[Federal Register Volume 87, Number 46 (Wednesday, March 9, 2022)]
[Notices]
[Pages 13374-13449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-04718]



[[Page 13373]]

Vol. 87

Wednesday,

No. 46

March 9, 2022

Part II





Department of Agriculture





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Rural Housing Service





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Section 514 Off-Farm Labor Housing Loans and Section 516 Off-Farm Labor 
Housing Grants To Improve, Repair, or Make Modifications to Existing 
Off-Farm Labor Housing Properties for Fiscal Year 2022; Notice

Federal Register / Vol. 87 , No. 46 / Wednesday, March 9, 2022 / 
Notices

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DEPARTMENT OF AGRICULTURE

Rural Housing Service

[Docket No.: RHS-22-MFH-0003]


Section 514 Off-Farm Labor Housing Loans and Section 516 Off-Farm 
Labor Housing Grants To Improve, Repair, or Make Modifications to 
Existing Off-Farm Labor Housing Properties for Fiscal Year 2022

AGENCY: Rural Housing Service, USDA.

ACTION: Notice of Funds Availability (NOFA).

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SUMMARY: The Rural Housing Service (RHS), a Rural Development agency of 
the United States Department of Agriculture, announces that it is 
accepting pre-applications for subsequent Section 514 Off-Farm Labor 
Housing (Off-FLH) loans and subsequent Section 516 Off-FLH grants to 
improve, repair, or make modifications to existing Off-Farm Labor 
Housing Properties for fiscal year 2022. Funds made available under 
this notice are $5,500,000 for Section 514 loans and $17,000,000 for 
Section 516 grants. This Notice describes the method used to distribute 
funds, the pre-application and final application process, and 
submission requirements.

DATES: Eligible pre-applications submitted to the Production and 
Preservation Division, Processing and Report Review Branch, for this 
Notice will be accepted until April 25, 2022, 12 p.m., Eastern Standard 
Time. Pre-applications that are deemed eligible but are not selected 
for further processing, will be withdrawn from processing. RHS will not 
consider any application that is received after the established 
deadlines unless the date and time are extended by another Notice 
published in the Federal Register. The RHS may at any time supplement, 
extend, amend, modify, or supersede this Notice by publishing another 
Notice in the Federal Register. Additional information about this 
funding opportunity can be found on the Grants.gov website at https://www.grants.gov.
    The application deadlines are as follows:
    1. Pre-applications must be submitted by April 25, 2022, 12 p.m., 
Eastern Standard Time.
    2. RHS notification to applicants by June 27, 2022.
    3. Final applications must be submitted by August 29, 2022, 12 
p.m., Eastern Standard Time.
    4. Awards communicated to applicants by October 31, 2022.
    5. Awards posted to the RHS website by November 30, 2022.

ADDRESSES: Applications to this Notice must be submitted electronically 
to the Production and Preservation Division, Processing and Report 
Review Branch.
    At least two business days prior to the application deadline, the 
applicant must email the RHS a request to create a shared folder in 
CloudVault. The email must be sent to the following address: <a href="/cdn-cgi/l/email-protection#c887aeaee58e8480a9b8b8a4a1aba9bca1a7a688bdbbaca9e6afa7be"><span class="__cf_email__" data-cfemail="97d8f1f1bad1dbdff6e7e7fbfef4f6e3fef8f9d7e2e4f3f6b9f0f8e1">[email protected]</span></a>. The email must contain the following 
information:
    1. Subject line: ``Off-FLH Repair Application Submission.''
    2. Body of email: Borrower Name, Project Name, Borrower Contact 
Information, Project State.
    3. Request language: ``Please create a shared CloudVault folder so 
that we may submit our application documents.''
    Once the email request to create a shared CloudVault folder has 
been received, a shared folder will be created within 2 business days. 
When the shared CloudVault folder is created by the RHS, the system 
will automatically send an email to the applicant's submission email 
with a link to the shared folder. All required application documents in 
accordance with this Notice must be loaded into the shared CloudVault 
folder. When the submission deadline is reached the applicant's access 
to the shared CloudVault folder will be removed. Any document uploaded 
to the shared CloudVault folder after the application deadline will not 
be reviewed or considered.
    For further instructions, please refer to Section C. Pre-
Application and Submission Information of this Notice.

FOR FURTHER INFORMATION CONTACT: Jonathan Bell, Director, Processing 
and Report Review Branches, Production and Preservation Division, 
Multifamily Housing Programs, Rural Development, United States 
Department of Agriculture, via email: <a href="/cdn-cgi/l/email-protection#6d202b251d1f020e081e1e04030a5c2d181e090c430a021b"><span class="__cf_email__" data-cfemail="6b262d231b1904080e181802050c5a2b1e180f0a450c041d">[email protected]</span></a> or 
telephone: (254) 742-9764.
    For information regarding the Addendum: Capital Needs Assessment 
Process located at the end of this notice, contact: Jonathan Bell, 
Director, Processing and Report Review Branches, Production and 
Preservation Division, Multifamily Housing Programs, Rural Development, 
United States Department of Agriculture, via email: 
<a href="/cdn-cgi/l/email-protection#5e1318162e2c313d3b2d2d3730396f1e2b2d3a3f70393128"><span class="__cf_email__" data-cfemail="df929997afadb0bcbaacacb6b1b8ee9faaacbbbef1b8b0a9">[email protected]</span></a> or telephone: (254) 742-9764.

SUPPLEMENTARY INFORMATION:

Authority

    This solicitation is authorized pursuant to the Title V of the 
Housing Act of 1949 (Pub. L. 81-171), as amended; 7 CFR 3560, subpart 
L; 42 U.S.C. 1484; 42 U.S.C. 1486(h); and 42 U.S.C. 1480.

Rural Development: Key Priorities

    The RHS encourages applicants to consider projects that will 
advance the following key priorities:
    <bullet> Assisting Rural communities recover economically from the 
impacts of the COVID-19 pandemic, particularly disadvantaged 
communities;
    <bullet> Ensuring all rural residents have equitable access to RD 
programs and benefits from RD funded projects; and
    <bullet> Reducing climate pollution and increasing resilience to 
the impacts of climate change through economic support to rural 
communities.
    For further information, visit https://www.rd.usda.gov/priority-points.

Background

    USDA's Rural Development Agencies, comprising the Rural Business-
Cooperative Service (RB-CS), Rural Housing Service (RHS), and the Rural 
Utilities Service (RUS), are leading the way in helping rural America 
improve the quality of life and increase the economic opportunities for 
rural people. RHS offers a variety of programs to build or improve 
housing and essential community facilities in rural areas. The Agency 
also offers loans, grants, and loan guarantees for single- and multi-
family housing, child-care centers, fire and police stations, 
hospitals, libraries, nursing homes, schools, first responder vehicles 
and equipment, housing for farm laborers and much more. The Agency also 
provides technical assistance loans and grants in partnership with non-
profit organizations, Indian tribes, state and Federal government 
agencies, and local communities.
    Sections 514 and 516 of the Housing Act of 1949 allows the RHS to 
provide competitive financing and grants, respectively, for affordable 
multi-family rental housing. The program objective is to better 
administer repair funds in a fair, equitable, and transparent manner. 
Funds will be used to improve, repair, or make modifications to 
existing Off-FLH properties currently financed by the RHS that serve 
domestic farm laborers, retired domestic farm laborers, or disabled 
domestic farm laborers.
    To focus investments in areas where the need for increased 
prosperity is greatest, the RHS will set aside 10 percent of the 
available funds for

[[Page 13375]]

applications that will serve persistent poverty counties. Persistent 
poverty counties are areas where at least 20 percent of the population 
is living in poverty over the last 30 years (measured by the 1980, 
1990, 2000 and 2010 decennial censuses and 2007-2011 American Community 
Survey 5-year estimates) according to the American Community Survey 
census tract data. Information on which counties are considered 
persistent poverty counties can be found through the United States 
Department of Agriculture's (USDA) Economic Research Service (ERS) 
(https://ers.usda.gov/). ERS is the main source of economic information 
and research for USDA and a principal agency of the U.S. Federal 
Statistical System located in Washington, DC. Set-aside funds will be 
awarded in the order of receipt of pre-applications. Once the set-aside 
funds are exhausted, any further set-aside applications will be 
evaluated and ranked with the other applications submitted in response 
to this Notice. If the RHS does not receive enough eligible 
applications to fully utilize the 10 percent set aside in the service 
of these areas, the RHS will award any unused set aside funds to other 
eligible applicants.

Overview

    Federal Agency: Rural Housing Service.
    Funding Opportunity Title: Section 514 Off-Farm Labor Housing Loans 
and Subsequent Section 516 Off-Farm Labor Housing Grants to Improve, 
Repair, or Make Modifications to existing Off-Farm Labor Housing 
Properties for Fiscal Year 2022.
    Funding Opportunity Number: USDA-RD-HCFP-FLH-2022.
    Available Funds: Section 514 Loans: $5,500,000; Section 516 Grants: 
$17,000,000.
    Maximum Award: Award may not exceed $15,000 per unit (total loan 
and grant). There is no minimum award.
    Announcement Type: Request for applications from qualified 
applicants for Fiscal Year 2022.
    Assistance Listing Numbers (formerly CFDA): 10.405.
    Please Note: Expenses incurred in developing pre-applications and 
final applications will be at the applicant's sole risk.

A. Federal Award Description

    (1) Pre-applications will only be accepted through the date and 
time listed in this Notice. The maximum award per selected project may 
not exceed $15,000 per unit (total loan and grant). There is no minimum 
award requirement. Substantial rehabilitation or proposals for limited 
improvements, repairs, or modifications such as accessibility 
compliance and health and safety issues will be considered under this 
Notice.
    (2) A State will not receive more than 50 percent of the Off-FLH 
funding unless there are remaining Section 514 and Section 516 funds 
after all eligible applications nationwide have been funded. In this 
case, funds will be awarded to the next highest-ranking eligible 
applications among all of the remaining unfunded applications. The 
allocation of these funds may result in a State or States exceeding the 
50 percent limitation.
    (3) Section 516 Off-FLH grants may not exceed 90 percent of the 
total development cost (TDC) of the proposed transaction. TDC is 
defined in 7 CFR 3560.11. Section 514 Off-FLH loans may not exceed the 
limits set forth in 7 CFR 3560.562(b).
    (4) Applications that propose the use of Low-Income Housing Tax 
Credits (LIHTC), will not be considered and are not eligible under this 
Notice.
    (5) Any proposed leveraged funds must be in the form of a grant or 
similar funding source with no debt service. No other source of 
leveraged funds is acceptable. Pre-applications that propose the use of 
leveraged funds must include firm commitment letters within their final 
application, if available. If the applicant is unable to secure a 
third-party firm commitment letter within 180 calendar days from the 
issuance of the award letter under this NOFA, the application will be 
deemed incomplete, and the award letter will be considered null and 
void.
    (6) A firm commitment letter is defined as a grantor's unqualified 
pledge to the applicant that they meet their guidelines, and they are 
willing to offer the applicant a grant under specified terms. The 
letter validates that the applicant's grant has been fully approved and 
that the grantor is prepared to close the transaction. Preliminary 
commitment letters, term sheets, or any other letter from the grantor 
that does not meet the definition above will not be considered a firm 
commitment letter and will not meet the requirements specified in this 
Notice. Rental Assistance (RA) and Operating Assistance (OA) are not 
available for this Notice.
    (7) To maximize the use of the limited supply of FLH funds, the RHS 
may contact eligible applicants selected for an award in point score 
order starting with the highest score, with proposals to modify the 
transaction's proportions of loan and grant funds. In addition, if 
funds remain after the highest scoring eligible applications are 
selected for awards, we may contact those eligible applicants selected 
for the awards, in point score order starting with the highest score, 
to ascertain whether those respondents will accept the remaining funds.
    (8) To enhance customer service and the transparency of this 
program, the RHS will publish a list of awardees including the project 
name and location and the loan and/or grant amounts of their respective 
awards in accordance with the date listed in this Notice. This 
information can be found at: https://www.rd.usda.gov/programs-services/farm-labor-housing-direct-loans-grants. The RHS reserves the right to 
post all information submitted as part of the pre-application and final 
application package, which is not protected under the Privacy Act, on a 
public website with free and open access to any member of the public.

B. Eligibility Information

(1) Housing Eligibility
    (a) Housing that is improved, repaired, or modified with subsequent 
Off-FLH loan and/or grant funds must meet the standards contained in 7 
CFR part 1924, subparts A and C. Off-FLH must be managed in accordance 
with 7 CFR part 3560.
    (b) Off-FLH must be operated on a non-profit basis and tenancy must 
be open to all qualified domestic farm laborers, regardless of which 
farm they work at.
    (c) Section 514(f)(3) of the Housing Act of 1949, as amended (42 
U.S.C. 1484(f)(3)) defines domestic farm laborers to include any person 
regardless of the person's source of employment, who receives a 
substantial portion of his/her income from the primary production of 
agricultural or aqua cultural commodities in the unprocessed or 
processed stage, and also includes the person's family.
(2) Tenant Eligibility
    (a) Tenant eligibility is limited to persons who meet the 
definition of a ``domestic farm laborer,'' or a ``disabled domestic 
farm laborer,'' or a ``retired domestic farm laborer'' as defined in 
Section 514(f)(3) of the Housing Act of 1949, as amended (42 U.S.C. 
1484(f)(3)).
    Section 514(f)(3)(A) of the Housing Act of 1949 (42 U.S.C. 
1484(f)(3)(A)) has been amended to extend FLH tenant eligibility to 
agricultural workers legally admitted to the United States and 
authorized to work in agriculture. It is important to note, that 
persons admitted legally for agricultural work remain ineligible for RA 
as set forth in 7 CFR

[[Page 13376]]

3560.254(c). In addition, under no circumstance may any currently 
eligible FLH tenants be displaced from their homes as a result of this 
statutory change.
    (b) Owners are responsible for verifying tenant income eligibility. 
Only very low or low-income households are eligible for operating or 
rental assistance rents. Households with incomes above the low-income 
limits, moderate income households, must pay the full rent.
    (c) Migrant or migrant agricultural laborer is a person (and the 
family of such person) who receives a substantial portion of his or her 
income from farm labor employment and who establishes a residence in a 
location on a seasonal or temporary basis, in an attempt to receive 
farm labor employment at one or more locations away from their home 
base state, excluding day-haul agricultural workers whose travels are 
limited to work areas within one day of their residence.
    (d) Seasonal housing is housing that is operated on a seasonal 
basis, typically for migrants or migrant agricultural laborers as 
opposed to year-round. Off-FLH subsequent loan and grant funds may be 
used to improve, repair, or modify existing properties currently 
financed by the RHS for seasonal or temporary residential use. A 
temporary residence is a dwelling which is used for occupancy, usually 
for a short period of time, but is not the legal residence for the 
occupant.
    (e) The requirements established in Sec.  3560.60 apply to all 
applications for Off-FLH loans and grants except that seasonal Off-FLH 
that will be occupied for eight months or less per year by migrant 
farmworkers while they are away from their residence, may be improved 
in accordance with Exhibit I of 7 CFR part 1924, subpart A.
    (f) For Off-FLH operating on a seasonal basis, the management plan 
must establish specific opening and closing dates. During the off-
season, Off-FLH may be used as defined in 7 CFR 3560, subpart A, under 
short-term lease provisions. Where rents are charged on a per-unit 
basis and family income qualifies the household for rental assistance, 
rental assistance may be used.
    (g) Off-FLH is subject to the tenant contribution and rental unit 
rent requirements for Plan II housing established under 7 CFR 3560, 
subpart E, except where seasonal housing will be occupied for less than 
a 3-month period. In such instances the best available and practical 
income verification methods may be used with prior approval of the RHS.
    (h) Actual dollars earned from farm labor by domestic farm laborers 
other than migrant farmworkers must equal at least 65 percent of the 
annual income limits indicated for the Standard Federal regions as 
published by the RHS for their particular region of the country. For 
migrant farmworkers living in seasonal housing the actual dollars 
earned from farm labor by a domestic farm laborer must equal at least 
50 percent of annual income limits indicated for the Standard Federal 
regions, as published by the RHS.
(3) Applicant Eligibility
    All eligible applicants must meet the following requirements:
    (a) To be eligible to receive a subsequent Section 514 loan for 
Off-FLH, the applicant must meet the requirements of 7 CFR 3560.555(a) 
and be a broad-based nonprofit organization, a nonprofit organization 
of farmworkers, a federally recognized Indian tribe, a community 
organization, or an agency or political subdivision of State or local 
government, and must meet the requirements of Sec.  3560.55, excluding 
Sec.  3560.55(a)(6). A broad-based nonprofit organization is a 
nonprofit organization that has a membership that reflects a variety of 
interests in the area where the housing will be located; or a limited 
partnership with a non-profit general partner which meets the 
requirements of Sec.  3560.55(d).
    (b) To be eligible to receive a subsequent Section 516 grant for 
Off-FLH, the applicant must meet the requirements of 7 CFR 3560.555(b) 
and be a broad-based nonprofit organization, a nonprofit organization 
of farmworkers, a federally recognized Indian tribe, a community 
organization, or an agency or political subdivision of State or local 
government, and must meet the requirements of Sec.  3560.55, excluding 
Sec.  3560.55(a)(6). A broad-based nonprofit organization is a 
nonprofit organization that has a membership that reflects a variety of 
interests in the area where the housing will be located and be able to 
contribute at least one-tenth of the total farm labor housing 
development cost from its own or other resources. The applicant's 
contribution must be available at the time of the grant closing. An 
Off-FLH loan financed by the RHS may be used to meet this requirement, 
however, an RHS grant cannot be used to meet this requirement. Limited 
partnerships with a non-profit general partner are eligible for Section 
514 loans, however, they are not eligible for Section 516 grants.
    (c) The applicant must be unable to obtain similar credit elsewhere 
at rates that would allow for rents within the payment ability of 
eligible residents. (Note: not applicable for State or local public 
agencies or Indian tribes.)
    (d) Possess the legal and financial capacity to carry out the 
obligations required for the subsequent loan and/or grant.
    (e) Broad-based non-profit organizations must have a membership 
that reflects a variety of interests in the area where the housing will 
be located.
    (f) Be able to maintain, manage, and operate the Off-FLH for its 
intended purpose and in accordance with all RHS requirements as 
demonstrated with its compliance with RHS servicing requirements. Non-
compliance with RHS servicing requirements with other projects owned 
and/or managed by natural person(s) managing/controlling (whether 
directly or indirectly through other entities) the borrowing entity, 
will render the applicant ineligible to participate in this Notice 
nationwide until the non-compliance event(s) is/are remedied or are in 
compliance with an RHS approved workout plan.
    (g) With the exception of applicants who are a non-profit 
organization, housing cooperative or public body, be able to provide 
the borrower contribution from their own resources (this contribution 
must be in the form of cash).
    (h) Not be suspended, debarred, or otherwise excluded from, or 
ineligible for, participation in Federal assistance programs under 2 
CFR parts 180 and 417.
    (i) Not be delinquent on Federal debt or a Federal judgment debtor, 
with the exception of those debtors described in 7 CFR 3560.55 (b).
    (j) Be in compliance with the requirements of the Improper Payments 
Elimination and Recovery Improvement Act (IPERIA) as applied by RHS.
    (k) Additional requirements for applicants: If an applicant, the 
managing general partner, managing member, or key principal in the 
organization decision-making and operational authority that have 
control of the applicant and any sub-applicant entities involved 
including the actual natural person(s) of any sub-entity (i.e., other 
organizations, partnerships, etc.) exercising management and/or 
financial control of an applicant borrower, as well as any affiliated 
entity having a 10 percent or more ownership interest, having a prior 
or existing RHS debt, the following additional requirements must be 
met:
    (i) The applicant must be in compliance with any existing loan or 
grant agreements and with all legal and regulatory requirements or be 
compliant with an RHS approved workout plan.

[[Page 13377]]

The RHS may require that applicants with monetary or non-monetary 
deficiencies be in compliance with an RHS approved workout plan for a 
minimum of six (6) consecutive months before becoming eligible for 
further assistance, as determined by the RHS.
    (ii) The applicant must be in compliance with Title VI of the Civil 
Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, and 
all other applicable civil rights laws. Under this Notice, the project 
will also be considered eligible to apply if there is a current and 
accepted Self-Evaluation Transition Plan for the project.
    (l) Additional requirements for non-profit organizations. In 
addition to the eligibility requirements of the paragraphs above, non-
profit organizations must meet the following criteria:
    (i) The applicant must have received a tax-exempt ruling from the 
IRS designating the applicant as a 501(c)(3) or 501(c)(4) organization.
    (ii) The applicant must have in its charter the provision of 
affordable housing.
    (iii) No part of the applicant's earnings may benefit any of its 
members, founders, or contributors.
    (iv) The applicant must be legally organized under State and local 
law.
    (2) Additional requirements for limited partnerships. In addition 
to the applicant eligibility requirements of the paragraphs above, 
limited partnership loan applicants must meet the following criteria:
    (i) The general partners must be able to meet the borrower 
contribution requirements if the partnership is not able to do so at 
the time of loan request.
    (ii) The general partners must maintain a minimum 5 percent 
financial interest in the residuals or refinancing proceeds in 
accordance with the partnership organizational documents.
    (iii) The partnership must agree that new general partners can be 
brought into the organization only with the prior written consent of 
the RHS.
    (m) This Notice requires selected applicants to make the required 
equity contribution as outlined in 3560.63(c) for any new Section 514 
loan. Applicants may be eligible to receive additional Return to Owner 
(RTO) for this required contribution, if applicable.
    (n) Eligibility also includes the continued ability of the 
borrower/applicant to provide acceptable management and will include an 
evaluation of any current outstanding deficiencies. Any outstanding 
violations or extended open operational findings associated with the 
applicant/borrower or any affiliated entity having an identity of 
interest (IOI) with the project ownership and which are recorded in the 
RHS's automated Multi-Family Information System (MFIS), will preclude 
further processing of any application unless there is a current and 
approved RHS workout plan and the applicant is in compliance with the 
provisions of the workout plan. The RHS may require that applicants 
with deficiencies be in compliance with an RHS approved workout plan 
for a minimum of six (6) consecutive months, as determined by the RHS.
(4) Project Eligibility
    This Notice solicits pre-applications from the current borrowers/
owners of existing Off-FLH projects currently participating in the 
RHS's Section 514/516 Off-FLH portfolio for the purpose of improving, 
repairing, modifying, revitalizing, and preserving the facility to 
ensure that it will continue to provide decent, safe, and sanitary 
housing. Any Off-FLH project that is not already participating in the 
RHS's Section 514/516 Off-FLH portfolio as evidenced by currently 
having an outstanding Section 514 Off-FLH loan is not eligible under 
this Notice.
    (a) On-Farm Labor Housing projects are not eligible under this 
Notice.
    (b) This Notice is for stay in owner transactions only where the 
current owner, with an outstanding Section 514 Off-FLH loan, may apply 
for subsequent loan and/or grant funds to improve, repair, or make 
modifications to their Off-FLH property. Proposals that are for a 
transfer of ownership, to sell the property, to complete a 
recapitalization, or for an IOI or third-party acquisition transaction 
will not be considered and are not eligible under this Notice.
    (c) Applications that propose the use of LIHTC, will not be 
considered and are not eligible under this Notice as stated above.
    (d) Any Off-FLH property that currently has an RHS approved 
Diminished Needs Waiver (DNW) or is in the process of applying for a 
DNW, is not eligible under this Notice. All of the tenants residing in 
the project must be eligible farm labor tenants as defined in this 
Notice. A DNW allows non-farm labor tenants to reside in farm labor 
housing if the diminished need for such housing has been determined and 
accepted by RHS.
    (e) The average physical vacancy rate for the twelve (12) months 
preceding this Notice's pre-application submission due date of February 
1, 2022, can be no more than ten (10) percent for projects consisting 
of sixteen (16) or more revenue units and no more than fifteen (15) 
percent for projects with less than sixteen (16) revenue units unless 
the project is seasonal Off-FLH or unless the applicant has an RHS 
approved workout plan and is in compliance with the provisions of the 
workout plan and provides sufficient market documentation or a market 
study that clearly demonstrates to the RHS that sufficient market 
demand exists. If the project is seasonal Off-FLH, the applicant must 
provide detailed documentation for the twenty-four (24) months 
preceding this Notice's pre-application submission due date that 
verifies the project's operations including information regarding the 
open and close date, lease-up, vacancy, rent rolls, operating budgets, 
and any other information the applicant can provide to document the 
need for the seasonal Off-FLH project. All of the tenants in the 
project must be eligible farm labor tenants as defined in this Notice.
    (f) A positive cash flow for the previous full three (3) years of 
operations is required unless an exception applies for projects with an 
RHS approved workout plan where the applicant is in compliance with the 
provisions of the workout plan. The RHS may require that applicants 
with monetary or non-monetary deficiencies be in compliance with the 
RHS approved workout plan for a minimum of six (6) consecutive months 
before becoming eligible for a loan and/or grant under this Notice. 
Additionally, an exception may apply to projects that have a negative 
cash flow in operations if surplus cash exists in either the general 
operating account as defined in 7 CFR 3560.306(d)(1) or the reserve 
account. Surplus cash exists when the balance is greater than the 
required deposits minus authorized withdrawals. The applicant must 
provide the project's annual financial report(s) to document the 
project complies with this exception for each year the project has a 
negative cash flow, if applicable. Seasonal Off-FLH properties that 
receive OA may also be exempt from this requirement at the sole 
discretion of the RHS, if applicable.
    (g) An RHS approved As-Is Capital Needs Assessment (CNA) and an RHS 
financial evaluation and analysis must be conducted to ensure that 
utilization of the subsequent loan and/or grant funds are financially 
feasible and necessary to improve, repair, modify, and preserve the 
project as affordable housing.
    Specifically, a CNA provides a repair schedule for the property in 
its present condition, indicating repairs and replacements necessary 
for a property to function properly and efficiently over a

[[Page 13378]]

span of 20 years. At the end of this funding Notice, a CNA Addendum is 
provided with detailed instructions to assist the applicant in 
completing CNA reports, expected useful life tables, and forms. 
Additionally, there are six attachments which accompany the CNA 
addendum identified as followed: A CNA is comprised of nine main 
sections:
    <bullet> Definitions;
    <bullet> Contract Addendum;
    <bullet> Requirements and Statement of Work (SOW) for a CNA;
    <bullet> The CNA Review Process;
    <bullet> Guidance for the Multi-Family Housing (MFH) CNA Recipient 
Regarding Contracting for a CNA;
    <bullet> Revising an Accepted CNA During Underwriting;
    <bullet> Updating a CNA;
    <bullet> Incorporating a Property's Rehabilitation into a CNA; and
    <bullet> Repair and Replacement Schedule.
    Additionally, there are seven attachments which accompany the CNA 
addendum identified as follows:
    <bullet> Attachment A, ADDENDUM TO THE CAPITAL NEEDS ASSESSMENT 
CONTRACT.
    <bullet> (B) Attachment B, CAPITAL NEEDS ASSESSMENT STATEMENT OF 
WORK.
    <bullet> (C) Attachment C, FANNIE MAE PHYSICAL NEEDS ASSESSMENT 
GUIDANCE TO THE PROPERTY EVALUATOR.
    <bullet> (D) Attachment D, CNA e-Tool Estimated Useful Life Table.
    <bullet> (E) Attachment E, CAPITAL NEEDS ASSESSMENT REPORT.
    <bullet> (F) Attachment F, SAMPLE CAPITAL NEEDS ASSESSMENT REVIEW 
REPORT.
    <bullet> (G) Attachment G, CAPITAL NEEDS ASSESSMENT GUIDANCE TO THE 
REVIEWER.
    The CNA may be submitted with the final application. The Agency 
suggests that this information should be made available to RD MFH Off-
Farm Labor Housing (FLH) property owners, applicants and CNA Providers 
who are or are planning to submit transactions for the Off-FLH program.
    (h) Initial eligibility for any processing will be determined as of 
the pre-application submission due date of February 1, 2022. The RHS 
reserves the right to discontinue the processing of any application due 
to material changes in the applicant's status occurring any time after 
the initial eligibility determination.
(5) Priority of Funding
    (a) Subsequent Section 514 loan and subsequent Section 516 grant 
funds will be awarded under this Notice in accordance with the 
following priorities:
    <bullet> Health and Safety deficiencies.
    <bullet> Deferred maintenance and Fair Housing compliance.
    <bullet> Repairs that are needed to improve the sustained rental 
marketability of the property.
    (b) Proposals to build community rooms, playgrounds, or laundry 
rooms may be considered and are eligible under this Notice. 
Furthermore, proposals to develop or construct additional units within 
the existing building envelope to comply with accessibility 
requirements will be considered and are eligible under this Notice. 
Funds may be used to repair or renovate existing project items 
identified in the CNA and to satisfy accessibility transition plans and 
fair housing requirements. Additional items may be added to the scope 
of work, if practical and feasible, at the sole discretion of the RHS, 
which could include accessibility, energy efficiency or energy 
generation items.
    (c) Subsequent Section 514 Off-FLH loan funds may be used to 
establish a tenant protection account, if applicable and if required by 
the RHS, for existing unsubsidized tenants residing at the property on 
the day the transaction closes, to the extent necessary to reduce the 
rental payment to the pre-transaction rent, or thirty (30) percent of 
adjusted income, if higher. If applicable and if required by the RHS, 
the applicant will only be required to subsidize the difference in 
rents that exists at the time of the transaction closing for any 
unsubsidized tenant that is negatively impacted by the post-transaction 
rents. If applicable and if required by the RHS:
    <bullet> This analysis and the required tenant protection amount 
will be evaluated and calculated by the RHS.
    <bullet> all tenant protection costs must be included in the 
Sources and Uses analysis for the full amount needed to fund the 
initial two-year minimum period following the transaction closing date.
    <bullet> the applicant must agree to protect currently eligible 
tenants affected by the rent increase as long as the tenant resides in 
the project. The obligation with respect to each unsubsidized tenant in 
place at the time of the transaction closing will end when the tenant 
receives rental assistance, receives a housing voucher, voluntarily 
leaves the property, is evicted for proper cause, or has income 
increased to pay the post-transaction basic rent without being rent 
over-burdened. The tenant protection account will be applicable and 
required at the sole discretion of the RHS.
    (d) Grant Limit--the amount of any Off-FLH grant must not exceed 90 
percent of the TDC as provided in 7 CFR 3560.562(c)(1).
    (e) Other Requirements--the following requirements apply to 
subsequent loans and grants made in response to this Notice:
    (i) 7 CFR part 1901, subpart E, regarding equal opportunity 
requirements.
    (ii) For grants only, 2 CFR parts 200 and 400, which establishes 
the uniform administrative and audit requirements for grants and 
cooperative agreements to State and local Governments and to non-profit 
organizations.
    (iii) 7 CFR part 1901, subpart F, regarding historical and 
archaeological properties.
    (iv) 7 CFR 1970.11, Timing of the environmental review process. 
Please note, the environmental information must be submitted by the 
applicant to the RHS. The RHS must review and determine that the 
environmental information is acceptable before the obligation of funds.
    (v) 7 CFR part 3560, subpart L, regarding the loan and grant 
authorities of the Off-FLH program.
    (vi) 7 CFR part 1924, subpart A, regarding planning and performing 
construction and other development.
    (vii) 7 CFR part 1924, subpart C, regarding the planning and 
performing of site development work.
    (viii) For construction financed with a Section 516 grant, the 
provisions of the Davis-Bacon Act (40 U.S.C. 276(a)-276(a)-5) and 
implementing regulations published at 29 CFR parts 1, 3, and 5.
    (ix) Current (not older than six months from the date of issuance) 
combination comprehensive credit reports for the applicant, entity and 
principals must be submitted and considered during the Agency's review 
for eligibility determination. In the past, the Agency has required the 
applicant to submit the credit report fee. In lieu of the applicant 
submitting the fee, the Agency will require the applicant to provide 
the credit report. It is the Agency's expectation that this change will 
create an efficiency in the application process that did not exist, 
which should assist with streamlining the application process for the 
applicant. Only Credit reports provided by accredited major credit 
bureaus will be accepted.
    (x) Borrowers and grantees must take reasonable steps to ensure 
that tenants receive the language assistance necessary to afford them 
meaningful access to USDA programs and activities,

[[Page 13379]]

free of charge. Failure to provide this assistance to tenants who can 
effectively participate in or benefit from Federally assisted programs 
or activities may violate the prohibition under Title VI of the Civil 
Rights Act of 1964, 42 U.S.C. 2000d et seq. and Title VI regulations 
against national origin discrimination.
    (xi) In accordance with 7 CFR 3560.60, the housing must be 
economical to construct, operate, and maintain and must not be of 
elaborate design or materials.
    (xii) All other requirements contained in 7 CFR part 3560, 
regarding the Sections 514/516 Off-FLH programs.
    (xiii) System for Awards Management. All program applicants must be 
registered in the System for Awards Management (SAM) prior to 
submitting an application, unless determined exempt under 2 CFR 25.110. 
Federal award recipients must maintain an active SAM registration with 
current information at all times during which it has an active Federal 
award or an application under consideration by the RHS. The applicant 
must ensure that the information in the database is current, accurate, 
and complete. Applicants must ensure they complete the Financial 
Assistance General Certifications and Representations in SAM.
(6) Dun and Bradstreet Data Universal Numbering System (DUNS) for Award 
Management (SAM)
    A Dun and Bradstreet Data Universal Numbering System (DUNS) number 
must be obtained and registered in the System for Award Management 
(SAM) prior to submitting an application pursuant to 2 CFR 25.200(b). 
In addition, an entity applicant must maintain registration in SAM at 
all times during which it has an active Federal award or an application 
or plan under consideration by the Agency. The applicant must ensure 
that the information in the database is current, accurate, and 
complete. Applicants must ensure they complete the Financial Assistance 
General Certifications and Representations in SAM. Similarly, all 
recipients of Federal financial assistance are required to report 
information about first-tier subawards and executive compensation in 
accordance to 2 CFR part 170. So long as an entity applicant does not 
have an exception under 2 CFR 170.110(b), the applicant must have the 
necessary processes and systems in place to comply with the reporting 
requirements should the applicant receive funding. See 2 CFR 
170.200(b). An applicant, unless excepted under 2 CFR 25.110(b), (c), 
or (d), is required to:
    (a) Be registered in SAM before submitting its application;
    (b) Provide a valid DUNS number or unique entity identifier (UEI) 
in its application; and
    (c) Continue to maintain an active SAM registration with current 
information at all times during which it has an active Federal award or 
an application or plan under consideration by a Federal awarding 
agency. The Federal awarding agency may not make a federal award to an 
applicant until the applicant has complied with all applicable DUNS and 
SAM requirements and, if an applicant has not fully complied with the 
requirements by the time the Federal awarding agency is ready to make a 
Federal award, the Federal awarding agency may determine that the 
applicant is not qualified to receive a Federal award and use that 
determination as a basis for making a Federal award to another 
applicant. As required by the Office of Management and Budget (OMB), 
all applications must provide a DUNS number when applying for Federal 
assistance, on or after November 12, 2020. Organizations can receive a 
DUNS number at no cost by calling the dedicated toll-free number at 1-
866-705-5711 or via internet at https://fedgov.dnb.com/webform. 
Additional information concerning this requirement can be obtained on 
the Grants.gov website at https://www.grants.gov. Similarly, applicants 
may register for SAM at https://www.sam.gov or by calling 1-866-606-
8220. The applicant must provide documentation that they are registered 
in SAM and their DUNS or UEI number. If the applicant does not provide 
documentation that they are registered in SAM and their DUNS or UEI 
number, the application will not be considered for funding. The 
following forms for acceptance of a federal award are now collected 
through your registration or annual recertification in SAM.gov in the 
Financial Assistance General Certifications and Representations 
section:
    <bullet> Form AD-1047, ``Certification Regarding Debarment, 
Suspension, and Other Responsibility Matters-Primary Covered 
Transactions.''
    <bullet> Form AD-1048, ``Certification Regarding Debarment, 
Suspension, Ineligibility and Voluntary Exclusion. Lower Tier Covered 
Transactions.''
    <bullet> Form AD-1049, ``Certification Regarding Drug-Free 
Workplace Requirements (Grants).''
    <bullet> Form AD-3031, ``Assurance Regarding Felony Conviction or 
Tax Delinquent Status for Corporate Applicants.''
    <bullet> Form AD-3030, ``Representations Regarding Felony 
Conviction and Tax Delinquent Status for Corporate Applicants.''

C. Pre-Application and Submission Information

(1) Pre-Application Submission
    The application process will be in two phases: The initial pre-
application and the submission of a final application. Only those pre-
applications that are selected for further processing will be invited 
to submit a final application. In the event that a pre-application is 
selected for further processing and the applicant declines, the next 
highest ranked pre-application will be selected for further processing. 
All pre-applications for Section 514 and 516 funds must meet the 
requirements of this Notice. Incomplete pre-applications will be 
rejected and returned to the applicant. No pre-application will be 
accepted after the deadline unless the date and time are extended by 
another Notice published in the Federal Register.
    (a) Pre-applications must be submitted electronically. The process 
for submitting an electronic application to the RHS is as follows:
    (i) At least two business days prior to the application deadline, 
the applicant must email the RHS a request to create a shared folder in 
CloudVault. The email must be sent to the following address: <a href="/cdn-cgi/l/email-protection#521d34347f141e1a3322223e3b3133263b3d3c12272136337c353d24"><span class="__cf_email__" data-cfemail="79361f1f543f353118090915101a180d101617390c0a1d18571e160f">[email protected]</span></a>. The email must contain the following 
information:
    a. Subject line: ``Off-FLH Repair Application Submission.''
    b. Body of email: Borrower Name, Project Name, Borrower Contact 
Information, Project State.
    c. Request language: ``Please create a shared CloudVault folder so 
that we may submit our application documents.''
    (ii) Once the email request to create a shared CloudVault folder 
has been received, a shared folder will be created within 2 business 
days. When the shared CloudVault folder is created by the RHS, the 
system will automatically send an email to the applicant's submission 
email with a link to the shared folder. All required application 
documents in accordance with this Notice must be loaded into the shared 
CloudVault folder. When the submission deadline is reached the 
applicant's access to the shared CloudVault folder will be removed. Any 
document uploaded to the shared CloudVault folder after the application 
deadline will not be reviewed or considered.

[[Page 13380]]

    (iii) The applicant should upload a Table of Contents of all of the 
documents that have been uploaded to the shared CloudVault folder. 
Last-minute requests and submissions may not allow adequate time for 
the submission process to take place prior to the deadline. Note: 
Applicants are reminded that all submissions must be received by the 
deadline and the application will be rejected if it is not received by 
the deadline date and time, regardless of when the application was 
submitted.
    (b) The RHS plans to host a workshop to discuss this Notice, the 
application process and the borrower's responsibilities, among other 
topics. Further information regarding the date and time of this 
workshop as well as information on how to participate will be issued at 
a later date via a public notice.
    (c) If a pre-application is accepted for further processing, the 
applicant must submit a final application, acceptable to the RHS, by 
June 30, 2022, 12 p.m., Eastern Daylight Savings Time. If the pre-
application is not accepted for further processing due to being 
incomplete or ineligible, the applicant will be notified of appeal 
rights under 7 CFR part 11. Pre-applications that are deemed eligible 
but are not selected for further processing will be withdrawn from 
processing and will be encouraged to apply to future Notices, if 
applicable. This action is not appealable.
2. Pre-Application Requirements
    The pre-application must contain the following:
    (a) An executed and dated Executive Summary on the applicant's 
letterhead that must include at least the following:
    (i) Brief description of the project and its history. Include the 
borrower's name, project name, project location, number of units, 
number of Rental Assistance (RA) or Operating Assistance (OA) units, 
unit mix, etc. Be sure to address if the project is year-round or 
seasonal. Also provide the year the property was built and placed in 
service, the original sources of funding, and the original amounts of 
funding it received. Include a description of any significant 
improvements, repairs, or modifications that have been made since the 
property was placed in service, which would comprise substantial 
rehabilitations and significant repairs that were needed due to natural 
disasters, floods, fires, etc. Provide any other information that you 
may want to disclose regarding the project and its history.
    (ii) Brief description of the proposed transaction. Provide a 
narrative of the loan and/or grant funds that the applicant is seeking 
from the RHS or any other third-party grant source and a description of 
what the funds will be utilized for. Describe the scope of work and 
explain how the transaction will come together overall including 
information on how the project will absorb any additional debt service, 
if applicable.
    (iii) Description of the current ownership structure with an 
organizational chart.
    (iv) Narrative verifying the applicant's ability to meet the 
eligibility requirements stated earlier in this Notice.
    (v) A statement of the applicant's experience in operating labor 
housing or other rental housing.
    (vi) Description of the applicant's legal and financial capability 
to carry out the obligation of the subsequent loan and/or grant.
    (vii) Current management. A brief description of how the property 
is currently managed. As stated earlier in this Notice, the housing 
must be managed in accordance with the management regulations, 7 CFR 
part 3560.
    (viii) Any financial commitments, financial concessions, or other 
economic benefits proposed to be provided by the RHS.
    (ix) Third-party grant funding, if applicable. For each third-party 
grant funding source, discuss briefly the grant provider, grant amount, 
including terms, commitment status, timing issues, any restrictions 
that will be applicable to the project, and whether any accommodation 
from the RHS is proposed, such as a subordination in lien position. The 
desired lien position of any third-party grant funding source must be 
clearly disclosed as well as any proposal for the RHS to subordinate 
its lien position.
    (x) Any proposed compensation to parties having an identity of 
interest with either the consultant or technical assistance provider, 
etc.
    (xi) Any proposed construction financing, for example, a 
construction or bridge loan or the use of multiple advances.
    (xii) Type and method of construction such as owner builder, 
negotiated bid, or contractor method.
    (xiii) If an FLH grant is desired, a statement concerning the need 
for an FLH grant. The statement must include estimates of the rents 
required with a grant and rents required without a grant. Documentation 
to demonstrate how the rent figures were computed must be provided. 
Documentation must be in the form of a completed Form RD 3560-7, 
``Multiple Family Housing Project Budget/Utility Allowance,'' completed 
as if a grant were received and another form completed as if a grant 
would not be received. The RHS will review each budget to determine 
that the income and expenses are reasonable and customary for the area. 
The RHS will then verify that the proposed rental rates provided on the 
budget that considers rents without a grant, are at or above market 
rate rents or at a level that would overburden the residents.
    (xiv) Statement by the applicant that they will pay any cost 
overruns.
    (xv) Estimated development timeline to include estimated start and 
end date as well as any other important milestones.
    (xvi) Description of any required state or local approvals, if 
applicable.
    (xvii) Description of the required and intended applicant 
contribution, if applicable.
    (xviii) Any other pertinent information that the applicant feels 
should be disclosed as part of this proposal, if applicable.
    (b) Form RD 3560-1, ``Application for Partial Release, 
Subordination, or Consent,'' can be obtained at: https://formsadmin.sc.egov.usda.gov//efcommon/eFileServices/eFormsAdmin/RD3560-0001.pdf.
    (c) Standard Form 424, ``Application for Federal Assistance,'' can 
be obtained at: https://www.grants.gov/.
    (d) Current (within 6 months of this Notice's pre-application 
submission due date) financial statements for each entity within the 
ownership structure with the following paragraph certified by the 
applicant's designated and legally authorized signer:
    ``I/we certify the above is a true and accurate reflection of our 
financial condition as of the date stated herein. This statement is 
given for the purpose of inducing the United States of America to make 
a loan or to enable the United States of America to make a 
determination of continued eligibility of the applicant for a loan as 
requested in the loan application of which this statement is a part.''
    (e) Evidence that the applicant is unable to obtain credit from 
other sources. At least two letters from two separate credit 
institutions which normally provide real estate and repair loans in the 
area must be obtained and these letters must indicate the rates and 
terms upon which a loan might be provided. The RHS will review each 
letter to verify that the applicant is only able to obtain market rate 
financing, which would include a market rate interest rate and term of 
less than 30 (thirty) years.

[[Page 13381]]

    (f) Letter from the IRS indicating the applicant's tax 
identification number.
    (g) Documentation verifying the applicant's DUNS number, if 
applicable.
    (h) Current and fully executed limited partnership agreement and 
certificates of limited partners, if applicable. (Agency requirements 
should be contained in one section of the agreement and their location 
identified by the applicant in a cover sheet.)
    (i) If a nonprofit organization:
    i. Tax-exempt ruling from the IRS designating them as a 501(c)(3) 
or 501(c)(4) organization.
    ii. Purpose statement, including the provision of low-income 
housing.
    iii. Evidence of organization under state and local law and a copy 
of the applicant's charter, Articles of Incorporation, and By-laws.
    iv. List of Board of Directors including their names, occupations, 
phone numbers, and addresses.
    v. If a member or subsidiary of another organization, the 
organization's name, address, and nature of business.
    (j) Document the need for the project. As provided earlier in this 
Notice, the applicant must provide documentation that the average 
physical vacancy rate for the twelve (12) months preceding this 
Notice's pre-application submission due date has been no more than ten 
(10) percent for projects consisting of sixteen (16) or more revenue 
units and no more than fifteen (15) percent for projects with less than 
sixteen (16) revenue units unless the project is seasonal Off-FLH or 
unless the applicant has an RHS approved workout plan and is in 
compliance with the provisions of the workout plan and provides 
sufficient market documentation or a market study that clearly 
demonstrates to the RHS that sufficient market demand exists. If the 
project is seasonal Off-FLH, the applicant must provide detailed 
documentation for the twenty-four (24) months preceding this Notice's 
pre-application submission due date that verifies the project's 
operations including information regarding the open and close date, 
lease-up, vacancy, rent rolls, operating budgets, and any other 
information the applicant can provide to document the need for the 
seasonal Off-FLH project. All of the tenants in the project must be 
eligible farm labor tenants as defined in this Notice.
    (k) If the project does not meet the vacancy requirements above a 
description of the cause of the vacancy and the plan to increase the 
occupancy must be submitted. The requested loan or grant funds must be 
needed in order to stabilize occupancy. In addition, a market study 
must be submitted to document the need for the project and must meet 
the following requirements. The market area must be clearly identified 
and may include only the area from which tenants can reasonably be 
drawn to the project. Documentation must be provided to justify the 
need within the primary market area for the housing of domestic farm 
laborers. The documentation must also consider disabled and retired 
farm workers and adjusted medium incomes of very-low, low, and 
moderate. The market study must include the following information:
    <bullet> A complete description of the proposed site and a map 
showing the site, location of services, and their distances from the 
site.
    <bullet> Names and qualifications of members of the community 
interviewed during the site visit and a discussion of their comments.
    <bullet> Major employers in the area and year established.
    <bullet> Employment opportunities and rates for the area for the 
past 5 years.
    <bullet> Services available in the area, including shopping, 
schools, and medical facilities as well as community services such as 
recreational, transportation, and day care that are available.
    <bullet> Population by year plus the annual increase or decrease 
for the past 5 years.
    <bullet> Population characteristics by age.
    <bullet> Number of households by year and number of persons per 
household for the past 5 years.
    <bullet> Historical breakdown of households by owners and renters.
    <bullet> Households by income groups.
    <bullet> A survey of existing or proposed rental housing, including 
complex name, location, number of units, bedroom mix, family or elderly 
type, year built, rent charges, vacancies, waiting lists, amenities, 
and the availability of RA or other subsidies.
    <bullet> Available mobile homes, if part of housing stock.
    <bullet> The existing vacancy rate of all available rental units in 
the community, including houses.
    <bullet> Proportionate need for project type.
    <bullet> Building permits issued per year for the last 3 years for 
single and multiple unit dwellings.
    <bullet> For proposals where the applicant is requesting LIHTCs, 
the number of LIHTC units and the maximum LIHTC incomes and rents by 
unit size. This information will determine the levels of incomes in the 
market area, which will support the basic rents while also qualifying 
the applicant for tax credits.
    <bullet> The amount of RA necessary to ensure the project's 
success.
    <bullet> The annual income level of farmworker families in the 
area.
    <bullet> A realistic estimate of the number of farm workers who 
remain in the area where they harvest and the number of farm workers 
who normally migrate into the area. Information on migratory workers 
should indicate the average number of months the migrants reside in the 
area and an indication of what type of family groups are represented by 
the migrants (i.e., single individuals as opposed to families).
    <bullet> General information concerning the type of labor-intensive 
crops grown in the area and prospects for continued demand for farm 
laborers.
    <bullet> The overall occupancy rate for comparable rental units in 
the area and the rents charged and customary rental practices for these 
units (i.e., will they rent to large families, do they require annual 
leases, etc.).
    <bullet> The number, condition, adequacy, rental rates and 
ownership of units currently used or available to farm workers.
    <bullet> Information on any proposed new construction of housing 
units within the primary market area.
    <bullet> A description of the project's units, including the 
number, type, size, rental rates, amenities such as carpets and drapes, 
related facilities such as a laundry room or a community room and other 
facilities providing supportive services in connection with the housing 
and the needs of the tenants such as a health clinic or day care 
facility.
    <bullet> The applicant must also include documentation of the 
following applicable elements and provide the page number of the report 
which contains the information that satisfies each element:
    <bullet> Services available in the area include shopping, schools, 
and medical facilities as well as community services such as 
recreational, transportation, and day care. Services appear to be 
appropriate for the project type and within reasonable proximity of the 
site.
    <bullet> Building permits issued during the past 3 years and new 
employment opportunities show the community to be growing, rather than 
declining.
    <bullet> Major employers in the area provide employment 
opportunities sufficient to support a population base of renters for 
the proposed project.
    <bullet> Employment rates for the area have been high over the past 
5 years.
    <bullet> The analyst makes realistic recommendations supported by 
the statistical information provided:
    <bullet> Population characteristics and household data for the 
community are stable or show an increase during the past 5 years.
    <bullet> Population characteristics by age shows support for the 
type of project

[[Page 13382]]

being proposed and the type of complex proposed reflects the greater 
proportionate need and demand of the community. To establish this, 
compare the share or percentage of the community's total rental units 
that are designated for the elderly (62 years or older or disabled) to 
the community's share of elderly households, and the share of total 
rental units for families to the share of family households in the 
community.
    <bullet> For mixed projects, the unit mix must reflect the 
proportionate need of each household type.
    <bullet> Statistical data showing households by income group shows 
that there are households in the eligible income group that could rent 
in the project.
    <bullet> Historical breakdown of households by owners and renters 
shows that there is a tradition of renters.
    <bullet> The Market Feasibility Documentation (MFD) addresses the 
need for more than just one and two bedroom units.
    <bullet> The bedroom mix of the proposed units is proportional to 
the need in the market area based on renter household size and the 
bedroom mix of existing units.
    <bullet> The bedroom mix of fully accessible units (5 percent) is 
comparable to the bedroom mix of non-accessible units.
    <bullet> The MFD shows evidence of need for the housing in that 
there are rent overburdened households and/or households in substandard 
housing.
    <bullet> A discussion of existing housing supply includes reference 
to the single-family housing rental and sale units available and shows 
these to be inadequate.
    <bullet> Temporary residents of a community, including college 
students, military personnel, or others not claiming their current 
residence as their legal domicile, have not been included in 
determining need and project size.
    <bullet> The MFD includes a discussion on the current market for 
single-family houses and how sales, or the lack of sales, will affect 
the demand for elderly rental units. If the market study discusses how 
elderly homeowners reinforce the need for rental housing, it does so 
only as a secondary market and not as the primary market.
    <bullet> The vacancy rates in existing rental housing, including 
available single-family housing and mobile homes, is 5 percent (or the 
State-approved vacancy standard, if different) or less, or there is an 
acceptable explanation where higher rates occur. Existing rental 
complexes should also show waiting lists.
    <bullet> The Conventional Rents for Comparable Units (CRCU) shown 
is less than or equal to the rents proposed for the project.
    The market study must be obtained from and performed by an 
independent third-party provider that has no identity of interest with 
the property owner, management agent, applicant or any other principle 
or affiliate.
    Project funds may be used to obtain the market study if there are 
adequate funds available and the request to use project funds is 
approved by the Field Operations Division servicing official.
    (l) Document the project has a positive cash flow. As provided 
earlier in this Notice, the applicant must provide documentation that 
the project had a positive cash flow for the previous full three (3) 
years of operations preceding this Notice's pre-application submission 
due date unless an exception applies for projects with an RHS approved 
workout plan where the applicant is in compliance with the provisions 
of the workout plan. The RHS may require that applicants with monetary 
or non-monetary deficiencies be in compliance with the RHS approved 
workout plan for a minimum of six (6) consecutive months before 
becoming eligible for a loan and/or grant under this Notice. 
Additionally, an exception may apply to projects that have a negative 
cash flow in operations if surplus cash exists in either the general 
operating account as defined in 7 CFR 3560.306(d)(1) or the reserve 
account. Surplus cash exists when the balance is greater than the 
required deposits minus authorized withdrawals. The applicant must 
provide the project's annual financial report(s) to document the 
project complies with this exception for each year the project has a 
negative cash flow, if applicable. Seasonal Off-FLH properties that 
receive OA may also be exempt from this requirement at the sole 
discretion of the RHS, if applicable.
    (m) Current tenant supportive services plan which describes 
services that are currently provided on-site or made available to 
tenants through cooperative agreements with service providers in the 
community, such as a health clinic or day care facility, if applicable. 
Off-site services must be accessible and affordable to farm workers and 
their families. A map showing the location of support services must be 
included in the plan, if applicable. Letters of commitment from the 
current service providers must also be submitted with the plan, if 
applicable. The plan must describe how the services are funded. Project 
funds may not be used to pay for these services, however, costs 
associated with a Resident Services Coordinator or coordination of 
resident services are an eligible expense and could be included in the 
project budget, if applicable.
    (n) Preliminary plans and specifications, including type of 
construction and materials, if available. The preliminary plans and 
specifications, including type of construction and materials may be 
submitted with the final application. The housing must meet RHS's 
design and construction standards contained in 7 CFR part 1924, 
subparts A and C and must also meet all applicable Federal, State, and 
local accessibility standards. Also, applications for Off-FLH loans and 
grants must meet the design requirements in 7 CFR 3560.559.
    For projects that do not currently have interior/exterior washing 
facilities, applicants should consider incorporating interior/exterior 
washing facilities for tenants, as necessary to protect the asset and 
the tenants from excess dirt and chemical exposure. Such facilities 
might include a boot washing station or hose bibs, among others.
    (o) The applicant must submit a checklist, certification, and 
signed affidavit by the project architect or engineer, as applicable, 
for any energy programs the applicant intends to participate in.
    (p) A Sources and Uses Statement which shows all sources of funding 
included in the proposed transaction. The terms and schedules of all 
sources included in the project should be included in the Sources and 
Uses Statement. (Note: A Section 516 grant may not exceed 90 percent of 
the TDC of the transaction)
    (q) Evidence of the submission of the project description to the 
applicable State Housing Preservation Office (SHPO), and/or Tribal 
Historic Preservation Officer (THPO) with the request for comments, if 
applicable.
    (r) Evidence of compliance with Executive Order 12372. The 
applicant must send a copy of Form SF-424, ``Application for Federal 
Assistance,'' to the applicant's State clearinghouse for 
intergovernmental review. If the applicant is located in a State that 
does not have a clearinghouse, the applicant is not required to submit 
the form. However, evidence that the State does not have a 
clearinghouse must be submitted. Applications from Federally recognized 
Indian tribes are not subject to this requirement.
    (s) Comments regarding relevant offsite conditions.
    (t) The following forms are required to be submitted with the pre-
application:
    (i) Awards made under this Notice are subject to the provisions 
contained in the Consolidated Appropriations Act, 2019 (Pub. L. 116-6) 
sections 745 and

[[Page 13383]]

746 regarding felony convictions and corporate Federal tax 
delinquencies. To comply with these provisions, applicants that are or 
propose to be corporations will submit form AD-3030, ``Representations 
Regarding Felony Conviction and Tax Delinquent Status for Corporate 
Applicants,'' as part of their pre-application. This form is now 
collected through your registration or annual recertification in 
SAM.gov in the Financial Assistance General Certifications and 
Representations section.
    (ii) Form HUD-935.2A, ``Affirmative Fair Housing Marketing Plan 
(AFHMP)- Multifamily Housing,'' in accordance with 7 CFR 1901.203(c). 
The AFHMP will reflect that occupancy is open to all qualified 
``domestic farm laborers,'' regardless of which farming operation they 
work and that they will not discriminate on the basis of race, color, 
sex, age, disability, marital or familial status or National origin in 
regard to the occupancy or use of the units. The AFHMP must include all 
attachments and supporting documentation. The form can be found at: 
https://portal.hud.gov/hudportal/documents/huddoc?id=935-2a.PDF.
    If the project has a current AFHMP in place that is approved by the 
RHS, the applicant may submit the current approved AFHMP as part of 
their pre-application.
    The Native American Housing Enhancement Act of 2005 (NAHEA), Public 
Law 109-136, Codified at 25 U.S.C. 4101 et seq., amended Title V of the 
Housing Act of 1949 (42 U.S.C. 1471 et seq.) which created the housing 
programs administered by the U.S. Department of Agriculture, Rural 
Housing Service. The NAHEA excludes Indian Tribes, including 
instrumentalities of such Indian Tribes, from the requirement to comply 
with Title VI of the Civil Rights Act of 1964, and Title VIII of the 
Civil Rights Act of 1968, allowing members of Indian Tribes to be given 
preference for housing in accordance to the Native American Housing 
Assistance and Self Determination Act of 1996 (25 U.S.C. 4101 et seq.)
    The NAHEA does not exempt Indian Tribes from complying with other 
laws that apply to recipients of federal financial assistance. 
Therefore, federally recognized Indian Tribes must continue to comply 
with Section 504 of the Rehabilitation Act of 1973, the Age 
Discrimination Act of 1975, and Title IX of the Education Amendments 
Act of 1972, where applicable. The NAHEA also did not exempt the Indian 
Tribes from complying with the accessibility requirements of the Fair 
Housing Amendments Act (FHAA) of 1988. This Act amended Title VIII of 
the Fair Housing Act of 1968, to include disability and familial 
status. Therefore, the NAHEA did not specifically exempt Indian Tribes 
from the accessibility requirements of the FHAA. The requirements to 
construct multi-family housing properties accessible to or adaptable 
for persons with disabilities are to be followed. This requirement 
shall be consistent with RD Instructions 7 CFR 3560, Section 3560.60, 
Design Requirements.
    (iii) A proposed post-transaction operating budget utilizing Form 
RD 3560-7, ``Multiple Family Housing Project Budget/Utility 
Allowance,'' can be found at: https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD3560-7.PDF. The budget must include the debt 
service of the new RHS loan, if applicable. This will be a post 
transaction budget that must include a narrative that provides 
justification for any changes between the current budget and proposed 
budget.
    The RHS will review the budget to determine that the income and 
expenses are reasonable and customary for the area. The RHS will also 
verify that the budget reflects the new RHS loan debt service, if 
applicable, the existing RHS loan debt service, the number of units, 
unit mix, and rents. Overall, the RHS must review the budget for 
feasibility, accuracy, and reasonableness.
    (iv) An estimate of development costs utilizing Form RD 1924-13, 
``Estimate and Certificate of Actual Cost,'' can be found at: https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD1924-13.PDF.
    (v) Form RD 3560-30, ``Certification of no Identity of Interest 
(IOI),'' can be found at: https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD3560-30.PDF.
    (vi) Form RD 3560-31, ``Identity of Interest Disclosure/
Qualification Certification,'' can be found at: https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD3560-31.PDF.
    An IOI is defined in 7 CFR 3560.11. The RHS must review Form RD 
3560-30 and Form RD 3560-31, as applicable, to determine if they are 
completed in accordance with the Forms Manual Insert and to determine 
that all IOI's have been disclosed. Technical assistance will not be 
funded by the RHS when an IOI exists between the technical assistance 
provider and the loan or grant applicant.
    (vii) Form HUD 2530, ``Previous Participation Certification,'' if 
applicable, can be found at: https://www.hud.gov/sites/dfiles/OCHCO/documents/2530.pdf.
    Applicants are strongly encouraged to use the Active Partners 
Performance System (APPS) available on HUD's website to electronically 
submit the Form HUD 2530 for HUD staff review and approval, if 
applicable. If obtained, the applicant would submit the review from HUD 
indicating approval in the application. The website can be found at: 
https://www.hud.gov/program_offices/housing/mfh/apps/appsmfhm.
    (viii) Form RD 400-4, ``Assurance Agreement,'' can be found at: 
http://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD400-4.PDF.
    (ix) RD Instruction 1940-Q, Exhibit A-1, ``Certification for 
contracts, grants and loans,'' can be found at: https://www.rd.usda.gov/files/1940q.pdf.
    (u) A separate one-page information sheet listing each of the pre-
application scoring criteria contained in this Notice, followed by a 
reference to the page numbers of all relevant material and 
documentation that is contained in the proposal that supports the 
criteria.
    Applicants are encouraged to include a checklist of all of the 
application requirements and to have their application indexed and 
tabbed to facilitate the review process.
    If any of the required items listed above are not submitted within 
the pre-application in accordance with this Notice or are incomplete, 
the pre-application will be considered incomplete and will not be 
considered for funding.
    The RHS will not consider information from the applicant after the 
pre-application deadline. The RHS may contact the applicant to clarify 
other items in its application. The RHS will uniformly notify 
applicants of each curable deficiency. A curable deficiency is an error 
or oversight that if corrected it would not alter, in a positive or 
negative fashion, the review and rating of the application. An example 
of a curable (correctable) deficiency would be inconsistencies in the 
amount of the funding request. Non-curable deficiencies are threshold 
components that effect the review and rating of the application, 
including but not limited to, evidence of an eligible entity and 
evidence of the need for the project.

D. Pre-Application Review Information

    The RHS will accept, review, and score pre-applications in 
accordance with this Notice.
    Section 514 Off-FLH subsequent loan funds and Section 516 Off-FLH 
subsequent grant funds will be distributed based on a national 
competition, as follows:

[[Page 13384]]

    (1) Updates or enhancements (12 points). This factor is for 
applications that include updates or enhancements to existing plans to 
meet current tenant needs and enhance the marketability of the 
property. The updated or revised tenant supportive services plan must 
be submitted and describe the existing supportive services and the 
proposed new or enhanced tenant services, including a description of 
the public or private funds that are expected to fund the new services 
as well as the way the services will be delivered, who will administer 
them, and where they will be administered. All tenant supportive 
services plans must include letters of commitment that clearly state 
the service that will be provided at the project for the benefit of the 
residents from any party administering each service, including the 
applicant. These services may include, but are not limited to, 
transportation related services, on-site English as a Second Language 
classes, move-in funds, emergency assistance funds, homeownership 
counseling, food pantries, after school tutoring, and computer learning 
centers. The tenant supportive services plan must describe how the new 
or enhanced services will meet the identified needs of the tenants and 
how the services will be provided on a consistent, long-term basis to 
support the tenants. The plan must clearly state how the services will 
be funded. Project funds may not be used to pay for these services, 
however, costs associated with a Resident Services Coordinator or 
coordination of resident services are an eligible expense and could be 
included in the project budget, if applicable. Applicants must provide 
a detailed tenant supportive services plan and clearly document and 
outline at least two new or enhanced services in relation to the 
services already being provided in order to receive the maximum amount 
of points.
    (2) Owner and management capacity (25 points). This factor 
addresses the extent to which the applicant, or a member of the 
applicant's team, and the management agent has the experience and 
organizational resources to successfully implement the proposed 
activities in a timely manner. In this rating factor, the RHS will 
consider the extent to which the application demonstrates the 
applicant's and management agent's ability to develop, operate, and 
manage FLH on a long-term basis. In the case of co-sponsored 
applications, the rating will be based upon the combination of the 
experience of all co-sponsors in the area under review.
    A firm resume must be provided for the applicant and all Sponsors/
Co-Sponsors, including the management agent. Each resume must include 
evidence of development experience and services experience, as 
applicable. In addition, the resume should include a description of all 
similar projects that the applicant and Sponsors/Co-Sponsors have been 
involved with, to include whether they were federal housing projects, 
and information regarding the success of the projects.
    (3) Development Experience (15 points). Applicants should 
demonstrate how the scope, extent, and quality of the Sponsor's and/or 
their consultant team's recent experience in developing, operating and 
managing housing is consistent with the details of the proposed 
project. The evaluation will consider experience with utilizing federal 
financing programs and experience that shows familiarity with FLH and 
experience operating federally assisted housing, which may be 
demonstrated by providing supporting data related to actual 
performance. Also, the evaluation will consider if funds that were 
received for previous transactions were spent within the regulatory 
timeframes of the funding source. The description or firm resumes must 
include any rental housing projects and supportive services facilities 
that the applicant sponsored, owns or operates.
    The RHS will make a determination on the level of experience of the 
applicant, all Sponsors/Co-Sponsors, if applicable, and the management 
agent based on the information and documentation presented within the 
pre-application. Points will be awarded as follows:
<bullet> No development experience (0 points)
<bullet> Low level of development experience--less than 50 units (2 
points)
<bullet> Medium level of development experience--more than 50 units (5 
points)
<bullet> High level of development experience--over 100 units (15 
points)
    To score the highest number of points for this factor, applicants 
must describe significant previous experience in providing housing to 
farm laborer's generally and significant previous experience 
implementing development activities with the type of financing 
proposed.
    (4) Supportive Services Experience (10 points). Applicants should 
demonstrate how the scope, extent, and quality of the applicant's 
experience and/or the experience of committed partners, including 
property managers, in providing services is consistent with the details 
of the proposed supportive services plan. The description and firm 
resumes must identify specific services provided. Applicants must 
explain their experience in RHS subsidy administration and/or their 
partners' experience in providing property management and coordinating 
supportive services.
    The RHS will make a determination on the level of experience of the 
applicant and all Sponsors/Co-Sponsors, if applicable, based on the 
information and documentation presented within the pre-application. 
Points will be awarded as follows:
<bullet> No supportive services experience (0 points)
<bullet> Low level of supportive services experience--less than 50 
units (2 point)
<bullet> Medium level of supportive services experience--more than 50 
units (5 points)
<bullet> High level of supportive services experience--over 100 units 
(10 points)
    To score the highest number of points for this factor, applicants 
and/or committed partners must describe and provide evidence of 
significant previous experience in providing and coordinating 
supportive services to farm laborers.
    (5) Market (18 points). Applicants must demonstrate that the 
location of the project supports farm labor housing. The applicant must 
identify the location, the proximity, and ease of access of the project 
site to amenities important to the residents that supplement the 
services provided on-site. The site location will be rated on the 
following:
    <bullet> Health care and social services (hospital, medical clinic, 
social service organization that offers services to farm workers) (3 
points);
    <bullet> Grocery stores (e.g., supermarket or other store that 
sells produce and meat) (3 points);
    <bullet> Recreational facilities (e.g., parks and green space, 
community center, gym, health club, or family entertainment venue, 
library) (3 points);
    <bullet> Civic facilities (e.g., place of worship, police or fire 
station, post office) (3 points);
    <bullet> Other neighborhood-serving amenities (e.g., apparel store, 
convenience store, pharmacy, bank, hair care, and restaurants) (3 
points).
    <bullet> Educational facilities adequate to meet the spectrum of 
tenant needs at the property (e.g., higher education institutions, K-
12, pre-k, and childcare) (3 points).

[[Page 13385]]

    Applicants must describe how residents could reasonably access 
critical amenities. Amenities will generally be considered readily 
available if they are within one-half mile walking distance or they can 
be accessed by public transportation (within one-quarter walking mile) 
including accessible public transportation option, and/or affordable 
private door-to-door shuttle/van service that is reliable and 
accessible. Applicants may commit to providing such transportation 
services if the nature of the commitment and the financing of the 
commitment is adequately described. Project funds cannot be used for 
this purpose.
    To score the maximum number of points on this factor, applicants 
must make a compelling argument that the location of the project is 
well suited with respect to proximate amenities to meet the needs of 
farm workers. Documentation must be provided that clearly outlines the 
project site and its proximity to the applicable amenities.
    (6) COVID-19 Impacts (5 points). Priority points will be awarded if 
the project is located in or serving one of the top 10% of counties or 
county equivalents based upon county risk score in the United States. 
if the project is located in or serving one of the top 10% of counties 
or county equivalents based upon the county risk score in the United 
States. Information on whether your project qualifies for priority 
points can be found at the following website: https://www.rd.usda.gov/priority-points. The US Territories would obtain points by using local 
data regarding how COVID-19 has impacted the project area. Priority 
points may be awarded if the project is located in or serving a 
community with score 0.75 or above on the CDC Social Vulnerability 
Index. Information on whether your project qualifies for priority 
points can be found at the following website: https://www.rd.usda.gov/priority-points.
    (7) Equity (5 points). Priority points will be awarded if the 
project is located in or servicing a community with a score of 0.75 or 
above on the CDC Social Vulnerability Index. Information on whether 
your project qualifies for priority points can be found at the 
following website: https://www.rd.usda.gov/priority-points.
    (8) Climate Impacts (5 points). Priority points will be awarded if 
the project is located in or serving coal, oil and gas, and power plant 
communities whose economic well-being ranks in the most distressed tier 
of the Distressed Communities Index. Information on whether your 
project qualifies for priority points can be found at the following 
website: https://www.rd.usda.gov/priority-points.
    (9) Points will be allocated for Energy initiatives (the aggregate 
points for all the Energy Initiative categories may not exceed (10 
points).
    (a) Properties may receive points for energy initiatives in the 
categories of energy conservation, water conservation and green 
property management. Properties may earn ``energy initiative'' points 
for rehabilitation.
    (b) National energy programs including the U.S. Green Building 
Council's Leadership in Energy and Environmental Design (LEED), 
National Association of Homebuilders 2020 ICC 700 National Green 
Building Standard, U.S. Department of Energy (DOE) Zero Energy Ready 
Homes, International Living Future Institute's Living Building 
Challenge, U.S. Environmental Protection Agency (EPA) Energy Star for 
Homes, Passive House Institute's PHIUS +, Enterprise Community Partners 
Green Communities, and local energy conservation programs, will each 
have an initial checklist indicating prerequisites for participation in 
its energy program. The applicable energy program checklist will 
establish whether prerequisites for the energy program's participation 
will be met. All checklists must be accompanied by a signed affidavit 
by the project architect or engineer stating that the goals are 
achievable, and the project has been enrolled in these programs if 
enrollment is applicable to that program. These programs evolve and 
newer versions are published, sometimes annually. Projects must 
participate in the current version of the programs and must consult 
with the program provider for the most current, applicable and 
available programs for their project location. In addition, projects 
that apply for points under the energy generation category must include 
calculations of savings of energy. Compare property energy usage of 
three scenarios: (1) Property built to required code of state with no 
renewables, to (2) property as-designed with commitments to stated 
energy conservation programs without the use of renewables and (3) 
property as-designed with commitments to stated energy conservation 
programs and the use of proposed renewables. Use local average metrics 
for weather and utility costs and detail savings in kWh and dollars. 
Provide payback calculations. These calculations must be done by a 
licensed engineer or credentialed renewable energy provider. Include 
with the application, the provider/engineer's credentials including 
qualifications, recommendations, and proof of previous work. The 
checklist, affidavit, calculations, and qualifications of the engineer/
energy provider must be submitted together with the pre-application.
    (c) Enrollment in EPA Portfolio Manager Program. All projects 
awarded scoring points for energy initiatives must enroll the project 
in the EPA Portfolio Manager program to track post-construction energy 
consumption data. More information about this program may be found at: 
https://www.energystar.gov/buildings/facility-owners-and-managers/existing-buildings/use-portfolio-manager.
    (d) Energy Conservation for rehabilitation. Projects may be 
eligible for scoring points when the pre-application includes a written 
certification by the applicant to participate and achieve certification 
in the following energy efficiency programs.
    The points will be allocated as follows:
    <bullet> Participation in the EPA's Energy Star Multifamily 
Certification Process (5 points). https://www.energystar.gov/partner_resources/residential_new/homes_prog_reqs/multifamily_national_page
    or
    <bullet> Participation in the Green Communities program by the 
Enterprise Community Partners (2020 Criteria). (5 points) https://www.enterprisecommunity.org/solutions-and-innovation/green-communities
    or
    <bullet> Participation in the DOE Zero Energy Ready Homes program. 
(5 points) https://www.energy.gov/eere/buildings/zero-energy-ready-homes
    or
    <bullet> PHIUS+ Passive Building Standard (2018) (5 points) https://multifamily.phius.org/service-category/phius-within-reach
    or
    <bullet> International Living Future Institute Living Building 
Challenge (5 points) https://living-future.org/lbc/.
    (e) Water Conservation in Irrigation Measures. Projects may be 
awarded two points (2 points) for the use of an engineered recycled 
water (gray water or storm water) for landscape irrigation covering 50 
percent or more of the property's site landscaping needs.
    (f) Property Management Credentials. Projects may be awarded three 
points (3 points) if the designated property management company or 
individuals that will assume maintenance and operation responsibilities 
upon completion of construction work have a Credential for Green 
Property Management. Credentialing can be

[[Page 13386]]

obtained from the National Apartment Association (NAA), National 
Affordable Housing Management Association, The Institute for Real 
Estate Management, USGBC LEED for Operations and Maintenance, or 
another source with a certifiable credentialing program. Credentialing 
must be illustrated in the resume(s) of the property management team 
and included with the pre-application.

E. Federal Award Administration Information

(1) Federal Award Notices
    (a) Applicants must submit their pre-application by the due date 
specified in this Notice. The RHS will rank by score, highest to 
lowest, eligible pre-applications. Based on available funding, the 10 
percent persistent poverty counties set-aside, and the 50 percent 
limitation per State, the RHS will determine which pre-applications 
will be selected for further processing starting with the highest 
scoring pre-application. The RHS will notify applicants with pre-
applications found eligible and selected for further processing.
    (b) Applicants will be notified if there are insufficient funds 
available for the proposal and such notification is not appealable. For 
applications found ineligible or incomplete, the RHS will send notices 
of ineligibility that provide appeal rights under 7 CFR part 11, as 
appropriate.
    (c) The RHS will rank all pre-applications nationwide. When 
proposals have an equal score and not all pre-applications can be 
funded, preference will be given first to Indian tribes as defined in 
Sec.  3560.11, then local non-profit organizations or public bodies 
whose principal purposes include low-income housing that meet the 
conditions of Sec.  3560.55(c), and the following conditions:
    <bullet> Is exempt from Federal income taxes under section 
501(c)(3) or 501(c)(4) of the Internal Revenue Service code;
    <bullet> Is not wholly or partially owned or controlled by a for-
profit or limited-profit type entity;
    <bullet> Whose members, or the entity, do not share an identity of 
interest with a for-profit or limited-profit type entity;
    <bullet> Is not co-venturing with another entity; and
    <bullet> The entity or its members will not be receiving any direct 
or indirect benefits pursuant to LIHTC.
    (d) If after all the above evaluations are completed and there are 
two or more pre-applications that have the same score, and all cannot 
be funded, a lottery will be used to break the tie. The lottery will 
consist of the names of each pre-application with equal scores printed 
onto a same size piece of paper, which will then be placed into a 
receptacle that fully obstructs the view of the names. The Director of 
the Production and Preservation Division, in the presence of two 
witnesses, will draw a piece of paper from the receptacle. The name on 
the piece of paper drawn will be the applicant to be funded.
    If insufficient funds remain for the next ranked proposal, that 
applicant will be given a chance to modify their pre-application to 
bring it within the remaining available funding. This will be repeated 
for each next ranked eligible proposal until an award can be made or 
the list is exhausted.
(2) Administrative and National Policy
    Projects receiving subsequent Off-FLH loans and/or grants are 
subject to additional restrictive-use provisions contained in 7 CFR 
3560.72(a)(2).
    (a) An FLH grant agreement, prepared by the RHS, must be dated, and 
executed by the applicant on the date of closing, if applicable. The 
form of resolution to be adopted by the applicant must contain policy 
and procedural requirements that should be read and be fully understood 
by the applicant's Board of Directors and officers.
    (b) The grant agreement will remain in effect for so long as there 
is a need for the FLH project and will not expire until an official 
determination has been made by the RHS that there is no longer a need 
for the FLH project, if applicable.
(3) Reporting
    (a) Borrowers must maintain separate financial records for the 
operation and maintenance of the project and for tenant services.
    (b) Project funds may not be used to pay for these services, 
however, costs associated with a Resident Services Coordinator or 
coordination of resident services are an eligible expense and could be 
included in the project budget, if applicable.
    (c) Funds allocated to the operation and maintenance of the project 
may not be used to supplement the cost of tenant services, nor may 
tenant service funds be used to supplement the project operation and 
maintenance.
    (d) Detailed financial reports regarding tenant services will not 
be required unless specifically requested by the RHS, and then only to 
the extent necessary for the RHS and the borrower to discuss the 
affordability (and competitiveness) of the service provided to the 
tenant.
    (e) The project audit, or verification of accounts on Form RD 3560-
10, ``Borrower Balance Sheet,'' together with an accompanying Form RD 
3560-7, ``Multiple Family Housing Project Budget/Utility Allowance,'' 
must allocate revenue and expenses between project operations and the 
tenant services component.

F. Preliminary Eligibility Assessment

    The RHS shall make a preliminary eligibility assessment using the 
following criteria:
    (1) The pre-application was received by the submission deadline 
specified in this Notice;
    (2) The pre-application is complete as specified by this Notice;
    (3) The applicant is an eligible entity and is not currently 
debarred, suspended, or delinquent on any Federal debt; and
    (4) The proposal is for authorized purposes.

G. Final Application and Submission Information

(1) Final Application Submission
    (a) The pre-applications that are selected for further processing 
will be invited to submit final applications. If a pre-application is 
selected for further processing and the applicant declines, the next 
highest ranked pre-application will be selected for further processing. 
The final applications will be due by June 30, 2022, 12 p.m., Eastern 
Standard Time.
    (b) All final applications must be filed with the RHS and must meet 
the requirements of this Notice. Incomplete final applications will be 
rejected and returned to the applicant. No final applications will be 
accepted after the deadline unless the date and time are extended by 
another Notice published in the Federal Register.
    (c) A final application in accordance with this Notice must be 
submitted and approved by the RHS prior to the obligation of funds.
    (d) The final application submission process will be the same as 
previously explained and outlined for the pre-application submission 
process in Section C(1), ``Pre-application and Submission 
Information.''
(2) Final Application Requirements
    The final application must contain the following information in 
addition to the pre-application documents that were previously 
submitted:
    (a) Description of any changes from the pre-application submission 
including funding, scope of work, etc.

[[Page 13387]]

    (b) If any document that was submitted within the pre-application 
has since changed or needs to be updated with the final application, 
please submit the updated form(s) with the final application:
    (i) Final Form RD 3560-1, ``Application for Partial Release, 
Subordination, or Consent,'' can be obtained at: https://formsadmin.sc.egov.usda.gov//efcommon/eFileServices/eFormsAdmin/RD3560-0001.pdf.
    (ii) Final Standard Form 424, ``Application for Federal 
Assistance.''
    (iii) Final proposed Form RD 1924-13, ``Estimate and Certificate of 
Actual Cost.''
    (iv) Final proposed post-transaction operating budget utilizing 
Form RD 3560-7, ``Multiple Family Housing Project Budget/Utility 
Allowance.'' The budget must include the debt service of the new RHS 
loan, if applicable. This will be a post transaction budget that must 
include a narrative that provides justification for any changes between 
the current budget and proposed budget.
    (c) Updated financial statements, if applicable (must be within 6 
months of this Notice's final application submission due date).
    (d) Submit a current (no older than six months from the date of 
issuance) combination comprehensive credit report for both the entity 
and the actual individual principals, partners, members, etc. within 
the applicant entity, including any sub-entities, who are responsible 
for controlling the ownership and operations of the entity. Although a 
commercial credit report for a new entity may have limited information 
available, a combination report ties the entity and individual 
principal(s) together under the applicant/borrower name based on the 
credit report agency's ability to provide a single reporting source. 
However, if any of the principals in the applicant entity are not 
natural persons (i.e., corporations, other limited liability companies, 
trusts, etc.) separate commercial credit reports must be submitted on 
those organizations as well. Individual personal consumer credit 
reports are not required if a combination report is being provided. 
Only Credit reports provided by accredited major credit bureaus will be 
accepted. If the credit report(s) is not submitted by the final 
application deadline, the application will be considered incomplete and 
will not be considered for funding.
    (e) Document the continued need for the project. The applicant must 
provide documentation that the average physical vacancy rate for the 
twelve (12) months preceding this Notice's final application submission 
due date has been no more than ten (10) percent for projects consisting 
of sixteen (16) or more revenue units and no more than fifteen (15) 
percent for projects with less than sixteen (16) revenue units unless 
the project is seasonal Off-FLH or unless the applicant has an RHS 
approved workout plan and is in compliance with the provisions of the 
workout plan and provides sufficient market documentation or a market 
study that clearly demonstrates to the RHS that sufficient market 
demand exists. If the project is seasonal Off-FLH, the applicant must 
provide detailed documentation for the twenty-four (24) months 
preceding this Notice's final application submission due date that 
verifies the project's operations including information regarding the 
open and close date, lease-up, vacancy, rent rolls, operating budgets, 
and any other information the applicant can provide to document the 
need for the seasonal Off-FLH project. All of the tenants in the 
project must be eligible farm labor tenants as defined in this Notice.
    (f) Document the project has maintained a positive cash flow. The 
applicant must provide documentation that the project had a positive 
cash flow for the previous full three (3) years of operations preceding 
this Notice's final application submission due date unless an exception 
applies for projects with an RHS approved workout plan where the 
applicant is in compliance with the provisions of the workout plan and 
has remained in compliance. The RHS may require that applicants with 
monetary or non-monetary deficiencies be in compliance with the RHS 
approved workout plan for a minimum of six (6) consecutive months 
before becoming eligible for a loan and/or grant under this Notice. 
Additionally, an exception may apply to projects that have a negative 
cash flow in operations if surplus cash exists in either the general 
operating account as defined in 7 CFR 3560.306(d)(1) or the reserve 
account. Surplus cash exists when the balance is greater than the 
required deposits minus authorized withdrawals. The applicant must 
provide the project's annual financial report(s) to document the 
project complies with this exception for each year the project has a 
negative cash flow, if applicable. Seasonal Off-FLH properties that 
receive OA may also be exempt from this requirement at the sole 
discretion of the RHS, if applicable.
    (g) Form RD 1910-11, ``Applicant Certification, Federal Collection 
Policies for Consumer or Commercial Debts'' can be found at: https://forms.sc.egov.usda.gov//efcommon/eFileServices/eForms/RD1910-11.PDF.
    (h) Form RD 400-1, ``Equal Opportunity Agreement,'' can be found 
at: https://forms.sc.egov.usda.gov/eForms/browseFormsAction.do?pageAction=displayPDF&formIndex=1.
    (i) Form RD 400-6, ``Compliance Statement,'' if available, can be 
found at: https://forms.sc.egov.usda.gov/eForms/browseFormsAction.do?pageAction=displayPDF&formIndex=4.
    The following forms for acceptance of a federal award are now 
collected through your registration or annual recertification in 
SAM.gov in the Financial Assistance General Certifications and 
Representations section:
    (j) Form AD-1047, ``Certification Regarding Debarment, Suspension, 
and Other Responsibility Matters Primary Covered Transactions,'' can be 
found at: https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1047_PrimaryCoveredTransactions_final.pdf.
    (k) Form AD-1048, ``Certification of Debarment, Suspension, 
Ineligibility and Voluntary Exclusion Lower Tier Covered 
Transactions,'' if applicable, can be found at: https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1048_LowerTierCoveredTransactions_final.pdf.
    (l) Form AD-1049, ``Certification Regarding Drug-Free Workplace 
Requirements (Grants) Alternative I--For Grantees Other Than 
Individuals,'' can be found at: https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1049_Alt1_GranteesOtherThanIndividuals_v2_final.pdf. https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1049_Alt1_GranteesOtherThanIndividuals_v2_final.pdf.
    (m) Form RD 3560-13, ``Multi-Family Project Borrower's/Management 
Agent's Management Certification,'' if applicable, can be found at: 
https://forms.sc.egov.usda.gov//efcommon/eFileServices/eForms/RD3560-13.PDF. This document is required only if the owner is changing the 
management agent or the management fee as part of this proposal.
    (n) Management plan with all attachments including the proposed 
record keeping system, the proposed lease with an attorney's 
certification, if applicable, and the proposed occupancy rules. This 
document is required only if the owner is changing the management agent 
or revising the management plan and any attachments as part of this 
proposal.
    (o) Management Agreement, if applicable. This document is required 
only if the owner is changing the

[[Page 13388]]

management agent or revising the management agreement and any 
attachments as part of this proposal.
    (p) Certificate of Good Standing.
    (q) Attorney Certification. Letter from the applicant's attorney 
certifying the legal sufficiency of the organizational documents. The 
attorney must certify:
    (1) The applicant's legal capacity to successfully operate the 
proposed project for the life of the loan and/or grant.
    (2) The organizational documents comply with RHS regulations.
    (3) For partnership purchasers, that the term of the partnership 
extends at least through the latest maturity of all proposed RHS debt.
    (4) That the organizational documents required prior written RHS 
approval for any of the following: Withdrawal of a general partner/
managing member, admission of a general partner/managing member, 
amending the organizational documents, and selling all or substantially 
all of the assets of the purchaser.
    (5) That there have been no changes to either the ownership entity 
or the property that have not been approved by the RHS.
    (r) Acceptable appraisal, if applicable. Applicants may contact the 
RHS to discuss the appraisal requirements including the Appraisal 
Assignment Guidance prior to engaging an appraiser. Appraisals prepared 
for any other participants or lenders may not satisfy the RHS Appraisal 
Assignment Guidance requirements and may require the applicant to incur 
additional costs. You may contact the RHS at <a href="/cdn-cgi/l/email-protection#d29f949aa2a0bdb1b7a1a1bbbcb5e392a7a1b6b3fcb5bda4"><span class="__cf_email__" data-cfemail="59141f11292b363a3c2a2a30373e68192c2a3d38773e362f">[email protected]</span></a> to 
obtain Appraisal Assignment Guidance prior to ordering the appraisal.
    Project funds may be used to obtain the appraisal if there are 
adequate funds available and the request to use project funds is 
approved by the Field Operations Division servicing official. No 
appraisal is required for subsequent Section 516 Off-FLH grant only 
requests.
    (s) An acceptable As-Is CNA in accordance with the requirements set 
forth in this funding notice and the addendum to this notice.
    <bullet> The minimum requirements for a CNA acceptable to the RHS 
can be found in the Addendum: Capital Needs Assessment Process at the 
end of this notice, Attachment B, CNA Statement of Work and Attachment 
C, Fannie Mae Physical Needs Assessment Guidance to the Property 
Evaluator.
    <bullet> The CNA report must be obtained by the CNA recipient from 
an independent third-party CNA provider that has no identity of 
interest with the property owner, management agent, applicant or any 
other principle or affiliate.
    <bullet> The CNA recipient will contract with the CNA provider and 
is therefore, the client of the provider. However, the CNA recipient 
must consult with RHS, before contracting with a CNA provider to review 
Guidance Regarding Contracting for a CNA.
    <bullet> The RHS CNA reviewer will evaluate a proposed agreement or 
engagement letter between the CNA recipient and the CNA provider using 
Attachment D, CNA e-Tool Estimated Useful Life Table, prior to 
reviewing any CNA report.
    <bullet> Unacceptable CNA proposals, contracts or reports will be 
returned to the CNA recipient for appropriate corrections before they 
will be used for any underwriting determinations.
    <bullet> The CNA reviewer will also review the cost of the CNA 
contract. In most cases, the CNA service contract amount has not 
exceeded $3,500 based on the RHS's most recent cost analysis. Borrowers 
and applicants are encouraged to obtain multiple bids in all cases. 
However, there is no RHS requirement to select the ``low bidder.''
    <bullet> All of the information and requirements, including the CNA 
Template that the can must be submitted on, can be found at: https://www.rd.usda.gov/programs-services/multi-family-housing-direct-loans.
    Project funds may be used to obtain the As-Is CNA if there are 
adequate funds available and the request to use project funds is 
approved by the Field Operations Division servicing official. The 
rehabilitation plan should be developed in accordance with the CNA and 
the applicant should submit documentation of the detailed plan and 
timeline for completion of the rehabilitation work.
    (t) Final plans and specifications along with the proposed manner 
of construction, if available. The housing must meet RHS's design and 
construction standards contained in 7 CFR part 1924, subparts A and C 
and must also meet all applicable Federal, State, and local 
accessibility standards. The final plans and specifications along with 
the proposed manner of construction must be submitted prior to the 
approval of the final application.
    (u) Final construction planning, bidding, and contract documents, 
including the construction contract and architectural agreement, etc., 
if available. The final construction planning, bidding, and contract 
documents, including the construction contract and architectural 
agreement, etc., must be submitted prior to the approval of the final 
application.
    (v) Environmental information in accordance with the requirements 
in 7 CFR 1970. The applicant may consult with the RHS to determine the 
appropriate level of environmental review and to obtain publicly 
available resources at the earliest possible time for guidance in 
identifying all relevant environmental issues that must be addressed 
and considered during early project planning and design throughout the 
process. Requests for a consult can be sent to the following email 
address: <a href="/cdn-cgi/l/email-protection#9ed3d8d6eeecf1fdfbededf7f0f9afdeebedfaffb0f9f1e8"><span class="__cf_email__" data-cfemail="95d8d3dde5e7faf6f0e6e6fcfbf2a4d5e0e6f1f4bbf2fae3">[email protected]</span></a>. The applicant is responsible for 
preparing and submitting the environmental review document in 
accordance with the format and standards provided by RHS in 7 CFR 1970. 
Applicants may employ a design or environmental professional or 
technical service provider to assist them in the preparation of their 
environmental review documents at their own expense.
    (w) The environmental information must include evidence of 
compliance with the requirements of the applicable State Housing 
Preservation Office (SHPO), and/or Tribal Historic Preservation Officer 
(THPO), if applicable. A letter from the SHPO and/or THPO where the 
Off-FLH project is located signed by their designee will serve as 
evidence of compliance, if applicable.
    (x) All applications that propose the use of any leveraged grant 
funds must submit firm commitment letters within their final 
application, if available. This includes any interim lender commitment 
letters with evidence of license to do business in the applicable 
state. If the applicant is unable to secure third-party firm commitment 
letters within 180 calendar days from the issuance of the award letter 
under this NOFA, the application will be deemed incomplete, and the 
award letter will be considered null and void and the applicant will be 
notified in writing that the application will be rejected.
    (y) Description of how the applicant will meet the equity 
contribution requirement as applicable.
    (z) Signed statement from the applicant agreeing to pay cost 
overruns.
    (aa) Tenant relocation plan, if applicable. Subsequent Section 514 
Off-FLH loans or subsequent Section 516 Off-FLH grants that are made 
for major repair and rehabilitation may require the temporary 
relocation of tenants while the project is undergoing work. The 
applicant must provide a plan and financial assistance for relocation 
of displaced persons from a site on which a project will be located. 
The plan must

[[Page 13389]]

meet the requirements of HB-1-3560, Chapter 3, Paragraph 3.19.
(3) Final Application Guidance
    The RHS will follow 7 CFR 3560 and this Notice for the processing 
of final applications. Final applications will need to follow the 
bidding process as set forth in 7 CFR part 1924.
(4) Documentation of Underwriting and Costs
    (a) All final applications including the loan and/or grant requests 
will be analyzed using an underwriting template that the RHS has 
developed. A complete analysis and underwriting of the proposed 
transaction will be completed to ensure all regulatory requirements are 
met and to ensure overall project feasibility as well as to determine 
the minimum amount of assistance that is needed for the proposal.
    (b) Once the loan and/or grant funds have been obligated, the 
applicant should be prepared to close the transaction and promptly 
complete construction within 12-18 months.
(5) Technical Assistance Providers
    Please be aware that technical assistance services may not be used 
to reimburse a nonprofit or public body applicant for technical 
services provided by a nonprofit organization, with housing and/or 
community development experience, to assist the nonprofit applicant 
entity in the development and packaging of its loan/grant docket and 
project. In addition, technical assistance will not be funded by the 
RHS when an identity of interest exists between the technical 
assistance provider and the loan or grant applicant. Identity of 
interest is defined in 7 CFR 3560.11. In instances where technical 
assistance is allowed, eligible costs will be limited to those allowed 
under 2 CFR part 200.
(6) Equal Opportunity Survey
    RHS should provide applicants the voluntary OMB 1890-0014 form, 
``Survey on Ensuring Equal Opportunity for Applicants'', (or other 
forms currently being used by RHS) and ask the applicant to complete it 
and return it to the RHS.
(7) Substantial Portion of Income From Farm Labor
    The Notice restates the requirement that domestic farm laborers 
must receive a substantial portion of their income from ``farm labor.'' 
Further explanation of this requirement can be found in the regulation 
at 7 CFR 3560.576(b)(2) and this notice for processing of final 
applications. The term ``farm labor'' is defined in 7 CFR 3560.11.

G. Paperwork Reduction Act

    The information collection requirements contained in this Notice 
have received approval from the Office of Management and Budget (OMB) 
under Control Number 0575-0189.

H. Equal Opportunity and Non-Discrimination Requirements

    In accordance with Federal civil rights law and the United States 
Department of Agriculture (USDA) civil rights regulations and policies, 
the USDA, its Agencies, offices, and employees, and institutions 
participating in or administering USDA programs are prohibited from 
discriminating based on race, color, national origin, religion, sex, 
gender identity (including gender expression), sexual orientation, 
disability, age, marital status, family/parental status, income derived 
from a public assistance program. Political beliefs, or reprisal or 
retaliation for prior civil rights activity, in any program or activity 
conducted or funded by USDA (not all bases apply to all programs). 
Remedies and complaint filing deadlines vary by program or incident.
    Persons with disabilities who require alternative means of 
communication for program information (e.g., Braille, large print, 
audiotape, American Sign Language, etc.) should contact the responsible 
Agency or USDA's TARGET Center at (202) 720-2600 (voice and TTY) or 
contact USDA through the Federal Relay Service at (800) 877-8339. 
Additionally, program information may be made available in languages 
other than English.
    To file a program discrimination complaint, complete the USDA 
Program Discrimination Complaint Form, AD-3027, found online at: 
https://www.ascr.usda.gov/complaint_filing_cust.html, and at any USDA 
office or write a letter addressed to USDA and provide in the letter 
all of the information requested in the form. To request a copy of a 
complaint form, call, (866) 632-9992. Submit your completed form or 
letter to USDA by:
    (1) Mail: United States Department of Agriculture, Office of the 
Assistant Secretary for Civil Rights, 1400 Independence Avenue SW, 
Washington, DC 20250-9410;
    (2) Fax: (202) 690-7442; or
    (3) Email at: <a href="/cdn-cgi/l/email-protection#3e4e4c51594c5f531057504a5f555b7e4b4d5a5f10595148"><span class="__cf_email__" data-cfemail="3f4f4d50584d5e521156514b5e545a7f4a4c5b5e11585049">[email protected]</span></a>.
    USDA is an equal opportunity provider, employer, and lender.

Addendum: Capital Needs Assessment Process

    A Capital Needs Assessment (CNA) provides a repair schedule for the 
property in its present condition, indicating repairs and replacements 
necessary for a property to function properly and efficiently over a 
span of 20 years.
    The purpose of this Addendum is to provide clarification and 
guidance on the Rural Development CNA process. The document includes 
general instructions used in completing CNA reports, specific 
instructions on how to use the expected useful life tables, and a set 
of applicable forms including the Terms of Reference form; Systems and 
Conditions forms; and Evaluator's Summary forms.
1. Definitions
    The following definitions are provided to clarify terms used in 
conjunction with the CNA process:
    CNA Recipient: This will be who enters into the contract with the 
CNA Provider. The Recipient can be either the property owner or 
applicant/transferee.
    ``As-Is'' CNA: This type of CNA is prepared for an existing MFH 
property and reports the physical condition including all Section 504 
Accessibility and Health and Safety items of the property based on that 
moment in time. This CNA can be useful for many program purposes other 
than the MPR Demonstration program such as: an ownership transfer, 
determining whether to offer pre-payment aversion incentive and 
evaluating or resizing the reserve account. The ``as-is'' report will 
include all major repairs and likely some minor repairs that are 
typically associated with the major work: Each major component, system, 
equipment item, etc. inside and outside; building(s); property; access 
and amenities in their present condition. A schedule of those items 
showing the anticipated repair or replacement timeframe and the 
associated hard costs for the ensuing 20-year term of the CNA serves as 
the basis or starting point in evaluating the underwriting that will be 
necessary to determine the feasibility and future viability of the 
property to continue serving the needs of eligible tenants.
    ``Post Rehabilitation'' CNA: This type of CNA builds on the 
findings of the accepted ``as-is'' CNA and is typically prepared for a 
project that will be funded for major rehabilitation. The Post 
Rehabilitation CNA is adjusted to reflect the work intended to be 
performed during the rehabilitation. The

[[Page 13390]]

assessment must be developed from the rehabilitation project plans and 
any construction contract documents to reflect the full extent of the 
planned rehabilitation.
    Life Cycle Cost Analysis (LCCA): A LCCA is an expanded version of a 
CNA and is defined at 7 CFR Section 3560.11. The LCCA will determine 
the initial purchase cost, the operation and maintenance cost, the 
``estimated useful life'', and the replacement cost of an item selected 
for the project. The LCCA provides the borrower with the information on 
repair or replacement costs and timeframes over a 20-year period. It 
also provides information that will assist with a more informed 
component selection and can provide the borrower with a more complete 
financial plan based on the predictive maintenance needs associated 
with those components. If the newly constructed project has already 
been completed without any previous LCCA requirements, either an ``as-
is'' CNA or LCCA can be provided to establish program mandated reserve 
deposits. An Architect or Engineer is the best qualified person(s) to 
prepare this report.
    Consolidation: In some circumstances, RD may permit two or more 
properties to be consolidated as defined in 7 CFR 3560, Sec.  3560.410 
when it is in the best interests of the Government. The CNA Recipient 
must consult with the RD loan official before engaging the CNA Provider 
in any case where the CNA intends to encompass more than a single (one) 
existing RD property to determine if a consolidated CNA may be 
acceptable for RD underwriting.
2. Contract Addendum
    RD uses a Contract Addendum to supplement the basic CNA Agreement 
or ``Contract'', between the CNA Recipient and CNA Provider, with 
additional details and conditions. It can be found in Attachment A, 
Addendum to Capital Needs Assessment Contract and must accompany all 
contracts executed between the CNA Recipient and CNA Provider for CNAs 
used in RD transactions. If any conflicts arise between the 
``Contract'' and ``Contract Addendum'', the ``Contract Addendum'' will 
supersede.
    The Contract Addendum identifies the responsibilities and 
requirements for both the CNA Recipient and the CNA Provider. To assure 
proper completion of the contract documents the following key 
provisions must be completed:
    a. The Contract Addendum will include the contract base amount for 
the CNA Provider's cost for services on page A-2, and provisions for 
additional services to establish the total price for the CNA.
    b. Item I e, will require an itemized listing for any additional 
anticipated services and their unit costs including future updates and 
revisions that may be required before the CNA is accepted by RD. Note: 
Any cost for updating a CNA must be included, in the ``additional 
services'' subpart, of the original CNA Contract.
    c. The selection criteria boxes in II a, will identify the type of 
CNA being provided.
    d. In III a, the required language for the blank on ``report 
format'' is: ``USDA RD CNA Template, current RD version, in Microsoft 
Excel format''. This format will import directly into the RD 
underwriting template for loan underwriting purposes.
3. Requirements and Statement of Work (SOW) for a CNA
    Minimum requirements for a CNA acceptable to RD can be found in 
Attachment B, Capital Needs Assessment Statement of Work. This is 
supplemented by Attachment C, Fannie Mae Physical Needs Assessment 
Guidance to the Property Evaluator. To resolve any inconsistency in the 
two documents, Attachment B, the CNA SOW, will in all cases prevail 
over Attachment C, Fannie Mae Physical Needs Assessment Guidance to the 
Property Evaluator. (For example, on page C-2 of Attachment C, Fannie 
Mae defines the ``term'' as ``term of the mortgage and two years 
beyond''. For USDA, the ``term'' will be 20 years, as defined in the 
CNA SOW.)
    Attachment B includes the required qualifications for the CNA 
Provider, the required SOW for a CNA assignment, and general 
distribution and review instructions to the CNA Provider. The CNA 
Providers must be able to report the current physical condition of the 
property and not base their findings on the financial condition of 
either the property or the CNA Recipient.
    Attachment C is a three-part document RD has permission to use as 
reference to the CNA process throughout the RD MFH program efforts. The 
three key components of this Attachment are: (1) Guidance to the 
property evaluator; (2) expected useful life tables; and (3) a set of 
forms.
    An acceptable CNA must appropriately address within the report and 
narrative all Accessibility Laws and Requirements that apply to Section 
515 and Sections 514/516 MFH properties. The CNA Provider must assess 
how the property meets the requirements of accessibility to persons 
with disabilities in accordance the Uniform Federal Accessibility 
Standards (UFAS) and Section 504 Accessibility Requirements. It is the 
responsibility of the Provider to inspect and verify whether all 
accessibility features are compliant.
4. The CNA Review Process
    A CNA used by RD will be reviewed by the designated RD CNA Reviewer 
with experience in construction, rehabilitation, and repair of MFH 
properties, especially as it relates to repair and replacement.
    A CNA report must be obtained by the CNA Recipient from an 
independent third-party CNA Provider that has no identity of interest 
with the property owner, management agent, applicant/transferee or any 
other principle or affiliate defined in 7 CFR part 3560, Sec.  3560.11. 
The CNA Recipient will contract with the CNA Provider and is therefore 
the client of the provider. However, the CNA Recipient must consult 
with RD, before contracting with a CNA Provider to review Guidance 
Regarding Contracting for a CNA. The RD CNA Reviewer will evaluate a 
proposed agreement or engagement letter between the CNA Recipient and 
the CNA Provider using Attachment D, Capital Needs Assessment Guidance 
to the Reviewer, prior to reviewing any CNA report. Unacceptable CNA 
proposals, contracts or reports will be returned to the CNA Recipient 
for appropriate corrections before they will be used for any 
underwriting determinations.
    The CNA Reviewer will also review the cost of the CNA contract. The 
proposed fee for the CNA must be approved as an eligible housing 
project expense under 7 CFR 3560.103 (c) for the agreement to be 
acceptable and paid using project funds. In most cases, the CNA service 
contract amount has not exceeded $3,500 based on the Agency's most 
recent cost analysis.
    Borrowers and applicants are encouraged to obtain multiple bids in 
all cases. However, there is no Agency requirement to select the ``low 
bidder'' under this UL and the CNA Recipient may select a CNA Provider 
that will provide the best value, based on qualifications, as well as 
price after reviewing references and past work.
    If the CNA is funded by the property's reserve account, a minimum 
of two bids is required if the CNA service contract amount is estimated 
to exceed $5,000 as specified in HB-2-3560, Chapter 4, Paragraph 4.17 
B. If the CNA contract under this UL is funded by another source, or 
will be under $5,000, a single bid is acceptable.

[[Page 13391]]

    If the proposed agreement is acceptable, the reviewer will advise 
the appropriate RD servicing official, who will in turn inform the CNA 
Recipient. If the proposed agreement is unacceptable, the reviewer will 
notify the servicing official, who will notify the CNA Recipient and 
the CNA Provider in writing and identify actions necessary to make the 
proposed CNA agreement acceptable to RD. Upon receipt of a satisfactory 
agreement, the RD CNA Reviewer should advise the appropriate RD 
servicing official or underwriting official to accept the proposal.
    The CNA Reviewer will review the preliminary CNA report submitted 
to RD by the CNA Provider using Attachment D and write the preliminary 
CNA review report. During the CNA review process, the CNA Reviewer and 
underwriter will consult with the servicing field office most familiar 
with the property for their input and knowledge of the property. Any 
differences of opinion that exist regarding the findings must be 
mutually addressed by RD staff. If corrections are needed, the loan 
official will notify the CNA Recipient, in writing, of any revisions 
necessary to make the CNA report acceptable to RD. The CNA Reviewer 
will review the final CNA report and deliver it to the loan official. 
The final report must be signed by both the CNA Reviewer and the loan 
official (underwriter). Upon signature by both, this report becomes the 
``accepted'' CNA indicating the actual condition of the property at the 
time of the CNA inspection--a ``snapshot'' in time--and will be marked 
``Current Property Condition'' for indefinite retention in the borrower 
case file.
    A CNA Provider should be fully aware of the intended use for the 
CNA because it can impact the calculations necessary to perform 
adequate accessibility assessments and can impact the acceptability of 
the report by RD. Unacceptable reports will not be used for any RD 
underwriting purposes even though they may otherwise be acceptable to 
the CNA Recipient or another third-party lender or participant in the 
transaction being proposed.
5. Guidance Regarding Contracting for a CNA
    CNA Recipients are responsible for choosing the CNA Provider they 
wish to contract with, and for delivering an acceptable CNA to Rural 
Development. RD in no way guarantees the performance any Provider nor 
the acceptability of the Provider's work.
    CNA Recipients are advised to request an information package from 
several CNA Providers and to evaluate the information before selecting 
a provider. At a minimum, the information package should include a list 
of qualifications, a list of references, a client list, and a sample 
CNA report. However, the CNA Recipient may request any additional 
information they feel necessary to evaluate potential candidates and 
select a suitable provider for this service. Consideration for the type 
of CNA required should be part of the CNA Recipient's selection 
criteria and inserted into the contract language as well. The necessary 
skill set to perform the ``as-is'' versus the Post Rehabilitation CNA 
or a LCCA needs to be considered carefully. Knowledge of the 
accessibility laws and standards and the ability to read and understand 
plans and specifications should also be among the critical skill 
elements to consider.
    Attachment A, Contract Addendum must be submitted to RD with the 
contract and signed by the CNA Recipient and CNA Provider. The proposed 
agreement with the CNA Recipient and CNA Provider must meet RD's 
qualification requirements for both the provider and the CNA SOW, as 
specified in Attachment B, Capital Needs Assessment Statement of Work. 
RD must review the proposed agreement between the CNA Recipient and the 
CNA Provider, and concur only if all of the RD requirements and 
conditions are met. (See the previous Section 3 of this UL, The CNA 
Review Process.)
    Please note: It is in the CNA Recipient's best interest to furnish 
the CNA Provider with the most current and up-to-date property 
information for a more comprehensive and thorough CNA report. RD 
recommends that the CNA Recipient conduct a pre-inspection meeting with 
the Owner, Property Manager, maintenance persons familiar with the 
property, CNA Provider, and Agency Representatives at the site. This 
meeting will allow a forum to discuss specific details about the 
property that may not be readily apparent to all parties involved 
during the review process, as well as making some physical observations 
on-site. Certain issues that may not be evident to the CNA Provider due 
to weather conditions at the time of review should also be discussed 
and included in the report. Additionally, other issues that may need to 
be addressed include environmental hazards, structural defects, and 
complex accessibility issues. It is imperative that the Agency be fully 
aware of the current physical condition of the property at the time the 
CNA is prepared. An Agency representative must make every effort to 
attend the CNA Providers on-site inspection of the property unless the 
Agency has performed a physical inspection of the property within the 
previous 12 months.
    This pre-inspection meeting also allows the CNA Provider to discuss 
with the CNA Recipient total number of units to be inspected, as well 
as identifying any specific units that will be inspected in detail. The 
minimum number of inspected units required by the Agency for an 
acceptable CNA is 50 percent. However, inspecting a larger number of 
units generally provides more accurate information to identify the 
specific line items to be addressed over the ``term'' being covered by 
the CNA report. CNA Recipients are encouraged to negotiate with the CNA 
Provider to achieve inspection of all units whenever possible. The 
ultimate goal for the CNA Recipient and CNA Provider, as well as the 
Agency, is to produce the most accurate ``baseline or snapshot'' of 
current physical property conditions for use as a tool in projecting 
future reserve account needs.
6. Revising an Accepted CNA During Underwriting (Applies to RD Actions)
    During transaction underwriting and analysis, presentation of the 
information contained in the ``accepted'' CNA may need to be revised by 
RD to address financing and other programmatic issues. The loan 
underwriter and the CNA Reviewer will work together to determine if 
revisions are necessary to meet the financial and physical needs of the 
property, and established RD underwriting or servicing standards and 
principals. These may involve shifting individual repair line items 
reported in the CNA, moving work from year to year, or other 
adjustments that will improve cash flow. The revised underwriting CNA 
will be used to establish reserve funding schedules as well as 
operating budget preparation and analysis and will be maintained by RD 
as supporting documentation for the loan underwriting.
    The initial CNA, prepared by the CNA Provider, will be maintained 
as an independent third- party record of the current condition of the 
property at the beginning of the 20-year cycle.
    Original CNAs will be maintained in the case file, clearly marked 
as either ``Current Property Condition'' (``As-is''), ``Post 
Rehabilitation Condition'', or ``Revised Underwriting/Replacement 
Schedule'', as applicable. Note: The CNA Provider is not the 
appropriate party to ``revise'' a CNA which has already been approved 
by the CNA Recipient and concurred with by the Agency. The CNA 
Provider's independent opinion was the basis of

[[Page 13392]]

the ``As is'' or ``Post Rehabilitation'' CNA. The CNA developed for 
underwriting may only be revised by RD staff during the underwriting 
process or as part of a post-closing servicing action.
7. Updating a CNA (Applies to ``As-Is'' and ``Post-Rehabilitation'' 
That Have Not Been Accepted by RD)
    A completed CNA more than a year old at the time of the RD CNA 
review and approval must be ``updated' prior to RD approval. Likewise, 
if at the time of underwriting the CNA is more than a year old (but 
less than two years old), it must be updated before the transaction can 
be approved.
    To update a CNA, the CNA Provider must review property changes 
(repairs, improvements, or failures) that have occurred since the date 
of the original CNA site visit with the CNA Recipient, review costs and 
quantities, and submit an updated CNA for approval. However, if the 
site visit for the CNA occurred more than two years prior to the loan 
underwriting, the CNA Provider should perform a new site visit to 
verify the current project condition.
    Once the CNA has been updated, the CNA Provider will include a 
statement noting ``This is an updated CNA of the earlier CNA dated 
______,'' at the beginning of the CNA's Narrative section. The CNA 
Provider should reprint the CNA with a new date for the updated CNA, 
and provide a new electronic copy to the CNA Recipient and RD.
    If the CNA age exceeds 2 years at the time of the RD CNA review and 
approval, the CNA Provider will need to repeat the site visit process 
to re-evaluate the condition of the property. The original report can 
remain the basis of the findings.
8. Incorporating a Property's Rehabilitation Into a CNA
    A CNA provides a repair schedule for the property in its present 
condition, indicating repairs and replacements necessary for a property 
to function properly and efficiently over a span of 20 years. It is not 
an estimate of existing rehabilitation needs, or an estimate of 
rehabilitation costs. If any rehabilitation of a MFH development is 
planned as part of the proposed transaction, a rehabilitation repair 
list (also called a ``Scope of Work'') must be developed independently 
based on the CNA repair schedule. This rehabilitation repair list may 
be developed by the CNA Recipient, a project Architect, or an outside 
party (such as the CNA Provider, when qualified) hired by the CNA 
Recipient.
    The CNA Recipient must not use repair line-item costs taken from 
the CNA to develop the rehabilitation cost estimates for the 
rehabilitation loan, as these costs will not be accurate. The repair 
costs in a CNA are based on estimated costs for the property. 
Typically, these costs include the labor, materials, overhead and 
profit, but do not include applicable ``soft costs''. For example, for 
CNA purposes, the probable cost is to send a repairman out, remove an 
appliance, and put a new one in its place. For rehabilitation cost 
estimates, the CNA Recipient typically intends to hire a general 
contractor to oversee and supervise the rehabilitation work, which is 
then considered a ``soft cost''. The cost of rehabilitation includes 
the costs for that general contractor, the general contractor's 
requirements, the cost of a project Architect (if one is used), tenant 
relocation (if needed), and interim financing (if used), which are 
considered ``soft costs'' attributed to the rehabilitation costs for 
the project.
    If a ``Post Rehabilitation'' CNA is required and authorized by RD, 
a copy of the rehabilitation repair list or SOW must be provided to the 
CNA Provider. The CNA Provider will prepare a
    ``Post Rehabilitation'' CNA indicating what repairs are planned for 
the property in the coming 20 years based on conditions after the 
rehabilitation is completed. Items to be replaced during rehabilitation 
that will need to be replaced again within the 20 years, such as 
appliances, will be included in the ``Post Rehabilitation'' CNA. Items 
that will not need replacement during the coming 20 years, such as a 
new roof, will not need to be calculated in the ``Post Rehabilitation'' 
CNA. The line item should not be removed from the CNA, but the cost 
data should be zeroed out. Appropriate comments should be included in 
the CNA report to acknowledge the SOW or rehabilitation/repairs that 
were considered.
9. Repair and Replacement Schedule
    A CNA is not a formal repair and replacement schedule and cannot be 
used as an exact replacement schedule. A CNA is an estimate of the 
anticipated replacement needs for the property over time, and the 
associated replacement costs. The goal of a CNA is to estimate the 
replacement times based on the Expected Useful Life (EUL) to assure 
funds are available to replace equipment as it is needed. Hopefully, 
materials will be well maintained and last longer than estimated in the 
CNA. However, the CNA cannot be used to mandate replacement times for 
the identified building components. The RD underwriter may find it 
necessary to adjust the proposed replacement schedule during the course 
of the underwriting to allow for an adequate Annual Deposit to 
Replacement Reserves (ADRR) payment that will sustain the property over 
a 20-year period and keep rents below the maximum rents that are 
allowed.
BILLING CODE 3410-XV-P

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Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2022-04718 Filed 3-8-22; 8:45 am]
BILLING CODE 3410-XV-C


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