Texas Administrative Code › Title 10 - COMMUNITY DEVELOPMENT › Part 1 - TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS › Chapter 13 - MULTIFAMILY DIRECT LOAN RULE › Section 13.11 - Post-Award Requirements

Current through Reg. 49, No. 28; July 12, 2024
(a)
				Direct Loan awardees must satisfactorily complete the Post-Award Requirements
				identified in this section after the Board approval date.
(b) If a Direct Loan award is declined by the
				Direct Loan awardee and returned after Board approval, or if the Direct Loan
				awardee or Affiliates fail to timely enter into the Contract, close the loan,
				begin and complete construction, or leave a portion of the Direct Loan award
				unexpended, penalties may apply under 10 TAC §
									11.9(f) (relating
				to Competitive HTC Selection Criteria), and/or the Department may prohibit the
				Applicant and all Affiliates from applying for MFDL funds for a period of two
				years.
(c) Benchmarks. Extensions
				to the benchmarks in paragraphs (1) - (8) of this subsection may only be
				approved by the Executive Director or authorized designee in accordance with
				§
									13.12 or §
									13.13 of this chapter (relating to
				Pre-Closing and Post-Closing Amendments), as applicable.
(1) Environmental Clearance. In order to
				obtain environmental clearance required by the National Environmental Policy
				Act (NEPA) and other related Federal and state environmental laws (if
				applicable), Direct Loan Applicants, including those previously awarded HTC,
				must submit a fully completed environmental review, including any applicable
				reports to the Department within 90 days of the Application Acceptance
				Date.
(2) Contract Execution. After
				a Development receives environmental clearance (if applicable), the Department
				will draft a Contract to be emailed to the Direct Loan awardee. Direct Loan
				awardees must execute and return a Contract to the Department within 30
				calendar days after receipt of the Contract.
(3) Loan Closing and Construction
				Commencement. Loan closing must occur and construction must begin on or before
				the dates described in the Contract. If construction has not commenced within
				12 months of the Contract Effective Date, the award may be
				terminated.
(4) Loan Closing. In
				preparation for closing any Direct Loan, the Development Owner must submit the
				items described in subparagraphs (A) - (F) of this paragraph. Providing
				incomplete documents, or not responding timely to subsequent Department
				requests for materials needed to facilitate closing, may significantly delay
				closing. Any request to change the financing structure of the Development, or
				the ownership structure, will in most cases extend the amount of time it will
				take for the Department to meet closing timelines, and may move prioritization
				of the closing below that of other Developments.
(A) Documentation of the prior closing or
				concurrent closing with all sources of funds necessary for the long-term
				financial feasibility of the Development.
(B) Due diligence items determined by the
				Department to be prudent and necessary to meet the Department's rules and to
				secure the interests of the Department, as requested by Staff.
(C) When Department funds have a first lien
				position during the construction term, or if the Development is a public work
				under state law, assurance of completion of the Development in the form of
				payment and performance bonds in the full amount of the construction contract
				or equivalent guarantee as allowable under state law in the sole determination
				of the Department is required. Development Owners utilizing the USDA §515
				program for a Development that is not a public work are exempt from this
				requirement, but must meet the alternative requirements set forth by
				USDA.
(D) Documentation required
				for preparation of closing loan documents includes, but is not limited to:
(i) Substantially final information necessary
				for REA staff to reevaluate the transaction prior to loan closing, including
				but not limited to a substantially final development cost schedule, sources and
				uses, operating pro forma, annual operating expenses, rent schedule, updated
				written financial commitments or term sheets, and any additional financing
				exhibits that have changed since the time of Application;
(ii) Substantially final Draft Owner/General
				Contractor agreement and draft Owner/Architect agreement prior to closing with
				final executed copies required by the day of closing;
(iii) Survey of the Property that includes a
				certification to the Department, Development Owner, Title Company, and other
				lenders;
(iv) Plans and
				specifications for review by the Department's inspection staff. Inspection
				staff will issue a plan review letter that is intended to assist in identifying
				early concerns associated with the Department's final construction
				requirements; and
(v) If layered
				with Housing Tax Credits, a substantially final draft limited partnership
				agreement between the General Partner and the tax credit investor
				entity.
(E) If required
				by the fund source, prior to Contract Execution unless an earlier period is
				described in Chapters 10, 11, or 12 of this title, the Development Owner must
				provide verification of:
(i) Environmental
				clearance from the Department or HUD, as applicable;
(ii) Site and Neighborhood clearance from the
				Department;
(iii) Documentation
				necessary to show compliance with the Uniform Relocation Assistance and
				Property Act and any other relocation requirements that may apply;
(iv) Title Insurance Commitment or Policy
				showing the Department as Lender, with copies of all Schedule B documents;
				and
(v) Any other documentation
				that is necessary or prudent to meet program requirements or state or federal
				law in the sole determination of the Department.
(F) The Direct Loan Contract as executed,
				which will be drafted by the Department's counsel or its designee for the
				Department. No changes proposed by the Developer or Developer's counsel will be
				accepted unless approved by the Department's Legal Division or its
				designee.
(6) Loan
				Documents. The Development Owner is required to execute all loan closing
				documents required by and in the form and substance acceptable to the
				Department's Legal Division.
(A) Loan closing
				documents include but are not limited to a promissory note, deed of trust,
				construction loan agreement (if the proceeds of the loan are to be used for
				construction), LURA, Architect and/or licensed engineer certification of
				understanding to complete environmental mitigation if such mitigation is
				identified in HUD's environmental clearance or the Underwriting Report and
				assignment and security instruments whereby the Developer, the Development
				Owner, and/or any Affiliates (if applicable) grants the Department their
				respective right, title, and interest in and to other collateral, including
				without limitation the Owner/Architect agreement and the Owner/General
				Contractor agreement, to secure the payment and performance of the Development
				Owner's obligations under the loan documents. Additional loan terms and
				conditions may be imposed by the loan closing documents.
(B) Loan terms and conditions may vary based
				on the type of Development, Real Estate Analysis Underwriting Report, and the
				Set-Aside under which the award was made.
(7) Quarterly Construction Status Reports.
				The Development Owner is required to submit quarterly Construction Status
				Reports to the Asset Management Division as described and by the deadlines
				specified in 10 TAC §
										10.401(e) of this
				title (relating to Construction Status Report).
(8) Mid-Construction Development Inspection
				Letter. In addition to any other obligations required as the result of any
				other Department funding sources, the Development Owner must submit a
				Mid-Construction Development Inspection Request once the Development has met at
				least 25% construction completion as indicated on the G703 Continuation Sheet
				or HUD equivalent form. Department inspection staff will issue a
				Mid-Construction Development Inspection Letter that confirms work is being done
				in accordance with the applicable codes, the construction contract, and
				construction documents.
(9)
				Construction Completion. Construction must be completed, as reflected by the
				Development's certificate(s) of occupancy (if new construction and/or
				reconstruction) and Certificate of Substantial Completion (AIA Form G704) or
				Form HUD-92485 for instances in which a federally insured HUD loan is being
				utilized, within the construction term of any superior construction loan(s) or
				up to 36 months of the actual loan closing date if no superior construction
				loan(s) exists, unless a shorter timeline is necessitated by the federal
				funding source.
(10) Closed Final
				Development Inspection Letter. The Closed Final Development Inspection Letter
				must be issued by the Department within 36 months of loan closing. This letter
				will verify committed amenities have been provided and confirm compliance with
				all applicable accessibility requirements; this letter may include deficiencies
				that require resolution. The Closed Final Development Inspection may be
				conducted concurrently with a NSPIRE inspection. However, any letters
				associated with a NSPIRE inspection will not satisfy the Closed Final
				Development Inspection Letter required by this subsection.
(11) Initial Occupancy. Initial occupancy of
				all MFDL assisted Units by eligible households shall occur within six months of
				the final Direct Loan draw. Requests to extend the initial occupancy period
				must be accompanied by documentation of marketing efforts and a marketing plan.
				The marketing plan may be submitted to HUD for final approval, if required by
				the MFDL fund source.
(12) Per Unit
				Repayment. Repayment may be required on a per Unit basis for Units that have
				not been rented to eligible households within 6-18 months of the final Direct
				Loan draw, depending on the fund source.
(13) Termination and Repayment for Failure to
				Complete. Termination of the Direct Loan award and repayment of all disbursed
				funds will be required for any Development that is not completed within four
				years of the effective date of a Direct Loan Contract.
(14) Disbursement of Funds. The Borrower must
				comply with the requirements in subparagraphs (A) - (K) of this paragraph in
				order to receive a disbursement of funds to reimburse eligible costs incurred.
				Submission of documentation related to the Borrower's compliance with these
				requirements is required with a request for disbursement:
(A) All requests for disbursement must be
				submitted using the MFDL draw workbook or such other format as the Department
				may requre;
(B) Documentation of
				the total construction costs incurred and costs incurred since the last
				disbursement of funds must be submitted. Such documentation must be signed by
				the General Contractor and certified by the Development architect and is
				generally in the form of an AIA Form G702/ G703 or HUD equivalent
				form;
(C) Disbursement requests
				must include a down-date endorsement to the Direct Loan (mortgagee) title
				policy or Nothing Further Certificate that includes a title search through the
				date of the Architect's signature on AIA form G702 or HUD equivalent form. For
				release of retainage, the down-date endorsement to the Direct Loan title policy
				or Nothing Further Certificate must be dated at least 30 calendar days after
				the date of the completion as certified on the Certificate of Substantial
				Completion (AIA Form G704) with $0 as the work remaining to be completed. If
				AIA Form G704 or HUD equivalent form indicates an amount of work remaining to
				be completed, the Architect must provide confirmation that all work has been
				completed. Disbursement requests for acquisition and closing costs are exempt
				from this requirement;
(D) Table
				Funding (the wiring of Direct Loan funds to the title company at loan closing)
				may be permitted at the time of closing, for disbursement of funds related to
				eligible acquisition costs and eligible softs costs incurred, and in an amount
				not to exceed 50% of the total funds. Table Funding must be requested in
				writing at least 30 calendar days prior to the anticipated closing date, and
				will not be considered unless the Direct Loan Contract has been executed and
				all necessary documentation has been submitted to and accepted by the
				Department at least 10 calendar days prior to the anticipated closing
				date;
(E) At least 50% of Direct
				Loan funds (except as otherwise allowed for Permanent Refinance Loans described
				in 10 TAC §
											13.8(e)) will be
				withheld from the initial disbursement of loan funds to allow for periodic
				disbursements;
(F) The initial draw
				request for the Development (excluding Table Funding) must be entered into the
				Department's Housing Contract System no later than 180 days after loan closing,
				and may not be submitted prior to submission of all architectural
				drawings;
(G) Developer Fee
				disbursement shall be limited by subparagraph (I) of this paragraph and is
				further conditioned upon clauses (i) - (iii), as applicable:
(i) For Developments in which the loan is
				secured by a first lien deed of trust against the Property, 75% shall be
				disbursed in accordance with percent of construction completed. 75% of the
				total allowable fee will be multiplied by the percent completion, as documented
				by the construction contract and as may be verified by an inspection by the
				Department. The remaining 25% shall be disbursed at the time of release of
				retainage; or
(ii) For Developments
				in which the loan is not secured by a first lien deed of trust or the
				Development is also utilizing Housing Tax Credits, Developer Fees will not be
				reimbursed by the Department, except as follows. If all other lenders and
				syndicator in a Housing Tax Credit Development (if applicable) provide written
				confirmation that they do not have an existing or planned agreement to govern
				the disbursement of Developer Fees and expect that Department funds shall be
				used to fund Developer Fees, they shall be reimbursed in the same manner as
				described in subparagraph (A) of this paragraph; and
(iii) The Department may reasonably withhold
				any disbursement in accordance with the Loan Documents and if it is determined
				that the Development is not progressing as reasonably necessary to meet the
				benchmarks for the timely completion of construction of the Development as set
				forth in the loan documents, or that cost overruns have put the Development
				Owner's ability to repay its Direct Loan or complete the construction at risk
				in accordance with the terms of the loan documents and within budget. If
				disbursement has been withheld under this subsection, the Development Owner
				must provide evidence to the satisfaction of the Department that the
				Development will be timely completed and occupied in order to continue
				receiving funds. If disbursement is withheld for any reason, disbursement of
				any remaining Developer Fee will be made only after construction of the
				Development has been completed, and all requirements for expenditure and
				occupancy have been met;
(H) Expenditures must be allowable and
				reasonable in accordance with federal and state rules and regulations. The
				Department shall review each expenditure requested for reasonableness. The
				Department may request the Development Owner make modifications to the
				disbursement request and is authorized to modify the disbursement procedures
				set forth herein and to establish such additional requirements for payment of
				Department funds to Development Owner as may be necessary or advisable for
				compliance with all program requirements;
(I) Following 50% construction completion,
				any funds will be released in accordance with the percentage of construction
				completion as documented on AIA Form G702/703 or HUD equivalent form. 10% of
				requested Hard Costs will be retained and will not be released until the final
				draw request. If the Development is receiving funds from more than one MFDL
				source, the retainage requirement will apply to each fund source individually.
				All of the items described in clauses (i) - (viii) of this subparagraph are
				required in order to approve the final draw request:
(i) Fully executed Certificate of Substantial
				Completion (AIA Form G704) or Form HUD-92485 (for instances in which a
				federally insured HUD loan is being utilized) with $0 as the cost estimate of
				work that is incomplete. If AIA Form G704 or Form HUD-92485 indicates an amount
				of work remaining to be completed, the Architect must provide confirmation that
				all work has been completed;
(ii) A
				down date endorsement to the Direct Loan title policy or Nothing Further
				Certificate dated at least 30 calendar days after the date of completion as
				certified on the Certificate of Substantial Completion (AIA Form G704) or Form
				HUD-92485;
(iii) For Developments
				not layered with Housing Tax Credits, a Closed Final Development Inspection
				Letter from the Department;
(iv)
				For NHTF Developments layered with HTCs, a separate, additional cost
				certification form completed by an independent, licensed, certified public
				accountant of all Development costs (including project costs), subject to the
				conditions and limitations set forth in the executed Direct Loan Contract,
				commonly known as a cost certification;
(v) For Developments subject to the
				Davis-Bacon Act, written documentation from the Department that the
				Department's Notice to Proceed that serves to lock in the Department of Labor's
				worker prevailing wage mandates at the development and authorizes start of
				construction was sent and final wage compliance report was received and
				approved or confirmation that HUD or other entity maintains Davis-Bacon
				oversight;
(vi) Certificate(s) of
				Occupancy (for New Construction or Reconstruction Units);
(vii) Development completion reports, which
				includes, but is not limited to, documentation of full compliance with the
				Uniform Relocation Act/104(d), Match Documentation requirements, and Section 3
				of the Housing and Urban Development Act of 1968, as applicable to the
				Development, and any other applicable requirement;
(viii) If applicable to the Development,
				certification from Architect or a licensed engineer that all HUD environmental
				mitigation conditions have been met; and
(ix) evidence of Match being credited to the
				Development.
(J) No
				disbursement of funds will be approved without receipt of all closing documents
				in the form and substance required by the Department's Legal
				Division;
(K) The final draw
				request must be submitted within the construction term as determined in
				accordance with 10 TAC §
											13.8(c)(1) or
				(d)(1) as applicable, unless the construction
				term has been extended in accordance with 10 TAC §
											13.12 or 10 TAC §
											13.13 of this chapter, as
				applicable; and
(L) Annually,
				Borrowers must submit at least one draw, and may not submit more than four
				draws, unless previously approved by the Executive Director or
				designee.
(15) Annual
				Audits and Cost Certifications under
				24 CFR §
											93.406(b).
(A) Annual Audits under
				24 CFR §
												93.406(b). Unless otherwise
				directed by the Department, the Development Owner shall arrange for the
				performance of an annual financial and compliance audit of funds received and
				performances rendered under the Direct Loan Contract, subject to the conditions
				and limitations set forth in the executed Direct Loan Contract. All approved
				audit reports will be made available for public inspection within 30 days after
				completion of the audit.
(B) Cost
				Certifications under 24 CFR
				§
												93.406(b).
(i) Non-HTC-Layered Developments. Within 180
				calendar days of the later of all title transfer requirements and construction
				work having been performed, as reflected by the Development's Certificate(s) of
				Occupancy (if New Construction) or Certificate of Substantial Completion (AIA
				Form G704 or HUD equivalent form), or when all modifications required as a
				result of the Department's Final Construction Inspection are cleared as
				evidenced by receipt of the Closed Final Development Inspection Letter, the
				Development Owner will submit to the Department a cost certification done by an
				independent licensed certified public accountant of all Development costs
				(including project NHTF eligible costs), subject to the conditions and
				limitations set forth in the executed Direct Loan Contract.
(ii) HTC-Layered Developments. With the Cost
				Certification required by the Low Income Housing Tax Credit Program, the
				Development Owner must submit to the Department a cost certification completed
				by an independent licensed certified public accountant of all Development costs
				(including NHTF project eligible costs), subject to the conditions and
				limitations set forth in the executed Direct Loan Contract.