**ADDITIONAL FUNDS TRANSACTIONS**

**New Requirements**

**Processing Additional Funds (A/F) Transactions**

**The Additional Funds Transaction Highlights Memorandum**

1.  **Purpose**

The A/F Transaction Highlights Memorandum (hereafter, the "A/F Memo")
was developed to document the critical components of an Additional Funds
transaction from initial submission through closing, and to ensure all
appropriate approvals and reviews are obtained along the way. Because a
full and complete understanding of an Additional Funds transaction is
often developed as it is brought through the OMHAR approval process, the
A/F Memo is intended to be completed iteratively, with needed revisions
at four specific points in the process.

2.  **The A/F Transaction Highlights Memorandum**

The A/F Memo template can be found as Attachment A to this document;
extensive instructions are integrated into the A/F Memo template.
Completion of the A/F Memo requires narrative discussion of key
information, including TPA processing, debt forgiveness, and the timing
and extent of additional funds. Additionally, the A/F Memo should be
accompanied by three ancillary forms: (1) the Rehab Summary (Excel),
which identifies exactly what elements of the rehab are part of the
OMHAR Baseline Transaction---this form is required; (2) A funding
timeline (Excel), which illustrates all permanent and interim
financing---this form is voluntary; and (3) A contact list (no format
required or provided), as these transactions often have numerous
stakeholders and parties who do not normally participate in the closing
of a Mark-to-Market transaction, but who need to be identified by
OMHAR's Closing Department---provision of this information is voluntary,
but recommended. The A/F Memo must be signed by the PAE Underwriter at
each iteration; additional entities should sign as specified on the
template (e.g. Production Office Portfolio Director, HQ Transaction
Specialist, etc.).

3.  **Procedure**

There are five main points during the process where the form (and its
ancillaries) is required to accompany a submission (not including the
requirement that AF transactions be submitted to the Resource Desk for a
Reality Check prior to the initial submission (see below):

Initial Submission When the transaction is initially submitted to the
Production Office for a Full Transaction Review (FTR);

1st Revision When the PAE submits the revised transaction to Production
Office Loan Committee (POLC), subsequent to the Transaction Review;

2nd Revision When the Portfolio Director submits the transaction for
Headquarters Loan Committee (HQLC); and,

3rd Revision Prior to submission of the transaction to the Closing
Department to schedule a funding date.

Final Revision After closing, a final revision of the A/F Memo is
submitted in the docket to the Post-Closing department by the PAE.

It is imperative that the A/F Memo be kept up-to-date with the content
of the transaction review and current with the discussions in the Loan
Committee presentations throughout the entire process. Please note that
although the A/F Memo should be resubmitted at a number of points in the
processing of an additional funds transaction, these versions reflect,
for the most part, revisions or additions to the initial document
developed by the PAE---not an entirely new document. The complete
process is described below.

1.  **All A/F Transactions must be submitted to the Resource Desk for a
    'reality check' prior to the submission of the transaction to the
    Production Office.**

2.  **Submission and Transaction Review -- Initial Submission of the A/F
    Memo.**

-   The PAE completes the A/F Memo and submits it---as a draft---along
    with the transaction submission to the Production Office.

-   The Production Office takes the submission (including the draft A/F
    Memo) and assigns it to a Reviewer, who is responsible for
    completing a Full Transaction Review ("FTR").

-   The Reviewer returns the completed FTR to the PAE and Relationship
    Manager ("RM"). Shortly thereafter, any concerns or shortcomings in
    the proposed restructuring are addressed in a resolution phone call
    between the PAE, the RM and the Reviewer.

    1.  **Resubmission and POLC Transaction Review -- 1st Revision of
        the A/F Memo.**

-   The PAE makes modifications based on the resolution phone call and
    resubmits the transaction to the Reviewer. Please note: It is
    imperative that the PAE amend the A/F Memo and resubmit at the same
    time in order to ensure the documents remain parallel in content.

-   Once all issues have been addressed, the final submission is
    delivered to the Production Office for Production Office Loan
    Committee.

    1.  **Headquarters Loan Committee (HQLC) -- 2nd Revision of the A/F
        Memo**

If the transaction is approved at POLC, the PAE must ensure any POLC
revisions or enhancements are reflected on the A/F Memo, which will be
submitted as supporting documentation for Headquarters Loan Committee
(HQLC). Note that while the PAE is responsible for any revisions to the
Memo, the Portfolio Director must also review and sign this form at this
step, as an indication that aspects of the transaction related to
Additional Funds policy have been considered and documented.

2.  **Closing -- 3rd Revision of the A/F Memo**

Upon HQLC approval, the PAE submits the updated A/F Memo (reflecting
HQLC revisions and enhancements) and accompanying model to the
Transaction Specialist, Dennis Manning. Once received, the Transaction
Specialist reviews the submission for closing issues and model integrity
in order to provide final approval. Any required corrections or
adjustments are made by the PAE or Production Office and are resubmitted
to the Transaction Specialist for review and approval. The transaction
will not be placed on the closing calendar until the Transaction
Specialist has given final approval.

3.  **Post Closing --Final Revision of the A/F Memo**

The PAE is responsible for submitting the final A/F memo to the Post
Closing department in the docket, no later than 65 days after closing of
the transaction. This revision must reflect the actual structure of the
closing.

4.  **Implementation**

Effective June 21, 2004, completion of the AF Deal Memo is required for
all transactions not yet submitted to OMHAR by the PAE.

For assets already in the OMHAR review and approval pipeline, the
initial AF Deal Memo submission must be submitted at the next applicable
step in the timeline (See 3 above) when a Revision to the original would
otherwise have been required (e.g., if deal has already gone to HQ loan
committee, (2^nd^ Revision) then initial submission required prior to
submitting the PPC to the Closing Dept to get on the Closing Calendar,
see 3.5 above). Effective June 21, no AF closings will be added to the
Closing Calendar without prior approval by the Transaction Specialist of
the AF Deal Memo.

For assets already on the Closing Calendar as of June 21, 2004, the PAE
will be required to provide specific information to the Transaction
Specialist for approval prior to Closing (a modified version of the AF
Deal Memo). Assuming these assets were identified as AF deals on the
7.4, this process is already underway. To avoid closing delays please
contact the Transaction Specialist regarding modified requirements for
any transactions already on the Closing Calendar.

5.  **Contacts**

Any questions about this process should be forwarded to:

Dennis Manning, Transaction Specialist

Dennis_A_Manning@HUD.GOV

202-708-3856, ext. 3871