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###### Department of Agriculture

###### Rural Housing Service

# AGENCY:

Rural Housing Service, USDA.

# ACTION:

Notice.

*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,                         *cynthia.reesefoxworth@usda.gov,*                         (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                           ( print 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                           ( print 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                           ( print 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                               ( print 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                           ( print 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                           ( print 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.

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BILLING CODE 3410-XV-P

[FR Doc. E9-9831 Filed 4-28-09; 8:45 am]

BILLING CODE 3410-XV-C