[Federal Register Volume 74, Number 81 (Wednesday, April 29, 2009)]
[Notices]
[Pages 19513-19524]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-9831]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service


Notice of Solicitation of Applications: Section 514, 515, and 516 
Multi-Family Housing Revitalization Demonstration Program (MPR) for 
Fiscal Year 2009

AGENCY: Rural Housing Service, USDA.

ACTION: Notice.

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    Announcement Type: Inviting applications from eligible applicants 
for Fiscal Year (FY) 2009 funding.

    Catalog of Federal Domestic Assistance Number (CFDA): 10.447.

SUMMARY: USDA Rural Development (Agency) which administers the programs 
of the Rural Housing Service (RHS) announces the timeframe to submit 
applications to participate in a demonstration program to preserve and 
revitalize existing rural rental housing projects financed by Rural 
Development under Section 515, Section 514, and Section 516 of the 
Housing Act of 1949, as amended. A subsequent Notice of Funding 
Availability (NOFA) will be published with specific funding information 
for fiscal year 2009 at a later date. The intended effect is to 
restructure selected existing Section 515 multi-family housing loans 
and Section 514 and 516 off-farm labor housing loans and grants 
expressly for the purpose of ensuring that sufficient resources are 
available to preserve the rental project for the purpose of providing 
safe and affordable housing for very low-, low-, or moderate-income 
residents. Expectations are that properties participating in this 
program will be revitalized and the affordable use will be extended 
without displacing tenants because of increased rents. No additional 
Agency rental assistance units will be made available under this 
program.

DATES: The deadline for receipt of all pre-applications in response to 
this Notice of Solicitation Availability (NOSA) is 5 p.m., Eastern 
Time, June 29, 2009. The pre-application closing deadline is firm as to 
date and hour. The Agency will not consider any pre-application that is 
received after the closing deadline. Applicants intending to mail pre-
applications must allow sufficient time to permit delivery on or before 
the closing deadline. Acceptance by a post office or private mailer 
does not constitute delivery. Facsimile (FAX) and postage-due pre-
applications will not be accepted.

FOR FURTHER INFORMATION CONTACT: Cynthia Foxworth, 
<a href="/cdn-cgi/l/email-protection#187b61766c707179366a7d7d6b7d7e77606f776a6c70586d6b7c79367f776e"><span class="__cf_email__" data-cfemail="98fbe1f6ecf0f1f9b6eafdfdebfdfef7e0eff7eaecf0d8edebfcf9b6fff7ee">[email protected]</span></a>, (202) 720-1940, Finance and Loan 
Analyst, Multi-Family Housing Preservation and Direct Loan Division, 
STOP 0782 (Room 1263-S), U. S. Department of Agriculture, Rural Housing 
Service, 1400 Independence Avenue, SW., Washington, DC 20250-0782. 
(Please note this telephone number is not a toll-free number.)

SUPPLEMENTARY INFORMATION:

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 0570-0190.

Overview

    The Agriculture, Rural Development, Food and Drug Administration, 
and Related Agencies Appropriations Act, 2008 (Pub. L. 110-161), 
December 26, 2007, details which level of funding and conditions were 
continued by the Omnibus Appropriations Act, 2009 (Pub. L. 111-8) 
(March 11, 2009), provides funding for and authorizes Rural Development 
to conduct a demonstration program for the preservation and 
revitalization of the Section 515 multi-family housing portfolio and 
Section 514 and 516 off-farm labor housing portfolio. Sections 514, 515 
and 516 multi-family housing programs are authorized by the Housing Act 
of 1949, as amended (42 U.S.C. Sections 1484, 1485, 1486) and provide 
Rural Development with the authority to make loans for low-income 
multi-family housing and farm labor housing and related facilities.

Program Administration

I. Funding Opportunities Description

    This NOSA solicits pre-applications from eligible borrowers/
applicants to restructure existing multi-family housing within the 
Agency's Section 515 multi-family housing portfolio and the 514/516 
off-farm labor housing portfolio for the purpose of revitalization and 
preservation. The demonstration program shall be referred to in this 
notice as the Multi-Family Housing Revitalization Demonstration program 
(MPR). Agency regulations for the Section 515 multi-family housing 
program and for the Sections 514/516 off farm labor housing program are 
published at 7 CFR part 3560.
    The MPR is intended to assure that existing rental projects will 
continue to deliver decent, safe, and sanitary affordable rental 
housing for the lesser of the remaining term of the loan or 20 years 
from the date of the MPR transaction closing. Once an applicant has 
been confirmed eligible and the project has been selected by the Agency 
in the process described in this notice, and the applicant agrees to 
participate in the MPR demonstration by written notification to the 
Agency, an independent third-party capital needs assessment (CNA) will 
be conducted to provide a fair and objective review of projected 
capital needs. The Agency shall implement this NOSA through an MPR 
Conditional Commitment (MPRCC) Letter of Conditions with the eligible 
borrower, which will include all the terms and conditions under this 
NOSA, including the MPR Debt Deferral Agreement.
    The primary restructuring tool to be used in this program is debt 
deferral for up to 20 years of the existing Section 514 and 515 loans 
obligated prior to October 1, 1991. The cash flow from the deferred 
payment will be deposited, as directed by the Agency, to the reserve 
account to help meet the future physical needs of the property or to 
reduce rents. Debt deferral is described as follows:
    Debt Deferral: A deferral of the existing Agency debt for the 
lesser of the remaining term of the loan or 20 years. All terms and 
conditions of the deferral will be described in the MPR Debt Deferral 
Agreement. A balloon payment of principal and accrued interest will be 
due at the end of the deferral period. Interest will accrue at the 
promissory note rate and subsidy will be applied as set out in the 
Agency's Interest Credit Agreement. Interest will not be charged on the 
deferred interest.
    If the resulting cash flow is not adequate to address the long-term 
needs

[[Page 19514]]

of the project, the Agency may use the following sources of funds:
(1) Other Agency Restructuring Tools as Follows
    (i) MPR Revitalization Grant: A revitalization grant (for non-
profit applicants/borrowers only) is limited to the cost of correcting 
health and safety violations as identified by the CNA. The grant 
administration will be in accordance with applicable provisions of 7 
CFR parts 3015 and 3019, as applicable.
    (ii) MPR Revitalization Zero Percent Loan: A revitalization loan at 
zero percent interest that will have a term of 30 years and be 
amortized over 50 years.
    (iii) MPR Soft-Second Loan: A loan with a one percent interest rate 
that will have its accrued interest and principal deferred, to a 
balloon payment, due at the time the latest maturing Section 514 or 
Section 515 loan already in place at the time of closing becomes due. 
The term of the soft-second loan will not be timed to match the term of 
any new 515 loan added during the transaction.
    MPR funds cannot be used to add new units, community rooms, 
playgrounds, and/or laundry rooms. However, other funding sources as 
outlined below in (2) through (6) can be used either for revitalization 
or for improvements listed above to the projects.
(2) Rural Development Section 515 Rehabilitation Loan Funds
(3) Rural Development Section 514/516 Off Farm Rehabilitation Loan and 
Grant Funds
(4) Rural Development Section 538 Guaranteed Rural Rental Housing 
Program Financing
(5) Rural Development Multi-Family Housing Re-lending Demonstration 
Program Funds
(6) Third-party Funds in the Form of Loans With Below Market Rates 
(Below the AFR), Grants, Tax Credits, and Tax Exempt Financing
(7) Owner-provided Capital Contributions in the Form of a Cash 
Infusion; A Cash Infusion Is Not a Loan
    Transfers, subordinations, and consolidations may be approved as 
part of a MPR transaction in accordance with existing servicing 
authorities of the Agency as available in 7 CFR part 3560. If a 
transfer is part of the MPR transaction, the transfer must meet the 
requirements of 7 CFR part 3560.406 before the MPR transaction is 
processed.
    For the purposes of the MPR, the restructuring transactions will be 
identified in three categories:
    (1) Simple transactions that involve no change in ownership.
    (2) Complex transactions which consist of a property transfer to 
new ownership processed in accordance with 7 CFR 3560.406, or 
transactions requiring a subordination agreement as a result of third 
party funds.
    (3) Portfolio transactions that are defined as multiple project 
sale transactions with a common purchaser or multiple MPR transactions 
with one stay-in owner all within one State closed on or after 
September 30, 2008. The common purchaser or stay-in owner must have at 
least one general partner in common.
    Each transactional category may utilize any or all restructuring 
tools. MPR Restructuring tools that may be available to address capital 
needs are based on the capital needs assessment process and the 
underwriting feasibility determination.
    While all non-deferred Agency debt, either in first lien position 
or a subordinated lien position must be secured within market value, 
deferred debt may exceed the market value of the security. Payment of 
such deferred debt will not be required from normal project operation 
income, but from excess cash from project operations and the value of 
the property after all other secured debts are satisfied.
    The following lays out the general steps of the MPR application 
process:
    (1) Pre-application: Applicants must submit a pre-application 
described in Section VI. This pre-application process is designed to 
lessen the cost burden on all applicants including those who may not be 
eligible or whose proposals may not be feasible.
    (2) Eligible Properties: Using criteria described below in Section 
III, USDA will conduct an initial screening for eligibility. As 
described in Section VIII, USDA will conduct additional eligibility 
screening later in the selection process.
    (3) Scoring and Ranking: All eligible, complete and timely-filed 
pre-applications will be scored, ranked and put in funding categories 
as discussed in Sections VI and VII.
    (4) Formal Applications: Top ranked pre-applicants will be invited 
to submit a formal application. As discussed in Section VIII paragraph 
(2) of this notice, USDA will require the owner to provide a capital 
needs assessment in order to determine the proper combination of tools 
to be offered to the applicant, to perform additional eligibility 
review, and to underwrite the proposal to determine financial 
feasibility. Where proposals are found to be ineligible or financially 
infeasible, owners will be informed and proposals lower in the funding 
categories will be considered.
    (5) Financial Feasibility: Using the results of the CNA to help 
identify the need for resources and applicant provided information 
regarding anticipated or available third-party financing, the Agency 
will determine the financial feasibility of each potential transaction, 
using restructuring tools available either through existing regulatory 
authorities or specifically authorized through this demonstration 
program. A project is financially feasible when a property can provide 
affordable, safe, decent, and sanitary housing for 20 years or the 
remaining term of any Agency loan whichever ends later, by using the 
authorities of this program while minimizing the cost to the Agency, 
and without increasing rents for tenants and farm laborers, except when 
necessary to meet normal and necessary operating expenses. If the 
transaction is determined financially feasible by the Agency, the 
borrower will be offered a restructuring proposal, which will include 
the requirement that the borrower will execute, for recordation, a 
restrictive use covenant for a period of 20 years, the remaining term 
of any existing loans, or the remaining term of any existing 
restrictive-use provisions, whichever ends later. The restructuring 
proposal will be established in the form of the MPRCC/Letter of 
Conditions.
    (6) MPR Agreements: If the offer is accepted by the applicant, the 
Agency and applicant will enter into a MPRCC. The applicant must also 
agree to restrict the property use pursuant to Agency direction when 
the MPR transaction is closed. Any third-party lender will be required 
to subordinate to the Agency's restrictive use covenant unless the 
Agency determines on a case-by-case basis that the lender refuses to 
subordinate and such refusal will not compromise the purpose of the 
MPR. The Agency may also request that the applicant sign an agreement 
that would require the owner to escrow reserve, tax, and insurance 
payments in accordance with all pertinent current and future Agency 
regulations. In addition, the Agency may also request that the 
applicant agree to accept future rent increases based on an Annual 
Adjustment Factor (AAF). The AAF allows rents to be adjusted by the 
annual inflation factor as determined by the United States Office of 
Management and Budget (OMB). The exact AAF will be established in the 
MPR Agreement.
    (7) General Requirements: The MPR transactions may be conducted 
with a stay-in owner (simple or portfolio) or may involve a change in 
ownership

[[Page 19515]]

(complex or portfolio). Any housing or related facilities that are 
constructed or repaired must meet the Agency design and construction 
standards and the development standards contained in 7 CFR part 1924, 
subparts A and C, respectively. Once constructed, Section 515 multi-
family housing and Sections 514/516 off farm labor housing must be 
managed in accordance with 7 CFR part 3560. Tenant eligibility will be 
limited to persons who qualify as an eligible household under Agency 
regulations or who are eligible under the requirements established to 
qualify for housing benefits provided by sources other than the Agency, 
such as U. S. Department of Housing and Urban Development (HUD) Section 
8 assistance or Low Income Housing Tax Credit (LIHTC) Assistance. 
Additional tenant eligibility requirements are contained in 7 CFR 
section 3560.152.
    (8) Voluntary Community Market Rent Demonstration (available for 
Section 515 properties only): In conjunction with this demonstration, 
Rural Development announces the opportunity for all successful Section 
515 applicants to participate on a voluntary basis in a viability test 
of a 30 percent limitation on tenant rents, as proposed in Section 
544(b)(7) of Saving America's Rural Housing Act of 2006, H.R. 5039, for 
post-restructured properties. Owners of properties in the Section 515 
restructuring program may elect to participate in the ``community 
market rent'' demonstration which will allow an owner to set a rent 
above the approved basic rent for any unit not currently occupied by a 
tenant receiving Rural Development rental assistance. Eligible tenants 
for these units must have adjusted annual incomes sufficient to allow 
them to pay the community market rent using less than 30 percent of 
their adjusted income. Tenants would be allowed to occupy without 
paying overage, additional sums that would otherwise be required to 
bring their rent payment up to 30 percent of income. With Rural 
Development's consent, up to 50 percent of the difference between the 
basic rent and the new ``community market rent'' could be retained by 
the owner as an increased return.
    For example, if the basic rent is $350, the owner could create a 
community market rent at $410, and market the unit to tenants who could 
pay that rent at less than 30 percent of adjusted income. A percentage 
of the difference, $60 could be retained by the owner, as negotiated 
with Rural Development, up to $30.
    Prior to implementation of the community market rent 
demonstrations, Rural Development will issue guidance to successful 
applicants who have indicated an interest in participating in the 
demonstration providing further details with respect to the program.
    (9) Increased Return to Owner (RTO) for Stay-in-Owners: Stay-in-
owners are existing borrowers that will retain their property, who 
contribute cash to fund any hard costs of construction to meet 
immediate needs identified by the CNA may receive a return on 
investment on those funds provided the Agency determines an increased 
return on investment is financially feasible, and it approves such a 
return in the revitalization plan presented to the borrower as an MPR 
offer. The Agency also may offer that the return to owner be included 
in a ``cash flow split'' agreement as outlined in MPRCC/Letter of 
Conditions. The cash flow split allows 50 percent of excess cash, 
generated by the owner's fiscal year end, to be split between paying 
down any outstanding deferred Agency loan balances and 50 percent to be 
returned to the borrower as an increased return to owner, subject to 
the provisions of 7 CFR section 3560.68.

II. Award Information

    The Consolidated Security, Disaster Assistance and Continuing 
Appropriations Act, 2009 (Pub. L. 110-329) (September 30, 2008) 
(Consolidated Appropriations Act 2009) continued the level of funding 
and conditions until March 6, 2009, from the Consolidated 
Appropriations Act, 2008 (Pub. L. 110-161) (December 26, 2007) which 
appropriated $20,000,000 to Rural Development for the MPR Demonstration 
Program.
    All funding must be approved no later than September 15, 2009, and 
obligated by the Agency not later than September 22, 2009. If funds 
available for the MPR are fully used before all pre-applications that 
have been determined eligible and selected under this NOSA are funded, 
the unfunded approved properties may receive priority for funding from 
the next fiscal year's resources available for multi-family housing 
revitalization if additional funds become available and the selected 
properties/owners meet any future eligibility criteria.

III. Eligibility Information

    Applicants (and the principals associated with each applicant) must 
meet the following requirements:
    (1) Eligibility under 7 CFR 3560.55; however, the requirements 
described in 7 CFR 3560.55(a)(5) pertaining to required borrower 
contributions and 7 CFR 3560.55(a)(6) pertaining to required 
contributions of initial operating capital are waived for all MPR 
proposals.
    (2) For Section 515 multi-family housing projects an average 
physical vacancy rate over the twelve months preceding the filing of 
the pre-application of no more than 10 percent for projects of 16 units 
or more and 15 percent for projects under 16 units unless an exception 
applies under Section VI paragraph (1)(ii) of this notice. If a project 
consolidation is involved, the consolidation will remain eligible so 
long as the average vacancy rate for all the projects involved meets 
the occupancy standard of this paragraph.
    For Sections 514 and 516 off-farm labor housing projects, rather 
than an average physical vacancy rate as stated above, the property 
must have positive cash flow for the previous full three years of 
operation unless an exception applies under Section VI paragraph 
(1)(ii) of this Notice.
    (3) Ownership of and ability to operate the facility after the 
transaction is completed. (In the event of a transfer, the proposed 
transferee with an executed purchase agreement or other evidence of 
site control will be the applicant).
    (4) A CNA and Agency financial evaluation must be conducted to 
ensure that utilization of the restructuring tools of the MPR program 
is financially feasible and necessary for the revitalization and 
preservation of the property for affordable housing. Initial 
eligibility for processing will be determined as of the date of the 
pre-application filing deadline. The Agency reserves the right to 
discontinue processing in the event that material changes in the 
applicant's status occurs any time after the initial determination.

IV. Equal Opportunity and Nondiscrimination Requirements

    USDA is an equal opportunity provider, employer, and lender.
    (1) Borrowers and applicants will comply with the provisions of 7 
CFR section 3560.2.
    (2) All housing must meet the accessibility requirements found at 7 
CFR section 3560.60(d).
    (3) All MPR participants must submit or have on file a valid Form 
RD 400-1, ``Equal Opportunity Agreement'' and Form RD 400-4, 
``Assurance Agreement.''
    USDA prohibits discrimination in all its programs and activities on 
the basis of race, color, national origin, age, disability, sex, 
marital status, familial status, religion, or because all or part of an 
individual's income is derived from any public assistance program. (Not 
all prohibited bases apply to all programs.) Persons with disabilities 
who require

[[Page 19516]]

alternative means for communication of program information (Braille, 
large print, audiotape, etc.) should contact USDA's TARGET Center at 
(202) 720-2600 (Voice and TDD). To file a complaint of discrimination, 
write to USDA, Director, Office of Adjudication and Compliance, 1400 
Independence Avenue, SW., Washington, DC 20250-9410, or call (800) 795-
3272 (Voice) or (202) 720-6382 (TDD).
    The policies and regulations contained in 7 CFR part 1901, subpart 
E, apply to this program.
    The Federal Register Notice pertains to announcing the availability 
of funds and the timeframe to submit applications to participate in a 
demonstration program to preserve and revitalize existing rural rental 
housing projects financed by Rural Development under Section 515, 
Section 514, and Section 516 of the Housing Act of 1949, as amended. 
This Notice does not have an adverse impact on minority/low-income 
populations.

V. Authorities Available for MPR

    MPR tools will be used in accordance with 7 CFR 3560 and its 
associated handbooks (available in any Rural Development office). The 
program will be administered within the resources available to the 
Agency through Public Law 110-329 for the preservation and 
revitalization of Sections 514/516 off farm and Section 515 financed 
properties. In the event that provisions of 7 CFR 3560 conflict with 
this demonstration program, the provisions of the MPR will take 
precedence.

VI. Application and Submission Information

    (1) The application submission and scoring process will be 
completed in two phases in order to avoid unnecessary effort and 
expense on the part of interested borrowers/applicants and to allow 
additional points for applicants that propose a transfer of a troubled 
project to an eligible owner.
    The first phase is the pre-application process. The applicant must 
submit a complete pre-application by the deadline date under the DATES 
section of this Notice. The applicant's submission will be classified 
as ``complete'' when a ``pre-application'' is received by multi-family 
housing staff for each MPR proposal the applicant wishes to be 
considered in the demonstration. In the event the MPR proposal involves 
a project consolidation it will be completed in accordance with 7 CFR 
3560.410. One pre-application for the proposed consolidated project is 
required and must identify each project included in the consolidation. 
If the MPR proposal involves a portfolio, one pre-application for each 
project in the portfolio is required and each pre-application must 
identify each project to be purchased as part of the portfolio. The 
form to be used for the pre-application is ``MPR Pre-application'' and 
is attached at the end of this Notice. An electronic version of this 
form may be found on the Internet at http://www.rurdev.usda.gov/rd/NOSAs/index.html.
    In order for the pre-application to be considered complete, all 
applicable information requested on the MPR Pre-application form must 
be provided.
    Additional information that must be provided with the pre-
application, when applicable, includes:
    (i) A copy of a purchase agreement if a transfer is being 
considered.
    (ii) A current market survey (completed within the previous 12 
months of the filing of an MPR application) if the project's occupancy 
standards cited in Section III (2) above are not met and there is an 
overwhelming market demand evidenced by waiting lists and a housing 
shortage confirmed by local housing agencies and realtors. The market 
survey must show a clear need and demand for the project once a 
restructuring transaction is completed. The results of the survey of 
existing or proposed rental or labor housing, including complex name, 
location, number of units, bedroom mix, family or elderly type, year 
built, rent charges must be provided as well as the existing vacancy 
rate of all available rental units in the community, their waiting 
lists and amenities, and the availability of rental assistance or other 
subsidies. For proposals where the applicant is requesting LIHTC, the 
number of LIHTC units and the maximum LIHTC incomes and rents by unit 
size must be provided. The Rural Development State Director will 
determine whether or not the proposal has market feasibility based on 
the data provided by the applicant. Any costs associated with the 
completion of the market survey will NOT be considered a project 
expense.
    Unless an exception under this section applies, the requirements 
stated in Section III, paragraph (2) of this notice must be met.
    The second phase of the application process will be completed by 
the Agency based on Agency records and the pre-application information.
    All eligible, complete, and timely-filed pre-applications will then 
be scored and ranked based on points received during this two-phase 
application process.
    Further, the Agency will categorize each MPR proposal as being 
potentially Simple, Complex, or Portfolio based on the information 
submitted on the pre-application and in accordance with the category 
description provided in Section I of this Notice.
    (2) Pre-applications can be submitted either electronically using 
the MPR Pre-application form or in hard copy using the MPR Pre-
application form. Applicants are strongly encouraged, but not required, 
to submit the pre-application electronically. The Agency will record 
pre-applications received electronically by the actual date and time 
received in the MPR Web site mail box. Hard copy pre-applications 
received on or before the deadline date will receive the close of 
business time of the day received as the receipt time. Assistance for 
filing electronic and hard copy pre-applications can be obtained from 
any Rural Development State Office.
    The electronic pre-application is stored as an Adobe Acrobat 
fillable form. The form contains a button labeled ``Submit by Email.'' 
Clicking on the button will result in an e-mail with an attachment that 
includes the electronic pre-application form. The form will be sent via 
e-mail to the Multi-Family Housing Preservation and Direct Loan 
Division (MPLD) in Washington, DC for consideration. Please click this 
button only once, as multiple clicks result in multiple filings.

    Please Note: If a purchase agreement or market survey is 
required, these additional documents are to be attached to the 
resulting e-mail prior to submission.

    Pre-application forms and MPR information may be accessed from the 
Agency's Internet Web site http://www.rurdev.usda.gov/rhs/mfh/MPR/MPRHome.htm or obtained by contacting the State Office in the state 
where the project is located. Hard copy pre-applications and additional 
materials can be mailed to the attention of Cynthia Foxworth, Finance 
and Loan Analyst, Multi-Family Housing Preservation and Direct Loan 
Division (MPLD), STOP 0782 (Room 1263-S), U.S. Department of 
Agriculture, Rural Housing Service, 1400 Independence Avenue, SW., 
Washington, DC 20250-0781.

    Note: All documents must be received on or before the pre-
application closing deadline to be considered complete and timely 
filed. Pre-applications that do not include a Purchase Agreement for 
transfer proposals, and/or market surveys for projects that do not 
meet the occupancy standards of Section III paragraph (2) of this 
notice, or if applicable, the requirements for the exception in 
Section VI paragraph (1)(ii) of this notice, will be

[[Page 19517]]

considered incomplete and will be returned to the applicant with 
appeal rights if not submitted by the closing deadline.

VII. Selection Process

    Pre-application ranking points will be based on information 
provided during the submission process and in Agency records. Points 
will be awarded as follows:
    (1) Contribution of funds from other sources. Other funds are those 
discussed in items (2) through (7) of Section I ``Funding Opportunities 
Description''. Points awarded are to be based on documented written 
evidence that the funds are committed. The maximum points awarded for 
this criterion is 25 points. These points will be awarded in the 
following manner:
    (i) Evidence of a commitment of at least $3,000 to $5,000 per unit 
per property from other sources--15 points, or
    (ii) Evidence of a commitment greater than $5,000 per unit per 
property from other sources--20 points, or
    (iii) Evidence of a commitment greater than $5,000 per unit per 
property from other sources and a binding written commitment by a third 
party to contribute 25 percent or more of any allowable developer fee 
to the hard costs of construction--25 points.
    (2) Owner contribution. The maximum points awarded for this 
criterion is 15 points. These points will be awarded in the following 
manner:
    (i) Owner contribution sufficient to pay transaction costs. (These 
funds cannot be from project reserve or operating funds or in the form 
of a loan). Transaction costs are defined as those costs required to 
complete the transaction and include, but are not limited to, the CNA, 
legal and closing costs, appraisal costs and filing/recording fees. The 
minimum contribution required to receive these points is $5,000 per 
project and will be required to be deposited in the property reserve 
account prior to closing--5 points.
    (ii) Owner contribution for the hard costs of construction. (These 
funds cannot be from project reserve or operating funds or in the form 
of a loan). Hard costs of construction are defined as a hard asset such 
as inventory, equipment, property or machinery. Hard costs are itemized 
on Form RD 1924-13 ``Estimate and Certificate of Actual Cost''. Form RD 
1924-13 can be found at http://www.rurdev.usda.gov/regs/Forms/1924-13.pdf. The minimum contribution required to receive these points is 
$1,000 per unit which will be required to be deposited in the property 
reserve account prior to closing. An increased return to owner may be 
budgeted and allowed for funds committed in accordance with 7 CFR 
section 3560.406(d)(14)(ii). 10 points.
    (3) Age of project. For project consolidation proposals, the 
project with the earliest operational date will be used in calculating 
the age of the project. Since the age of the project and the date that 
the loan was made are directly related to physical needs, a maximum of 
25 points will be awarded on the following criteria:
    (i) Projects with initial operational dates prior to December 21, 
1979--25 points.
    (ii) Projects with initial operational dates on or after December 
21, 1979, but before December 15, 1989--20 points.
    (iii) Projects with initial operational dates on or after December 
15, 1989, but before October 1, 1991--15 points.
    (4) Troubled project points. The Agency may award up to 25 
additional points to facilitate the transfer and revitalization of 
projects the Agency considers as troubled due to an act of nature or 
where physical and/or financial deterioration or management 
deficiencies exist. Projects with an Agency classification of ``C'' or 
``D'' according to Agency Handbook 2-3560, Chapter 9, Paragraph 9.7 
(available at http://www.rurdev.usda.gov/regs/hblist.html) will be 
considered troubled. Projects that are classified ``B'' and do not 
involve a transfer will also receive consideration. The handbook 
definition of Agency classification takes precedent over Multifamily 
Housing Information System (MFIS) status. Points will be awarded in the 
following manner:
    (i) For Stay-in Owners only: If the Agency servicing classification 
is B as a result of a workout plan approved by the Agency prior to 
January 1, 2009--25 points.
    (ii) If the Agency servicing classification is C or D for 24 months 
or more--20 points.
    (iii) If the Agency servicing classification is C or D for less 
than 24 months--15 points.
    (5) Prior Agency approvals. In the interest of ensuring timely 
application processing and underwriting, the Agency will award up to 20 
points for properties with CNAs already approved by the Agency. 
``Approved'' means either after the initial CNA has been reviewed and 
approved or after an updated CNA has been reviewed and approved by the 
Agency. CNAs over 12 months old may not be used for MPR underwriting 
without an update approved by the Agency. Points will be awarded for:
    (i) CNAs approved on or after October 1, 2007 and prior to October 
1, 2008--10 points.
    (ii) CNAs approved on or after October 1, 2008 but before the 
publication of the FY 2009 MPR NOSA--20 points.
    (6) Energy generation. Applicants will be awarded 5 points if the 
proposal includes the installation of energy generation systems to be 
funded by a third party. The proposal must include an overview of the 
energy generation system being proposed. Evidence that an energy 
generation system has been funded by a third party and that it has a 
quantifiable positive impact on energy consumption will be required. 5 
points.
    (7) Energy conservation. Applicants will be awarded up to 10 points 
if the proposal includes a written commitment evidenced by the 
application to achieve the following objectives which may be verified 
after rehabilitation or repair of a property:
    (i) ENERGY STAR compliance. In general rehabilitation that earns 
the ENERGY STAR label for residential construction. Units earning the 
ENERGY STAR label must be independently verified to meet guidelines for 
energy efficiency as set by the U.S. Environmental Protection Agency. 
All procedures used in verifying a unit for the ENERGY STAR label must 
comply with National Home Energy Ratings System (HERS) guidelines. 
ENERGY STAR guidelines for residential construction apply to single or 
low-rise multi-family residential buildings. 2 Points.
    (ii) More efficient heating, ventilation and air conditioning 
(HVAC) equipment. The rehabilitated HVAC equipment is more energy 
efficient than the previous HVAC equipment. 2 Points.
    (iii) More efficient windows. The newly installed windows are more 
energy efficient than the previous windows. 2 Points.
    (iv) Additional attic insulation. Additional attic insulation is 
added to the property. 2 Points.
    (v) Using ``green'' or renewable materials. Applicant uses 
``green'' or renewable materials in the rehabilitation or repair of the 
property. 2 Points.
    (8) Tenant service provision. The Agency will award 5 points for 
applications that include new services provided by a non-profit 
organization, which may include a faith-based organization, or by a 
Government agency. Such services shall be provided at no cost to the 
project and shall be made available to all tenants. Examples of such 
services are transportation for the elderly, after-school day care

[[Page 19518]]

services or after-school tutoring. 5 Points.
    (9) Consolidation of project operations. To encourage post-
transaction operational cost savings and management efficiencies, the 
Agency will award 5 points for applications that include at least two 
properties that will consolidate project budget and management 
operations and 10 points for applicants that include at least five 
properties that will consolidate project budget and management 
operations. Consolidations must meet the requirements of 7 CFR 
3560.410.
    (10) Property is located in a Presidentially declared Disaster 
Area. Borrowers can determine if they are in a Presidentially declared 
Disaster Area by checking http://www.rurdev.usda.gov/rd/disasters. 10 
Points.

    Note: For projects within a portfolio transaction or group of 
consolidated projects within a portfolio transaction, the Agency 
will calculate the average score for each project and each 
consolidation project group within the sale or consolidation.

    The Agency will total the points awarded to each pre-application 
received within the timeframes of this Notice and rank each pre-
application according to total score. If point totals are equal, the 
earliest time and date the pre-application was received by the Agency 
will determine the ranking. In the event pre-applications are still 
tied, they will be further ranked by giving priority to those 
properties with the earliest Rural Development operational date.
    Eligibility will then be confirmed on the 16 highest-scoring and 
complete pre-applications per State. If one or more of the 16 highest-
scoring pre-applications is determined ineligible, (i.e. the applicant 
is a borrower that is not in good standing with the Agency or has been 
debarred or suspended by the Agency, etc.) the next highest-scoring 
pre-application will be confirmed for eligibility.
    If one or more of the 16 highest-ranking pre-applications is a 
portfolio transaction, then eligibility determinations will be 
conducted on all of the pre-applications associated with the portfolio 
transaction. Should any of the pre-applications associated with the 
portfolio transaction be determined ineligible, that pre-application 
will be dropped, but the overall eligibility of the portfolio 
transaction will not be affected as long as the requirements in Section 
I ``Funding Opportunities Description'' are met.
    Once ranking has been established, the Agency will conduct a four-
step process to select pre-applications for submission of formal 
applications. This process is needed to assure that the Agency can 
process the proposed transactions within available staffing resources, 
develop a representative sampling of revitalization transaction types, 
assure geographic distribution, and assure an adequate pipeline of 
transactions to use all available funding.
    Step One: The Agency will review the eligible pre-applications 
nationwide, identify pre-applications as either RRH or FLH projects and 
then as Simple, Complex, or Portfolio and separate them by State.
    Step Two: The Agency will select, for further processing, the 
nationally top-ranked portfolio sale transactions until a total of 
$100,000,000 in potential debt deferral is reached. Portfolio 
transactions will be limited to one per State (either RRH or FLH) and 
will count as one (1) MPR transaction.
    Step Three: The highest ranked RRH complex transactions in each 
state will be selected for further processing, not to exceed 2 per 
State. The highest ranked FLH complex transactions in each state will 
be selected for further processing, not to exceed one (1) per state.
    Step Four: Additional projects will be selected from the highest 
ranked eligible pre-applications involving simple transactions in that 
state until a total of 5 RRH pre-applications for MPR transactions per 
state is reached. If a FLH complex transaction has not been selected in 
Step Three above, one additional FLH project will be selected from the 
highest ranked eligible pre-applications involving FLH simple 
transactions, in that state, until a total of 6 pre-applications for 
MPR transactions per state is reached.

VIII. Processing for Selected Pre-Applications

    Those proposals that are ranked and then selected for further 
processing will be invited to submit a formal application on SF 424 
``Application for Federal Assistance.'' Those pre-applications that are 
rejected by the Agency will be returned to the applicant and the 
applicant will be given appeal rights pursuant to 7 CFR section 11. 
Those proposals that are not selected due to low scores will be 
retained by the Agency unless they are withdrawn by the applicant. In 
the event that a pre-application is selected for further processing and 
the pre-applicant declines, the next highest ranked pre-application of 
the same transaction type in that state will be selected provided there 
is no change in the preliminary eligibility of the pre-applicant.
    If there are no other pre-applications of the same transaction 
type, then the next highest-ranked pre-application regardless of 
transaction type will be selected.
    Applications (SF 424s) can be obtained in hard copy by contacting 
the State Office in the state where the project is located and can be 
submitted either electronically or in hard copy to the State Office.
    If a pre-application is accepted for further processing, the 
applicant will be expected to submit additional information needed to 
demonstrate eligibility and feasibility (such as a CNA), consistent 
with this NOSA and the appropriate sections of 7 CFR section 3560, 
prior to the issuance of a restructuring offer.
    Rural Development will work with pre-applicants selected for 
further processing in accordance with the following steps:
    (1) Based on the feasibility of the type of transaction that will 
best suit the project and the availability of funds, further 
eligibility confirmation determinations will be conducted by the 
designated Multi-Family Housing Revitalization Coordinators assigned by 
each Rural Development State Director with the assistance of the Multi-
Family Housing Preservation and Direct Loan Division.
    (2) If one is not already available to the Agency, a CNA will be 
required and conducted in accordance with the requirements of 7 CFR 
3560.103(c), Handbook 3-3560, Chapter 7, ``Transfers of Project 
Ownership,'' and the CNA Statement of Work together with any non-
conflicting amendments (available in any Rural Development State 
Office.) A CNA is prepared by a qualified independent contractor and is 
obtained to determine needed repairs and any necessary adjustments to 
the reserve account for long-term project viability. While the 
requirements of the CNA are described in the materials referenced 
above, at a minimum, to be considered acceptable, a CNA must include:
    (i) A physical inspection of the site, architectural features, 
common areas and all electrical and mechanical systems;
    (ii) An inspection of a sample of dwelling units;
    (iii) Identify repair or replacement needs;
    (iv) Provide a cost estimate of the repair and replacement 
expenses; and
    (v) Provide at least a 20-year analysis of the timing and funding 
for identified needs which includes reasonable assumptions regarding 
inflation. The cost of the CNA will be considered a

[[Page 19519]]

part of the project expense and may be paid from the ``project 
reserve'' with prior approval of the Agency. The Agency approval for 
participation in this program will be contingent upon the Agency's 
final approval of the CNA and concurrence in the scope of work by the 
owner. The Agency, in its sole discretion, may choose to obtain a CNA, 
at its expense, if it determines that doing so is in the best interest 
of the Government.
    It is important to note that a CNA may be provided in two general 
formats. When an owner has received a firm commitment of third party 
funds sufficient to complete a complete rehabilitation, the CNA may be 
prepared based on the condition of the property after the 
rehabilitation is complete. All other CNAs will be completed based on 
the existing condition of the property.
    (3) Loan underwriting will be conducted by the designated Multi-
Family Housing Revitalization Coordinator assigned by each Rural 
Development State Director with the assistance of the Multi-Family 
Housing Preservation and Direct Loan Division. The feasibility and 
structure of each revitalization proposal will be determined using this 
underwriting process and will include a determination of the 
restructuring tools that will minimize the cost to the Government 
consistent with the purposes of this NOSA. To help assure a balanced 
utilization of revitalization tools and the long-term economic 
viability of revitalized projects, the MPR underwriting guidelines 
include, but are not limited to the following:
    (i) The maximum soft-second loan is limited to no more than $5,000 
per unit,
    (ii) The total assistance provided from a revitalization grant, 
revitalization zero percent loan, and/or revitalization soft-second 
loan is limited to $10,000 per unit,
    (iii) The maximum Section 515 loan or Section 514/516 off farm loan 
and grant is limited to no more than $20,000 per unit, and
    (iv) Properties receiving tax credits are expected to have 
sufficient funding sources and generally will receive debt deferral 
only.
    (4) Properties with more than 75 percent of the units receiving 
significant subsidy such as Rural Development rental assistance or HUD-
funded subsidy will be supplemented with Section 514, 515 and 516 loans 
and grants before revitalization grants and revitalization soft-second 
loans are considered.
    (5) MPR revitalization grants will be limited to $5,000 per unit.
    (6) Any rent increases that may be necessary will not exceed 10 
percent in any one year.
    (7) The approved MPR transaction will include projected revenue 
sufficient to cover a 10 percent Operations and Maintenance increase in 
the second year after the transaction.
    (8) Full return to owner will be budgeted pursuant to the Loan 
Agreement.
    (9) Budgeted increases to reserve deposit will not exceed three 
percent per annum.
    (10) The remaining reserve balance at the end of the 20-year 
analysis period should be at least 2.0 times the average annual needs, 
including inflation, over the 20-year analysis period.
    These guidelines have been developed based on experience in the FY 
2005-8 Demonstrations. The Agency believes that these guidelines will 
be appropriate for typical transactions. However, the Agency reserves 
the right to re-calculate which MPR demo tools should be used, in the 
Agency's judgment, if doing so would further the objectives of the MPR 
and is in the best interest of the Government.
    The Agency expects that some of the transactions proposed by 
selected pre-applicants will prove to be infeasible. The applicant 
entity may be determined to be ineligible under Section III of this 
Notice. If a proposed transaction is determined infeasible or the 
applicant determined ineligible, the Agency will then select the next 
highest-ranked project for processing regardless of transaction type.
    Each MPR offer will be approved by the Revitalization Review 
Committee chaired by the Deputy Administrator for Multi-Family Housing 
or an agency-authorized delegate. Approved MPR offers will be presented 
to applicants who will then have up to 15 calendar days to accept or 
reject the offer in writing. Offers will expire after 15 days. The 
Agency will replace expired applications by selecting the next highest-
ranked project. Closing of MPR offers will occur within 90 days of 
acceptance by the applicant unless extended by the Agency.

IX. Funding Restrictions

    Applicants will be selected in accordance with selection criteria 
and the four-step process identified in Section VII of this Notice. 
Once selected to proceed, the Agency will provide additional guidance 
to the applicant and request information and documents necessary to 
complete the underwriting and review process. Since the character of 
each application may vary substantially depending on the type of 
transactions proposed, information requirements will be provided as 
appropriate. Complete project information must be submitted as soon as 
possible but in no case later than 45 days from the date of Agency 
notification of the applicant's selection for further processing or 
September 1, 2009, whichever occurs first. Failure to submit the 
required information in a timely manner may result in the Agency 
discontinuing the processing of the request.
    Funding under this NOSA will be obligated to selectees that finish 
the processing steps outlined above first within each of the 3 funding 
categories described in Section VII of this Notice and that result in a 
ratio as close as possible to 30 percent portfolio transactions, 50 
percent complex transactions, and 20 percent simple transactions.

X. Application Review

    A review committee will make recommendations for final decision 
regarding funding to the appropriate Rural Development State Director 
based on the selection criteria contained in this NOSA.

XI. Appeal Process

    All adverse determinations regarding applicant eligibility and the 
awarding of points as a part of the selection process are appealable. 
Instructions on the appeal process will be provided at the time an 
applicant is notified of the adverse action.

    Dated: April 15, 2009.
Thomas E. Hannah,
Acting Administrator, Rural Housing Service.
BILLING CODE 3410-XV-P

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[FR Doc. E9-9831 Filed 4-28-09; 8:45 am]
BILLING CODE 3410-XV-C


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