income, all increases in rent plus

utility allowances will be based upon an increase in the percentage of

income you are paying, rather than an increase in the total dollar
amount

paid. Therefore, you and your neighbor may be paying different rents in

any one year.

In exchange for the incentives we agree to keep the housing affordable
and

follow these and other HUD rules for 50 years or for the remaining
useful

life of the project, whichever is longer.

NAMES, ADDRESS AND TIMES AVAILABLE FOR INSPECTION FOR:

TENANT REPRESENTATIVES

HUD OFFICE

ON-SITE OFFICE

ATTACHMENT: List of Rehabilitation Items

92

ATTACHMENT L

REVISED PTAG APPLICATION EXHIBITS 3, 6 & 7

EXHIBIT 3 - DETAIL OF PROPOSED ACTIVITIES AND COSTS

ACCEPTABLE ACTIVITIES:

1.Establishing and organizing Resident Councils or CBO\'s, including

legal services to incorporate and establish non-profit status.

2.Establishing accounting procedures and related activities.

3.Architectural and engineering services.

4.Submission of expression of interest and preparation of bona fide

offer.

5.Securing financing and preparation of mortgage documents,

Transfer of Physical Assets documents, and other documentation

incident to closing a purchase offer.

6.Training for community residents in skills related to operations

and management of the project, including leadership training.

7.Training for board members and affiliated persons.

8.Developing potential management functions or tasks to be

undertaken by the applicant organization.

9.Developing and negotiating management contracts and related

management procedures.

10.Preparing market studies.

11.Other activities related to this NOFA which are approved by the

Field Office and are reasonable both in costs, timeliness, and

applicability to achieve the purposes of this NOFA.

For EACH of the above activities the organization proposes to

accomplish, provide a separate sheet for EACH grant phase with the

information listed in Sections A and B below. Incomplete submissions or

applications that deviate from this format will not be accepted.

Provide the information requested in the following two sections.

93

SECTION A. - Exhibit 3A

1.ACTIVITY TO BE ACCOMPLISHED IN GRANT PHASE \_\_\_\_\_\_\_\_\_ (I, II
OR III)

2\. ACTIVITY NUMBER (Per above list of acceptable activities)
\_\_\_\_\_\_\_\_\_\_\_\_

ACTIVITY
NAME\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

3\. NARRATIVE DESCRIPTION OF ACTIVITY: Include description of benefit

expected from the activity and the reasons why this activity is NOT a

duplication of an activity proposed for the same individual under a

different grant. Also describe why this activity is NOT a duplication of

an activity already funded by HUD under a different part of the

Preservation Process (example: why additional inspections services are

needed if a comprehensive PCNA has already been completed and paid for
by

HUD.) Include anticipated duration of the activity.

Specifically describe training to be provided. Separate training for

residents of the project proposed for purchase (Activity 6 above) as a

separate item from training for Board members (Activity 7 above).
Provide

schedule of training, purpose, length of duration. Explain how the

training will achieve the purposes for which it is directed. Explain why

training is needed for Board members and why such skills are not
currently

possessed by the Board as one criteria for Board selection.

4\. SCHEDULE AND CALENDAR OF ACTIVITIES FOR THIS ITEM, INCLUDING

COMPLETION DATE:

EXAMPLE: FEB 96 MAR 96 APR 96 MAY 96

PREPARE PLAN OF ACTION A. 12 HRS A. 6 HRS A. 24 HRS COMPLETE

B. 2 HRS C. 6 HRS COMPLETE

TPA PACKAGE C. 12 HRS D. 14 HRS E. 8 HRS

5\. PERSONNEL INVOLVED: (Provide a narrative of the method of obtaining

the most economical services for all contractors and consultants)
Include

the name and titles of all salaried personnel, all paid AND pro bono

consultants.

COST PER TOTAL TOTAL

NAME TITLE HR HOURS COST

A.\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_

B.\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_

C.\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_

D.\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_

Identify and describe the method of obtaining the most economical
services

for consultants and contractors which will be used by the organization.

94

6\. SUPPLIES, MATERIAL AND EQUIPMENT COSTS FOR THIS ACTIVITY: (for any

item costing more than \$500 provide a description of the
organization\'s

method of obtaining the most competitive cost of the item) These items
are

for direct costs of materials, supplies, and equipment. Overhead
expenses

of consultants are contained within their hourly rate as an indirect

expense. (See applicable OMB Circulars.)

Description Cost Purpose

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

7\. RENTAL SPACE: Provide location of space to be rented, and length of

rental period, including evidence that rental of space will not benefit
any

members/directors of the Board or the Seller. Space costs of consultants

are included in their hourly rate as an indirect expenses. (See
applicable

OMB Circulars.)

8\. Explain how the activity listed as a cost center fits into the
overall

plan which is supported by the residents to achieve the purchase of the

property.

Information requested in this Exhibit is required to evaluate cost

effectiveness of the organization\'s plans and is tied to the
organization\'s

certifications under Exhibit 12 of this application.

95

EXHIBIT 3B

SECTION 2: COSTS AND ACTIVITIES SUMMARY

PHASE \_\_\_\_\_\_\_\_\_

Total Grant Grant Non-Funds

Activity Costs Requested Funds Approved

\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_
\_\_\_\_\_\_\_\_\_

1.Legal Services to

incorporated applicant

and establish non-profit

corporation \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_

2.Accounting services,

accounting systems

and audit \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_

3.Architectural and

Engineering service \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_
\_\_\_\_\_\_\_\_\_

4.Expression of interest,

Bona fide offers to

purchase \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_

5.Secure financing, prepare

TPA or Mortgage

documentation \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_
\_\_\_\_\_\_\_\_\_

6.Training and Technical

Assistance for

Residents \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_

7.Training and Technical

Assistance for Board

of Directors \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_

8.Develop Management

Functions \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_

9.Negotiate Management

Contracts \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_

10\. Market Studies \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_
\_\_\_\_\_\_\_\_\_

11\. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_

(Other Eligible

Activities)

12\. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_
\_\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_

(Other Eligible

Activities)

TOTAL \_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\_\_\_

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EXHIBIT 6 - APPLICANT EXPERIENCE

1\. Applicant Name
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Address\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

2\. Sponsoring Organization
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(If applicable)

Sponsor
Address\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

3.Check one:

\[\_\_\] The information regarding experience is provided for

the sponsor because the applicant organization has no

direct experience in the development/management of

multi-family housing

\[\_\_\] The information regarding experience is provided for

the applicant because the applicant organization has

direct experience in the development/management of

multi-family housing.

\[\_\_\] The information regarding experience is provided for

Member(s)/Director(s) of the applicant organization

because the applicant organization has no direct experience in

the development/management of multi-family housing and has no

sponsor with direct experience in the development/management

multi-family housing.

A. Provide details of experience and role in the development/

management of multi-family housing. Include name(s) of project(s), type
of

financing, size and occupancy type, timeframe of involvement. Attach as

Exhibit 6A.

B. Provide details of experience and role in the provision of

multi-family ownership programs - for example, conversions of rental

programs to cooperatives or condominiums. Identify year of activity,
type

of involvement, problems encountered, solutions, and result of
activities.

Attach as Exhibit 6B.

C. Provide details of experience in organizing, developing and/or

training low income neighborhood or resident groups. Identify location,

year of involvement, length of involvement, problems encountered,

solutions, and result of activities. If consultants or Board members
will

be used to provide this expertise, provide detailed information for the

consultant experience. If consultants have not been selected, identify
the

selection process to be used to obtain consultants who will provide the

level of experience required. Attach as Exhibit 6C.

D. Describe how the experience/expertise outline in Exhibits 6A, 6B,

and 6C is applicable and sufficient for the proposed tasks. Attach as

Exhibit 6D.

E. Provide information regarding staff experience. DO NOT PROVIDE A

STANDARDIZED RESUME. Describe the nature and extent of the experience of

the key staff, individually, in development/management of housing
projects

and provisions of technical assistance. Give specific names of projects,

dates of involvement, role played, individual contribution to results of

efforts. Give size of budget administered, number of employees
supervised,

number of clients served. State whether projects were troubled and how

issues were resolved.

97

If positions have not yet been filled, describe requirements for

positions, principal duties and responsibilities, advertising and
selection

procedures.

Attach as Exhibit 6E.

98

Exhibit 7 - Applicant Eligibility

1\. Name of
Organization\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Address
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Organization is filing as (check one):

Resident Council (per 24 CFR 248.101) \[\_\_\_\]

Resident Management Group \[\_\_\_\]

Community Based Non-Profit Organization (CBO) \[\_\_\_\]

(Per 24 CFR 248.101, and as approved by the Field Office)

2\. Date of Filing for Incorporation (if applicable)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date of Filing for IRS 501(c)(3) status
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Copy of IRS letter of receipt dated \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
Exhibit 7A

Signed copy of IRS Form 8821, dated \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
Exhibit 7B

(PTAG App. Date)

3.Members of the Board:

Name Address Board Term Low-Income

(Dates) Yes No

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4.Articles of Incorporation

Attach a certified copy as Exhibit 7C.

5.By-laws of the Organization

Attach a certified copy as Exhibit 7D.

Amendments must be attached as Exhibit 7E, or a statement that

there have been no amendments as of the date of the PTAG

application.

6.By-laws must clearly identify the following information:

a)Board members/directors may not serve more than two consecutive

terms, not to exceed three years per term.

99

b)Process by which board members/directors are appointed to the

Board. Board members/directors shall be selected by individuals

or organizations other than the current Board in an open process

which is outlined in the By-laws. No more than 1/3 of the board

members may be public officials. Up to 1/3 of the members may be

appointed by the State or local government.

c)Board members/directors may not be related by blood, marriage, or

other operation of law, or have any business or close personal

connection with the Seller of the property, its agents, or any

staff/consultants of the Seller, or with any staff/consultants of

the applicant. This information is required to address the

requirement that the CBO is neither controlled by, nor under the

direction of, individuals or entities seeking to derive profit or

gain from the organization.

d)Process by which members/directors may be removed from the Board

for cause. Removal must be in a public meeting, notice of which

is circulated to all interested parties. Removal of

members/directors must be by at least a 3/4 vote of the entire

membership of the Board.

e)Board membership must at all times include a minimum of 1/3 of

the members representing the immediate low-income community,

including at least one member residing in the project and elected

by the residents of the project proposed to be purchased by the

applicant.

f)Board membership must be comprised of members residing in the

community. For urban areas, \"community\" is the immediate

community of the project, defined as the boundaries of the area

in which the project is located, as defined in the applicable

CHAS for the project. For rural areas, \"community\" may be the

neighborhood or neighborhoods, town, village, country, or

multi-county area (but not the entire state), provided the Board

of Directors of the organization contains low-income residents

from each county of a multi-county area.

g)Process used to provide a formal process for low-income, program

beneficiaries to advise the organization on its decisions

regarding the acquisition, rehabilitation, and management of

affordable housing.

100

NOTE:This is for guidance only. It must be adapted for the specific

circumstances of the POA being submitted.

SUMMARY OF PLAN OF ACTION TO PURCHASE A PROJECT

To: Tenants of \_\_(Name of Project)\_\_\_

\_\_(Name of owners)\_\_, the owners of \_\_(name of project)\_\_\_\_
AND \_\_\_(Name of

Purchaser)\_\_\_, who will be purchasing the project, have submitted a
Plan of

Action (POA) to HUD requesting incentives to keep this project
affordable

for you. A summary of this POA is below.

A copy of the complete POA is available for inspection and copying at
the

locations and times shown at the end of the summary. All documentation
to

support the POA, except proprietary (private) information is available
from

the owner and HUD at the addresses shown at the end of the Notice. You

have 60 days to review this summary, the POA and supporting material and
to

send your comments to the HUD Office.

PURCHASER\'S ADDRESS AND PHONE NUMBER

NAME, ADDRESS, AND PHONE NUMBER FOR MANAGEMENT AGENT

The following incentives are requested:

1.\$\_\_\_\_\_ in HUD-Insured (or non-insured) loans and grants for the

project:

A loan of \$\_\_\_\_\_\_\_\_\_\_\_\_ at \_\_\_ percent interest to be
paid back

(amortized) for a period of 40 years. The payments (debt

service) on this loan will be \$\_\_\_\_\_\_\_\_\_ paid monthly.

\$\_\_\_\_\_\_\_\_ in a grant from HUD.

The total funds are arrived at as follows:

\$\_\_\_\_\_\_\_\_\_ to buy the project from the present owners

\$\_\_\_\_\_\_\_\_ for expected rehabilitation costs. \$\_\_\_\_\_\_\_
of this

amount must be placed in a special reserve for replacement

account to be used for future repairs on the project. A list of

repairs, we are expecting to make are attached to this summary.

\$\_\_\_\_\_\_\_\_\_\_\_ for transaction costs (other costs involved in

buying the project). The major costs in this category include:

Consultant Fees

Legal Fees

Organizational Costs of the Purchaser

Training Costs for the Purchaser\'s Board Members

Operating Deficit for the repair period and the phase-in

period.

(List any others being requested).

The purchaser is contributing \$\_\_\_\_\_\_\_\_\_ towards the cost of

purchase and repairs.

2.An annual owner\'s distribution of up to \$\_\_\_\_\_\_\_\_\_\_\_\_.
The

purchaser/new owner can only take this distribution in any year

in which there are funds left over after all project expenses

have been met.

101

3.\$\_\_\_\_\_\_\_\_\_ for oversight costs to be added to the budget.
These

costs will be phased out as the Board of Directors gain

management experience and the help is no longer required.

The following requirements will affect tenants:

1.All very low- and low-income tenants at the project who do not

have Section 8 vouchers or certificates will receive a Section 8

rental subsidy which will be given to the project. We are

requesting Section 8 for \_\_\_\_\_\_\_ tenants. Any family whose

current income is below the following limits would qualify at

this time:

INSERT CURRENT LOW-INCOME LIMITS

Section 8 Contract Rents are the amounts HUD guarantees after the

tenants have paid their share. We are requesting the following

Section 8 rents and utility allowances for the project:

TYPE GROSS RENT UTILITY ALLOWANCE CONTRACT RENT

1 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

2 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

3 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

Other

(specify) \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

The rent plus utility allowance for tenants with Section 8 subsidy

will be set as are all Section 8 rents. For tenants not receiving the

subsidy, rent plus utility allowance will be set at the lowest of 30

percent of the family\'s adjusted monthly income (AMI) or HUD\'s fair

market rent (FMR) for the area. (If applicable: We feel that if

project specific rents (PSR) were calculated for this project, they

would be lower than FMR. We are therefore requesting that PSRs be

used instead of FMR. We will request use of PSRs in any year in which

they are lower than FMR in order to keep your rent lower.) A Minimum

Rent will also be set each year for tenants whose income goes down

when there is no Section 8 subsidy available. Initial FMRs or PSRs we

are requesting for this project are:

TYPE FMR or PSR UTILITY ALLOWANCE TENANT RENT

1 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

2 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

3 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

Other

(specify) \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

However, no current moderate-income tenant\'s rent will be reduced
because

of POA approval.

With these rents, the project should receive gross rents (Gross Rent

Potential) of \$\_\_\_\_\_\_\_\_. (For Section 236 projects: If more
than \$\_\_\_\_ is

102

collected in rents each month, the excess will be returned to the

Government.) With the utility allowances for all apartments, the total

will be (Preservation Project Rents) \$\_\_\_\_\_\_\_\_\_\_.

Tenants will be selected to fill vacancies in order to meet the
following

income profile:

\_\_\_\_\_ Very Low-Income

\_\_\_\_\_ Low-Income

\_\_\_\_\_ Moderate Income

The rent for any tenant whose rent will be increasing more than 10% must
be

phased in. We are requesting that the phase in take place at the
following

rate:

INSERT PROPOSED RATE OF PHASE-IN, INCLUDING PASS THROUGH OF OPERATING

EXPENSE INCREASES

Since rents will vary based on your income, all increases in rent plus

utility allowances will be based upon an increase in the percentage of

income you are paying, rather than an increase in the total dollar
amount

paid. Therefore, you and your neighbor may be paying different rents in

any one year.

In exchange for the incentives we agree to keep the housing affordable
and

follow these and other HUD rules for 50 years or for the remaining
useful

life of the project, whichever is longer.

NAMES, ADDRESS AND TIMES AVAILABLE FOR INSPECTION FOR:

TENANT REPRESENTATIVES

HUD OFFICE

ON-SITE OFFICE

ATTACHMENT: List of Rehabilitation Items

103

APPENDIX 8

NOTE:This is for guidance only. It must be adapted for the specific

circumstances of the POA being submitted.

SUMMARY OF PLAN OF ACTION TO RETAIN A PROJECT

To: Tenants of \_\_\_(Name of Project)\_\_\_\_

\_\_(Name of owners)\_\_\_, the owners of \_\_\_(name of project)\_\_\_
have submitted

a Plan of Action (POA) to HUD requesting incentives to keep this project

affordable for you. A summary of this POA is below.

A copy of the complete POA is available for inspection and copying at
the

locations and times shown at the end of the summary. All documentation
to

support the POA, except proprietary (private) information is available
from

the owner and HUD at the addresses shown at the end of the Notice. You

have 60 days to review this summary, the POA and supporting material and
to

send your comments to the HUD Office.

OWNER\'S ADDRESS AND PHONE NUMBER

NAME, ADDRESS, AND PHONE NUMBER FOR MANAGEMENT AGENT

The following incentives are requested:

1\. A loan of \$\_\_\_\_\_\_\_\_\_\_ at \_\_\_ percent interest which
will be

repaid over a period (amortized) of \_\_\_\_\_ years.

The total loan is composed of \$\_\_\_\_ for the owner\'s equity and
\$\_\_\_\_\_

\_\_\_ for rehabilitation of the project. The payments (debt service) on

this loan will be \$\_\_\_\_\_\_\_\_\_ : \$\_\_\_\_\_\_\_\_ for the
equity portion and

\$\_\_\_\_\_\_ for the rehabilitation portion of the loan.

The list of rehabilitation items are attached. The owner is

contributing \$\_\_\_\_\_\_ over and above the loan towards this

rehabilitation. Of the amount set aside for rehabilitation,
\$\_\_\_\_\_\_\_

will be used to deposit into an account set aside for doing future

repairs (a reserve for replacement account). At loan closing, an

additional \$\_\_\_\_\_\_\_\_ will be put into a special account for a
period

of at least five years or until the project meets HUD\'s Housing

Quality Standards.

2\. An Annual Authorized Return of up to \$\_\_\_\_\_\_\_\_. This is the

return on investment which the owner can take each year, in addition

to the debt service on the loan, if all expenses are paid and there is

money remaining in project funds.

The following requirements will affect tenants:

1\. All very low- and low-income tenants at the project who do not

have Section 8 vouchers or certificates will receive a Section 8

rental subsidy which will be given to the project. We are requesting

Section 8 for \_\_\_\_\_\_\_ tenants. Any family whose current income is

below the following limits would qualify at this time:

INSERT CURRENT LOW-INCOME LIMITS

Section 8 Contract Rents are the amounts HUD guarantees after the

tenants have paid their share. We are requesting the following

Section 8 rents and utility allowances for the project:

104

TYPE GROSS RENT UTILITY ALLOWANCE CONTRACT RENT

1 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

2 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

3 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

Other

(specify) \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

The rent plus utility allowance for tenants with Section 8 subsidy

will be set as are all Section 8 rents. For tenants not receiving the

subsidy, rent plus utility allowance will be set at the lowest of 30

percent of the family\'s adjusted monthly income (AMI) or HUD\'s fair

market rent (FMR) for the area. (If applicable: We feel that if

project specific rents (PSR) were calculated for this project, they

would be lower than FMR. We are therefore requesting that PSRs be

used instead of FMR. We will request use of PSRs in any year in which

they are lower than FMR in order to keep your rent lower.) A Minimum

Rent will also be set each year for tenants whose income goes down

when there is no Section 8 subsidy available. Initial FMRs or PSRs we

are requesting for this project are:

TYPE FMR or PSR UTILITY ALLOWANCE TENANT RENT

1 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

2 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

3 BR \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

Other

(specify) \$ \_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_\_\_\_

However, no current moderate-income tenant\'s rent will be reduced
because

of POA approval.

With these rents, the project should receive gross rents (Gross Rent

Potential) of \$\_\_\_\_\_\_\_\_\_ . (For Section 236 projects: If more
than \$\_\_\_\_\_

is collected in rents each month, the excess will be returned to the

Government.) With the utility allowances for all apartments, the total

will be (Preservation Project Rents) \$\_\_\_\_\_\_\_\_\_\_.

Tenants will be selected to fill vacancies in order to meet the
following

income profile:

\_\_\_\_\_ Very Low-Income

\_\_\_\_\_ Low-Income

\_\_\_\_\_ Moderate Income

The rent for any tenant whose rent will be increasing more than 10% must
be

phased in. We are requesting that the phase in take place at the
following

rate:

105

INSERT PROPOSED RATE OF PHASE-IN, INCLUDING PASS THROUGH OF OPERATING

EXPENSE INCREASES

Since rents will vary based on your income, all increases in rent plus

utility allowances will be based upon an increase in the percentage of

income you are paying, rather than an increase in the total dollar
amount

paid. Therefore, you and your neighbor may be paying different rents in

any one year.

In exchange for the incentives we agree to keep the housing affordable
and

follow these and other HUD rules for 50 years or for the remaining
useful

life of the project, whichever is longer.

NAMES, ADDRESS AND TIMES AVAILABLE FOR INSPECTION FOR:

TENANT REPRESENTATIVES

HUD OFFICE

ON-SITE OFFICE

ATTACHMENT: List of Rehabilitation Items

\*U.S. Government Printing Office: 1995 \-- 387-734/20142

106