Cost Controls and Safe Harbor Standards for Homeownership Development Effective April 1, 2004



Similar documents
COEUR D ALENE TRIBAL HOUSING AUTHORITY MORTGAGE FINANCING ASSISTANCE FINAL POLICY (CDTHA MFA)

Commonwealth of Massachusetts HOME Investment Partnerships Program/Housing Stabilization Fund Project-Based Homeownership Program

Guidance on NSP-Eligible Acquisition & Rehabilitation Activities

PENNSYLVANIA HOUSING FINANCE AGENCY (2016 UNDERWRITING APPLICATION)

Vacant Properties Rehabilitation Program

Attachment B. FCRHA Housing Choice Voucher Section 8 Homeownership Capacity Statement

1Q. Why does HUD review Total Development Costs (TDC) and Housing Cost Caps (HCC) for Public Housing projects?

PENNSYLVANIA HOUSING FINANCE AGENCY COST CERTIFICATION GUIDE TAX CREDIT PROGRAM

Vacant Properties Rehabilitation Program

COEUR D ALENE TRIBAL HOUSING AUTHORITY HOUSING REHABILITATION POLICY (CDTHA REHAB)

2016 HOME REQUEST FOR PROPOSALS AFFORDABLE HOUSING ACQUISITION AND/OR REHABILITATION or NEW CONSTRUCTION

Example of a Lease-Purchase Policies and Procedures Manual for Short- Term Lease-Purchase Programs

HOME Investment Partnerships Program FAQs

LOAN APPLICATION. Name of Business (Legal Name): Address: City, State, Zip: Business Phone: Federal Tax ID #:

Facilities Consolidation Fund Loans for the Facilities Consolidation Initiative. Program Guidelines

HOUSING ASSISTANCE REHABILITATION PROGRAM (HARP)

CHAPTER 10: LEVERAGED LOANS SECTION 1: UNDERSTANDING LEVERAGED LOANS

Housing Opportunities for Native Americans & Alaska Natives NativeNatives

Native American Homeownership Initiative 2013 Program Guidelines As Amended June 19, 2013

HOUSING FINANCE AND LOW-INCOME HOUSING TAX CREDITS. September 2012 With gratitude to Kathleen Foster

Contact Information. Oklahoma City Housing Authority 1700 Northeast Fourth Street Oklahoma City, Oklahoma

HOMEBUYER PROGRAM MANUAL (Existing & New Construction) AMENDED DECEMBER, 2008

CDA BLF LOAN APPLICATION

CHAPTER Senate Bill No. 1852

Public Housing Mortgage Program Proposed Notice for Comment Comments Requested by January 31, 2010

CITY OF PASSAIC DEPARTMENT OF COMMUNITY DEVELOPMENT 330 PASSAIC STREET PASSAIC, NEW JERSEY 07055

FHA Section 542(c) Risk-Sharing Program for Multifamily Housing Program Rules

DEVELOPMENT FINANCE DIVISION APPLICATION GENERAL INFORMATION

HOUSING FINANCE AUTHORITY OF PINELLAS COUNTY AFFORDABLE MULTIFAMILY RENTAL DEVELOPMENT LOAN PROCEDURES

Affordable Housing: LIHTC Accounting Overview. July 30, 2014

STATE OF NEW YORK MORTGAGE AGENCY MORTGAGE INSURANCE FUND NEW YORK STATE HOUSING FINANCE AGENCY NYHOMES CONSTRUCTION LOAN FINANCING PROGRAM

CHAPTER 4. COMPLETING FORM HUD-92330, MORTGAGOR'S CERTIFICATE OF ACTUAL COST

EXHIBIT 1 GUIDELINES FOR CAPITAL FUNDING REQUESTS FOR NOT-FOR-PROFIT ORGANIZATIONS

MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY COMMUNITY DEVELOPMENT DIVISION

City of Madison TIF Loan Underwriting Policy

Multi-family Affordable. Becky Christoffersen, Midwest Housing Development Fund, Inc.

NSP Homebuyer Programs:

Payment Schedule for Program Management Services

HOME Investment Partnerships Program Application. Rental and Homeownership Proposals

THE OXBRIDGE FHA FACILITY FHA TERM SHEETS

EHDOC Robert Sharp Towers II Limited Partnership (A Florida Limited Partnership) Financial Report October 31, 2014

How should banks account for their investment in other real estate owned (OREO) property?

SBA 504 Loan Program FACT SHEET

Native American Mortgage

Rio Homes Permanently Affordable Homes Application Process

HUD Mortgage Insurance Program Section 232 LEAN

NEW YORK STATE HOMES AND COMMUNITY RENEWAL S MITCHELL-LAMA REHABILITATION AND PRESERVATION PROGRAM

Connecticut Housing Finance Authority

Rural Business Enterprise Loan Program (RBE)

Tax-Exempt Housing Bond Basics

Rental Loan Program October, 2012

HomeTown: Portsmouth s First Time Homebuyer Program Information & Guidelines

QUICK MORTGAGE GUIDE

- 1 - Neighborhood Stabilization Program Information Summary Sheet

Indiana Affordable Housing & Community Development Fund Application Process, Underwriting Guidelines, & Compliance Requirements

2010 NSP FIRST Mortgage Loan Program Summary Approved by THDA 05/07/2010

APPENDIX D: HOUSING PROGRAM DIRECTORY

FIRST TIME HOMEBUYER S PROGRAM OPERATING PROCEDURES. Division of Housing Services Room 218A, City Hall (856) HOME FUNDED

Housing Tax Credit Essentials

MAINE AGRICULTURAL MARKETING LOAN FUND (AMLF) LOAN APPLICATION

CITY OF NEWARK SECTION 108 LOAN PROGRAM. DRAFT PROGRAM GUIDELINES As approved on 7/28/13 by HUD and written on 9/15/14

The City of Kenner Community Development Department

cäéñáäáäáíáéë Ñçê ^ÑÑçêÇ~ÄäÉ eçìëáåö

SECTION 184 INDIAN HOUSING LOAN GUARANTEE PROGRAM Processing Guidelines 2014

GOAL Program: Project Cost Certification Requirements

CITY OF TEMPE COMMUNITY DEVELOPMENT DEPARTMENT HOUSING SERVICES DIVISION

MANUFACTURED HOUSING DOWN PAYMENT LOAN PROGRAM

Get Your Multifamily Deal Done With FHA

CITY OF HUNTSVILLE, ALABAMA. DOWNPAYMENT ASSISTANCE PROGRAM - DAP Program Description & Guidelines

Juneau Affordable Housing Fund Application for Funding

DHS NEW TIER II SHELTER CONSTRUCTION and OPERATION PROGRAM TERM SHEET

A Simplified Overview of FHA Loan Origination

Juneau Affordable Housing Fund

Mortgage Fundamentals

Federal Home Loan Bank of Cincinnati Affordable Housing Program

Brooklyn Park Economic Development Authority

Get the facts. What every homeowner who is at least 62 years of age should know about reverse mortgage loans

GUIDE TO CREATING A CAPITAL CAMPAIGN PLAN: CONTENTS

Page 1 of 9 MICROLOAN RULES AND REGULATIONS

CONSTRUCTION AND PERMANENT LOAN FINANCING TERM SHEET

ReverseMortgages.com, Inc. A Guide to Reverse Mortgages

SUBORDINATION REQUIREMENTS

PROGRAM GUIDELINES THE ONE MORTGAGE PROGRAM

Assistance for the Redevelopment of Abandoned and Foreclosed Properties City of Atlanta, Georgia

`2 TERMS AND CONDITIONS

Commonwealth of Massachusetts HOUSING STABILIZATION FUND (HSF) Rental Application Guidelines

DEPARTMENT OF COMMERCE REVOLVING LOAN FUND (RLF) SUMMARY

Buy a home, plus make improvements, with just one loan

REQUEST FOR QUALIFICATIONS ST. LOUIS COUNTY OFFICE OF COMMUNITY DEVELOPMENT HOMEBUYER ASSISTANCE & COMMUNITY BUILDER INCENTIVE 2016

Lake County Homebuyer Programs Lender Guidelines as of 1/22/2014

SINGLE FAMILY DEVELOPMENT

Community Based Housing Loans for the Development of Housing for People with Disabilities. Program Guidelines

Special Attention of: NOTICE H All FHA Approved Multifamily Mortgagees Issued: February 3, 2012 Expires: February 28, 2013

Pennsylvania Section 108 Loan Program Standards for Financial Underwriting

Homeowner Handbook. 88 King Street Burlington, Vermont

CITY OF REDWOOD FALLS PORT AUTHORITY REVOLVING LOAN FUND (RLF) APPLICATION

City of Wichita. Housing and Community Services Department HOME INVESTMENT PARTNERSHIPS PROGRAM HOUSING DEVELOPMENT LOAN PROGRAM

PARTICIPATION AGREEMENT AND ACKNOWLEDGMENT OF LOAN RESTRICTIONS

Section B. Transactions Affecting Maximum Mortgage Calculations Overview

Reverse Mortgages in Relocation Assistance

Transcription:

Cost Controls and Safe Harbor Standards for Homeownership Development Effective April 1, 2004 To expedite the homeownership review process, HUD is instituting safe harbor and maximum fee ranges for a number of costs relating to homeownership projects. These cost controls only apply to homeownership plans that call for fee-simple sale of newly constructed or rehabilitated units receiving the benefit of public housing funds or public housing land. The standards do not apply to programs where public funds are only used for direct financing to the purchaser, or programs where no public housing funds are involved. This guidance is specific to homeownership developments, and does not apply to rental phases or lease-purchase projects. Lease-purchase units must comply with the Rental Cost Controls and Safe Harbor Standards. Any terms previously approved by HUD through approval of the predevelopment agreement, development agreement, or program manager contract are not subject to further review. HUD s Cost Controls and Safe Harbors are contained in the following chart. The chart provides a brief definition of each term, lists the safe harbor and maximum allowable fees, and briefly describes the risk factors or circumstances that may result in a fee above the safe harbor standards. Housing authorities, developers, and consultants should use these guidelines when negotiating terms and drafting homeownership documents for HUD review. HUD will review the project terms when receiving predevelopment and development agreements, program manager contracts, homeownership proposals, and/or other documents that contain negotiated terms. If a project is at or below a safe harbor standard, no further justification to HUD will be necessary. If a project is above a safe harbor standard, additional review by HUD will be necessary. In order to approve terms above the safe harbor, the housing authority must demonstrate to HUD that the negotiated terms are appropriate for the level of risk involved in the project, the scope of work, any specific circumstance of the development, and the local or national market for the services provided.

Net Developer Fee for Homeownership Developments (Developer Fee and Overhead) The safe harbor and maximum standards apply to net developer fee, i.e., the portion of the developer fee received by the developer to cover overhead and profit. Payments to developers such as deferred developer fee are considered part of the fee/overhead amount. The developer fee may not be paid from public housing funds. 9% or less of the project costs (profit and overhead). 12% of the project costs (profit and overhead) with justification to Net developer fee is expressed as a percentage of the project costs. Project costs are defined as all hard and soft costs of constructing a particular component with the exclusion of the following: Third-party costs paid by the PHA under contracts entered into directly by PHA and third parties, which will not be reimbursed to PHA upon receipt of construction financing (e.g., where the PHA contracts separately for demolition services or program management services); The developer fee itself; All costs related to family self-sufficiency, homeownership counseling, and resident relocation activities. A homebuilder who is receiving a developer fee may receive up to a 6% fee for general conditions, but is not permitted to charge a fee for overhead or profit. Developers may receive up to a 1% addition to their fee (with a cap of 12% developer fee) in any of the following ways: 1) Where the sales prices of some of the units exceed the construction/rehabilitation costs, the developer and housing authority may share the profit. 2) Where actual sales prices of the units exceed the anticipated sale price, the developer and the housing authority may share the profit. 3) Where there are cost savings from non-public housing sources, the developer and housing authority may share the savings. Profits or savings in excess of the 1% addition to the developer fee constitute PHA program income to be used for eligible program costs or other low-income housing purposes Developers should follow the construction lenders underwriting standard regarding required number of presold homes. The safe harbor and maximum guidelines assume the net developer fee excludes any portion of the fee received by the developer or codeveloper (including a PHA) that is returned to the project to cover project costs. Page 2

Net Developer Fee for Homeownership Mixed-Finance Developments (continued) Developers with fees above the safe harbor standard should meet most or all of the following factors: Developer obtains private debt financing to cover some portion of construction costs; Developer and/or associated broker is responsible for sale of the homes and will not receive a separate broker s fee; Developer obtains site control from an entity other than a PHA, PHA affiliate or City (fee increases with number of sites); Developer acquires sites with own funds and is not reimbursed during pre-development. Project is small (e.g., 20 units or less); Developer carries the financing of model home(s); Project is complex (e.g., financial, legal, site acquisition, non-contiguous lots, environmental, and/or political); At least 50% of the homes are sold to existing public housing residents; A minimum of 50% of the developer fee is deferred until 100% of the homes are sold; The developer bears a minimum of 50% of the predevelopment costs (until developer s receipt of construction financing). All criteria apply to both for-profit and non-profit developers. PHAs or PHA affiliates that act as developer can only receive fees if they are first returned to the project and, to the extent that funds are remaining, subsequently classified as program income and used for low-income housing purposes. Pay-Out Schedule for Developer Fee/Overhead Except as noted below, public housing funds may not be used for payment of developer fee/overhead. Where public housing funds pay 100% of the construction financing, only permanent, non-public housing fund sources may fund the developer fee. HUD limits the pay-out schedule, to the extent that non-public housing funds are available, by phase: At mixed-finance closing, no more than 50% of the fee/overhead amount. Upon sale of individual home; pro rata share of the remaining fee per home sold. Within recommended pay-out schedule. Payments of greater than 50% upon receipt of construction financing and pro rata share per sale of individual home with justification to A portion of the fee can be further deferred. On a case-by-case basis, HUD will consider advancing the developer fees where there is an extended predevelopment period caused by such external factors as environmental remediation, consent orders, etc. If HUD determines such an advance is warranted, the PHA can disburse up to 15% of the total developer fee/overhead amount (not to include legal fees) to the developer prior to receipt of construction financing. Page 3

Contractor Fee for Non-Bid Contracts Percentages are based on hard construction cost (not including contingency). General Conditions includes the bond premium. A homebuilder who is receiving a developer fee may receive up to a 6% fee for general conditions, but is not permitted to charge a fee for overhead or profit. Overhead: 2% Profit: 6% General Conditions: 6% 14% is the maximum for these combined costs provided that the PHA justifies why the 2/6/6 percentages for the individual costs cannot be met. Total Amount of Public Housing Funds for Construction Financing The PHA may provide public housing funds for a construction loan, but the loan amount may not exceed the TDC limit. The allowable Total Development Cost of the project. Total Amount of Public Housing Funds for Permanent Financing The PHA may provide public housing funds for permanent write-downs and financing directly to purchasers. Collectively, these public housing funds must be within the TDC limit. The allowable Total Development Cost of the units. PHA Administrative/ Consultant Costs Costs should reflect only documented expenditure of time and overhead cost (supplies, equipment, telephone, etc.). Such costs include both in-house staff time and outside consultants (program manager, development advisors, relocation specialists, etc.), but exclude outside legal and community and supportive services costs. On the HUD budgets, these costs may be captured under multiple BLIs. 3% of the total project budget (basis includes all hard and soft development costs excluding CSS expenses). 6% of the total project budget with justification to Fee for Program Management Services Typically a fixed-price contract. Contracts must be performance-based with payments fixed to milestones (or monthly if tied to milestones). Size of fee should be related to the specific scope and role PM is expected to play. Costs for program management (either a full team or independently procured consultants) must be included in the PHA s Administrative Cost Cap. PHAs must comply with the provision of the procurement regulations that requires a PHA to prepare a cost estimate for procured services prior to receipt of bids. ; the fee must be contained within the PHA s overall Administrative Cost Cap. Use checklist of responsibilities and clearly defined scope to limit costs. A permanent write-down is a grant that makes up the difference between the appraised value of the unit (i.e., sales price) and the actual construction cost. Page 4

Sharing of Third-party Predevelopment Costs HUD recommends the following cost-sharing schedule: PHA and Developer split third-party costs 75/25. Developer s share of third-party costs (25%) will be reimbursed upon receipt of construction financing out of available sources. Costs to be shared are all third-party costs under the developer s scope of work (e.g., A/E, market study, etc.) incurred during the predevelopment period. Public housing funds may not be used to reimburse developer legal counsel prior to receipt of construction financing. Because site acquisition is not a third party cost, it is not subject to the 75/25 split of third -party costs. Costs are shared up to 75% by the PHA and at least 25% by the Developer. A PHA may pay up to 100% of thirdparty predevelopment costs to small, local, non-profit, and/or minority/disadvantaged firms with justification to Identity of Interest Parties Identity of interest parties are those that share an ownership interest. Identity of interest relationships are most common between a developer and construction management, general contractor (GC), architect/engineer (A/E), broker, and/or equity provider. PHAs are required to ensure cost competitiveness to the extent possible. Where a developer and GC have an identity of interest, the PHA needs to conduct an independent cost estimate, and submit that estimate to HUD recommends those developers who wish to select a homebuilder for construction of homeownership units do so through competitive selection. Legal Fees Fees should be largely dependent upon the complexity of the project (e.g., number of sites, sales, and/or land transfers). HUD will review PHA legal costs when reviewing development budgets. In order to reduce costs and provide an incentive to reach closing, public housing funds may not be used to pay developer legal costs prior to the developer s receipt of construction financing. The developer legal costs are in addition to the 25% of third-party costs the developer bears until receipt of construction financing. Page 5

Subordinate Mortgage Administrator Where the PHA provides subordinate mortgages to the purchasers in its homeownership program, the PHA may procure loan administration services instead of conducting this activity in-house. The loan administrator s responsibilities may include: development of standardized loan documents with the PHA; administration and servicing of the subordinate mortgage to purchasers; and tracking of payment on the subordinate mortgage upon resale, bankruptcy, or foreclosure. Fees should reflect local Broker Fees The broker fees should reflect local If the broker has an identity of interest relationship with the developer, the PHA must require the developer to assure that the broker s fees are competitive. Likewise, a homebuilder s broker fees must be reflective of local Fees should reflect local Homebuyer Training/ Counseling The PHA may choose to procure an entity or to perform these services in-house. The homebuyer counseling contracts must be performance-based and are usually funded through the housing authority s Community and Supportive Services budget. PHAs should refer to their locality s First Time Homebuyer program and existing providers of this service for guidance on appropriate homeownership counseling fees. Fees should reflect local Page 6