[Federal Register Volume 61, Number 100 (Wednesday, May 22, 1996)]
[Notices]
[Pages 25752-25762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12795]




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_______________________________________________________________________

Part III





Department of Housing and Urban Development





_______________________________________________________________________



Availability of Additional Units for the Housing Finance Agency Risk-
Sharing Program; Notice

Federal Register / Vol. 61, No. 100 / Wednesday, May 22, 1996 / 
Notices

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4064-N-01]


Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner; Availability of Additional Units for the Housing Finance 
Agency Risk-Sharing Program

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Notice of the Availability of Additional Units for the Housing 
Finance Agency Risk-Sharing Program.

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SUMMARY: This Notice announces the availability of an additional 10,000 
units for the Housing Finance Agency Risk-Sharing program and invites 
qualified Housing Finance Agencies (HFAs) that are not yet approved to 
participate in the program (new applicants) to apply for approval to 
participate in the program. HFAs that are currently approved to 
participate in the program will be notified by certified mail that they 
may request additional units by letter to the Department.
    The Housing Finance Agency Risk-Sharing program is authorized under 
section 542(c) of the Housing and Community Development Act of 1992, as 
amended. Section 8 of the Housing Opportunity Program Extension Act of 
1996 extends section 542(c) by authorizing the Secretary to enter into 
HUD mortgage insurance commitments processed by State and local HFAs 
for an additional 12,000 multifamily units for Fiscal Year 1996. Ten 
thousand of those units are being made available by this invitation. 
The balance of the 12,000 new units (2,000) are being retained by HUD 
Headquarters to meet the immediate needs of current risk-sharing 
participants so that they can maintain essential risk-sharing 
operations and staff resources.

APPLICATION DEADLINE: The deadline for receipt of applications from new 
applicants to participate in this program is 4:00 pm, Eastern Daylight 
Savings Time on July 22, 1996. Applications received after the date and 
time stated herein will not be accepted and will be returned to the 
sender. HFAs are encouraged to submit applications prior to the end of 
the 60-day period, as applications will be reviewed and approved as 
they are received. Applicants should obtain a copy of the program 
handbook (Handbook 4590.01 REV-1) and the program regulations at 24 CFR 
part 266 to become familiar with program requirements. If there are 
differences between the handbook and this Notice, the requirements of 
this Notice shall prevail. Qualified agencies may call Jane Luton at 
202-708-2556 for a copy of the handbook and regulations. This is not a 
toll-free number. Hearing- or speech-impaired persons may access that 
number by calling toll-free the Federal Information Relay Service at 
(800) 877-8339.

ADDRESS FOR SUBMISSION: Applications for participation in the program 
must be identified on the envelope or wrapper and be submitted as 
follows: Director, Office of Multifamily Housing Development, 
Application for Housing Finance Agency Risk-Sharing Program, U.S. 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Room 6142, Washington, DC 20410.
    HFAs shall submit an original and three copies (a FAX copy is NOT 
acceptable) of the application to the above address by the application 
deadline.

    Note: Any new applicant that is not a HUD-approved mortgagee at 
the time of its application to participate in the program (see 
2.(ii) under Application Requirements below) must submit an 
Application for Approval as a HUD-Approved Mortgagee. Such 
applications must be identified on the envelope or wrapper as such 
and submitted by the application deadline to the following address: 
Director, Office of Lender Activities and Land Sales Registration, 
Application for Housing Finance Agency Risk-Sharing Program, U.S. 
Department of Housing and Urban Development, Room 9156, Washington, 
DC 20410.

APPLICATION FEE: New applicants must submit an application fee of 
$10,000 through FEDWIRE. The Federal Deposit System offers individual 
and corporate remitters the ability to move funds electronically from 
their bank account to the Treasury. The remitter identifies the payment 
and the Department of Housing and Urban Development as the government 
agency to be credited on the funds transfer message. Instructions for 
your bank to follow to complete a FEDWIRE are listed in Attachment A.

FOR FURTHER INFORMATION CONTACT: Jane Luton, Director, New Products 
Division, Office of Multifamily Housing Development, Room 6142, U.S. 
Department of Housing and Urban Development, Washington, D.C. 20410. 
Telephone: (202) 708-2556; (This number is not toll-free.) Hearing- or 
speech-impaired persons may access that number by calling toll-free the 
Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The information collection requirements contained in this Notice 
have been approved by the Office of Management and Budget (OMB), under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), and assigned 
OMB Control Number 2502-0500. An agency may not conduct or sponsor, and 
a person is not required to respond to, a collection of information 
unless the collection displays a valid control number.

Purpose and Program Summary

    Section 542(c) of the Housing and Community Development Act of 1992 
authorized the Department to implement a multifamily mortgage insurance 
risk-sharing pilot program with qualified State and local Housing 
Finance Agencies (HFAs). On December 3, 1993, the Department 
promulgated interim regulations implementing the pilot program, the 
purpose of which was to demonstrate the effectiveness of providing new 
forms of Federal credit enhancement for the development of affordable 
multifamily housing by State and local HFAs. On December 5, 1994, the 
Department promulgated final regulations for the program. To date, the 
Department has allocated 30,000 units which were available for Fiscal 
Years 1993, 1994, and 1995 to 31 participating HFAs. These HFAs have 
received HUD Firm Approval Letters (notifications that units have been 
reserved for proposed projects) for over 14,000 units.
    The program has been designed to increase the supply of affordable 
multifamily housing through partnerships between HUD and State and 
local housing finance agencies. Qualified HFAs are authorized to 
originate, underwrite, and close loans for multifamily housing projects 
requiring new construction and substantial rehabilitation as well as 
certain acquisitions and refinancings. HUD will endorse such loans for 
full mortgage insurance upon presentation of appropriate 
certifications. HFAs will be responsible for the full range of loan 
management, servicing, and property disposition activities associated 
with these projects.
    Through a Risk-Sharing Agreement between HUD and the HFA, the HFA 
contracts to assume a portion of the risk on each loan it underwrites. 
HUD, in turn, commits to pay 100 percent of the outstanding principal 
mortgage balance upon default of the loan and filing of a claim. The 
HFA will issue a debenture for the amount of the claim pending the 
final settlement of the loss. HUD and the HFA will share in any loss in 
accordance with the amount of risk assumed by each under the Risk-
Sharing Agreement.

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    HFAs will be approved on one of the following three levels: (1) 
Level I; (2) Level II; or (3) a combination of Level I and Level II. 
The primary distinction between Level I and Level II is in the level of 
risk apportionment an HFA agrees to accept. HFAs participating at Level 
I are those that will assume 50 percent or more of the risk associated 
with a loan default. These HFAs may use their own underwriting 
standards and loan terms and conditions without further approval from 
HUD. HFAs participating at Level II will assume less than 50 percent of 
the risk and must have their underwriting standards and loan terms and 
conditions approved by HUD.
    This document contains information concerning: (a) Deadline and 
address for submission of applications; (b) eligibility requirements; 
(c) allocation of units; (d) application requirements; (e) 
establishment of dedicated account; (f) application review procedures; 
(g) approval of applications; and, (h) authorization to use the unit 
set-aside.

Eligibility

    To participate in the program, an HFA must meet the qualifications 
set forth in 24 CFR 266.100 and the requirements in 24 CFR 266.105 (a).

Allocation of Units

    HUD will set aside units for approved HFAs as follows:
    (1) Unit set-aside. Each approved HFA will receive a set-aside of 
units based upon an assessment of their previous multifamily housing 
experience, their current capacity to utilize the number of units 
requested, the population size of the HFA's jurisdiction in comparison 
to other new applicants and participating HFAs, and the number of units 
requested by the HFA. The unit set-aside will be reserved in a Risk-
Sharing Agreement executed by the HFA and HUD.
    (2) Headquarters reserve. HUD may hold back a small portion of the 
10,000 units for future use in FY 1996 to meet unforeseen needs of 
current and new HFA participants.
    (3) Credit subsidy. The set-aside of units will be subject to the 
availability of credit subsidy which will be obligated and allocated in 
accordance with outstanding Department instructions.

Application Requirements

    New applicants must submit an application containing the following 
information:
    (1) Name, title, telephone and fax numbers. Provide the name, 
title, telephone and fax numbers of the person most familiar with the 
material contained in the application in case HUD needs to contact the 
HFA for clarification and/or further information.
    (2) Evidence of eligibility. The HFA must provide evidence that it 
meets the following:
    (i) Be a HUD-approved mortgagee in good standing;

    (Note: HFAs that are not HUD-approved mortgagees at the time of 
their application to participate in this program must submit, 
concurrently, separate applications for approval to participate in 
this program and for approval to operate as a HUD-approved 
mortgagee. An application for approval to operate as a HUD-approved 
mortgagee must be submitted to HUD in accordance with the 
requirements established under 24 CFR 202.10 through 202.19);

    (ii) Has at least five years experience in multifamily 
underwriting; and
    (iii) Carries the designation of ``top tier'' or its equivalent, as 
evaluated by Standard and Poors or any other nationally recognized 
rating agency; OR
    (iv) Has a current overall rating of ``A'' for its general 
obligation bonds from a nationally recognized rating agency; OR
    (v) For HFAs not qualifying as (iii) or (iv), the Housing Finance 
Agency Questionnaire (Attachment B to this Notice)
    (3) Application fee. Evidence that the application fee of $10,000 
has been wire-transferred to the U.S. Treasury. This fee will not be 
refunded once the application has been accepted for review.
    (4) Units requested. A statement indicating the number of units the 
HFA is requesting as well as the number of units the HFA proposes to 
process to firm approval letter by September 30, 1997.
    (5) Risk-sharing arrangement. HFA declaration of the risk-sharing 
arrangement it has selected, i.e., Level I, Level II or both Level I 
and Level II.
    (6) Legal opinion. A letter from the HFA's legal counsel providing 
its opinion, after careful review of the HFA's program, that the HFA 
has the necessary powers and ability to comply with all program 
requirements. The opinion for an HFA with an overall rating of ``A'' on 
its general obligation bonds must also state that the general 
obligation will extend to the HFA's responsibilities under the Risk-
Sharing Agreement and any debenture issued by the HFA to the 
Commissioner. If the opinion of counsel does not include this 
statement, the HFA must establish a dedicated reserve account in the 
amount of $500,000 in accordance with the requirements in 24 CFR 
266.110 (b).
    (7) Underwriting procedures, loan terms and conditions, investment 
policies and business and financial practices. A description of the 
following: (i) The manner in which the HFA will process mortgage loans, 
including its underwriting procedures and loan terms and conditions as 
follows: (A) The approval process and fee schedule, (B) maximum 
mortgage term, (C) minimum debt service coverage, (D) maximum loan-to-
value ratio, (E) maximum loan amount, (F) minimum equity requirement, 
(G) minimum income-to-expense ratio, (H) prepayment requirements, (I) 
title requirements, (J) escrow and reserves (including replacement 
reserves), and (K) hazard insurance requirements; (ii) loan management, 
loan servicing and property disposition activities; (iii) the manner in 
which the HFA's and mortgagor's reserves and escrows (including letters 
of credit) will be established and controlled; and (iv) a description 
of the HFA's investment policies and overall business practices.
    (8) Underwriting staff. Identification, background description and 
years of experience of individuals with final underwriting approval 
authority (e.g., chief underwriter) and the individual responsible for 
project management, loan servicing and property disposition (e.g., 
asset manager). These functions may not be contracted out by the HFA.
    (9) Default history. A description of the default history 
(including workouts) for all HFA-financed multifamily projects.
    (10) Oversight. A description of oversight by State or local 
government agencies.
    (11) Financial statements. Copies of audited financial statements 
for the HFA's last three fiscal years.
    (12) Certification. A certification (Attachment C to this Notice) 
signed by an authorized official from the HFA that certifies to the 
following:
    (i) The HFA will at all times comply with the financial 
requirements of 24 CFR 266.110 and, where applicable, maintain required 
reserves in a dedicated account in liquid funds (i.e., cash, cash 
equivalents, or readily marketable securities) in a financial 
institution acceptable to HUD;
    (ii) The Department of Justice has not brought a civil rights suit 
against the Agency and no suit is pending;
    (iii) There has not been an adjudication of a civil rights 
violation in a civil action brought against the Agency by a private 
individual, unless the Agency is operating in compliance with a court 
order, or implementing a HUD-approved compliance agreement designed to 
correct the areas of non-compliance; and,

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    (iv) There are no outstanding findings of noncompliance with civil 
rights statutes, Executive Orders, or regulations as a result of formal 
administrative procedures, or the Secretary of HUD has not issued a 
charge against the Agency under the Fair Housing Act, unless the Agency 
is operating under a compliance agreement designed to correct the areas 
of noncompliance.
    (13) Sample debenture form issued by the HFA.
    (14) The Housing Finance Agency Questionnaire (Attachment B) The 
Questionnaire is to be completed only by HFAs that do not carry the 
designation ``top-tier'' or its equivalent, or do not currently receive 
an overall rating of ``A'' for their general obligation bonds from a 
nationally recognized rating agency.

Establishment of Dedicated Account

    Prior to execution of the Risk-Sharing Agreement, HFAs that do not 
have a top-tier rating, have not received an overall rating of ``A'' on 
their general obligation bonds or those whose opinion of legal counsel 
(required above) did not state that the general obligation will extend 
to the HFA's responsibilities under the Risk-Sharing Agreement and any 
debenture issued by the HFA to the Commissioner must establish a 
specifically identified dedicated account (see Attachment D). This 
account must consist entirely of liquid assets (i.e., cash, cash 
equivalents, or readily marketable securities) and be located in a 
financial institution acceptable to HUD. Such an institution has assets 
of not less than $100,000,000; is organized under the laws of the 
United States or a State thereof; and is regulated and examined by the 
Comptroller of the Currency, Federal Deposit Insurance Corporation or 
the Federal Reserve Board, has a long-term bank deposit rating of ``A-
1'' or better by Moody's Investors Service or ``A+'' rating by Standard 
and Poors. Reserve requirements are set forth in 24 CFR 266.110 of the 
regulations.

Application Review Procedures

    1. Additional Information. If HUD requires additional data from a 
new applicant, the new applicant will have 5 business days from the 
date of notification to submit such data to the appropriate HUD 
official. (If notification is by mail, an HFA will be presumed to 
receive notification five business days from the date of such 
notification.)
    2. Review Criteria. HUD will review each application to determine 
if the applicant meets all the requirements of the regulation and this 
Notice and demonstrates the ability to underwrite, originate, process, 
close, service, manage, and dispose of multifamily loans in a prudent 
manner.
    3. Acceptability Standards. HUD will review the submissions of HFAs 
which do not have a top-tier rating or have not received an overall 
rating of ``A'' on their general obligation bonds in accordance with 
the above Review Criteria and the standards set forth below:
    (i) Demonstrated capability to carry out program responsibilities, 
including: (A) continuity of management; (B) staff qualifications and 
experience; and (C) the HFA's established track record of performing 
multifamily loan processing, servicing, loan management (including 
capability to enforce regulatory agreements and to perform workouts), 
and property disposition for the types of loans eligible under this 
program.
    (ii) Adequacy of the HFA's administrative capabilities to ensure 
sound underwriting and loan management.
    (iii) Soundness of the HFA's multifamily portfolio, including 
default experience.
    (iv) Strength of the relationship between the HFA and the State or 
local government.
    (v) The HFA's fiscal soundness, including (A) amounts and sources 
of revenues for housing activities and its investment policies for fund 
balances (if any); (B) how it proposes to meet any monetary obligations 
required under this program; and (C) the adequacy of funding to commit 
to the level requested in the application.

Approval of Applications

    1. Notification. HUD will notify new applicants of approval or 
disapproval within 60 days of the deadline for applications.
    2. Approval Levels. HFAs will be approved to operate under one of 
three requested risk-sharing arrangements as follows:
    (i) Level I--the HFA is approved to originate, service and dispose 
of multifamily mortgages using its own underwriting standards and loan 
terms and conditions. The HFA assumes 50 to 90 percent of the risk in 
increments of 10 percent.
    (ii) Level II--the HFA is approved to originate, service and 
dispose of multifamily mortgages where the HFA uses underwriting 
standards and loan terms and conditions approved by HUD, and
    A. When the loan-to-replacement cost ratio for new construction and 
substantial rehabilitation projects or the loan-to-value ratio for 
existing projects are greater than or equal to 75 percent, the HFA 
shall assume at least 25 percent of the risk.
    B. When the loan-to-replacement cost ratio for new construction and 
substantial rehabilitation projects or the loan-to-value ratio for 
existing projects are less than 75 percent, the HFA shall assume 10 
percent or 25 percent of the risk, at the HFA's option.
    (iii) Combined Levels I/II--For HFAs which plan to use Level I and 
Level II process, the underwriting standards and loan terms and 
conditions to be used on Level II loans must be approved by HUD as 
described in (ii), above.
    3. Risk-Sharing Agreement. When an HFA is determined by HUD to be 
qualified to participate in the program, the Department will grant 
tentative approval to the HFA and forward the Risk-Sharing Agreement 
(similar to that shown in Attachment E) to the HFA for signature. The 
Risk-Sharing Agreement will set aside the number of units for the HFA. 
It will also set forth other obligations of the HFA. The HFA must 
return the executed document, along with evidence that the dedicated 
reserve account has been established (where appropriate).

Authorization to Use Unit Set-Aside

    After receipt of the signed Risk-Sharing Agreement, HUD will return 
a copy of the Risk-Sharing Agreement executed on behalf of the 
Department and notify the HFA that it may begin using its unit set-
aside. No HFA will be authorized to process loans for mortgage 
insurance until it has received HUD-approved mortgagee status, been 
approved under the Risk-Sharing program, has executed a Risk-Sharing 
Agreement and, where required, provided evidence to the Department that 
it has established a dedicated reserve account.

Other Matters

    Environmental Finding. A Finding of No Significant Impact with 
respect to the environment has been made in accordance with HUD 
regulations at 24 CFR part 50 implementing section 102(2)(C) of the 
National Environmental Policy Act of 1969 (42 U.S.C. 4332). The Finding 
of No Significant Impact is available for public inspection and copying 
between 7:30 a.m. and 5:30 p.m. weekdays at the Office of the Rules 
Docket Clerk, 451 Seventh Street, SW., Room 10276, Washington, DC 
20410.
    Executive Order 12612, Federalism. The General Counsel, as the 
Designated Official under section 6(a) of Executive Order 12612, 
Federalism, has determined that the policies and procedures contained 
in this Notice will

[[Page 25755]]

not have substantial direct effects on States or their political 
subdivisions, or the relationship between the federal government and 
the States, or on the distribution of power and responsibilities among 
the various levels of government. As a result, the Notice is not 
subject to review under the Order.
    Executive Order 12606, The Family. The General Counsel, as the 
Designated Official for Executive Order 12606, The Family, has 
determined that this Notice will likely have a beneficial impact on 
family formation, maintenance and general well-being. Accordingly, 
since the impact on the family is beneficial, no further review is 
considered necessary.
    Accountability in the Provision of HUD Assistance. The Department 
has promulgated a final rule to implement section 102 of the Department 
of Housing and Urban Development Reform Act of 1989 (HUD Reform Act). 
The final rule is codified at 24 CFR part 12. Section 102 contains a 
number of provisions that are designed to ensure greater accountability 
and integrity in the provision of certain types of assistance 
administered by the Department. On January 16, 1992, the Department 
published at 57 FR 1942, additional information that gave the public 
(including applicants for, and recipients of, HUD assistance) further 
information on the implementation, public access, and disclosure 
requirements of section 102. The documentation, public access, and 
disclosure requirements of section 102 are applicable to assistance 
awarded under this Notice as follows:
    (1) Documentation and Public Access. The Department will ensure 
that documentation and other information regarding each application 
submitted pursuant to this Notice are sufficient to indicate the basis 
upon which assistance was provided or denied. This material, including 
any letters of support, will be made available for public inspection 
for a five-year period beginning not less than 30 days after the award 
of the assistance. Material will be made available in accordance with 
the Freedom of Information Act (5 U.S.C. 552) and HUD's implementing 
regulations at 24 CFR part 15. In addition, HUD will include the 
recipients of assistance pursuant to this Notice in its Federal 
Register notice of all recipients of HUD assistance awarded on a 
competitive basis. (See 24 CFR 12.14(a) and 12.16(b), and the notice 
published in the Federal Register on January 16, 1992 (57 FR 1942), for 
further information on these requirements.)
    (2) HUD Responsibilities--Disclosures. The Department will make 
available to the public for five years all applicant disclosure reports 
(Form HUD-2880) submitted in connection with this Notice. Update 
reports (also Form HUD-2880) will be made available along with the 
applicant disclosure reports, but in no case for a period less than 
three years. All reports, both applicant disclosures and updates, will 
be made available in accordance with the Freedom of Information Act (5 
U.S.C. 552) and HUD's implementing regulations at 24 CFR part 15. (See 
24 CFR part 12, Subpart C, and the notice published in the Federal 
Register on January 16, 1992 (57 FR 1942), for further information on 
these disclosure requirements.)
    Prohibition Against Advance Information on Funding Decisions. HUD's 
regulation implementing section 103 of the Department of Housing and 
Urban Development Reform Act of 1989, codified as 24 CFR part 4, 
applies to the funding competition announced today. The requirements of 
the rule continue to apply until the announcement of the selection of 
successful applicants. HUD employees involved in the review of 
applications and in the making of funding decisions are limited by part 
4 from providing advance information to any person (other than an 
authorized employee of HUD) concerning funding decisions, or from 
otherwise giving any applicant an unfair competitive advantage. Persons 
who apply for assistance in this competition should confine their 
inquiries to the subject areas permitted under 24 CFR part 4.
    Applicants or employees who have ethics related questions should 
contact the HUD Office of Ethics (202) 708-3815. Hearing- or speech-
impaired individuals may access this number via TTY by calling the 
Federal Information Relay Service at 1-800-877-8339. (With the 
exception of the ``800'' number, these are not toll-free numbers.) For 
HUD employees who have specific program questions, such as whether 
particular subject matter can be discussed with persons outside HUD, 
the employee should contact the appropriate Field Office Counsel, or 
Headquarters counsel for the program to which the question pertains.
    Prohibition against Lobbying Activities. The use of assistance 
under this Notice is subject to the disclosure requirements and 
prohibitions of section 319 of the Department of the Interior and 
Related Agencies Appropriations Act for Fiscal Year 1990 (31 U.S.C. 
1352)(the ``Byrd Amendment'') and the implementing regulations at 24 
CFR part 87. These authorities prohibit recipients of Federal 
contracts, grants, or loans from using appropriated funds for lobbying 
the Executive or Legislative Branches of the Federal Government in 
connection with a specific contract, grant, or loan. The prohibition 
also covers the awarding of contracts, grants, cooperative agreements, 
or loans unless the recipient has made an acceptable certification 
regarding lobbying. Under 24 CFR part 87, applicants, recipients and 
subrecipients of assistance exceeding $100,000 must certify that no 
Federal funds have been or will be spent on lobbying activities in 
connection with the assistance.

    Catalog of Federal Domestic Assistance Program. The Catalog of 
Federal Domestic Assistance program title and number is 14.188, 
Housing Finance Agency Risk-Sharing Program.

    Authority: Section 542(c) of the Housing and Community 
Development Act of 1992, as amended, 12 U.S.C. 1707.

    Dated: May 16, 1996.
Stephanie A. Smith,
Acting General Deputy Assistant Secretary for Housing, Federal Housing 
Commissioner.

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Attachment B--Housing Finance Agency Questionnaire

    Responses to this questionnaire fulfill the documentation 
requirements pursuant to 24 CFR 266.10(d)(4)(iii). All Housing 
Finance Agencies (HFAs) seeking approval to participate in the HFA 
Risk-Sharing program who do not have ``top-tier'' designation or an 
overall rating of ``A'' on their general obligation bonds from one 
of the nationally recognized rating agencies must complete this 
questionnaire.
    The questionnaire addresses 5 different aspects of the HFA and 
are consistent with conditions set forth in Section 542(d)(2) of the 
Housing and Community Development Act of 1992. Applicants should be 
careful to craft responses so that they clearly address the issues 
set forth in the body of this Notice. Responses should represent a 
summary of the detailed information that may be found in the HFA's 
operating, administrative and quality control manuals or guidelines. 
In order to ensure that the Department can expeditiously review and 
approve applications, ALL NARRATIVE RESPONSES ARE LIMITED TO 15 
PAGES. Responses to questions related to the portfolio (item II) may 
be presented in tabular form, where appropriate, and attached as 
exhibits to the 15 page narrative responses. The Department 
encourages HFAs to prepare responses in a manner similar to that 
which might be used for the HFAs Annual Reports and reports to the 
Board of Directors.

I. Organizational History

    Describe the history and organizational background of the HFA. 
Indicate how long it has been in existence, when it began to finance 
multifamily loans, and an overall description of its multifamily 
lending activities.
    Describe the HFA's relationship to the State or local 
government, as appropriate. Clearly indicate whether or not State or 
local government officials serve on the HFA's board of directors and 
describe, if any, the role State or local officials play in the 
HFA's program operations.
    Discuss any State or local appropriations for the past 5 years 
and any anticipated appropriations over the next 3 years to support 
the HFA's multifamily housing goals.

II. Portfolio Information

    Indicate how many multifamily loans have been financed within 
the past 10 years (dates specified), by year. Include the number and 
type of projects (family, elderly, assisted living, cooperative, 
etc.) and units in each, type of loan (first mortgage, second, gap 
loan, credit support, new construction, rehabilitation, refinancing 
with or without repairs, etc.) and original mortgage amounts, 
outstanding principal balances, status (current, default, 
foreclosed, workout) and location (urban/suburban/central city/
rural).
    For the multifamily loans currently in the HFA's portfolio, 
indicate how many are HFA owned, owned by other public agencies, 
nonprofit organizations, privately owned and other ownership types.

III. Staff Capacity

    Describe general background and indicate years of experience of 
individual responsible for the overall underwriting decision (e.g., 
chief underwriter) and for project management, loan servicing and 
property disposition (e.g., Director of Asset Management). Note that 
these functions may not be contracted out by the HFA.

IV. Operating Procedures

A. Cost Certification

    Describe the HFA's cost certification process. Explain how it 
will prevent fraud and misrepresentation, ensure legitimate costs 
and completion of repairs prior to acceptance of certification. 
Describe how mortgage excesses and mandatory prepayments will be 
handled.

B. Loan Approval

    Describe the loan approval process. Describe circumstances if 
any, under which the chief underwriter's recommendations can be 
overridden.
    Describe any situations where loans are not referred to a 
committee, what they are and to whom they are referred.

C. Loan Servicing

    Describe the HFA's overall loan servicing system and the 
procedures for enforcing the Regulatory Agreement.
    Describe the computerization of its portfolio, project audits/
reviews and procedures for resolving deficiencies.

D. Workout Procedures

    State the number of workout plans developed by the HFA over the 
last five years, elements of the agreement and current status. If 
there is no previous experience with workouts, describe plans, tools 
or strategies proposed to establish workout agreements.

V. Financial Capability

    Describe the amount and sources of funds the HFA has available 
to support multifamily housing programs. If funds are earmarked for 
specific projects or programs, or otherwise have a contingent 
liability, indicate how much and for what purpose. Indicate how much 
of the funds are unrestricted, how those funds are governed (e.g., 
approval of the board of directors or state or local government) and 
the eligible uses of these funds. Identify any funding sources 
available to supplement less than break-even projects.
    Indicate the overall percentage of total unrestricted funds to 
total debt and the percentage of liquid unrestricted funds to total 
mortgages outstanding.
    Describe the collateral the HFA will use if it does not have the 
authority to pledge its full faith and credit to back debentures 
issued against claims.
    Describe how the HFA intends to fund the dedicated account, its 
procedures for ensuring required balances are in place at all times 
and that the amounts are increased at each loan closing. Describe 
the funding source (all funds in the account must be liquid) for the 
dedicated account and identify the financial institution in which 
the HFA proposes to maintain these funds.
    Describe the circumstances or conditions under which other 
governmental entities or public bodies have access to the HFA's 
funds.
    Describe briefly, the types of financial and quality control 
audits performed on the HFA. Indicate the State or local HFA or 
authority that has responsibility for conducting the annual 
financial audit and when that audit is conducted.
    Describe the mechanism for disposing/resolving audit findings.
    Identify any periodic reports required for the board of 
directors and/or other organizational oversight body.
    Describe the procedures in place to generate financial reports, 
changes in fund balances, and changes in financial position. 
Describe procedures in place for the prompt notification to HUD of 
negative changes in the HFA's financial position.

Attachment C--Certifications Housing Finance Agency Letterhead

    I __________ (name of authorized official) hereby certify that I 
am the __________ (title) of the __________ (name of housing finance 
agency) __________ ``the Agency'', and that I am authorized to make 
the certifications set forth below on behalf of the Agency.
    I hereby certify that:
    (1) The Agency will at all times comply with the financial 
requirements of 24 CFR 266.110 of the Risk-Sharing Program and, 
where applicable, maintain required reserves in a dedicated account 
in liquid funds (i.e., cash, cash equivalents, or readily marketable 
securities) in a financial institution acceptable to HUD.
    (2) The Department of Justice has not brought a civil rights 
suit against the Agency and no suit is pending;
    (3) There has not been an adjudication of a civil rights 
violation in a civil action brought against the Agency by a private 
individual, unless the Agency is operating in compliance with a 
court order, or implementing a HUD-approved compliance agreement 
designed to correct the areas of noncompliance; and
    (4) There are no outstanding findings of noncompliance with 
civil rights statutes, Executive Orders, or regulations as a result 
of formal administrative procedures, or the Secretary of HUD has not 
issued a charge against the Agency under the Fair Housing Act, 
unless the Agency is operating under a compliance agreement designed 
to correct the areas of non-compliance.
Dated:-----------------------------------------------------------------
----------------------------------------------------------------------
Name of Agency

By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------

Attachment D--Housing Finance Agency Risk-Sharing Program Section 
542(C)

Dedicated Reserve Account

    The following information is required to evidence establishment 
of a dedicated reserve account in an initial amount of $500,000 to 
be used solely in connection with the Housing Finance Agency (HFA) 
Risk-Sharing Program. Thereafter, the HFA shall make additional 
deposits at each loan closing in accordance with 24 CFR 266.110.
    Duplicate originals of the attached agreement and one copy must 
be forwarded by the HFA to a financial institution with whom it 
intends to establish a Dedicated Reserve Account. In each of the 
attached agreements and on the copy, such financial

[[Page 25759]]

institution will certify to the existence of the dedicated reserve 
account by inserting the date the account was established, the 
account number, and the account balance. Upon completion of the 
certification, the financial institution shall sign and return an 
original and one copy to the HFA which, in turn, will forward the 
original to HUD. The HFA should retain a duplicate copy for its 
records. This information must be submitted to Linda D. Cheatham, 
Director, Office of Multifamily Housing Development, Room 6134, 451 
Seventh Street, S.W., Washington, D. C. 20410 prior to the HFA's 
approval to participate in the program.

Agreement for HFA's Dedicated Reserve Account

HFA Name---------------------------------------------------------------
Address----------------------------------------------------------------
(Street Number)

----------------------------------------------------------------------
(City, State and Zip Code)

Date-------------------------------------------------------------------
----------------------------------------------------------------------
(Name of Institution)

----------------------------------------------------------------------
(Street)

----------------------------------------------------------------------
(City, State, and Zip Code)

    You are authorized and requested to establish a Reserve Account 
to be specifically designated ``(HFA Name)/HUD Risk-Sharing''. This 
account may be drawn upon by the Department of Housing and Urban 
Development (hereinafter ``HUD'') and may be used by the HFA only 
with the prior written approval of HUD for the purpose of meeting 
the HFA's risk-sharing obligations under this program.
    This letter is submitted to you in duplicate originals. Please 
execute the duplicate originals of the certification below, 
acknowledging the existence of such account, so that we may present 
an original signed by you to HUD. Specimen signatures of HFA 
representatives and identification of authorized HUD signatory 
positions are enclosed.
----------------------------------------------------------------------
(Signature of HFA authorized official)

To Be Completed By the Financial Institution

To: The Department of Housing and Urban Development
    The undersigned institution certifies to HUD that the above 
account was established on ________ in the amount of ________ in 
this institution under account number ________ and agrees with the 
HFA named above and HUD to honor withdrawals from the account as set 
forth above and agrees to send quarterly statements regarding the 
account to both HUD and the HFA. The financial institution further 
certifies that it:
    (1) has assets of not less than $100,000,000;
    (2) is organized under the laws of the United States or a State 
thereof;
    (3) is regulated and examined by the Comptroller of the 
Currency, Federal Deposit Insurance Corporation or the Federal 
Reserve Board; and
    (4) has a long-term bank deposit rating of ``A-1'' or better by 
Moody's Investors Service or ``A+'' by Standard and Poor's.
----------------------------------------------------------------------
(Name of Institution)

By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------

Authorized HUD Signatory Positions

    Persons in the following positions are authorized to withdraw 
from the HFA/HUD Risk-Sharing Account on behalf of HUD and/or 
approve on behalf of HUD, the withdrawal of funds from the Account 
by the HFA:

Director, Office of Multifamily Housing Development
Deputy Director, Office of Multifamily Housing Development
Director, Office of Multifamily Asset Management and Disposition
Associate Director for Program Management, Office of Multifamily 
Asset Management and Disposition
Associate Director for Program Operations, Office of Multifamily 
Asset Management and Disposition

Specimen Signatures of HFA Authorized Officials

    Based upon prior approval from HUD, the following individuals 
are authorized to withdraw funds from the HFA/HUD Risk-Sharing 
Account on behalf of the HFA:
(Name)-----------------------------------------------------------------
(Title)----------------------------------------------------------------
(Name)-----------------------------------------------------------------
(Title)----------------------------------------------------------------

Attachment E--Sample Risk-Sharing Agreement and Addendum

(subject to revision)

    This Risk-Sharing Agreement (hereinafter referred to as 
``Agreement'') is entered into on this ______ day of ______, 
19______, by and between ______ whose address is ______ and its 
successors (hereinafter referred to as ``HFA'') and the undersigned 
Secretary of Housing and Urban Development and his/her successors 
and assigns acting by and through the Assistant Secretary for 
Housing-Federal Housing Commissioner (hereinafter referred to as 
``Commissioner'').
    WHEREAS, the Housing and Community Development Act of 1992 
authorizes, under Section 542(c) thereof, the development of a Risk-
Sharing Pilot Program under which the Commissioner will enter into 
Risk-Sharing Agreements with qualified housing finance agencies and 
provide for full mortgage insurance through the Federal Housing 
Administration of loans for affordable housing originated by the 
qualified housing finance agencies;
    WHEREAS Section 8 of the Housing Opportunity Program Extension 
Act of 1996 extends Section 542(c) through the end of Fiscal Year 
1996;
    WHEREAS, under the authority of Section 542(c), the Commissioner 
has published implementing regulations at 24 CFR Part 266.
    WHEREAS, the HFA seeks to participate in the Risk-Sharing 
Program, in accordance with Section 542(c), the regulations issued 
pursuant thereto and the terms set forth herein, in order to obtain 
full insurance on loans made by the HFA for affordable multifamily 
housing for persons in its community;
    WHEREAS, the Commissioner seeks to enter into this Agreement 
with the HFA in order to test the effectiveness of Federal credit 
enhancement for loans for affordable multifamily housing through a 
system of risk-sharing agreements with the HFA; and
    NOW THEREFORE, in consideration of the foregoing, the parties 
agree as follows:

Article I--Allocation/Credit Subsidy

    In furtherance of this Agreement,
    A. The Commissioner has set aside ______ units of affordable 
multifamily housing to be originated by the HFA.
    B. The Commissioner reserves the right to modify the number of 
units set forth in this Agreement to: (1) Allocate additional units 
in excess of the number set aside above, or (2) to reduce such 
allocation based on the Commissioner's review of the HFA's use of 
its prior set-aside(s). Any such changes shall be incorporated by an 
addendum to this Agreement.
    C. Credit subsidy is required for all insured projects, 
including projects insured pursuant to this Agreement. Credit 
subsidy is subject to availability in accordance with the 
Commissioner's outstanding instructions. The HFA shall be notified 
that the Firm Approval Letter will be delayed if credit subsidy has 
been exhausted.

Article II--Definitions

    As used in this Agreement the term:
    ``Addendum'' means that document attached to this Agreement, 
which shall be used for reserving units and establishing the risk 
share percentage for specific projects, modifying the number of 
units set aside to the HFA and for other purposes.
    ``Amendment'' means a modification of the terms and conditions 
of this Agreement requiring the consent of both the Commissioner and 
the HFA or a modification by HUD to 24 CFR Part 266.
    ``Contract of Insurance'' means the agreement evidenced by the 
endorsement of the Commissioner upon the credit instrument given in 
connection with a mortgage, incorporating by reference the 
regulations in 24 CFR Part 266 and the applicable provisions of 
Section 542(c).
    ``Credit Subsidy'' means the cost of a direct loan or loan 
guarantee under the Federal Credit Reform Act of 1990 as defined in 
Subpart B of Title 13 of the Omnibus Budget Reconciliation Act of 
1990 (Pub. L. 101-508, approved November 5, 1990).
    ``Dedicated Account'' means an account maintained in a financial 
institution acceptable to the Commissioner which consists entirely 
of liquid assets (i.e., cash or cash equivalents or readily 
marketable securities.)
    ``Exhibit'' means a document which provides names, titles and/or 
specimen signatures of principal staff of the HFA.
    ``Firm Approval Letter'' means a letter issued by the 
Commissioner or his/her designee to an HFA upon the positive 
completion of the HUD-retained reviews described in 24 CFR Section 
266.210. The letter will apportion units and obligate credit subsidy 
to the property and provide that, so long as the HFA complies with 
any conditions included therein or attached

[[Page 25760]]

thereto, is in good standing, makes the required certifications at 
the time of the HUD closing, and absent fraud or misrepresentation 
by the HFA, the Commissioner shall endorse the property mortgage for 
insurance.
    ``Mortgage'' means such single first lien upon the real estate 
as is commonly given to secure advances on, or the unpaid purchase 
price of, real estate under the laws of the jurisdiction where the 
real estate is situated, together with the credit instrument, if 
any, secured thereby.
    ``Mortgagee'' refers to the original lender under a Mortgage and 
its successors approved by the Commissioner.
    ``Project'' means the mortgaged property and all assets wherever 
situated, used in or owned by the owner of the Mortgaged property in 
the business conducted on the Mortgaged property.
    ``Reservation'' means the number of units from an HFA's set-
aside committed upon issuance of a Firm Approval Letter. The number 
of units reserved may be adjusted upon endorsement, for a specific 
project to be insured under Section 542(c).
    ``Set-aside'' includes the total number of units allocated for 
use by an HFA under Section 542(c) which allocation may be increased 
or decreased from time to time by the Commissioner in accordance 
with the Commissioner's administrative instructions.

Article III--Certifications

    In consideration of the endorsement for full insurance by the 
Commissioner of loans covering the units set aside in Article I, 
Paragraph A of this Agreement, and in order to comply with the 
requirements of the risk-sharing program established by Section 
542(c) and the regulations adopted by the Commissioner pursuant 
thereto, the HFA agrees and certifies for itself, and its 
successors, that in connection with any mortgage insured under 
Section 542(c) and so long as the Commissioner is obligated to 
insure mortgages pursuant to this Agreement that:
    A. The HFA has been approved by the Commissioner as a Level I 
____ and/or Level II____ [check one or both, as appropriate] 
Participant as defined in 24 CFR Sections 266.5 and 266.100(b).
    B. The individuals (principal staff) employed by the HFA as the 
persons responsible for the overall underwriting decision and for 
project management, loan servicing and property disposition with 
respect to loans insured or to be insured under Section 542(c) are 
listed in Exhibit A to this Agreement. The HFA agrees to notify the 
Commissioner promptly in writing any time the HFA changes principal 
staff.
    C. The individuals, whose names, titles and specimen signatures 
appear in Exhibit B have authority to sign loan documents on behalf 
of the HFA and otherwise commit the HFA under the Section 542(c) 
Risk-Sharing Program. The HFA agrees to notify the Commissioner 
promptly in writing of any changes of individuals authorized to sign 
loan documents on behalf of the HFA and provide the Commissioner 
with specimen signatures of such new individuals.
    D. The HFA shall allow periodic auditing and review by the 
Commissioner, the Inspector General and the General Accounting 
Office or their duly authorized agents regarding the HFA's 
participation in the risk-sharing program.
    E. The HFA shall permit an inspection and examination of its 
financial records and records associated with loans insured under 
Section 542(c) by the Commissioner and/or his duly authorized agents 
upon reasonable notice.
    F. The HFA has fully disclosed and provided copies of all of its 
underwriting standards and procedures, loan terms and conditions to 
the Commissioner, and, if the HFA operates as, or originates or 
processes any loans as a Level II agency, it has obtained the 
Commissioner's prior written approval to utilize such underwriting 
standards and procedures, loan terms and conditions. The HFA's 
originating, underwriting, closing, project management, servicing 
and property disposition procedures utilized in processing and 
servicing the loans insured or to be insured under Section 542(c) 
are incorporated herein by reference and made a part hereof.
    G. The HFA shall notify the Commissioner before implementing any 
amendment to the HFA's underwriting standards and procedures, loan 
terms and conditions and will provide the Commissioner with copies 
of any amendments within ____ business days before implementation of 
such amendments by the HFA. If the HFA operates as, or originates or 
processes any loans as a Level II agency, it shall also obtain the 
prior written approval of the Commissioner before implementing any 
amendment to its underwriting standards and procedures, loan terms 
and conditions.
    H. If the HFA (a) does not meet the qualification requirements 
of 24 CFR 266.110(a) (i.e., top-tier rating or equivalent 
designation or has an overall ``A'' rating on its general obligation 
bonds), or (b) has an overall ``A'' rating but cannot provide the 
necessary legal opinion of counsel requisite to participation in the 
risk-sharing program, it has established a specifically identified 
Dedicated Account (meeting the requirements of 24 CFR 266.110(b) and 
the administrative requirements of the Commissioner) in __________ 
(insert name of financial institution) a financial institution which 
has assets of not less than $100,000,000, is organized under the 
laws of the United States or a State thereof and is regulated and 
examined by the Comptroller of the Currency, Federal Deposit 
Insurance Corporation or the Federal Reserve Board, and has a long 
term bank deposit rating of ``A-1'' or better by Moody's Investors 
Service or ``A+'' by Standard and Poor's. The Commissioner may 
determine that higher levels of reserves may be necessary.
    I. If at any time the HFA loses the designation or rating, as 
applicable, set forth in 24 CFR 266.110(a), or can no longer provide 
the legal opinion requisite to participation in the program, it 
shall, within 5 business days, provide the Commissioner with notice 
of the loss of its designation or rating or of its inability to 
provide the statement noted above. Within 15 business days after the 
loss of the HFA's designation or rating or its inability to provide 
the requisite legal opinion, the HFA shall establish a Dedicated 
Account funded in accordance with Paragraph H above. The HFA must 
calculate the deposits to this Dedicated Account in accordance with 
the requirements of 24 CFR 266.110(b) so that the account reflects 
all loans in the HFA's portfolio insured under Section 542(c).
    J. Within 90 days following the end of its fiscal year, the HFA 
shall furnish the Commissioner with a complete annual financial 
audit based upon an examination of the books and records of the HFA 
prepared and certified in accordance with the requirements of the 
State or locality in which the HFA is located.
    K. The HFA shall at all times comply with the financial 
requirements of the Section 542(c) program and it shall notify the 
Commissioner of any pending or actual changes in its financial 
status that would adversely affect the HFA's operating or financial 
status within 5 business days after becoming aware of such pending 
or actual changes.
    L. Within 90 days following the end of its fiscal year, the HFA 
shall furnish the Commissioner, along with a copy of the audit 
specified in Paragraph J above, a certification signed by an 
authorized official of the HFA that there have been no changes that 
would adversely affect the HFA's organization, business activities, 
financial status and other information submitted with its 
application to participate in the Section 542(c) program and that 
the HFA has complied with all eligibility requirements for 
participation in the program during the past year. If there has been 
a change in information submitted with the HFA's application 
relating to the HFA's organization, business activities, financial 
status or other information submitted with its application, the 
certification will state the nature of the change.
    M. The HFA shall comply with the Fair Housing Act, as 
implemented by 24 CFR Part 100; titles II and III of the Americans 
with Disabilities Act of 1990, as implemented by 28 CFR Part 35; 
Section 3 of the Housing and Urban Development Act of 1968, (12 
U.S.C. Section 1701u), implemented by 24 CFR Part 135, the Equal 
Credit Opportunity Act, implemented by 12 CFR Part 202; Executive 
Order 11063, as amended, and implemented by 24 CFR Part 107; 
Executive Order 11246, as implemented by 41 CFR Part 60; other 
applicable Federal laws and regulations issued pursuant to these 
authorities; and applicable State and local fair housing and equal 
opportunity laws. In addition, the HFA shall require that mortgagors 
which receive Federal financial assistance must also certify to the 
HFA that, so long as the mortgage is insured under Section 542(c), 
it shall comply with title VI of the Civil Rights Act of 1964, as 
implemented by 24 CFR Part 1; the Age Discrimination Act of 1975, as 
implemented by 24 CFR 146; and section 504 of the Rehabilitation Act 
of 1973, as implemented by 24 CFR Part 8.
    N. During the period that the Commissioner is the insurer of any 
mortgage endorsed under Section 542(c), the HFA shall remain the 
mortgagee of record and shall perform all functions in connection 
with loans originated under the 542(c) program

[[Page 25761]]

including loan servicing (including workouts), property management 
and property disposition functions. The Commissioner shall have no 
obligation to recognize or deal with anyone other than the HFA in 
its role as mortgagee of record with respect to the rights and 
obligations of the HFA under the contract of mortgage insurance and 
this agreement.
    O. The HFA shall retain records pertaining to origination and 
servicing of all mortgages insured under Section 542(c) for as long 
as the mortgage insurance remains in effect. In the event of a 
default and mortgage insurance claim, all records pertaining to the 
insured mortgage, the mortgage default and insurance claim shall be 
retained three (3) years after the date of final settlement as final 
settlement is described in 24 CFR Section 266.654.
    P. The HFA shall maintain a Lender's Fidelity Bond/Surety Bond 
and Errors and Omissions Insurance in a form and amount satisfactory 
to the Commissioner.
    Q. The HFA shall issue Debentures as defined in 24 CFR Section 
266.638 acceptable to the Commissioner as collateral for the full 
amount of its risk-sharing obligation under this agreement pending 
final settlement of any insurance claim. The Debentures shall be 
backed by the full faith and credit of the HFA. If the HFA operates 
as a department or division of the State in which it is located, or 
as a unit of local government, and the HFA cannot pledge the full 
faith and credit of the HFA, the HFA shall collateralize its 
obligation through a letter of credit, reinsurance, or other form of 
credit acceptable to the Commissioner.
    R. Any reinsurance obtained by the HFA to cover its portion of 
the risk shall: (i) Be subordinate to the HUD-insured mortgage; (ii) 
not affect reimbursement to the Commissioner, notwithstanding the 
timing of the actual settlement between the HFA and the reinsurer; 
(iii) not be used to reduce any reserve or fund balance requirements 
established by the Commissioner; and (iv) not result in the Federal 
Government incurring any liability as a result of the reinsurance 
agreement.
    S. With respect to any project mortgage endorsed for insurance 
under Section 542(c), the HFA shall furnish to the Commissioner 
project information in a format specified by the Commissioner in HUD 
Handbook 4590.01. Basic underwriting and closing information shall 
accompany the initial and final closing dockets submitted for each 
project. Information relating to project management, servicing and 
disposition shall be submitted to the Commissioner on a periodic 
basis after endorsement in accordance with the requirements set 
forth in Handbook 4590.01.
    T. The HFA shall enforce the Regulatory Agreement between the 
HFA and mortgagor and take action against the mortgagor for 
violation of any provision(s) thereof.
    U. The HFA shall perform annual physical inspections of all 
projects insured under Section 542(c) and shall submit a copy of the 
inspection report to the Commissioner (i.e., showing and certifying 
that the project is in safe and sanitary condition). If a project is 
not in safe and sanitary condition, the HFA will provide the 
Commissioner with a summary of required actions, with target dates, 
to correct unresolved findings.
    V. The HFA shall analyze the project's annual audit and within 
30 days of the date of the audit, provide the Commissioner with a 
summary of unresolved findings disclosed in the audit and a summary 
of actions planned, with target dates, to correct unresolved 
findings. The HFA shall analyze the project's annual audit and 
within 6 months of the date of the audit, provide the Commissioner 
with a summary of unresolved findings disclosed in the audit and a 
summary of actions planned, with target dates, to correct unresolved 
fundings.
    W. The HFA shall submit semi-annual reports to the Commissioner 
for all projects insured under Section 542(c) setting forth the 
original mortgage amounts and outstanding principal balances on 
mortgages the HFA has underwritten, the status of all projects 
(e.g., whether current, in default, acquired, under workout 
agreement, in bankruptcy, etc.). For projects where the mortgagor 
has declared bankruptcy, the HFA will submit information containing 
the date the bankruptcy was filed and the date the HFA requested the 
Court to dismiss the bankruptcy proceedings.
    X. All appraisal functions will be completed by Certified 
General Appraisers licensed in the state in which the property is 
located, and all appraisal functions will be completed in accordance 
with the Uniform Standards of Professional Appraisal Practice.
    Y. In the event of a default on a multifamily mortgage insured 
under Section 542(c) which results in the Commissioner having to pay 
a claim under a Contract of Insurance to the HFA, the HFA will, upon 
determination of the loss, assume the percentage of loss specified 
in an Addendum to this Agreement (such Addendum being made a part of 
this Agreement) and in the endorsement panel of the mortgage note, 
and reimburse the Commissioner, pursuant to administrative 
instructions of the Commissioner, the amount based on that 
percentage pursuant to 24 CFR Section 266.654. (The HFA's percentage 
of loss specified in the Addendum for a particular project must be 
consistent with the percentage of loss associated with the HFA's 
approval level specified in Paragraph A of Article III of this 
Agreement. A loan which refinances an HFA-financed loan which was in 
monetary default (as that term is defined in 24 CFR Section 266.626) 
12 months prior to the application for refinancing hereunder, the 
HFA's percentage of loss specified in the Addendum shall be at least 
50 percent of the risk). An HFA-financed loan which goes into 
default after the submission of an application for refinancing of 
such loan under Section 542(c) will not be eligible for insurance 
under Section 542(c).
    Z. The HFA shall require that the mortgagor keep the 
improvements now existing or hereafter erected on the mortgaged 
property insured against loss by fire and such other hazards, 
casualties, and contingencies, as may be stipulated by the 
Commissioner upon the insurance of the mortgage and other hazards as 
may be required from time to time by the HFA. All such insurance 
shall be evidenced by a standard Fire and Extended Coverage 
Insurance Policy or policies, in amounts not less than necessary to 
comply with the applicable coinsurance clause percentage, but in no 
event shall the amounts of coverage be less than eighty per centum 
(80%) of the actual cash value of the insurable improvements and 
equipment of the project, and in default thereof the HFA shall have 
the right to obtain such insurance in accordance with the mortgage. 
Such hazard insurance policies shall be endorsed with the standard 
mortgagee clause with loss payable to the HFA. The hazard insurance 
policy shall be deposited with the HFA.
    AA. The HFA shall ensure that loans insured hereunder shall be 
on properties which comply with the affordable housing requirements 
defined in 24 CFR 266.5.

Article IV--Mortgage Insurance Endorsement

    Absent fraud or material misrepresentation on the part of the 
HFA, the Commissioner shall endorse any mortgage presented for 
mortgage insurance by the HFA in accordance with the provisions of 
Section 542(c), subject to the Commissioner's right to adjust the 
amount of mortgage insurance in accordance with 24 CFR Section 
266.417, so long as the HFA is in good standing with the 
Commissioner, has been issued a Firm Approval Letter pursuant to 24 
CFR Section 266.300(c) and/or Section 266.305(c), and complies with 
any conditions therein or attached thereto, and submits with each 
loan to be endorsed a closing docket in accordance with 24 CFR 
Section 266.420(b) and written certifications that:
    a. The property covered by the mortgage is free from all liens 
other than the lien of the FHA insured mortgage, except that the 
property may be subject to such inferior lien or liens, as approved 
by the HFA, as long as the insured mortgage has first priority for 
payment.
    b. All contractual obligations in connection with the mortgage 
transaction, including the purchase of the property and the 
improvements to the property, have been paid. An exception is made 
for obligations that are approved by the HFA and determined by the 
HFA to be inferior to the lien of the insured mortgage.<SUP>1
---------------------------------------------------------------------------

    \1\ Pursuant to 24 CFR Section 266.415(b), this certification is 
made at final closing only.
---------------------------------------------------------------------------

    c. The property owner has submitted and the HFA has approved an 
Affirmative Fair Housing Marketing Plan which complies with the 
provisions set forth in 24 CFR Part 200, Subpart M.
    d. Equal employment requirements were followed by the property 
owner pursuant to Executive Order 11246 as implemented by 41 CFR 
Part 60.
    e. The property owner has executed the regulatory agreement 
which complies with the provisions set forth in 24 CFR Section 
266.505.
    f. The property has been processed, prudently underwritten 
(including a determination that a market exists for the project), 
cost certified (if the loan is being submitted for final 
endorsement) and closed in full compliance with the HFA's standards 
and requirements and are in full compliance with HUD standards 
established in connection with approval of advances for

[[Page 25762]]

insurance and cost certification. (Note: For mortgages originated 
under Level II, the certification will state ``in full compliance 
with the underwriting standards and loan terms and conditions as 
approved by the Commissioner.'') Further, the loan shall be serviced 
and the property managed in accordance with procedures disclosed and 
made a part of this Agreement.
    g. For periodic advances cases, that each advance made was 
proportionate to construction progress as evidenced by HFA 
inspection prior to approval of the advance.
    h. The HFA's Dedicated Account, if required, has been 
established and has been increased by the amounts required pursuant 
to 24 CFR Section 266.110(b).
    i. For properties subject to Davis-Bacon requirements under 24 
CFR Section 266.225, laborers and mechanics employed in the 
construction of the project have been paid not less than the 
prevailing wages determined by the Secretary of Labor in accordance 
with 24 CFR Section 266.225(a).

Article V--Sanctions

    Upon a violation of any of the provisions of this Agreement by 
the HFA, or upon commission of any violation cited in 24 CFR Section 
266.120, or of the administrative requirements established by the 
Commissioner for the Section 542(c) program, the Commissioner or his 
designee may declare a default under this agreement and impose any 
of the sanctions set forth at 24 CFR Section 266.125. Any sanction 
imposed by the Commissioner will be in accordance with the 
provisions of 24 CFR Section 266.125(d). Any sanction involving a 
suspension or withdrawal of the HFA's participation in the Section 
542(c) program will not affect any mortgage insurance endorsement in 
effect on the date of the suspension or withdrawal action.

Article VI--Amendments/Modifications

    A. This Agreement shall not be modified or amended without the 
consent of both parties hereto, except for changes made by the 
Commissioner to items covered by Article VII, and amendments or 
modifications that may be made by the Commissioner as set forth in 
the attached Addendum to this Agreement which: (1) Specify the 
number of units set aside to the HFA, and (2) other changes that 
conform to statutory or regulatory amendments. No such modification 
or amendment will adversely affect the interest of a HFA for any 
project for which a Firm Approval letter has been issued.
    B. The HFA hereby agrees that its written consent to an Addendum 
executed by the Commissioner which modifies this Agreement to list: 
(1) Changes in its principal staff or individuals with authority to 
sign loan documents; (2) changes to existing HFA underwriting 
standards and procedures, loan terms and conditions; and/or (3) a 
change in the financial institution in which the Dedicated Account 
is deposited, will not be necessary if such change(s) was requested 
by the HFA in writing.

Article VII--Incorporation of Regulations

    The regulations set forth in 24 CFR Part 266 are incorporated 
into this Agreement by reference and made a part hereof. The HFA 
shall, at all times, comply with the applicable regulations and with 
all other applicable Federal laws, rules and regulations.

Article VIII--Warranty

    The HFA warrants that it has not, and will not, execute any 
other agreement with provisions contradictory to, or in opposition 
to, the provisions hereof, and that, in any event, the requirements 
of this Agreement and the regulations set forth in 24 CFR Part 266 
and any administrative requirements established by the Commissioner 
are paramount and controlling as to the rights and obligations set 
forth herein and supersede any other requirements in conflict 
herewith.

Article IX--Miscellaneous

    The Article headings set forth in this Agreement are not 
intended to be a limitation on what materials are included within 
each Article.
    This Agreement shall bind, and the benefits shall inure to, the 
parties, their successors and assigns so long as any Contract of 
Insurance remains in full force and effect.
    The invalidity of any clause, part or provision of this 
Agreement shall not affect the validity of the remaining portions 
hereof.
    In witness hereof, the undersigned have caused this Agreement to 
be duly executed as of the date and year first written above.

Department of Housing and Urban Development
By:--------------------------------------------------------------------
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------
Housing Finance Agency
By:--------------------------------------------------------------------
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------

    Warning: U.S. Criminal Code, Section 1001, Title 18 U.S.C., 
``Whoever, in any matter within the jurisdiction of any department 
or agency of the United States knowingly and willfully * * * makes 
any false, fictitious or fraudulent statements or representations, 
or makes or uses any false writing or document knowing the same to 
contain any false, fictitious or fraudulent statement or entry, 
shall be fined not more than $10,000 or imprisoned not more than 
five years, or both.''

Addendum to Risk-Sharing Agreement

HQ [  ]
FO [  ]
Number-----------------------------------------------------------------
    This addendum modifies the Risk-Sharing Agreement, and/or any 
addendum thereto, by and between __________ (HFA) whose address is 
__________ and the Assistant Secretary for Housing--Federal Housing 
Commissioner (the Commissioner) dated the ____ day of __________, 
199____.
    The purpose of this addendum is to [check one]:

A. (  ) Reserve units and to establish the risk-share percentage 
between the HFA and Commissioner for Project Number ________ located 
at __________.
    Units reserved ________
    Risk-share apportionment
    HUD ______/HFA ______
B. (  ) Modify the present set-aside of units.
    The number of units presently set-aside is ______, which is (  ) 
increased by ______ units, (  ) decreased by ______ units to a total 
of ______ units.
C. (  ) New principal staff or individuals with authority to sign 
loan documents or commit the HFA under the Section 542(c) program 
are:
D. (  ) New provisions, or changes to existing, HFA underwriting 
standards and procedures, loan terms and conditions are incorporated 
by reference into the Risk-Sharing Agreement and are as follows:
E. (  ) The name and address of the new financial institution in 
which dedicated account is deposited is:

----------------------------------------------------------------------
(Name of Financial Institution)

----------------------------------------------------------------------
(Address)

F. [Reserved for other purposes.]

Department of Housing and Urban Development
----------------------------------------------------------------------
Authorized Agent

Date-------------------------------------------------------------------

Exhibit A

    The following individuals (principal staff) are employed by the 
HFA as the persons responsible for the overall underwriting decision 
and for project management, loan servicing and property disposition 
with respect to loans insured or to be insured under Section 542(c):
----------------------------------------------------------------------
(Name and Title)

----------------------------------------------------------------------
(Name and Title)

Exhibit B

    The following individuals, whose names, titles and specimen 
signatures appear below, have the authority to sign loan documents 
on behalf of the HFA and otherwise commit the HFA under the Section 
542(c) Risk-Sharing Program.
----------------------------------------------------------------------
(Name and Title)

----------------------------------------------------------------------
(Signature)

----------------------------------------------------------------------
(Name and Title)

----------------------------------------------------------------------
(Signature)

[FR Doc. 96-12795 Filed 5-21-96; 8:45 am]
BILLING CODE 4210-27-P