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Board of Directors’ Meeting

January 26, 2016 Meeting Materials

Tab 1 - Agenda

Tab 2 - Memo from Ralph Perrey

Tab 3 - Board Meeting Minutes

from November 17, 2015

Tab 4 – Bond Finance Committee Meeting Materials

Tab 5 – Audit & Budget Committee Meeting Materials

Tab 6 – Lending Committee

Meeting Materials

Tab 7 – Grants Committee

Meeting Materials

Tab 8 – Tax Credit Committee Meeting Materials

Tab # 1 Items:

Agenda

THDA Board of Directors Meeting January 26, 2016—1:00 p.m. William R. Snodgrass -Tennessee Tower 312 Rosa L Parks Avenue, Third Floor The Nashville Room Nashville, Tennessee 37243

* Indicates Board Action Required ? Indicates Discussion Which Might Result In Board Action

AGENDA (Tab #1)

Public Comment to the Board Bills, Perrey, Board Members

A. Opening Comments and Introductions ................................................................................................... Bills

B. Staff Recognition (Directors) (Tab #2)................................................................................................. Perrey

C. Approval of Minutes from November 17, 2015, Meeting (Tab #3) ....................................................... Bills

D. Executive Director’s Report (Tab #2) .................................................................................................. Perrey

E. Committee Reports and Committee Matters

1. Bond Finance Committee (January 25—2:00 p.m. State Capitol Room G-11) (Tab #4) ............. Bills

* a. Authorization of Issue 2016-1.................................................................................................. (Miller) * b. Issue 2016-1 Reimbursement Resolution ................................................................................ (Miller) c. Annual THDA Volume Cap Update ........................................................................................ (Miller)

2. Audit & Budget Committee (January 26—9:30 a.m. Tennessee Tower, The Nashville Room) (Tab #5) ...................................................................................................... Lillard a. 2015 Enterprise Risk Management Analysis Review .............................................................. (Oliver)

3. Lending Committee (January 26—9:45 a.m. Tennessee Tower, The Nashville Room) (Tab #6) ..................................................................................................... Cleaves * a. Housing Cost Index Report ........................................................................................................ (Arik) b. Single Family Calendar Year End Report .................................................................................. (Arik)

4. Grants Committee (January 26—10:00 a.m. Tennessee Tower, The Nashville Room) (Tab #7) ........................................................................................................ Baker * a. Program Description for the Housing Trust Fund 2016 Spring Competitive Round ................. (Watt) b. HOME Beneficiary Report ..................................................................................................... (Mansa) c. Federal Housing Trust Fund Update .......................................................................................... (Watt) d. GHHI Presentation ................................................................................................................... (Baker)

5. Tax Credit Committee (January 26—10:15 a.m. Tennessee Tower, The Nashville Room) (Tab #8) ........................................................................................................... Bills * a. Waiver request from LDG for Noncompetitive Credits .......................................................... (Blade) b. 2017 Low Income Housing Tax Credit Qualified Allocation Plan Discussion ....................... (Blade)

Tab # 2 Items:

Memo from Ralph Perrey, Executive Director

Staff Service Awards

Ralph M. Perrey, Executive Director

Andrew Jackson Building Third Floor - 502 Deaderick St. - Nashville, TN 37243

www.THDA.org - (615) 815-2200 - Toll Free: 800-228-THDA

TO: THDA Board of Directors

FROM: Ralph M. Perrey

DATE: January 15, 2016

SUBJ: THDA Board Update

THDA Board Members,

We look forward to seeing you at our meeting on Tuesday, January 26, the first meeting of 2016

and the first for new Board Member, Kim Brown. Among other updates, we hope to know more

by then about the additional funds appropriated by Congress for the Hardest Hit Fund, how much

might be available to Tennessee, what THDA might be able to do with those funds, and where in

our state we can use them.

Internal Audit Director, Gay Oliver will report on THDA’s annual Enterprise Risk Assessment.

We will brief the Tax Credit Committee on a pair of ideas for the 2017 QAP: 1) an ‘Innovation

Round’ similar to the one created by Indiana, and; 2) a way to use leftover tax credits to provide

housing for youth aging out of foster care modeled after Kentucky’s successful Scholar House

program.

In addition, several action items await you, including:

We will ask your authorization for the first bond issuance of 2016. At this point we

anticipate issuing up to $150 million, including the refunding of older higher cost bonds.

Background material and recommendations from our financial advisor may be found

behind the Bond Finance Committee tab.

We will present proposed revisions to the Housing Trust Fund that will enable us to target

grants to priorities in our strategic plan, including new emphasis on housing for youth aging

out of foster care and transitional housing for those newly released from incarceration.

More information about the revisions are included behind the Grants Committee tab.

As a reminder, all committees other than Bond Finance will meet on Tuesday, January 26 in the

Tennessee Tower. Please contact Cindy Ripley (email [email protected] or call 615-815-2269) if

you have questions about or need assistance with lodging and logistics.

RMP/csr

http://www.thda.org/

mailto:[email protected]

Celebrating Years of Service

5 Years

April Grubbs NSP Compliance Monitor

Community Programs

THDA Hire Date: January 4, 2011

5 Years

Rhonda Mosier Administrative Assistant

Executive


5 Years

Shelly Kitts IT Business Analyst

Information Technology

State Hire Date: January 18, 2011

5 Years

Jarmaine Betts Customer Response Center Manager

Public Affairs

THDA Hire Date: February 1, 2011

5 Years

Cynthia Peraza Assistant Director of Single Family

Programs

Single Family Program


5 Years

Wendy Weaver Assistant Legal Counsel

Executive


10 Years

Rhonda Groves Financial Accountant

Accounting

State Hire Date: March 9, 1981

Term Date: October 28, 1983

Reinstated Date: April 11, 1994

Term Date: September 19, 1995

Reinstated Date: March 17, 2010

THDA Hire Date: November 9, 2015

10 Years

Meg Palmer HR Coordinator - Payroll and Leave

Administration

Human Resources


10 Years

Nicole Epperson Program Compliance Coordinator

Program Compliance

THDA Hire Date: November 17, 2008

State Hire Date: February 1, 2006

15 Years

Beverly Fears Rental Assistance Specialist

Section 8 Rental Assistance

THDA Hire Date: December 16, 2000

20 Years

Sherry Smith Senior Housing Program Coordinator

Community Programs

State Hire Date: June 1, 1986 Term Date: May 12, 1989


25 Years

Coralee Holloway Director of Community Programs

Community Programs


15 Years

David Richardson Program Compliance Manager

Program Compliance


20 Years

Sarah Turner Rental Assistance Specialist

Section 8 Rental Assistance


State Hire Date: January 1, 1995

Tab # 3 Items:

Board Meeting Minutes from November 17, 2015

TENNESSEE HOUSING DEVELOPMENT AGENCY BOARD OF DIRECTORS

November 17, 2015

Pursuant to the call of the Chairman, the Tennessee Housing Development Agency Board of Directors met in regular session on Tuesday, November 17, 2015, at 12:30 p.m. Central Time, in the William R. Snodgrass Tennessee Tower, The Nashville Room, Nashville, Tennessee.

The following Board members were present: Brian Bills (Chair), John Baker, Ann Butterworth (for

Comptroller of the Treasury Justin Wilson), Dorothy Cleaves, Kendra Cooke, State Treasurer David Lillard, Greg Turner (for Commissioner of Finance & Administration Larry Martin), Secretary of State Tre Hargett (joined the meeting at 12:43 p.m., Jonathan Rummel was present until that time), Ashleigh Roberts, Benjie Shuler and Pieter van Vuuren. The following Board member was absent: Ron Jones.

Chairman Bills recognized Ralph Perrey, Executive Director, who recognized the following THDA

staff members for their years of service: Denise McBride Community Outreach 5 years Debra Fuller Public Affairs 5 years Latichia Harvey S8 Contract Administration 10 years Rebecca Zastrow S8 Contract Administration 10 years Hulya Arik Research & Planning 10 years Felita Hamilton Multifamily Development 10 years Bettie Teasley Sulmers Research & Planning 15 years Jana LaPeer S8 Rental Assistance 15 years Tammy Walker Single Family Programs 25 years Wayne Beard Finance 30 years Mr. Perrey also recognized Gay Oliver, Director of Internal Audit for her accomplishment of

completing and graduating from TGEI. Chairman Bills offered a time for public comment and none was made. Chairman Bills, seeing a quorum present, called the meeting to order and called for consideration

of September 22, 2015 meeting minutes. Upon motion by Ms. Butterworth, second by Mr. Baker, the minutes were approved.

Chairman Bills began with annual meeting items and nominated Mr. Baker to serve as Vice Chair,

second by Ms. Cooke. No other nominations were offered. The motion carried. Chairman Bills continued to the next item, Signing and Countersigning Checks Resolution, and

recognized Lynn Miller, Chief Legal Counsel. Ms. Miller noted that changes were necessary in authorization for signing and counter signing checks due to changes in position names and changes were made to streamline and simplify prior authorizing resolutions. She explained that the prior resolution incorporated four other resolutions by reference, however, with the assistance of Ms. Butterworth, the proposed authorizing resolution restates and replaces all of the prior resolutions. Upon motion by Chairman Bills, second by Mr. Shuler, the Signing and Countersigning Checks Resolution was approved.

Chairman Bills recognized Mr. Perrey to review the 2016 THDA Board of Directors meeting

schedule. Mr. Perrey also announced that the out of town Board meeting is scheduled for September, 2016 with the location under consideration.

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Chairman Bills recognized Mr. Perrey to discuss a proposed challenge grant by THDA to Habitat for Humanity International for a 2016 “super” build in Memphis. Mr. Perrey explained that Habitat for Humanity International expects to build 100 homes and rehab 30 to 40 others in Memphis, however, Memphis and it Habitat chapter will be fundraising for the effort. Mr. Perrey described his recommendation to make $1million available as a special grant from the THDA Housing Trust Fund as a “challenge grant” to jump start the local fundraising effort. Upon motion by Mr. Baker, second by Mr. Bills, motion carried to approve the $1 million special one-time challenge grant to support the Habitat build in Memphis.

Chairman Bills called on Mr. Perrey, who provided the Executive Director’s report: • Loan production - Remains strong for November with production just under $1 million for each

business day in November. • Five Year Financial Plan - Loan production previously forecasted at $250 million each year,

has been increased to $336 million. Adjustments to capital needed for reserves will be made, due to larger amounts needed for down payment assistance loans. THDA remains financially strong with an overall program asset to debt ratio above what the rating agencies expect for a AAA ratings.

• 2016 Housing Trust Fund Grant Program Description - Will be presented in January to give staff more time to integrate Strategic Plan priorities with the program requirements.

• Research and Planning – Completed two issue briefs on inclusionary zoning and residential property tax relief to provide timely information to local leaders who are grappling with these issues. This further establishes THDA as a resource for insight, information and ideas related to affordable housing challenges.

• Servicing – Staff continues to work with the Department of Finance and Administration on an expansion request and to progress toward bringing loan servicing in house next year. Lindsay Hall has been designated as the Chief Administrative Officer of Single Family Programs since she will be assuming additional responsibilities with the addition of all servicing activity.

• Leadership Academy Graduation – Graduation ceremonies for the inaugural class is scheduled for December 1st, for the 11 THDA staff members who completed the yearlong program.

Chairman Bills began the Bond Finance Committee report by recognizing Lynn Miller, THDA

Chief Legal Counsel to present the Issue 2015-2 State Form CT-0253 Report on Debt Obligation (“State Form”). Ms. Miller noted that a draft version of the State Form was previously circulated, but the final version of the State Form is being presented today. She explained that the State Form is statutorily required for every bond sale and must be submitted to the Board of Directors for review. She noted that the final State Form was filed with the Office of the Comptroller on November 6, 2015. She called attention to her memo dated November 16, 2015, that shows various fees and expenses associated with Issue 2015-2 and prior bond issues and explained that the variation in cost was primarily due to the size of the bond issues.

Chairman Bills referenced a report prepared by CSG, financial advisor for THDA titled

“Underwriter Performance Review: January 2015 through October 2015” and noted that this report fulfills the requirement in THDA’s Debt Management Policy for underwriter performance to be reviewed at least annually. Chairman Bills reported that CSG felt the current structure for the underwriting team appeared to be effective in fostering competition between the managers, appears to produce very strong in-state retail sales, and did not recommend changes.

Chairman Bills next referenced a memo dated November 5, 2015, containing a report on the THDA

statutory debt limit. He explained that the THDA Debt Management Policy requires an annual review of the THDA debt limit to determine how likely it is that the debt limit would be reached within the next two

3

years. He noted that with the anticipated bonds issues, refundings and bond redemptions, THDA will remain well within the statutory debt limit of $2,930,000,000.

Chairman Bills then recognized Trent Ridley, THDA Chief Financial Officer, to present the THDA

FY16-20 Five-Year Financial Plan (the “Plan”). Mr. Ridley pointed out that the THDA Debt Management Policy requires annual updates to a five-year financial plan. He explained that the Plan is a liquidity analysis of THDA’s cash position in terms of cash available and the amount of debt and investments over the next five years based on specific assumption. He described the following major assumptions and results:

• Approximately $2 billion in bond issuance, including approximately $401 million in

refundings; • Approximately $330-$336 million per year in production; • Net withdrawals and uses of approximately $212.9 million from the general bond

resolutions primarily for bond related expenses, bond reserve fund, operating costs and programs approved by the Board, including approximately $66.4 million for down payment assistance, approximately $37.5 million for the Housing Trust Fund, and approximately $40 million for New Start loans;

• Net servicing earnings of approximately $19.7 million once servicing is brought in house; and

• A weighted average Program Asset Debt Ratio (PADR) of 1.17 for all three general bond resolutions and a PADR of 1.12 for the 2013 General Bond Resolution by 2020.

Chairman Bills began the Tax Credit Committee report by referencing a staff and Committee

recommended amendment to the 2016 Low Income Housing Tax Credit Qualified Allocation Plan (the “2016 QAP”) regarding Choice Neighborhood Initiative (CNI) developments and the county caps. He recognized Mr. Perrey, Executive Director, who noted the following:

• The intent of the 2016 QAP was to make 2016 low income housing tax credits available to

support HUD CNI grants made in Tennessee. • The 2016 QAP gives extra weight within the general pool to applications for CNI

developments, however, if a county cap is met before allocations are made from the general pool, then the additional priority intended for CNI developments would not occur.

• The original staff proposal to address this situation described in the memo from Mike Blade dated November 4, 2015 has been replaced.

• The new staff proposal is to change the order of the cascade so that CNI applications follow only allocations from the Non-Profit Set-Aside to ensure that eligible CNI applications receive the intended priority.

Upon motion by Chairman Bills, second by Mr. Lillard, the amendment to the 2016 QAP was approved.

Chairman Bills next referenced the 2016 Multifamily Tax-Exempt Bond Authority Program

Description (the “2016 Bond Authority Program Description”), and recognized Judith Smith, Multifamily Development Administrator, to present this item. Ms. Smith referenced the list of proposed changes attached to the memo from Mike Blade dated November 4, 2015 and indicated that most of the changes conform the 2016 Bond Authority Program Description to the approved 2016 QAP. She also noted the staff recommendation to make up to $150 million of 2016 volume cap available for the program in 2016. Upon motion by Chairman Bills, second by Mr. Baker, the 2016 Bond Authority Program Description was approved.

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Chairman Bills recognized Secretary Hargett for the Audit & Budget Committee report. Secretary Hargett noted the first two items on the agenda, the disclosure analysis report for Board members and the disclosure analysis report for THDA staff, would be considered together and come with a Committee recommendation to accept both reports. Upon motion by Secretary Hargett, second by Treasurer Lillard, both reports were accepted.

Chairman Hargett then recognized Ms. Oliver for an update on Enterprise Risk Management

(ERM). Ms. Oliver pointed out that the ERM process must be completed and the ERM Report submitted to the State Comptroller’s Office and the Commissioner of Finance & Administration by December 31 of each year. She indicated that the 2015 ERM report will be available for review at the January 2016 meeting. She explained that the state Financial Integrity Act requires THDA to establish and maintain a system of internal controls and the ERM Report documents whether THDA’s system of accounting and administrative controls comply with the statute.

Next, Ms. Oliver presented the report titled “Report to the Audit & Budget Committee of FYE 2015

IA Activity Summary”. She pointed out that the report provides highlights of the monitoring and investigative activities of the Internal Audit Division conducted during the fiscal year ended June 30, 2015, including 21 review reports, 16 investigative reports and 3 compilation reports.

Chairman Hargett recognized Trent Ridley, THDA Chief Financial Officer, to provide the Fiscal

Year 2015 Financial Audit Summary. Mr. Ridley indicated that staff has been meeting with State Audit regarding the audit of THDA’s financial statements and, to date, there are no findings and no exceptions. He noted that THDA and State Audit are waiting for information for one of the notes to the financial statements relating to GASB 68 and once the information is received, the audit of the financial statements will be completed.

Secretary Hargett noted that the Committee also conducted the annual performance evaluation of

the Director of Internal Audit who reports directly to the Audit & Budget Committee. Chairman Bills then recognized Ms. Cleaves for the Lending Committee report. Ms. Cleaves called

on Ms. Miller who referenced her memo dated November 5, 2015 and discussed the recommended Mortgage Credit Certificate Volume Cap authorization. She noted that the Committee recommended carrying forward over $200,000,000 of 2012 volume cap that will otherwise expire December 31, 2015, for a mortgage credit certificate program in 2016 and authorizing staff to submit the Mortgage Credit Certificate Election documentation to the IRS. Upon motion by Ms. Cleaves, second by Chairman Bills, the Committee recommendation was approved.

Ms. Cleaves called on Lindsay Hall, Senior Director of Single Family Programs, who referenced

her memo dated November 3, 2015, regarding the proposed T2 Loan Program. She explained that as staff began work on the Blight Elimination Program, they discovered a significant inventory of properties in need of repair and at risk of becoming blighted, so staff developed a loan program to offer first mortgage loans for homeowners who are at 80% or less of area median income through the purchase of a property owned and renovated by a T2 Program Partner. She indicated that T2 Program Partners would be non-profit organizations, approved by THDA, who acquire properties through purchases or donations. She explained that unused funds from the New Start Program would be used for these loans and that eligible borrowers will meet criteria similar to that of other THDA loans:

• Income at or below 80% of area median household income limits per county based on family size • Minimum FICO score of 620 • Maximum qualifying ratios of 29/41

5

• Maximum loan to value of 75% for the T2 first mortgage loan • Maximum sales price of $112,500

Ms. Hall noted that the Committee recommended approval of the T2 Loan Program as described and approval of up to $2,000,000 of the amount made available for New Start for this loan program. Upon motion by Ms. Cleaves, second by Chairman Bills, the Committee recommendation was approved.

Chairman Bills noted that Pieter van Vuuren was appointed as the newest member of the Lending

Committee. Chairman Bills then recognized Mr. Baker for the Grants Committee report. He referenced a memo

from Don Watt, Director of Community Programs, regarding funding for 2016 fall Housing Trust Fund competitive grants and noted that 33 applications were received, requesting over $9.6 million in funding for the approximately $2.3 million in funding available, with eight applications deemed ineligible. Upon motion by Mr. Baker, second by Chairman Bills, funding for the top six applicants on the matrix attached to the referenced memo (Council for Alcohol & Drug Abuse Services, Keystone Development, Inc., Community Housing Partners Williamson County, Binghampton Development Corporation, Urban Housing Solutions, and Mending Hearts, Inc.) was approved.

Mr. Baker then referenced a memo dated November 2, 2015 from Coralee Holloway, regarding the

2015-2016 HOME Program Description. He reviewed the staff proposed changes and noted one of the main changes is to combine 2015 and 2016 HOME allocations into one application round, with 2016 awards subject to receipt of a HOME allocation from HUD and the approval of the 2016 Action Plan. Upon motion by Mr. Baker, second by Chairman Bills, the 2015-2016 HOME Program Description was approved.

Mr. Baker then referenced a memo dated November 3, 2015 from Mr. Watt describing the staff

proposed changes to the 2016 ESG Program Description and noted that approximately $3 million in FY2016 funding and $1.2 million in FY2015 funding is expected to be available. Upon motion by Mr. Baker, second by Chairman Bills, the 2016 Emergency Solutions Grant Program Description was approved.

Mr. Baker then presented a Committee recommended extension request from Doors of Hope for its

2014 ESG Contract from December 31, 2015 to May 31, 2016. Upon motion by Mr. Baker, second by Chairman Bills, the Doors of Hope 2014 ESG contract was extended to June 30, 2016.

Mr. Baker noted that Ms. Holloway announced that this would be her last THDA Board Meeting

after serving THDA for 25 years. He commended Ms. Holloway for her work and efforts. With no further business to address, meeting was adjourned. Respectfully submitted,

Ralph M. Perrey Executive Director

Approved this ___ day of January 2016.

Tab # 4 Items:

Bond Finance Committee Meeting Materials

Tennessee Housing Development Agency Bond Finance Committee

January 25, 2016 2:00 p.m. Central Time

AGENDA 1. Call to Order ................................................................................................... Bills 2. Approval of Minutes from November 16, 2015 ............................................. Bills 3. Authorization of Issue 2016-1 ...................................................................... Miller 4. Issue 2016-1 Reimbursement Resolution ..................................................... Miller 5. Annual THDA Volume Cap Update ............................................................. Miller 6. Adjourn ........................................................................................................... Bills

LOCATION COMMITTEE MEMBERS

State Capitol Brian Bills, Chair Conference Room G-11 Tre Hargett Nashville, Tennessee 37243 David Lillard Larry Martin Justin Wilson

TENNESSEE HOUSING DEVELOPMENT AGENCY BOND FINANCE COMMITTEE

November 16, 2015

Pursuant to the call of the Chairman, the Bond Finance Committee of the Tennessee Housing Development Agency Board of Directors met on Monday, November 16, 2015, at 2:00 P.M. in Conference Room G-11, State Capitol, Nashville, Tennessee. The following members were present: Brian Bills (Chairman), Secretary of State Tre Hargett, Treasurer David Lillard, Greg Turner (for Commissioner of Finance & Administration Larry Martin), and Comptroller Justin Wilson (Secretary).

Recognizing a quorum present, Chairman Bills called the meeting to order and asked for approval of the minutes of the September 22, 2015, meeting and the September 23, 2015, meeting. Mr. Wilson moved that both sets of minutes be approved. Mr. Lillard seconded the motion and the minutes were unanimously approved.

Chairman Bills indicated the next item for consideration was the Issue 2015-2 State Form CT-0253 Report on Debt Obligation (“State Form”) and recognized Lynn Miller, THDA Chief Legal Counsel. Ms. Miller indicated that a draft version of the State Form was previously circulated, however, final information, including the Moody’s rating fee, is included in the final State Form. She explained that the State Form, statutorily required for every bond sale, must be submitted to the Board of Directors and was filed with the Office of the Comptroller on November 6, 2015. Ms. Miller noted that the chart in her memo dated November 5, 2015, provided information about the various fees and expenses associated with Issue 2015-2 and prior bond issues for comparison. Chairman Bills noted the costs associated with using two rating agencies and asked about the need to use two rating agencies. Ms. Miller indicated that cost variations were due to the size of the bond issues and that the 2013 General Bond Resolution requires a rating from both Moody’s and S&P.

Chairman Bills indicated the Committee would hear the report on THDA debt issuance and underwriter performance next. Tim Rittenhouse with CSG Advisors, THDA’s financial advisor (“CSG”), participated in the discussion by conference call. Ms. Miller referenced a report prepared by CSG titled “Underwriter Performance Review: January 2015 through October 2015” and noted that this report fulfills the requirement in THDA’s Debt Management Policy for underwriter performance to be reviewed at least annually. Mr. Rittenhouse reviewed highlights of the report. Mr. Rittenhouse indicated that the current structure appeared to be effective in fostering competition between the managers and appeared to produce very strong in-state retail sales. CSG suggested maintaining the current structure.

Next on the agenda was a report on THDA’s debt limit. Chairman Bills recognized Ms. Miller who referenced a memo dated November 5, 2015, and noted that THDA’s Debt Management Policy requires an annual review of THDA’s statutory debt limit. She noted that with the anticipated bond issues, bond refundings and bond redemptions, THDA will remain well within the statutory debt limit of $2,930,000,000.

Chairman Bills next recognized Trent Ridley, THDA Chief Financial Officer, for a presentation on the THDA FY2016-20 Five-Year Financial Plan (the “Plan”). Mr. Ridley pointed out that THDA’s Debt Management Policy requires an annual update of THDA’s five-year financial plan. He explained that the Plan is a liquidity analysis of THDA’s cash position in terms of cash available and the amount of debt and investments over the next five years based on specific assumptions. He described the following major assumptions and results:

Approximately $2 billion in bond issuance, including approximately $401.7 million in refundings;

Approximately $336 million per year in loan production;

2

Net withdrawals and use of approximately $212.9 million from the general bond resolutions primarily for bond related expenses, bond reserve fund, operating costs and programs approved by the Board, including approximately $66.4 million for down payment assistance, approximately $37.5 million for the Housing Trust Fund, and approximately $40 million for New Start loans;

Net servicing earnings of approximately $19.7 million once loan servicing is brought in house; and

A weighted average Program Asset Debt Ratio (PADR) of 1.17 for all three general bond resolutions and a PADR of 1.12 for the 2013 General Bond Resolution by 2020.

There being no further business, Chairman Bills adjourned the meeting.

Respectfully submitted, ______________________________________ Assistant Secretary

Approved the ____ day of January, 2016.

.,*i-4ffi"..#KäXìår

WTennessee Housing Development Agency

Andrew Jackson Building, Third Floor502 Deaderick Street, Nashville, TN 37243

Bill HaslamGovernor

NtrLNtrORAIILTLM

DATE: January 13,2016

TO: Bond Finance Committee

FROM: Lynnwiller l¡44ChiefLegal Counsel

SIJBJECT: Authorization of General Residential Finance Program Bonds, Issue 2016-1

Ralph M. PerreyExecutive Director

DOCUMENTS FOR BOND FINANCE COMMITTEE CONSIDERATION

Attached please find the following documents in connection \¡,¡ith the requested authorization ofthe nextTHDA bond issue, Issue 2016-1:

l. Memo from CSG Advisors recommending authorization in the maximum principal amount of$150 million for a bond issue under the General Residential Finance Program Bond Resolutionadopted in 2013, including authorization of a new money component, a refunding component ând

mortgage backed securities. Staff expects this bond issue to be priced in early to mid- April, withclosing in mid- May 2016, depending on THDA loan production. The final size and structure willbe determined by the Bond Finance Committee closer to pricing.

2. THDA Plan of Financing for Issue 2016-l Residential Finance Program Bonds, which the BondFinance Committee will be asked to approve.

3. Resolution ofthe Board of Directors ofthe Tennessee Housing Development Agency Authorizingthe Issuance and Sale of Residential Finance Program Bonds, Issue 2016-1, which includes theform of Series Resolution for Issue 2016-l and which authorizes the referenced bond issue anddelegates authority to the Bond Finance Committee to determine all final terms and conditions. TheBond Finance Committee will be asked to recommend this resolution and the transaction to theTHDA Board of Directors.

4. Resolution ofthe Board of Directors ofthe Tennessee Housing Developrnent Agency AuthorizingReimbursement ofTHDA from Proceeds oflssue 2016-l in an amount notto exceed $60 million.

*avw-THDA.ore - (615) 816-1200 - Toll Free: 800-228-THDA

Bond Finance CommitteeJanuary 13,2016Page 2

COMPLIANCE V/ITH THDA DEBT MANAGEMENT POLICY

Issue 2016-l complies with the Tennessee Housing Development Agency Debt Management Policyadopted on November 28, 2011 (the "Debt Management Policy"). In particular, Issue 2016-l complies withthe Debt Management Policy as follows:

Part III - by allowing THDA "...to maintain a steadily available supply of funds to finance itsmortgage loan programs at cost levels that provide competitive, fixed interest rate mortgage loansthat benefit lo\¡r' and moderate income families, while maintaining or improving THDA's overallfìnancial strength and fl exibility..."

Part VIII - the issuance ofthis debt will not cause TT{DA to exceed the statutory debt limit containedin TCA Section 13-23-121.

Part X - the factors a¡d items listed to be considered in planning, structuring and executing a bondissue have been and will be considered as planning, structuring and executing this bond issue movesforward.

Part XIV - serial bonds, terms bonds and PAC bonds are being considered for the structure ofthebond issue.

Part XV - authorization ofa potential refunding component is expected to result in present valuesavings and will ñ¡rther THDA program objectives of providing competitive, fixed interest ratemortgage loans that benefit low and moderate income families.

Parts XVII, XIX, XX and XXI are not applicable as authorization requested for Issue 20 i 6- I doesnot include interest rate and forward purchase agreements, conduit debt, or variable rate debt.

BOOKRTJNNING SENIOR MANAGER ROTATION

RBC Capital Markets is next in the rotation to serve as bookrunning senior manager for this bond issue.

ROTATINC CO-MANAGER

CSG Advisors has advised that J.J.B. Hilliard Lyons, W.L. Lyons, LLC, from the selling group, made thebest contribution in terms ofquantity ând quaìity ofTennessee retail orders and best supported retail sales

in the last THDA bond issue, therefore, they are expected to be elevated from the selling group to serve as

co-manager on this bond issues.

SELLING GROUP

The selling group members are:

Avondale PartnersDuncan WilliamsHarvestonsPiper JaffrayRobert W. BairdVr'iley Bros.

LEM/ds

2 CRAMPTON ROAD, BRONXVILLE, NY 10708 | (914) 961-0003 | [email protected] AND

1725 WINDWARD CONCOURSE, STE 425, ALPHARETTA, GA 30005 | (678) 319-1911 | [email protected]

Atlanta • Los Angeles • New Jersey • New York • San Francisco

MEMORANDUM TO: THDA Board of Directors and THDA Bond Finance Committee FROM: Tim Rittenhouse, David Jones & Mark Kaveny SUBJECT: Bond Issue Authorization Recommendation RE: Residential Finance Program Bonds, Issue 2016-1 DATE: January 11, 2016 Current Market Conditions Since THDA’s last bond sale on September 23, 2015, interest rates have continued to fluctuate with the 10-year U.S. Treasury bond ranging between 1.99% and 2.36%, and slipping to 2.12% as of the January 8, 2016 market close, down 0.04% from 2.16% on September 23. Tax-exempt rates have outperformed the movement in taxable rates with the yield on the 30-year Municipal Market Data Index (“MMD”) falling 0.41% from 3.11% to 2.70% over the same period. The gradual strengthening of the US economy, the Federal Reserve’s confidence to finally raise its overnight borrowing rate by 0.25% in mid-December, and, most recently, greater weakness and instability in the Chinese economy and markets – all have been key drivers of bond market rates during this period. Background On September 23, 2015, THDA sold Residential Finance Program Bonds, Issue 2015-2 in the amount of $175,000,000. Of this amount $43,070,000 was issued to refund prior Homeownership Program Bonds, and $131,930,000 was used to purchase new mortgage loans and cover other required amounts. THDA expects to fully commit remaining Issue 2015-2 proceeds by the beginning of March, 2016. After exhausting the Issue 2015-2 proceeds, THDA will begin to purchase mortgage loans using available THDA funds, expecting that such advances will be reimbursed with proceeds of Issue 2016-1. By mid-May THDA anticipates building a pipeline of up to $60 million of mortgage loans and continuing to commit $35 to $40 million per month in additional mortgage loans. THDA staff expects THDA has sufficient available funds on hand to continue purchasing mortgage loans through mid-May, when additional bond funds likely will be needed. Additionally, Homeownership Program Bonds, Issue 2006-3 will become optionally redeemable at par on July 1, 2016 (with an expected outstanding amount not to exceed $26 million). These bonds may be defeased by Issue 2016-1 on July 1 under a common plan of finance with the “new money” portion of the Issue 2016-1 transaction. As shown under Scenario 2 of Exhibit A, a refunding of the Issue 2006-3 bonds would result in estimated net present value savings after costs of issuance and negative reinvestment spreads as follows:



THDA RFPB Issues 2016-1 Bond Issue Authorization Recommendation CSG Advisors Incorporated January 11, 2016

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THDA’s Economic Savings as a Result of Refunding:

Loan Prepayment Speed Issue 2006-3 100% FHA* $2.7 million (10.9%) 200% PSA $2.1 “ (8.6%) 300% PSA $1.6 “ (6.4%)

• Percentages shown are of refunding bonds issued. • The weighted average prepayment speed for Issue 2006-3 between 6/30/14 and 11/30/15 was 282% PSA. • As prepayment speeds increase, the economic savings to THDA decreases, because faster prepayments reduce

the period of time during which THDA earns the interest spread between the mortgage rate on the refunded loans and the interest cost of the refunding bonds.

* 100% FHA is shown since it is typically the prepayment speed required for determining yield spread on the mortgage loans for tax purposes. 100% FHA is approximately equivalent to 115% PSA prepayments.

Including the refunding allows THDA to offer lower mortgage loan interest rates, preserve zero participation loans, and maximize THDA’s allowable spread. The expected net present value savings significantly exceed the benefits to THDA if THDA did not refund the prior bonds. Proposed Sizing and Structure for Issue 2016-1 Authorizing a bond issue of not to exceed $150 million would allow THDA to refund up to $26 million of Issue 2006-3 bonds that are optionally redeemable, as well as to provide new proceeds of approximately $124 million to allow THDA to continue purchasing mortgage loans through early July, 2016, subject to loan demand.

Based on current market conditions and investor appetite, structuring Issue 2016-1 to include planned amortization class bonds (“PACs”) to be sold at a premium would significantly lower the issue’s bond yield. PACs are often priced at a premium and most commonly designed with an expected five-year average life, assuming future prepayment speeds over a broad range. Prepayments up to 100% PSA would be directed first to redeeming the PACs until they are completely retired. Due to the projected short and stable average life and the high coupon on the PACs, institutional investors accept much lower yields than for conventional term bonds with the same maturity.

A possible concern with the use of PACs is that actual prepayments could occur at a sustained rate below 100% PSA, causing the PACs to remain outstanding longer than projected and potentially extending the period during which THDA would pay the high coupon on these bonds. However, THDA’s average historical prepayment speed is greater than 150% PSA. Also, if the actual sustained prepayment speed is less than 100% PSA, at its option THDA could choose to redeem the PACs with other available funds in order to maintain the short average life of the PACs.

Three alternative bond structures are shown on Exhibit B. In each case, after calculating an estimated bond yield, the spread for tax compliance purposes between the mortgage yield and the bond yield was determined. Then, the amount of zero participation loans needed to bring the issue up to the maximum allowable tax spread of 1.125% was computed, based on current bond interest rates and THDA’s current mortgage rates.

• Scenario 1 shows a level-debt all “new money” issue totaling $125.275 million with no PACs. The spread for tax purposes is 0.552%. $17.4 million in zeros would be consumed to raise the issue to a full 1.125% spread.


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• Scenario 2 includes a PAC bond. The lower yield on the PACs reduces the bond yield by 0.31% and results in a tax law spread of 0.863%. The required amount of zeros used is $7.9 million.

• Scenario 3 includes an estimated $24.725 million of proceeds to refund Issue 2006-3, in addition to new proceeds of $125.275 million. The structure incorporates both AMT and non-AMT PAC bond components. Since the refunding allows for a shorter maturity schedule with more PACs, the tax law spread rises to 1.205%, projected to create $2.8 million in new zeros.

Demand from institutional investors for housing bonds such as premium PACs has improved greatly in the years since the 2008 housing crisis. As the financing is developed, production needs are refined, and the proposed pricing date approaches, CSG will continue to evaluate the benefits of the refunding and including PACs and other premium or discount bonds, or super-sinker bonds to evaluate if further refinement of the structure could offer an improvement in the pricing of Issue 2016-1. Issuing the bonds under the 2013 General Resolution will avoid the state moral obligation pledge on the “new money” portion of Issue 2016-1 bonds and would also eliminate the pledge on any 2006-3 refunding bonds.

Method of Sale

In the current market for housing bonds THDA will continue to benefit from offering its bonds via negotiated sale, rather than by competitive bid. Factors favoring a negotiated sale include:

Retail Sales / In-State Selling Group – THDA has enjoyed strong demand for its bonds among Tennessee retail investors with retail buyers often helping to set prices for institutions. Underwriting syndicate members with strong in-state marketing and distribution networks for bonds to retail investors have been an important component of support for THDA’s issues. Bonds not subject to the AMT have been and are expected to continue to appeal to retail investors. The presence of selling group members, who only earn a fee on bonds they sell, helps assure that competitive forces work in THDA’s interest during a negotiated sale. When housing bonds are sold via competitive bid, the winning bidder has little time or incentive to market bonds to retail investors or to involve smaller Tennessee-based broker-dealers. Compared to offerings with little retail participation, interest rate savings on bonds sold principally to retail investors typically range from 0.05% to 0.10%. THDA’s practice of elevating a top-performing member of the selling group to co-manager status on the next offering has reinforced retail support.

Market Volatility – A competitively bid bond issue requires that the timing and, to a significant extent, the final bond structure be established well in advance of the bid date. Continued market volatility and low housing bond volumes make it unlikely THDA could structure its bonds to obtain the lowest possible cost of debt in advance of pricing. A negotiated sale provides flexibility to price on shorter notice, to adjust the bond structure through the pricing in response to market factors and investor indications, or to delay or accelerate the pricing as conditions warrant.

Complexity and Credit – While investors are familiar with bonds issued by housing finance agencies, because the housing sector played a major role in the financial crisis, some investors have remained concerned about transactions financing whole loans and wary of making credit decisions solely based on ratings. A negotiated sale provides greater opportunity to communicate with investors about the more complex structure and the credit features of THDA’s bonds.

Bond Structure – Though the structure of Issue 2016-1 is expected to be relatively straightforward for a traditional housing bond, it may be desirable to make changes to the structure close to the time of the bond sale in order to cater to the interests of certain investors, such as those interested in the PACs or in


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bonds priced at a premium or discount. A negotiated sale facilitates greater flexibility to make structural changes.

Pricing Oversight – THDA’s policies and practices for negotiated bond sales – including the review of co-manager price views, consensus scales, comparable pricings, historic and current spreads, other current market data, and concurrent monitoring by the Office of State and Local Finance and CSG – provide THDA with the basis for confirming that its bonds are priced fairly at time of sale. In advance of the offering CSG also provides a pre-pricing memo with information related to general bond market conditions, the housing bond market, and projected interest rate levels based on recent housing bond issues, previous THDA offerings, pending statistical releases, and candid independent discussions with uninvolved third-party underwriting desks. In order to manage incentives for the syndicate members and investors, CSG also advises on syndicate rules and procedures, proposed holdbacks of specific maturities, and allotments of bonds.

Recommendations CSG Advisors recommends that the THDA Board of Directors:

• Authorize the issuance and sale of Residential Finance Program Bonds, Issue 2016-1 with a par amount not to exceed $150 million;

• Delegate to the Bond Finance Committee authority to establish the structure, sub-series and pricing schedule of Issue 2016-1;

• Delegate to the Bond Finance Committee authority to establish the principal amount of Issue 2016-1, with the aggregate size of Issue 2016-1 not to exceed $150 million;

• Delegate to the Bond Finance Committee authority to refund any combination of bonds that are optionally callable as of July 1, 2016, based upon projected economic benefit under market conditions at time of sale;

• Delegate to the Bond Finance Committee authority to approve long and shorter maturity bonds in any combination of fixed rate bonds not to exceed a maturity of 34 years; and

• Based on current market conditions and for the reasons described above, authorize Issue 2016-1 via a negotiated sale.

Additional analysis and recommendations about final size, structure, and other factors should be made closer to the time of sale.

Exhibit A (Issue 2006-3)

Economic Refunding Analysis - With All Benefit Reflected in PV SavingsInterest Rates as of January 6, 2016

2006-3 "As Is"Scenario 1 Scenario 2

Without PAC With PACGeneral Information

Optional Redemption Date 7/1/2016 7/1/2016 7/1/2016Potential Bond Defeasance Date 5/17/2016 5/17/2016 5/17/2016Projected Amount Outstanding on July 1, 2016:

AMT: 24,725,000 24,725,000 24,725,000 Non-AMT: - - - Total: 24,725,000 24,725,000 24,725,000

Weighted Average Coupon of Refunded Bonds 4.816% 4.816% 4.816%Weighted Average Coupon of Refunding Bonds n/a 3.063% 3.704%

Reduction in Bond Coupon n/a 1.753% 1.112%

Tax Law Yields of Bonds to be Refunded at IssuanceMortgage Yield 5.707% 5.707% 5.707%Bond Yield 4.583% 4.583% 4.583%

Yield Spread 1.124% 1.124% 1.124%

Tax Law Yields on 5/15/16Mortgage Yield 5.550% 5.550% 5.550%

Yield of Bonds to be Refunded 4.847% 4.847% 4.847%Projected Spread: As Is 0.702% 0.702% 0.702%

Refunding Bond Yield n/a 3.321% 2.741%Projected Spread: If Refunded N/A 2.229% 2.809%

Benefit of Refunding (total)Gross Present Value Savings @ 100% FHA - 2,226,211 3,091,944 Less: Negative Arbitrage - (145,537) (145,537) Less: Costs of Issuance - (247,250) (247,250)

Net Present Value Savings @ 100% FHA - 1,833,424 2,699,157 Net Present Value Savings as a Percent of Bonds n/a 7.4% 10.9%

Net Present Value Savings @ 200% PSA - 1,238,134 2,115,227 Net Present Value Savings as a Percent of Bonds 0.0% 5.0% 8.6%

Net Present Value Savings @ 300% PSA - 868,777 1,592,975 Net Present Value Savings as a Percent of Bonds 0.0% 3.5% 6.4%

Issue 2006-3Refunding Scenario

Exhibit B

Preliminary Structuring AnalysisInterest Rates as of January 6, 2016

Scenario 1 Scenario 2 Scenario 3

Structuring ScenarioAll New Money /

No PACAll New Money /

With PACNew Money /

Refunding / PACIncluding PAC Bonds No Yes YesIncluding Refunding of $24,725,000 No No Yes

Issue AmountsNew Money Non-AMT 125,275,000 125,275,000 125,275,000 Refunding of 2006-3 AMT - - 24,725,000

TOTAL 125,275,000 125,275,000 150,000,000

Bond Structure Coupon / YieldSerials 2017-2026 Non-AMT 0.60 - 2.60 % 33,075,000 28,795,000 40,235,000 Term 2031 Non-AMT 3.050 % 9,875,000 17,335,000 19,805,000 Term 2036 Non-AMT 3.450 % 20,950,000 11,830,000 18,170,000 Term 2041 Non-AMT 3.700 % 29,150,000 11,425,000 12,805,000 Term 2046 Non-AMT 3.800 % 32,225,000 19,050,000 13,260,000 Term 2045 PAC AMT 4.00 / 2.24 % - - 24,725,000 Term 2045 PAC Non-AMT 4.00 / 2.09 % - 36,840,000 21,000,000

125,275,000 125,275,000 150,000,000

YieldsMortgage Yield (1) 3.941 % 3.941 % 4.199 %Bond Yield 3.389 3.078 2.994

Yield Spread 0.552 0.863 1.205

Zero Percent Loans (Needed) / Created (17,400,000) (7,900,000) 2,800,000

Yield Spread After Zero Participations 1.125 % 1.125 % 1.125 %

(1) Based on projected Transferred Loans, Great Choice Loans @ 4.10% & Brave Choice Loans @ 3.60% with 2nd lien downpayment / closing cost assistance loans.

Exhibit B - Supplement

Preliminary Structuring AnalysisInterest Rates as of January 6, 2016Note: All references to mortgage rates refer to the mortgage rate on Great Choice loans

Scenario 1 Scenario 2 Scenario 3

Structuring ScenarioAll New Money /

No PACAll New Money /

With PACNew Money /

Refunding / PACIncluding PAC Bonds No Yes YesIncluding Refunding of $24,725,000 No No Yes

Bond Yields 3.389 % 3.078 % 2.994 %

Mortgage Rates and Zero Percent Loans NeededA Mortgage Rate on New Money Mortgages 4.100 % 4.100 % 4.100 %

Mortgage Yield (1) 3.941 % 3.833 % 4.199 %Yield Spread 0.552 0.755 1.205

Zero Percent Loans (Needed) / Created for Full Spread (17,400,000) (7,900,000) 2,800,000

B 4.400 % 4.240 % 4.050 %

Mortgage Yield 4.514 % 4.203 % 4.119 %Yield Spread 1.125 1.125 1.125

Zero Percent Loans (Needed) / Created for Full Spread (8,700,000) (3,950,000) 1,400,000

C 4.690 % 4.370 % 4.000 %

Mortgage Yield 4.514 % 4.203 % 4.119 %Yield Spread 1.125 1.125 1.125

Zero Percent Loans (Needed) / Created for Full Spread - - -

Mortgage Rate on New Money Mortgages to Reduce Zeros by 50%

Mortgage Rate on New Money Mortgages to Reduce Zeros by 100%

TENNESSEE HOUSING DEVELOPMENT AGENCY PLAN OF FINANCING

RESIDENTIAL FINANCE PROGRAM BONDS, ISSUE 2016-1 January 25, 2016

Pursuant to TCA Section 13-23-120(e)(4):

AMOUNT: The bonds may be sold in one or more series to be known as Residential Finance Program Bonds, Issue 2016-1 (the “Bonds”), to be issued under the General Residential Finance Program Bond Resolution adopted by THDA on January 29, 2013, as amended (the “General Resolution”).

The aggregate principal amount of the Bonds shall not exceed $150,000,000. The actual aggregate principal amount shall be determined by the Bond Finance Committee of the THDA Board of Directors (the “Bond Finance Committee”) upon the recommendation of the Financial Advisor, Executive Director, Assistant Secretary of the Bond Finance Committee and approved by THDA’s Bond Counsel and may take into account the following limitations and other factors:

(1) the amount of Bonds which may be issued pursuant to the Act and the total amount of bonds outstanding under the General Resolution; and

(2) the amount of Bonds which may be issued to refund bonds or notes outstanding under the General Resolution, the General Homeownership Program Bond Resolution (the “1985 Resolution”); or under the General Housing Finance Resolution (the “2009 Resolution”) to provide economic savings, additional opportunities for interest rate subsidies with respect to THDA Program Loans or as a result of prepayments, proceeds on hand, excess revenues, or maturing principal; and

(3) the amount of Bonds which may be issued, the proceeds of which are necessary to reimburse THDA for Program Loans or mortgage-backed securities guaranteed by Fannie Mae and backed by privately insured conventional loans made to eligible borrowers (“MBS”) financed from available THDA funds prior to the availability of proceeds from the Bonds; and

(4) the amount of Bonds which may be issued, the proceeds of which are necessary to meet demand for Program Loans; and

(5) the availability of THDA’s funds, subject to the review of the Bond Finance Committee, for the purpose of providing for the payment of the costs of issuance of the Bonds, paying capitalized interest with respect to the Bonds, funding the Bond Reserve Fund, providing additional security for the Bonds, and achieving a lower rate of interest on the Program Loans.

APPLICATION OF PROCEEDS:

Proceeds of the Bonds will be applied to (i) redemption and payment at maturity of certain of THDA’s bonds or notes outstanding under the 1985 Resolution, and/or the 2009 Resolution; (ii) finance Program Loans either by the direct purchase thereof or the purchase of MBS; and (iii) other uses as specified below in approximately the following amounts:

90% for single-family first lien mortgage loans, refinancing outstanding bonds, and/or purchasing MBS;

8% for bond reserve; 1% for capitalized interest; and 1% for cost of issuance and underwriter’s

discount/fee.

DATE, METHOD AND TERMS OF SALE:

The sale of the Bonds will take place by competitive or negotiated sale, including private placement, and will occur no later than June 30, 2016. THDA will prepare for the sale with the aid of its financial advisor, CSG Advisors, and its bond counsel, Kutak Rock.

MATURITIES: The Bonds may be any combination of tax-exempt and/or taxable long and/or short term serial, term, and/or discounted or premium bonds as may be determined by the Bond Finance Committee. The Bonds shall have a maturity not to exceed 34 years from the date of original issuance.

BOND INTEREST RATES: The interest rates on the Bonds shall be fixed long term rates and shall not result in a net interest cost in excess of 9% per annum.

REDEMPTION TERMS: The Bonds may be subject to redemption prior to maturity on such terms as are to be determined by the Bond Finance Committee.

LOAN INTEREST RATES AND COST OF ADMINISTRATION:

Unless otherwise permitted under the Internal Revenue Code, the blended effective interest rate on Program Loans financed with proceeds of tax-exempt Bonds (including any transferred loans upon the refunding of any outstanding bonds) will not exceed 112.5 basis points over the yield on such tax-exempt bonds, as calculated in accordance with the Internal Revenue Code, from which all of THDA’s costs of administration for the Bonds may be paid.

RESOLUTION OF THE BOARD OF DIRECTORS OF THE TENNESSEE HOUSING DEVELOPMENT AGENCY

AUTHORIZING THE ISSUANCE AND SALE OF RESIDENTIAL FINANCE PROGRAM BONDS, ISSUE 2016-1

January 26, 2016

WHEREAS, pursuant to the Tennessee Housing Development Agency Act (the “Act”), the Bond Finance Committee of the THDA Board of Directors (the “Committee”), on January 25, 2016, approved a plan of financing for Residential Finance Program Bonds, Issue 2016-1 (the “Bonds”) in an aggregate amount not to exceed $150,000,000 (the “Plan of Financing”); and

WHEREAS, the Plan of Financing provides for the Bonds to be issued as additional series of long term and/or short term tax-exempt and/or taxable bonds, with fixed interest rates, under the General Residential Finance Program Bond Resolution adopted by THDA on January 29, 2013, as amended (the “General Resolution”) and to be sold by competitive or negotiated sale, all at the election of the Committee; and

WHEREAS, THDA established a Housing Cost Index, as defined in Section 13-23-103(7) of the Act, which shows that, as of January 13, 2016, primary housing costs exceed 25% of an average Tennessee household’s gross monthly income; and

WHEREAS, pursuant to Section 147 of the Internal Revenue Code of 1986, as amended (the “Code”), THDA must conduct a public hearing regarding the issuance of the Bonds and submit the results of the public hearing to the Governor of the State of Tennessee for approval; and

WHEREAS, THDA proposes to distribute a preliminary official statement (the “Preliminary Official Statement”) to prospective purchasers and to make available to the respective purchasers a final official statement (the “Official Statement”) with respect to the Bonds; and

WHEREAS, the Board wishes to authorize the Committee to proceed with the issuance and sale of the Bonds to provide funds for THDA’s programs in accordance with the Plan of Financing and this Resolution.

NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE TENNESSEE HOUSING DEVELOPMENT AGENCY AS FOLLOWS:

1. The issuance and sale of the Bonds, in an aggregate amount not to exceed $150,000,000, with the final terms, all as determined by the Committee, upon the recommendation of THDA’s Financial Advisor, the Executive Director and the Secretary of the Committee, with the approval of THDA’s Bond Counsel, is hereby authorized.

2. The resolution titled “A Resolution Authorizing the Sale of Residential Finance Program Bonds, $__________ Issue 2016-1A (AMT), $__________ Issue 2016-1B (Non-AMT), and $__________ Issue 2016-1C (Non-AMT)” (the “Supplemental Resolution”), in the form attached hereto, is adopted, subject to the provisions contained herein.

3. In addition to the direct purchase of individual mortgage loans made to eligible borrowers, the use of Bond proceeds to purchase mortgage backed securities guaranteed by Fannie Mae and backed by privately insured conventional loans made to eligible borrowers (“MBS”) to be held as purpose investments in the General Resolution is hereby authorized.

4. THDA is authorized and directed to conduct a public hearing prior to the issuance of the Bonds, to the extent required by the Code, with reasonable public notice and to submit the results of the public hearing to the Governor to obtain the Governor’s written approval.

5. The Committee is authorized to (a) select the manner of sale; (b) designate multiple series or sub-series, as needed; (c) designate AMT, non-AMT or taxable components; (d) designate fixed interest rates; (e) approve a final structure for the Bonds; (f) approve a final principal amount or amounts, not to exceed an

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aggregate amount of $150,000,000; (g) authorize bond insurance, if determined necessary; (h) determine an amount to be made available to purchase MBS backed by privately insured conventional loans to eligible borrowers satisfactory to THDA; (i) determine all other final terms of the Bonds, in accordance with this Resolution, the Plan of Financing and the Supplemental Resolution; (j) approve the final version of the Supplemental Resolution, with such additional changes, substitutions, deletions, additions, completions or amendments therein as determined by the Committee, upon the recommendation of the Executive Director or Secretary of the Committee, with the approval of Chief Legal Counsel of THDA and Bond Counsel, as the Committee shall determine to be necessary or appropriate to establish the final terms of the Bonds and their manner of sale; and (k) award the Bonds in accordance therewith. At the discretion of the Committee, the Bonds may include new volume cap and any combination of amounts needed to refund all or any part of bonds or notes outstanding under the General Resolution, under the General Homeownership Program Bond Resolution or under the General Housing Finance Resolution, including, without limitation, to produce proceeds for new mortgage loans or to produce economic savings or opportunities for interest rate subsidies. In addition, the Committee, at its discretion may elect to transfer resources from the General Homeownership Program Bond Resolution and/or the General Housing Finance Resolution to the General Resolution in connection with the issuance of the Bonds upon recommendation of the Executive Director or Secretary of the Committee with the approval of Bond Counsel, Financial Advisor and Chief Legal Counsel.

6. The Assistant Secretary of the Committee, with the assistance of Bond Counsel, the Financial Advisor, and the Executive Director and Chief Legal Counsel of THDA, is authorized to prepare a Preliminary Official Statement and a final Official Statement for printing and distribution in connection with the issuance and sale of the Bonds.

7. The Assistant Secretary of the Committee, with the assistance of Bond Counsel and the Executive Director and Chief Legal Counsel of THDA, is authorized to prepare all documents determined to be necessary or appropriate for the competitive sale of all or any portion of the Bonds or all documents, including, without limitation, a purchase agreement in a form appropriate for a negotiated sale, including a private placement, of all or any portion of the Bonds, as determined to be necessary or appropriate, for a negotiated sale of all or any portion of the Bonds.

8. The Secretary of the Committee, or the Chairman, the Vice Chairman, or the Executive Director of THDA is hereby authorized to execute (i) the proposal submitted by the lowest bidder or bidders in the event of a competitive sale of all or any portion of the Bonds or (ii) a purchase agreement in the event of a negotiated sale, including a private placement, of all or any portion of the Bonds, the form of which has been approved by the Committee, upon the recommendation of the Financial Advisor and Bond Counsel, and (iii) to deliver the Bonds as appropriate.

9. The Assistant Secretary of the Committee is hereby authorized to do and perform all acts and things provided to be done or performed by the Secretary of the Committee herein, in the General Resolution and in the Supplemental Resolution.

10. The Secretary of the Committee, and the Chairman, the Vice-Chairman, the Executive Director, the Director of Finance and the Chief Legal Counsel of THDA and other appropriate officers and employees of THDA are hereby authorized to do and perform or cause to be done and performed, for or on behalf of THDA, all acts and things (including, without limitation, execution and delivery of documents) that constitute conditions precedent to the issuance and sale of the Bonds or that are otherwise required to be done and performed by or on behalf of THDA prior to or simultaneously with the issuance and sale of the Bonds.

11. Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Supplemental Resolution, as the context indicates.

12. This resolution shall take effect immediately.

This Resolution was adopted by the affirmative vote of no fewer than eight (8) members of the THDA Board of Directors at its meeting on January 26, 2016.

4839-3941-9692.1

TENNESSEE HOUSING DEVELOPMENT AGENCY

A Supplemental Resolution

Authorizing the Sale of

Residential Finance Program Bonds

$__________ Issue 2016-1A (AMT)

$__________ Issue 2016-1B (Non-AMT)

$__________ Issue 2016-1C (Non-AMT)

Adopted January 26, 2016 as amended and supplemented

by the Bond Finance Committee of THDA on __________ __, 2016

i 4839-3941-9692.1

ARTICLE I DEFINITIONS AND AUTHORITY

Section 1.01. Short Title ........................................................................................................ 1 Section 1.02. Definitions........................................................................................................ 1 Section 1.03. Authority for this Resolution ........................................................................... 4

ARTICLE II TERMS AND ISSUANCE

Section 2.01. Issue Amount and Designation ........................................................................ 4 Section 2.02. Purposes ........................................................................................................... 4 Section 2.03. Amounts, Maturities and Interest Rates ........................................................... 5 Section 2.04. Denominations, Numbers and Letters.............................................................. 7 Section 2.05. Paying Agent .................................................................................................... 7 Section 2.06. Execution of Bonds .......................................................................................... 7 Section 2.07. Place of Payment; Record Date ....................................................................... 8 Section 2.08. Sinking Fund Redemption Provisions ............................................................. 8 Section 2.09. Optional Redemption ....................................................................................... 9 Section 2.10. Special Optional Redemption ........................................................................ 10 Section 2.11. Special Mandatory Redemptions ................................................................... 11 Section 2.12. Selection by Lot ............................................................................................. 13 Section 2.13. Purchase of Bonds by THDA or Trustee ....................................................... 13

ARTICLE III SALE AND DELIVERY

Section 3.01. Sale ................................................................................................................. 13

ARTICLE IV DISPOSITION OF PROCEEDS AND OTHER MONEYS

Section 4.01. Loan Fund; Bond Reserve Fund Requirement............................................... 13 Section 4.02. Proceeds of Issue 2016-1A Bonds and Issue 2016-1B Bonds ....................... 14 Section 4.03. Program Loan Determinations ....................................................................... 15

ARTICLE V FORM OF BONDS, AND TRUSTEE’S CERTIFICATE OF AUTHENTICATION

Section 5.01. Form of Bonds ............................................................................................... 15 Section 5.02. Form of Trustee’s and Authenticating Agent’s Certificate of

Authentication ................................................................................................ 16

ii 4839-3941-9692.1

ARTICLE VI MISCELLANEOUS

Section 6.01. No Recourse Against Members or Other Persons ......................................... 16 Section 6.02. Bonds not Debt, Liability or Obligation of the State or the United

States of America ........................................................................................... 16 Section 6.03. Delivery of Projected Cash Flow Statements ................................................ 16 Section 6.04. Authorized Officers ....................................................................................... 16 Section 6.05. Authorized Trustee......................................................................................... 17 Section 6.06. Covenant to Comply with Federal Tax Law Requirements........................... 17 Section 6.07. Continuing Disclosure Undertaking .............................................................. 17 Section 6.08. Confirmation and Adjustment of Terms by Committee ................................ 20 Section 6.09. Effective Date ................................................................................................ 20

EXHIBIT A BOND PURCHASE AGREEMENT EXHIBIT B [PLANNED AMORTIZATION AMOUNTS FOR ISSUE 2016-1A PAC

BONDS, ISSUE 2016-1C PAC BONDS AND 400% PSA PREPAYMENT AMOUNT TABLE]

EXHIBIT C FORM OF BONDS

1 4839-3941-9692.1

A SUPPLEMENTAL RESOLUTION AUTHORIZING THE SALE OF

RESIDENTIAL FINANCE PROGRAM BONDS $__________ ISSUE 2016-1A (AMT)

$__________ ISSUE 2016-1B (Non-AMT) $__________ ISSUE 2016-1C (Non-AMT)

BE IT RESOLVED by the Board of Directors of the TENNESSEE HOUSING DEVELOPMENT AGENCY (“THDA”) as follows:

ARTICLE I

DEFINITIONS AND AUTHORITY

Section 1.01. Short Title. This resolution may hereafter be cited by THDA as the Issue 2016-1 Supplemental Residential Finance Program Bond Resolution.

Section 1.02. Definitions.

(a) All terms which are defined in Section 1.2 of the resolution of THDA adopted January 29, 2013, as amended and supplemented by the Bond Finance Committee on April 18, 2013, and entitled “General Residential Finance Program Bond Resolution” (the “General Resolution”) have the same meanings in this Resolution as such terms are given in Section 1.2 of the General Resolution.

(b) In addition, as used in this Resolution, unless the context otherwise requires, the following terms have the following respective meanings:

[“400% PSA Prepayment Amount” means the cumulative amount of principal prepayments on the Program Loans allocable to the Issue 2016-1 Bonds (including Program Securities and the Transferred Program Loans) at a rate equal to 400% PSA, as set forth in Exhibit B hereto.]

“Bond Purchase Agreement” means the contract for the purchase of the Issue 2016-1 Bonds between THDA and the Underwriters, in substantially the form attached hereto as Exhibit A.

“Business Day” shall mean any day except for a Saturday, Sunday or any day on which banks in Tennessee or New York are required or authorized to be closed.

“Co-Managers” means FTN Financial Capital Markets, J.P. Morgan Securities LLC, J.J.B. Hilliard, W.L. Lyons, LLC and Wells Fargo Bank, National Association.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

2 4839-3941-9692.1

“DTC” means The Depository Trust Company, New York, New York, a limited-purpose trust company organized under the laws of the State of New York, and its successors and assigns.

“Excess 2016-1 Principal Payments” means, as of any date of computation, 100% of all regularly scheduled principal payments and prepayments on Program Loans, or portions thereof, allocable to the Issue 2016-1 Bonds (including Program Securities [and the Transferred Program Loans)] to the extent such regularly scheduled principal payments and prepayments are not required to make regularly scheduled principal payments, including Sinking Fund Payments, on the Issue 2016-1 Bonds.

“Issue 2016-1 Bonds” means, collectively, the Issue 2016-1A Bonds, the Issue 2016-1B Bonds and the Issue 2016-1C Bonds.

“Issue 2016-1A Bonds” means the Issue 2016-1A Bonds of THDA authorized by this Resolution pursuant to the Plan of Financing.

[“Issue 2016-1A PAC Bonds” means the Issue 2016-1A Bonds in the aggregate principal of $__________ maturing __________.]

[“Issue 2016-1A PAC Bonds Planned Amortization Amount” means the cumulative amount of Issue 2016-1A PAC Bonds expected to be redeemed upon the receipt of Excess 2016-1 Principal Payments at a rate equal to ___% PSA, as set forth in Exhibit B hereto.]

“Issue 2016-1B Bonds” means the Issue 2016-1B Bonds of THDA authorized by this Resolution pursuant to the Plan of Financing.

“Issue 2016-1C Bonds” means the Issue 2016-1C Bonds of THDA authorized by this Resolution pursuant to the Plan of Financing.

[“Issue 2016-1C PAC Bonds” means the Issue 2016-1C Bonds in the principal amount of $__________ maturing __________.]

[“Issue 2016-1C PAC Bonds Planned Amortization Amount” means the cumulative amount of Issue 2016-1C PAC Bonds expected to be redeemed upon the receipt of Excess 2016-1 Principal Payments at a rate equal to ___% PSA, as set forth in Exhibit B hereto.]

“Issue Date” means the date on which the Issue 2016-1 Bonds are issued by THDA and delivered to the Underwriters, expected to occur on _____ __, 2016.

“MSRB” means the Municipal Securities Rulemaking Board by operation of its Electronic Municipal Market Access System.

“Official Statement” means the Official Statement dated __________ __, 2016 used in connection with the sale of the Issue 2016-1 Bonds.

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[“PAC Bonds” means, collectively, the Issue 2016-1A PAC Bonds and the Issue 2016-1C PAC Bonds.]

“Preliminary Official Statement” means the Preliminary Official Statement dated __________ __, 2016 used in connection with the offering of the Issue 2016-1 Bonds.

“Rating Agency” shall mean Moody’s Investors Service, Inc. (or any successor thereto), and Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLP business (or any successor thereto).

[“Refunded Bonds” means, THDA’s Homeownership Program Bonds, Issue _____ and Homeownership Program Bonds, Issue _____.]

“Resolution” means this Supplemental Resolution adopted by THDA on January 26, 2016 as amended and supplemented by the Bond Finance Committee on __________ __, 2016.

“Serial Bonds” means the Issue 2016-1 Bonds which are not Term Bonds.

“Term Bonds” means, collectively, the Issue 2016-1A Bonds maturing __________, the Issue 2016-1B Bonds maturing _____ and the Issue 2016-1C Bonds maturing __________.

[“Transferred Investments” means amounts on deposit in certain funds and accounts of THDA allocated to the Refunded Bonds which are allocated to the Issue 2016-1 Bonds upon the refunding of the Refunded Bonds.]

[“Transferred Program Loans” means the Program Loans allocable to the Refunded Bonds which are allocated to the Issue 2016-1 Bonds upon the refunding of the Refunded Bonds.]

“Underwriters” means, collectively, RBC Capital Markets, LLC, Citigroup Global Markets Inc. and Raymond James & Associates, Inc., their respective successors and assigns, and the Co-Managers as purchasers of the Issue 2016-1 Bonds.

(c) Unless the context otherwise indicates, words of the masculine gender will be deemed and construed to include correlative words of feminine and neuter genders, words importing the singular number include the plural number and vice versa, and words importing persons include firms, associations, partnerships (including limited partnerships), trusts, corporations and other legal entities, including public bodies, as well as natural persons.

(d) The terms “hereby,” “hereof,” “hereto,” “herein,” “hereunder” and any similar terms as used in this Resolution refer to this Resolution and such terms used in the form of registered bond herein refer to such bonds.

(e) [Unless the context otherwise indicates, the term “Program Loan” as used herein shall include Transferred Program Loans and Program Securities and the phrase

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“Program Loans allocable to the Issue 2016-1 Bonds” shall include the Transferred Program Loans as well as any new Program Loans and Program Securities acquired with proceeds of the Issue 2016-1 Bonds.]

Section 1.03. Authority for this Resolution. This Resolution is adopted pursuant to the provisions of the Act and the General Resolution.

ARTICLE II

TERMS AND ISSUANCE

Section 2.01. Issue Amount and Designation. In order to provide funds necessary for the Residential Finance Program in accordance with and subject to the terms, conditions and limitations established herein and in the General Resolution, Residential Finance Program Bonds, Issue 2016-1A are hereby authorized to be issued in the aggregate principal amount of $__________, Residential Finance Program Bonds, Issue 2016-1B are hereby authorized to be issued in the aggregate principal amount of $__________ and Issue 2016-1C are hereby authorized to be issued in the aggregate principal amount of $__________. In addition to the title “Residential Finance Program Bond,” the Issue 2016-1 Bonds will bear the additional designations “Issue 2016-1A (AMT), “Issue 2016-1B (Non-AMT)” and “Issue 2016-1C (Non-AMT),” as appropriate. The Issue 2016-1 Bonds shall be issued only in fully registered form. The Issue 2016-1A Bonds will consist of $__________ principal amount of Serial Bonds and $__________ principal amount of Term Bonds. The Issue 2016-1B Bonds will consist of $__________ principal amount of Serial Bonds and $__________ principal amount of Term Bonds. The Issue 2016-1C Bonds will consist of $__________ principal amount of Serial Bonds and $__________ principal amount of Term Bonds.

Section 2.02. Purposes. [The Issue 2016-1A Bonds and the Issue 2016-1B Bonds are being issued to refund the Refunded Bonds. As a result of such refunding, the Transferred Program Loans and the Transferred Investments will become allocated to the Issue 2016-1 Bonds.] The Issue 2016-1C Bonds are being issued (a) to finance Program Loans (including Program Securities), or participations therein, on single family residences located within the State, (b) if required, to pay capitalized interest on the Issue 2016-1 Bonds, (c) if required, to make a deposit in the Bond Reserve Fund, and (d) if required, to pay certain costs of issuance relating to the Issue 2016-1 Bonds.

The proceeds of the Issue 2016-1 Bonds [and the Transferred Investments] shall be applied in accordance with Article IV hereof.

Section 2.03. Amounts, Maturities and Interest Rates.

(a) The Issue 2016-1 Bonds will mature on the dates, in the principal amounts and bear interest from their Issue Date, calculated on the basis of a 360-day year of twelve 30-day months, payable semi-annually on each January 1 and July 1, commencing [July 1, 2016], at the rate set opposite such date in the following tables:

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Issue 2016-1A Bonds Serial Bonds

Maturity Date

Principal Amount

Interest Rate

Maturity Date

Principal Amount

Interest Rate

$ % $ %

Term Bonds

Maturity Date

Principal Amount

Interest Rate

$ %

Issue 2016-1B Bonds Serial Bonds

Maturity Date

Principal Amount

Interest Rate

Maturity Date

Principal Amount

Interest Rate

$ % $ %

Term Bonds

Maturity Date

Principal Amount

Interest Rate

$ %

Issue 2016-1C Bonds Serial Bonds

Maturity

Date Principal Amount

Interest Rate

Maturity Date

Principal Amount

Interest Rate

$ % $ %

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Term Bonds

Maturity Date

Principal Amount

Interest Rate

$ %

(b) Whenever the due date for payment of interest on or principal of the Issue 2016-1 Bonds or the date fixed for redemption of any Issue 2016-1 Bond shall be a day which is not a Business Day, then payment of such interest, principal or Redemption Price need not be made on such date, but may be made on the next succeeding Business Day, with the same force and effect as if made on the due date for payment of principal, interest or Redemption Price and no additional interest shall be payable on such Business Day which, merely by operation of this paragraph, may have accrued after the original due date.

Section 2.04. Denominations, Numbers and Letters.

(a) The Issue 2016-1 Bonds of each series maturing in each year are to be issued in denominations of $5,000 or any integral multiple thereof not exceeding the aggregate principal amount of Issue 2016-1 Bonds of each series maturing in such year. The Issue 2016-1 Bonds are to be lettered “RA,” “RB,” or “RC,” as applicable, and numbered separately from 1 consecutively upwards.

(b) The Issue 2016-1 Bonds, when issued, will be registered in the name of Cede & Co., as nominee of DTC. Only one Issue 2016-1 Bond will be outstanding for each maturity and interest rate of each series of the Issue 2016-1 Bonds in the aggregate principal amount of such maturity, interest rate and series. Subject to the provisions of the General Resolution, purchases of ownership interests in the Issue 2016-1 Bonds will be made in book-entry form only in authorized denominations set forth in Section 2.04(a). Beneficial owners of the Issue 2016-1 Bonds will not receive certificates representing their interest in the Issue 2016-1 Bonds. So long as Cede & Co. shall be the registered owner of the Issue 2016-1 Bonds, THDA will deem and treat Cede & Co. as the sole and exclusive owner of the Issue 2016-1 Bonds and THDA will have no responsibility to any DTC participant or beneficial owner thereof.

Section 2.05. Paying Agent. The Trustee is hereby appointed as paying agent for the Issue 2016-1 Bonds pursuant to Section 11.2 of the General Resolution. The Trustee may appoint an agent for presentation of transfers in New York, New York and DTC may act as such agent.

Section 2.06. Execution of Bonds. The Issue 2016-1 Bonds shall be executed by the manual or facsimile signature of the Chairperson or Vice Chairperson and the seal of THDA or a facsimile thereof shall be imprinted, impressed or otherwise reproduced on the Issue 2016-1 Bonds and attested by the manual or facsimile signature of the Executive Director or Secretary of THDA. The Issue 2016-1 Bonds shall be delivered to the Trustee for proper authentication and delivered to DTC pursuant to the DTC FAST delivery program, as the registered owner of the Issue 2016-1 Bonds upon instructions from THDA to that effect.

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Section 2.07. Place of Payment; Record Date. While the Issue 2016-1 Bonds are registered in book-entry only form in the name of Cede & Co. as nominee of DTC, payments of principal, Redemption Price and interest on the Issue 2016-1 Bonds shall be made in accordance with the procedures of DTC. In the event the Issue 2016-1 Bonds are no longer held in book-entry only form, the principal and Redemption Price of all Issue 2016-1 Bonds shall be payable at the designated corporate trust office of the Trustee. Interest on the Issue 2016-1 Bonds will be paid by check mailed by the Trustee to the registered owner thereof. Any registered owner of the Issue 2016-1 Bonds in a principal amount equal to or exceeding $1,000,000 may receive payments of interest by wire transfer if written notice is given to the Trustee at least ten Business Days before an applicable Interest Payment Date. The Record Date for payment of interest on the Issue 2016-1 Bonds shall be the 15th day of the month next preceding an Interest Payment Date.

Section 2.08. Sinking Fund Redemption Provisions.

(a) The Issue 2016-1 Bonds that are Term Bonds are subject to redemption in part by lot on the dates set forth below for such maturity of Issue 2016-1 Bonds at a Redemption Price equal to 100% of the principal amount thereof from mandatory Sinking Fund Payments in the principal amounts for each of the dates set forth below:

Issue 2016-1A Term Bonds due __________

Date

Amount Due

Date

Amount Due

$ $

*Maturity

Issue 2016-1B Term Bonds due ___________

Date

Amount Due

Date

Amount Due

$ $

*Maturity

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Issue 2016-1C Term Bonds due __________

Date

Amount Due

Date

Amount Due

$ $

*Maturity

(b) Upon the purchase or redemption of Issue 2016-1 Bonds of any series and maturity for which Sinking Fund Payments have been established other than by application of Sinking Fund Payments, each future Sinking Fund Payment for such Issue 2016-1 Bonds of such series and maturity will be credited by an amount bearing the same ratio to such Sinking Fund Payment as the total principal amount of such Issue 2016-1 Bonds of such series and maturity to be purchased or redeemed bears to the total amount of all Sinking Fund Payments for such series and maturity of Issue 2016-1 Bonds, unless otherwise directed by THDA in accordance with the General Resolution.

Section 2.09. Optional Redemption. The Issue 2016-1 Bonds maturing on and after [July 1, 2025] [other than the PAC Bonds], are subject to redemption at the option of THDA prior to their respective maturities, either as a whole or in part at any time, on or after [January 1, 2025] (any such date to be determined by THDA or selected by the Trustee subject to the provisions of and in accordance with the General Resolution, and when so determined or selected will be deemed and is hereby set forth as the redemption date), upon notice as provided in Article VI of the General Resolution, at a Redemption Price equal to 100% of the principal amount thereof, plus accrued interest to the date of redemption.

[The PAC Bonds are subject to redemption at the option of THDA, either as a whole or in part at any time or on or after [July 1, 2025] (any such date to be determined by THDA or selected by the Trustee subject to the provisions of and in accordance with the General Resolution, and when determined or selected will be deemed and is hereby set forth as the redemption date), upon notice as provided in Article VI of the General Resolution, at the respective Redemption Prices set forth below (expressed as a percentage of the principal amount of such PAC Bonds to be redeemed), plus accrued interest to the redemption date:

Period Issue 2016-1A PAC Bond Redemption Price

Issue 2016-1C PAC Bond Redemption Price

[July 1, 2025] to [__________] [_____]% [______]% [__________] and thereafter [_____] [______]]

Section 2.10. Special Optional Redemption. The Issue 2016-1 Bonds are subject to

redemption, at the option of THDA, as a whole or in part at any time prior to maturity, in accordance with the provisions of the General Resolution in an amount equal to amounts available for such purpose from (i) proceeds of the Issue 2016-1 Bonds not expected to be applied to the financing of Program Loans, (ii) repayments and prepayments of Program Loans (including Program Securities [and the Transferred Program Loans]) allocated to the Issue

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2016-1 Bonds not otherwise required to be applied to the special mandatory redemption of the Issue 2016-1 Bonds as described in Sections 2.11(b) or 2.11(c) hereof or to make regularly scheduled principal payments, including Sinking Fund Payments, on the Issue 2016-1 Bonds, (iii) repayments and prepayments of Program Loans made with the proceeds of any other Bonds issued under the General Resolution, subject to limitations contained in the Code, (iv) other amounts on deposit in the Revenue Fund in excess of the amounts required for the payment of Debt Service and Program Expenses, and (v) amounts on deposit in the Bond Reserve Fund in excess of the Bond Reserve Requirement; provided however, that the PAC Bonds (A) are only subject to redemption as described in clause (ii) above as described in Section 2.11(b) hereof [, and] (B) shall not be subject to redemption as described in clauses (iii), (iv) and (v) above if such redemption would cause amortization of a PAC Bond to exceed the related Planned Amortization Amount [and (C) shall be redeemed on a pro rata basis to the extent of any special optional redemption].

The date of redemption pursuant to this Section 2.10 shall be determined by the Trustee upon the direction of THDA subject to the provisions of and in accordance with the General Resolution (and when so determined such date will be deemed and is hereby set forth as the redemption date). The Issue 2016-1 Bonds to be so redeemed shall be redeemed at a Redemption Price of 100% of the principal amount thereof, plus interest accrued to the redemption date, if applicable; provided, however, that the Redemption Price for the PAC Bonds in the event of a redemption described in clause (i) of the paragraph above shall be the issue price thereof (par plus premium), plus accrued interest to the redemption date.

The Issue 2016-1 Bonds to be redeemed pursuant to this Section 2.10 shall be selected by THDA in its sole discretion; provided, however, that the PAC Bonds may not be redeemed in an amount in excess of their proportionate amount of all Issue 2016-1 Bonds then Outstanding in the event of any redemption pursuant to clause (i) of the first paragraph of this Section 2.10 [, and, to the extent the PAC Bonds are redeemed pursuant to any special optional redemption, the PAC Bonds shall be redeemed on a pro rata basis.]

Section 2.11. Special Mandatory Redemptions.

(a) Unexpended Proceeds. The Issue 2016-1 Bonds are subject to mandatory redemption on _________ in the event and to the extent that there are unexpended proceeds of the Issue 2016-1 Bonds on deposit in the Issue 2016-1 Subaccount of the Loan Fund on _______; provided that such redemption date may be extended, at the option of THDA, and subject to the satisfaction of the conditions set forth in Section 4.01 hereof.

Notwithstanding any extension of the redemption date described above, in order to satisfy requirements of the Code, the Issue 2016-1 Bonds are subject to mandatory redemption on ______ __, 2019, to the extent any amounts remain on deposit in the Issue 2016-1 Subaccount of the Loan Fund on ______ __, 2019.

The redemption price of the Issue 2016-1 Bonds to be so redeemed shall be 100% of the principal amount thereof plus interest accrued to the date of redemption, if applicable; provided, however, that the redemption price for the PAC Bonds shall be the issue price thereof (par plus premium) plus accrued interest to the redemption date. The Issue 2016-1 Bonds to be redeemed shall be selected by THDA in its sole discretion;

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provided, however, that the PAC Bonds may not be redeemed in an amount in excess of their proportionate amount of all Issue 2016-1 Bonds then Outstanding [, and, to the extent the PAC Bonds are redeemed, the PAC Bonds shall be redeemed on a pro rata basis.]

(b) [Excess 2016-1 Principal Payments (PAC Bonds). The PAC Bonds are subject to redemption prior to their maturity, in whole or in part at a Redemption Price of 100% of the principal amount of such PAC Bonds to be redeemed, plus interest accrued to the date of redemption, from amounts transferred to the Redemption Account representing Excess 2016-1 Principal Payments. Any Excess 2016-1 Principal Payments so deposited in the Redemption Account shall be applied to the redemption of PAC Bonds on any Interest Payment Date commencing [July 1, 2016] [January 1, 2017]; provided that PAC Bonds may be redeemed between Interest Payment Dates on the first Business Day of any month for which adequate notice of redemption may be given.

While any PAC Bonds remain Outstanding, Excess 2016-1 Principal Payments shall be used as follows:

FIRST, if principal prepayments on the Program Loans allocable to the Issue 2016-1 Bonds (including Program Securities [and the Transferred Program Loans]) are equal to or less than the 400% PSA Prepayment Amount, as determined by THDA, then available Excess 2016-1 Principal Payments shall first be applied to redeem the PAC Bonds on a pro rata basis up to an amount correlating to the Issue 2016-1A PAC Bonds Planned Amortization Amount and the Issue 2016-1C PAC Bonds Planned Amortization Amount, as applicable, and, subject to Section 2.11(c) below, the remainder may be applied by THDA for any purpose permissible under the Resolution, including the redemption of any Bonds under the Resolution, other than the PAC Bonds.

SECOND, if principal prepayments on the Program Loans allocable to the Issue 2016-1 Bonds (including Program Securities [and the Transferred Program Loans]) are in excess of the 400% PSA Prepayment Amount, as determined by THDA, then available Excess 2016-1 Principal Payments shall first be applied to redeem PAC Bonds on a pro rata basis up to an amount correlating to the Issue 2016-1A PAC Bonds Planned Amortization Amount and the Issue 2016-1C PAC Bonds Planned Amortization Amount, as applicable, (as set forth in “FIRST” above) and, subject to Section 2.11(c) below, the remainder may be applied by THDA for any purpose permissible under the Resolution, including the redemption of any Bonds issued under the Resolution, including the PAC Bonds (any such remainder used to redeem PAC Bonds being an “Excess Principal PAC Bond Redemption”); provided, however, that (i) the source of an Excess Principal PAC Bond Redemption is restricted to that portion of available Excess 2016-1 Principal Payments which is in excess of 400% PSA, (ii) the principal amount of an Excess Principal PAC Bond Redemption may not be an amount in excess of the PAC Bonds’ proportionate amount of all Issue 2016-1 Bonds then Outstanding and (iii) the PAC Bonds shall be redeemed on a pro rata basis.

The Issue 2016-1A PAC Bonds Planned Amortization Amount, the Issue 2016-1C PAC Bonds Planned Amortization Amount and the 400% PSA Prepayment Amount set forth in Exhibit B hereto are each subject to proportionate reduction to the extent PAC Bonds are redeemed from amounts on deposit in the Issue 2016-1

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Subaccount of the Loan Fund which are not applied to finance Program Loans in accordance with Section 2.11(a) hereof.]

(c) Ten Year Rule.

(i) To the extent not required to make regularly scheduled principal payments on the Issue 2016-1 Bonds (including Sinking Fund Payments) or otherwise required to be used to redeem the PAC Bonds as described in Section 2.11 (b) above, repayments and prepayments of principal on the Program Loans, or portions thereof, allocable to the Issue 2016-1 Bonds (including Program Securities [and the Transferred Program Loans]) received more than ten years after the Issue Date of the Issue 2016-1 Bonds (or the date of original issuance of the bonds refunded by the Issue 2016-1 Bonds, directly or through a series of refundings) shall be applied to redeem the Issue 2016-1 Bonds on or before the next Interest Payment Date with respect to the Issue 2016-1 Bonds, which Interest Payment Date is at least six months from the date of receipt of such Program Loan principal payments, in such principal amounts as required to satisfy requirements of the Code. The Redemption Price of Issue 2016-1 Bonds so redeemed shall be 100% of the principal amount thereof, plus interest accrued to the redemption date, if applicable.

(ii) THDA shall advise the Trustee of the appropriate Redemption Date for any redemption pursuant to this Section 2.11(c). The Issue 2016-1 Bonds to be redeemed shall be selected by THDA in its sole discretion; provided however, that the PAC Bonds may be redeemed in an amount that exceeds the applicable Planned Amortization Amount only if there are no other Issue 2016-1 Bonds Outstanding and if such PAC Bonds are redeemed pursuant to this paragraph, the PAC Bonds shall be redeemed on a pro rata basis.

Section 2.12. Selection by Lot. If less than all of the Issue 2016-1 Bonds of like Series and maturity are to be redeemed, the particular bonds of such maturity to be redeemed shall be selected by lot in accordance with Section 6.4 of the General Resolution.

Section 2.13. Purchase of Bonds by THDA or Trustee. Whenever moneys are available for redemption of Bonds under Sections 2.08, 2.09, 2.10 or 2.11 above, THDA or the Trustee is authorized to purchase Bonds at a price not to exceed the applicable Redemption Price.

ARTICLE III

SALE AND DELIVERY

Section 3.01. Sale.

(a) The Issue 2016-1 Bonds are hereby authorized to be sold to the Underwriters at the prices and on the terms and conditions set forth in the Bond Purchase Agreement and upon the basis of the representations, warranties and agreements therein set forth. The Chairman, Secretary or Assistant Secretary of the Bond Finance Committee and the Executive Director of THDA are hereby authorized to execute the

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Bond Purchase Agreement. The Board of Directors of THDA hereby authorizes the Committee to adopt a resolution approving the purchase price of the Issue 2016-1 Bonds.

(b) The Secretary of the Bond Finance Committee of THDA is hereby authorized to make public and to authorize distribution of the Official Statement relating to the Issue 2016-1 Bonds in substantially the form presented to THDA with such changes, omissions, insertions and revisions as such officer shall deem advisable. The Chairman, Vice Chairman, Executive Director and Secretary of the Bond Finance Committee are hereby authorized to sign and deliver such Official Statement to the Underwriters. The distribution of the Preliminary Official Statement relating to the Issue 2016-1 Bonds to the public is hereby authorized and approved.

(c) The Issue 2016-1 Bonds shall be delivered to the Underwriters in accordance with the terms of the Bond Purchase Agreement and this 2016-1 Supplemental Resolution.

ARTICLE IV

DISPOSITION OF PROCEEDS AND OTHER MONEYS

Section 4.01. Loan Fund; Bond Reserve Fund Requirement. Upon receipt of the proceeds of the sale of the Issue 2016-1 Bonds, THDA shall deposit such proceeds, together with any contribution from THDA of available THDA funds, in the Issue 2016-1 Bond Subaccount of the Loan Fund and in the Bond Reserve Fund, if applicable, as shall be set forth in a certificate of THDA delivered on or prior to the date of issuance of the Issue 2016-1 Bonds. Amounts on deposit in the Issue 2016-1 Bond Subaccount of the Loan Fund in excess of $__________ shall be applied to (i) the financing of Program Loans (including Program Securities), or participations therein, in accordance with the provisions of the General Resolution and Section 4.03 hereof, (ii) deposits to the Bond Reserve Fund and the Debt Service and Expense Account of the Revenue Fund, (iii) payment of Costs of Issuance and (iv) payment of capitalized interest to the extent, if any, specified by written instructions of an Authorized Officer.

Amounts on deposit in the Issue 2016-1 Subaccount of the Loan Fund shall be withdrawn therefrom and applied to the mandatory redemption of Issue 2016-1 Bonds as described in Section 2.11(a) hereof. The date of such redemption provided in Section 2.11(a) may be extended upon the delivery by THDA to the Trustee and the Rating Agency of a Projected Cash Flow Statement which satisfies the requirements of Section 7.11 of the General Resolution; provided further that the date of such redemption shall not be extended beyond the date set forth in the second paragraph of Section 2.11(a) unless THDA is in receipt of an opinion of Bond Counsel to the effect that such extension will not adversely affect the exclusion of interest on the Issue 2016-1 Bonds from the income of the owners thereof for federal income tax purposes. The amount of funds on deposit in the Issue 2016-1 Bond Subaccount of the Loan Fund to be used to pay Costs of Issuance with respect to the Issue 2016-1 Bonds shall not exceed 2% of the proceeds of the Issue 2016-1 Bonds.

THDA hereby covenants that an amount equal to twenty percent (20%) of the funds deposited in the Issue 2016-1 Bond Subaccount of the Loan Fund which are to be used to finance Program Loans (including Program Securities) (or other available funds of THDA), shall be

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made available for owner financing of “targeted area residences” (as defined in Section 143(j) of the Code) until __________ ___, 2017.

The Bond Reserve Fund Requirement with respect to the Issue 2016-1 Bonds shall be [an amount equal to 3% of the then current balance of Program Loans (other than Program Loans underlying Program Securities) allocable to the Issue 2016-1 Bonds plus the amount on deposit in the Issue 2016-1 Subaccount of the Loan Fund which has not been designated to provide for the payment of Costs of Issuance or capitalized interest. On the Issue Date, THDA shall deposit an amount in the Bond Reserve Fund to satisfy the Bond Reserve Requirement.]

Section 4.02. Proceeds of Issue 2016-1A Bonds and Issue 2016-1B Bonds. Proceeds of the Issue 2016-1A Bonds and Issue 2016-1B Bonds, together with any contribution from THDA of available THDA funds, initially shall be deposited in the Issue 2016-1 Bond Subaccount of the Loan Fund. On the Issuance Date, $__________ of the amount on deposit in the Issue 2016-1 Bond Subaccount of the Loan Fund (representing [the principal] [a portion of] the proceeds of the Issue 2016-1A Bonds and the [entire proceeds of the] Issue 2016-1B Bonds [in the aggregate amount of $__________ [and available funds of THDA in the amount of $__________]]) shall be applied to the refunding of the Refunded Bonds. [On such date, the Transferred Program Loans shall be credited to the Issue 2016-1 Bond Subaccount of the Loan Fund and the Transferred Investments shall be deposited in such Funds or Accounts as shall be set forth in a certificate of THDA delivered on or prior to the Issuance Date.]]

Section 4.03. Program Loan Determinations. No Program Loan shall be financed with proceeds of the Issue 2016-1 Bonds unless (i) such Program Loan is made for the acquisition of residential housing for occupancy by not more than four families and (ii) the deed of trust securing such Program Loan shall constitute and create a first lien subject only to Permitted Encumbrances, on the real property or on the interest in the real property constituting a part of the residential housing with respect to which the Program Loan secured thereby is made and on the fixtures acquired with the proceeds of the Program Loan attached to or used in connection with such residential housing.

In addition, the Program Loan must either:

(a) have been pooled into a Program Security; or

(b) have been insured or guaranteed by the Federal Housing Administration, the Farmers Home Administration, the Veteran’s Administration, or another agency or instrumentality of the United States or the State to which the powers of any of them have been transferred, or which is exercising similar powers with reference to the insurance or guaranty of Program Loans; or

(c) have a principal balance not exceeding 78% of the value, as determined in an appraisal by or acceptable to THDA, or the purchase price of the property securing the Program Loan, whichever is less; or

(d) be made in an amount not exceeding the value, as determined in an appraisal by or acceptable to THDA, or purchase price of the property securing the Program Loan, whichever is less, but only if (i) THDA is issued a mortgage insurance policy by a private mortgage insurance company, qualified to do business in the State and

14 4839-3941-9692.1

the claims paying ability of which private mortgage insurer is rated by each Rating Agency in a rating category at least as high as the then current rating assigned to the Bonds, under which the insurer, upon foreclosure of the property securing the Program Loan, must pay the holder of the Program Loan the unrecovered balance of a claim including unpaid principal, accrued interest, taxes, insurance premiums, and expenses of foreclosure, if any, or in lieu thereof may permit the holder of the Program Loan to retain title and may pay an agreed insured percentage of such claim; and (ii) the insured percentage of the Program Loan equals the amount by which the original principal amount of the Program Loan exceeds 78% of the value, as determined by an appraisal by or acceptable to THDA or purchase price of the property securing the Program Loan, whichever is less.

ARTICLE V

FORM OF BONDS, AND TRUSTEE’S CERTIFICATE OF AUTHENTICATION

Section 5.01. Form of Bonds. Subject to the provisions of the General Resolution, the Issue 2016-1 Bonds in fully registered form shall be in substantially the form attached hereto as Exhibit C, with such variations as shall be appropriate in order to conform to the terms and provisions of the General Resolution and this Resolution.

Section 5.02. Form of Trustee’s and Authenticating Agent’s Certificate of Authentication. The Issue 2016-1 Bonds shall not be valid or become obligatory for any purpose unless there shall have been endorsed thereon a certificate of authentication in substantially the following form:

(FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION)

This bond is one of the bonds described in the within-mentioned Resolutions and is one of the Residential Finance Program Bonds, [Issue 2016-1A (AMT)] [Issue 2016-1B (Non-AMT)] [Issue 2016-1C (Non-AMT)] of the Tennessee Housing Development Agency.

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By Authorized Officer

ARTICLE VI

MISCELLANEOUS

Section 6.01. No Recourse Against Members or Other Persons. No recourse may be had for the payment of principal of or premium or interest on the Issue 2016-1 Bonds or for any claim based thereon or on this Resolution against any member of THDA or any person executing the Issue 2016-1 Bonds and neither the members of THDA nor any person executing the Issue

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2016-1 Bonds may be liable personally on the Issue 2016-1 Bonds or be subject to any personal liability or accountability by reason of the execution thereof.

Section 6.02. Bonds not Debt, Liability or Obligation of the State or the United States of America. The Issue 2016-1 Bonds are not a debt, liability or the obligation of the State or any other political subdivision thereof. Neither the full faith and credit nor the taxing power of the State, or of any other political subdivision thereof, is pledged for the payment of the principal of or interest on the Issue 2016-1 Bonds. The Issue 2016-1 Bonds are not a debt, liability or obligation of the United States of America or any agency thereof. Neither the full faith and credit nor the taxing power of the United States of America is pledged for payment of the principal of or interest on the Issue 2016-1 Bonds.

Section 6.03. Delivery of Projected Cash Flow Statements. THDA shall deliver such Projected Cash Flow Statements at the times and on the occasions set forth in the General Resolution or this Resolution.

Section 6.04. Authorized Officers. The Chairman, Vice Chairman, Executive Director, General Counsel, Deputy Executive Director and Secretary of THDA and the Secretary and any Assistant Secretary of the Bond Finance Committee and any other proper officer of THDA, be, and each of them hereby is, authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the transactions contemplated by this Resolution, the General Resolution and the Official Statement.

Section 6.05. Authorized Trustee. THDA authorizes and directs the Trustee to perform any and all acts contemplated to be performed by the Trustee pursuant to the terms and provisions of this Resolution.

Section 6.06. Covenant to Comply with Federal Tax Law Requirements. THDA hereby covenants to comply with all applicable requirements of the Code so that interest on the Issue 2016-1 Bonds will be excluded from gross income of the holders thereof for federal income tax purposes, including the rebate requirement of Section 148(f) of the Code. THDA also covenants to pay any interest or penalty imposed by the United States for failure to comply with said rebate requirements. In accordance with the rebate requirement, THDA agrees that there will be paid from time to time all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and any temporary, proposed or final Treasury Regulations as may be applicable to the Issue 2016-1 Bonds from time to time.

Section 6.07. Continuing Disclosure Undertaking.

(a) THDA shall deliver to the MSRB, within 210 days after the end of each Fiscal Year:

(i) a copy of the annual financial statements of THDA prepared in accordance with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board; and

(ii) an annual update of the type of information in the Official Statement (A) contained in Appendix E, (B) regarding annual required contributions for employee pension plan and other post-employment benefits to

16 4839-3941-9692.1

the extent not included in annual financial statements and (C) of the nature disclosed under the following headings (including, without limitation, information with respect to the outstanding balances of Program Loans, by mortgage type, delinquency information, acquisition costs and income limits):

(A) Residential Finance Program Bonds; and

(B) Residential Finance Program Loans.

The information described in this subsection (a) may be provided by specific reference to documents (including official statements, to the extent the official statements include the information described in this subsection (a)) previously provided to the MSRB or filed with the Securities and Exchange Commission.

If unaudited financial statements are provided as part of the information required to be delivered under this subsection (a) within the time period specified above, THDA shall provide, when and if available, a copy of THDA’s audited financial statements to the MSRB.

(b) THDA shall deliver to the MSRB and the Trustee, in a timely manner not in excess of 10 business days after the occurrence of the event, notice of the occurrence of any of the following events (if applicable) with respect to the Issue 2016-1 Bonds:

(i) principal and interest payment delinquencies;

(ii) non-payment related defaults, if material;

(iii) unscheduled draws on the Bond Reserve Fund (or other debt service reserves) reflecting financial difficulties;

(iv) unscheduled draws on any credit enhancements reflecting financial difficulties;

(v) substitution of any credit or liquidity provider, or their failure to perform;

(vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Issue 2016-1 Bonds, or other material events affecting the tax status of the Issue 2016-1 Bonds;

(vii) modifications to rights of the holders of the Issue 2016-1 Bonds, if material;

(viii) bond calls, if material, and tender offers;

(ix) defeasances;

(x) release, substitution or sale of property securing repayment of the Issue 2016-1 Bonds, if material;

17 4839-3941-9692.1

(xi) rating changes;

(xii) bankruptcy, insolvency, receivership or similar event of THDA (which event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for THDA in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of THDA, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of THDA);

(xiii) The consummation of a merger, consolidation or acquisition involving THDA or the sale of all or substantially all of the assets of THDA, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

(xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material.

Notwithstanding the foregoing, notice of optional or unscheduled redemption of any Issue 2016-1 Bonds or defeasance of any Issue 2016-1 Bonds need not be given pursuant to this Section 6.07 any earlier than the notice (if any) of such redemption or defeasance is given to the owners of the Issue 2016-1 Bonds pursuant to the Resolution.

(c) THDA shall give notice to the Trustee and the MSRB in a timely manner of any failure by THDA to provide any information required pursuant to subsection (a) above within the time limit specified therein.

(d) All notices, documents and information provided to the MSRB shall be provided in an electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

(e) THDA agrees that the provisions of this Section 6.07 shall be for the benefit of the beneficial owners of the Issue 2016-1 Bonds whether or not the Rule (as defined below) applies to such Issue 2016-1 Bonds.

(f) THDA may amend this Resolution with respect to the above agreements, without the consent of the beneficial owners of the Issue 2016-1 Bonds (except to the extent required under clause (iv)(B) below), if all of the following conditions are satisfied: (i) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the identity, nature or status of THDA or the type of business conducted thereby; (ii) these agreements

18 4839-3941-9692.1

as so amended would have complied with the requirements of Rule 15c2-12 (the “Rule”) as of the date of this Resolution, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (iii) THDA shall have delivered to the Trustee an opinion of counsel, addressed to THDA and the Trustee, to the same effect as set forth in clause (ii) above; (iv) either (A) THDA shall deliver to the Trustee an opinion of or determination by a person unaffiliated with THDA (which may include the Trustee or bond counsel), acceptable to THDA and the Trustee, addressed to THDA and the Trustee, to the effect that the amendment does not materially impair the interests of the holders of the Issue 2016-1 Bonds or (B) the holders of the Issue 2016-1 Bonds consent to the amendment pursuant to the same procedures as are required for amendments to the General Resolution with consent of the holders of Bonds pursuant to the General Resolution as in effect on the date of this Resolution; and (v) THDA shall have delivered copies of such opinion(s) and the amendment to the MSRB.

(g) THDA’s obligations with respect to the beneficial owners of the Issue 2016-1 Bonds under these agreements as set forth above terminate upon a legal defeasance pursuant to the General Resolution, prior redemption or payment in full of all of the Issue 2016-1 Bonds. THDA shall give notice of any such termination to the MSRB.

(h) Failure by THDA to comply with this Section 6.07 shall not constitute an Event of Default under the General Resolution but the undertaking in this Section 6.07 may be enforced by any beneficial owner of the Issue 2016-1 Bonds exclusively by an action for specific performance. The obligations of THDA in this Section 6.07 shall be construed and interpreted in accordance with the laws of the State, and any suits and actions arising out of the obligations under this Section 6.07 shall be instituted in a court of competent jurisdiction in the State.

Section 6.08. Confirmation and Adjustment of Terms by Committee. The terms of the Issue 2016-1 Bonds are herein established subject to confirmation by the Committee upon the sale of the Issue 2016-1 Bonds by the Committee. The Committee is hereby authorized to make such changes or modifications in the principal amounts, maturities and interest rates for the Issue 2016-1 Bonds and in the application of the proceeds thereof, paying agents, terms of redemption and the schedule of prepayment amounts to be used for accrued principal installments in such manner as the Committee determines to be necessary or convenient to better achieve the purposes of the Act and in the best interests of THDA.

Section 6.09. Effective Date. This Resolution will take effect immediately.

4839-3941-9692.1

EXHIBIT A

BOND PURCHASE AGREEMENT

4839-3941-9692.1

EXHIBIT B

[PLANNED AMORTIZATION AMOUNTS FOR PAC BONDS]

Date [Issue 2016-1A PAC Bonds Planned Amortization

Amount]

[Issue 2016-1C PAC Bonds Planned Amortization

Amount]

2 4839-3941-9692.1

[[400]% PSA PREPAYMENT AMOUNTS

FOR ISSUE 2016-1 BONDS]

Date Cumulative

Amount

Date Cumulative

Amount

4839-3941-9692.1

EXHIBIT C

FORM OF BONDS

REGISTERED

R[A][B][C][-1] $[_________]

TENNESSEE HOUSING DEVELOPMENT AGENCY RESIDENTIAL FINANCE PROGRAM BOND ISSUE 2016-1[A][B][C] [(AMT)][(Non-AMT)]

Interest Rate Dated Date Maturity Date Cusip

[___]% [_____], 2015 [_____]

880461[___]

REGISTERED OWNER: CEDE & CO.

PRINCIPAL SUM: [_________]

TENNESSEE HOUSING DEVELOPMENT AGENCY (hereinafter sometimes called “THDA”), a body politic and corporate and a political subdivision of the State of Tennessee (herein called the “State”), created and existing under and by virtue of the laws of the State, acknowledges itself indebted, and for value received hereby promises to pay to the Registered Owner (shown above), or registered assigns, the principal sum (shown above), on the maturity date specified above, and to pay interest on said principal sum to the Registered Owner of this Bond from the dated date hereof until THDA’s obligation with respect to the payment of said principal sum shall be discharged, at the rate per annum specified above payable on each January 1 and July 1 commencing [July 1, 2016]. The principal of and interest on this Bond are payable at the designated corporate trust office of U.S. Bank National Association, Nashville, Tennessee in any coin or currency of the United States of America, which, on the respective dates of payment thereof shall be legal tender for the payment of public and private debts.

This Bond is one of the bonds of THDA designated “Residential Finance Program Bonds” (herein called the “Bonds”) authorized to be issued in various series under and pursuant to the Tennessee Housing Development Agency Act, Sections 13-23-101 et seq., of the Tennessee Code Annotated, as amended (herein called the “Act”), a resolution of THDA adopted January 29, 2013, as amended and supplemented by the Bond Finance Committee on April 18, 2013, and entitled “Residential Housing Finance Resolution” (herein called the “General Resolution”) and a supplemental resolution authorizing each issue. As provided in the General Resolution, the Bonds may be issued from time to time in one or more series of various principal amounts, may bear interest at different rates and subject to the provisions thereof, may otherwise

2 4839-3941-9692.1

vary. All Bonds issued and to be issued under the General Resolution are and will be equally secured by the pledges and covenants made therein, except as otherwise expressly provided or permitted in the General Resolution.

This bond is one of a series of bonds additionally designated “Issue 2016-1[A][B][C]” (herein called the “Bonds”) issued in the aggregate principal amount of $________ under the General Resolution, a resolution of THDA adopted on January 26, 2016, as amended and supplemented by the Bond Finance Committee on __________ __, 2016 (collectively with the General Resolution, the “Resolutions”). Copies of the Resolutions are on file at the office of THDA in Nashville, Tennessee and at the principal corporate trust office of U.S. Bank National Association, Nashville, Tennessee, as trustee under the General Resolution (said trustee under the General Resolution being called herein the “Trustee”) and reference to the Resolutions and any and all supplements thereto and modifications and amendments thereof and to the Act is made for a description of the pledges and covenants securing the Bonds, the nature, extent and manner of enforcement of such pledges, the rights and remedies of the bearers or registered owners of the Bonds with respect thereto and the terms and conditions upon which the Bonds have been issued and may be issued thereunder.

To the extent and in the manner permitted by the terms of the Resolutions, the provisions of the Resolutions or any resolution amendatory thereof or supplemental thereto may be modified or amended by THDA with the written consent of the holders of at least two-thirds in principal amount of the Bonds then outstanding, and, in case less than all of the several series of Bonds would be affected thereby, with such consent of the holders of at least two-thirds in principal amount of the Bonds of each series so affected then outstanding. If such modification or amendment will by its terms not take effect so long as any Bonds of any specified like series and maturity remain outstanding, however, the consent of the holders of such Bonds shall not be required. In addition, certain other modifications or amendments to the Resolutions can be made which are not contrary to or inconsistent with the Resolutions without the consent of the Bondholders.

The holder of this Bond shall have no right to enforce the provisions of the Resolutions, to institute actions to enforce the provisions of the Resolutions or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the General Resolution. In certain events, on the conditions, in the manner and with the effect set forth in the General Resolution, the principal of all the Bonds issued thereunder and then outstanding, together with accrued interest thereon, may become or may be declared due and payable before the maturity thereof.

This Bond is transferable, as provided in the Resolutions, only upon the books of THDA kept for that purpose at the office of the Trustee by the registered owner hereof in person or by such owner’s attorney duly authorized in writing, upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or such owner’s attorney duly authorized in writing, and thereupon a new registered Bond or Bonds in the same aggregate principal amount and of the same subseries and maturity shall be issued to the transferee in exchange therefor as provided in the General Resolution and upon the payment of the charges, if any, therein prescribed. THDA and the Trustee may treat and consider the person in whose name this Bond is registered as the absolute owner hereof for the purpose of

3 4839-3941-9692.1

receiving payment of, or on account of, the principal or redemption price, if any, hereof and interest due hereon and for all other purposes whatsoever.

This Bond is a special limited obligation of THDA payable solely from the revenues and assets pledged therefor pursuant to the General Resolution.

The Bonds are issued as fully registered bonds in the denomination of $5,000 or any integral multiple thereof.

The Bonds are subject to optional, mandatory and sinking fund redemption as described in the Resolutions.

This Bond does not constitute a debt, liability or other obligation of the State or any political subdivision thereof other than THDA and neither the State nor any political subdivision thereof shall be obligated to pay the principal of the Bonds or the interest thereon. Neither the faith and credit nor the taxing power of the State or of any political subdivision thereof is pledged to the payment of the principal of or interest on the Bonds.

This Bond shall not be valid or become obligatory for any other purpose or be entitled to any security or benefit under the Resolutions until the Certificate of Authentication hereon shall have been signed by the Trustee.

The Act provides that neither the members of THDA nor any person executing this Bond shall be liable personally hereon or shall be subject to any personal liability or accountability by reason of its execution.

IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by the Constitution or statutes of the State and the Resolutions to exist, to have happened or to have been performed precedent to or in the issuance of this Bond, exist, have happened and have been performed in due time, form and manner as required by law and that the issuance of the Bonds, together with all other indebtedness, of THDA, is within every debt and other limit prescribed by law.

[Remainder of page intentionally left blank]

4 4839-3941-9692.1

IN WITNESS WHEREOF, TENNESSEE HOUSING DEVELOPMENT AGENCY has caused this Bond to be executed in its name by the manual or facsimile signature of its Chairman and its corporate seal (or a facsimile thereof) to be affixed, imprinted, engraved or otherwise reproduced hereon and attested by the manual or facsimile signature of its Executive Director, all as of the dated date shown above.


By Brian Bills Chairman

[SEAL]

Attest:

By Ralph M. Perrey Executive Director

5 4839-3941-9692.1

CERTIFICATE OF AUTHENTICATION

This bond is one of the bonds described in the within-mentioned Resolutions and is one of the Residential Finance Program Bonds, Issue 2016-1[A][B][C] [(AMT)][(Non-AMT)] of the Tennessee Housing Development Agency.

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By Authorized Signatory

Dated: __________ __, 2016

6 4839-3941-9692.1

ABBREVIATIONS

The following abbreviations, when used in the inscription on the face of the within Bond, shall be construed as though they were written out in full according to applicable laws or regulations.

TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with the

right of survivorship and not as tenants in common

UNIFORM GIFT MIN ACT - Custodian (Cust) (Minor)

under Uniform Gifts to Minors

Act (State)

Additional Abbreviations may also be used though not in the above list

ASSIGNMENT

For value received, the undersigned hereby sells, assigns and transfers unto the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints , attorney to transfer the said Bond on the bond register, with full power of substitution in the premises.

Dated:

Social Security Number or Employer Identification Number of Transferred:

Signature guaranteed:

NOTICE: The assignor’s signature to this Assignment must correspond with the name as it appears on the face of the within Bond in every particular without alteration or any change whatever.

A RESOLUTION OF THE BOARD OF DIRECTORS OF THE TENNESSEE HOUSING DEVELOPMENT AGENCY

AUTHORIZING REIMBURSMENT OF THDA FROM PROCEEDS OF ISSUE 2016-1

January 26, 2016

WHEREAS, the Tennessee Housing Development Agency (“THDA”) is financing mortgage loans for eligible borrowers to purchase single family residences in compliance with the Internal Revenue Code of 1986, as amended (the “Code”), and the General Residential Finance Program Bond Resolution, (the “2013 General Resolution”) and purchasing mortgage backed securities guaranteed by Fannie Mae backed by approved privately insured conventional loans made to eligible borrowers to be held in the 2013 General Resolution (“MBS”); and

WHEREAS, THDA expects to use its own funds to continue its mortgage loan programs prior to the availability of proceeds from the issuance of the General Residential Finance Program Bonds, Issue 2016-1, if and when issued and sold (the “Bonds”), either through the direct purchase of eligible mortgage loans or the purchase of MBS; and

WHEREAS, THDA will continue to commit and purchase mortgage loans and MBS prior to the closing date for the Bonds (the “Closing”); and

WHEREAS, THDA expects that up to $60,000,000 in mortgage loans and MBS may be purchased prior to Closing; and

WHEREAS, it is in the best interest of THDA to reimburse itself from the proceeds of the Bonds for THDA funds expended to purchase mortgage loans and MBS prior to the Closing.

NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THDA THAT:

1. Use of proceeds from the Bonds in an amount not to exceed Sixty Million and 00/100 Dollars ($60,000,000) shall be used to reimburse THDA for the actual amounts expended to purchase mortgage loans made to eligible borrowers who purchased single family residences in accordance with the requirements of the Code and the 2013 General Resolution or MBS backed by approved privately insured conventional loans made to eligible borrowers.


Tennessee Housing Development AgencyAndrew Jackson Building, Third Floor

502 Deaderick Street, Nashville, TN 37243

Bill HaslamGovernor


MEMORANDUMDATE: January 13,2016

TO: THDA Board of Directors

FROM: Lynn E. Miller, Chief Legal CounTrent Ridley, Chief Financial Offi

SUBJECT: THDA Volume Cap Annual Update

Background

THDA receives allocations of volume cap every year from the Tennessee Department of Economic and

Community Development ("ECD"). The amount of volume cap allocated to THDA is the total amount ofvolume cap made available for single family and multifamily housing funded with tax exempt bonds in thestate. The amount of this resource allocated to THDA drives the amount of single family mortgage loans

THDA may purchase each year and the amount of tax exempt bonds for multifamily housing that may be

issued by local issuers under THDA's Multifamily Tax-Exempt Bond Authority Program.

Volume cap THDA receives in one year may be carried forward and subsequently used for single familybond issues over 3 additional years. In addition, volume cap may be carried forward for a mortgagecredit certificate program ("MCC"). Volume cap THDA allocates to local issuers under the MultifamilyTax-Exempt Bond Authority Program must be used in the year of allocation and cannot be carried forwardfor multifamily purposes.

The amount of volume cap made available each year to Tennessee is based on population. Of the totalamount Tennessee receives, THDA, pursuant to a plan developed by ECD, receives 35%o of the total at the

beginning of each year. Then, at year end, THDA is one of two entities that rnay receive an additionalallocation based on the amount of volume cap not otherwise used for other eligible tax exempt bond

issuances during the year.

All information contained in this memo is based on current state and federal law

2016 Volume Cap

o allocation: 0110612016: $231,010,500

. amount available for multifamily bonds in 2016: $ I 50,000,000

. amount expected to be used for THDA single family bonds in2016: $0, due to the availability ofvolume cap from prior years that expires sooner

www.THDA.ors - (615) 8t5-2200 - Toll Free: 800-228-THDA

a

a

THDA Board of DirectorsJanuary 13,2016Page 2

the amount of the 0110612016 allocation, together with a year-end allocation, if any, less the arnountused for multifamily will be available for THDA single family bonds through 1213112019

2016 volume cap is expected to be used for THDA single family bond issues in2019 and unusedamounts could be made available through 1213112021for an MCC program

2015 Volume Cap

. allocations: 01107 12015: 5229 ,227 ,250t2lt6l20ts 42s.707.7s0

TOTAL $654,935,000

¡ amount used for multifamily bonds in 2015: approximately $l18,388,000

o amount used for THDA single family bonds to date: $0, due to the availability of volume capfrom prior years that expires sooner

¡ amount available for THDA single family bonds through 1213112018: approximately $536,547,000

. 2015 volume cap is expected to be used for THDA single family bond issues in 2018 and unusedamounts could be made available through 1213112020 for an MCC program

2014 Volume Cap

o allocations: 0111512014 5227,359,300

1210s12014 422.238.700

TOTAL $649,598,000

o amount used for multifamily bonds in2014: approximately $25,075,000

o amount used for THDA single family bonds to date: $0, due to the availability of volume cap fromprior years that expires sooner

o amount available for THDA single family bonds through l2l3ll20l7: approximately $624,523,000

o 2014 volume cap is expected to be used for THDA single family bond issues in 2017 and unusedamounts could be made available through 1213112019 for an MCC program

2013 Volume Can

o allocations: 0310412013 5214,670,050

1211212013 398.672.950

TOTAL $613,343,000

¡ amount used for multifamily bonds in 2013: approximately $20,200,000

¡ amount used for THDA single farnily bonds to date: $0, due to the availability of volume cap fromprior years that expires sooner

o amount available for THDA single family bonds through 1213112016: approximately $593,143,000

. 2013 volume cap is expected to be used for THDA single family bond issues in 2016 and unusedarrounts could be made available through 1213112018 for an MCC prograrn

THDA Board of DirectorsJanuary 13,2016Page 3

2012 Volume Cap

. af locations: 0110412012 $212,911,650

1210512012 368.907.350

TOTAL $581,819,000

. amount used for multifamily bonds in 2012 approximately $32,984,454

o amount used for THDA single family bonds to date: 5345,917,789

o amount preserved for use in a MCC program through 1213112017:5202,916,757

20ll Volume Cap

. allocations: 01106120ll $211,008,000

l2l16l20tt 312.772.000

TOTAL $523,780,000

o amount used for multifamily bonds in 2011: $0

. amount used for THDA single family bonds to date: 5274,280,354

. amount preserved for use in a MCC program through 1213112016:5234,899,646

LEM/TR/ds

Tab # 5 Items:

Audit & Budget Committee Meeting Materials

Tennessee Housing Development Agency Audit & Budget Committee

January 26, 2016 9:30 a.m. Central Time

AGENDA

1. Call to Order ........................................................................................ Lillard 2. Approval of Minutes from November 17, 2015 .................................. Lillard 3. Enterprise Risk Management Analysis Review ................................... Oliver 4. Adjourn ................................................................................................ Lillard LOCATION COMMITTEE MEMBERS

William R. Snodgrass Tennessee Tower David Lillard, Chair 312 Rosa L Parks Avenue, Third Floor Brian Bills Nashville, TN 37243 Dorothy Cleaves Tre Hargett The Nashville Room Pieter van Vuuren

TENNESSEE HOUSING DEVELOPMENT AGENCY AUDIT & BUDGET COMMITTEE

November 17, 2015

Pursuant to the call of the Chairman, the Audit & Budget Committee of the Tennessee Housing Development Agency Board of Directors met on Tuesday, November 17, 2015, at 9:15 a.m., in the Nashville Room of the William R. Snodgrass Tennessee Tower, Nashville, Tennessee.

The following Committee members were present: Secretary of State Tre Hargett (Chair), Brian Bills, Dorothy Cleaves, State Treasurer David Lillard, and Pieter van Vuuren. Other Board members attending were John Baker and Benjie Shuler.

Recognizing a quorum present, Chairman Hargett called the meeting to order and asked for approval of the minutes for the meeting held on September 22, 2015. Upon motion by Mr. Bills, seconded by Mr. Lillard, the minutes were unanimously approved. Chairman Hargett welcomed Mr. van Vuuren who was appointed by the THDA Board Chair to serve on the Committee.

The next item on the agenda was consideration of the disclosure analysis report for Board members. Chairman Hargett recognized Gay Oliver, Director of Internal Audit, who noted THDA’s enabling legislation and the THDA Board Disclosure Policy require that each year Board members and voting representatives disclose direct or indirect involvement in activities that do or could involve THDA or THDA programs, including federally funded programs with the review of such disclosures to be noted in THDA’s official minutes. Ms. Oliver indicated disclosure forms were received from all Board members with the exception of Commissioner Larry Martin. She noted the Commissioner’s disclosure was in process and would be received soon. The original disclosure forms are located at THDA and are available for public inspection as provided in the open records statute. Ms. Oliver and Lynn Miller, THDA Chief Legal Counsel, reviewed all disclosure forms and categorized them as incidental interests or indirect interests. Their analysis report is included in the meeting material. None of the disclosures present conflicts that are prohibited. Ms. Oliver reminded the Committee that even if no conflict exists, the Code of Conduct applies and members should refrain from any activity that would give the appearance of impropriety or a conflict of interest.

Chairman Hargett indicated the disclosure analysis report for THDA staff was next for consideration. Ms. Oliver noted the Staff Disclosure Policy requires staff to provide annual disclosures and that the review of staff disclosures be noted in the official minutes. She explained that a new process was implemented for staff disclosures to be completed electronically and responses are available for review as provided in the open record statute. Ms. Oliver and Ms. Miller reviewed staff disclosures and their report is included in the meeting material. Ms. Oliver noted the analysis revealed incidental and indirect interests, but no prohibited interests or conflicts of interest. She pointed out that staff have been reminded that where potential conflicts or indirect conflicts exists or create an apparent conflict, the employee must refrain from discussion or participation in the THDA activity connected with the conflict or potential conflict.

Upon motion by Ms. Cleaves, second by Mr. Bills, the Board and staff disclosure analysis reports were accepted for inclusion in the Audit & Budget Committee minutes.

Chairman Hargett noted that an item had been omitted from the Committee’s meeting agenda and indicated the annual performance review of the Director of Internal Audit would be added as the ninth item on the agenda. He then recognized Ms. Oliver to provide an update on Enterprise Risk Management (ERM). Ms. Oliver pointed out that the ERM process must be completed and the ERM Report submitted to the State Comptroller’s Office and the Commissioner of Finance & Administration by December 31 of each year. The Audit & Budget Committee and the Board will receive the 2015 ERM report to review at the January

2

2016 meeting. The Financial Integrity Act requires that a system of internal controls be established and maintained. The ERM Report documents whether THDA’s system of accounting and administrative controls comply with the statute. Ms. Oliver described the risk management review process performed annually by each division director and noted that each director will:

review major strategies and objectives of their division;

list the major risks and estimate the potential impact to THDA if those risk occur;

assess the likelihood that each risk will occur on a scale of probable, reasonably possible and remote;

if there is no control activity, then develop a control activity to be put into place to mitigate the risk; and

document whether the control activities are operating effectively to mitigate the risks.

Next, Ms. Oliver presented the report titled “Report to the Audit & Budget Committee of FYE 2015 IA Activity Summary”. She pointed out that the report provides highlights of the monitoring and investigative activities of the Internal Audit Division conducted during the fiscal year ended June 30, 2015, and noted that the complete summary is included in the meeting material. THDA’s audit plan must be submitted to the Comptroller’s office each year and staff submits copies of audit reports to the Committee as staff completes them. She pointed out that in FYE 2015, staff completed 21 review reports, 16 investigative reports and 3 compilation reports. Chairman Hargett noted that there was a backlog of activities when Ms. Oliver joined THDA and congratulated her and her staff for clearing the backlog and doing current year work.

Chairman Hargett recognized Trent Ridley, THDA Chief Financial Officer, to provide the Fiscal Year 2015 Financial Audit Summary. Mr. Ridley indicated that staff has been meeting with State Audit regarding the audit of THDA’s financial statements and to date there are no findings and no exceptions. He noted that he shared preliminary results with the Committee in September meeting. He indicated that State Audit is waiting for information for one of the notes to the financial statements relating to GASB 68 and once the information is received, the audit of the financial statements will be completed.

Mr. Ridley next presented the Five Year Financial Plan. He noted that THDA’s Debt Management Policy requires that a five-year financial plan be maintained and updated annually for THDA. He pointed out that the Five Year Financial Plan is a liquidity analysis of THDA’s cash position in terms of cash available and the amount of debt and investments over the next five years based on specific assumptions. He described the following major assumptions and results:

Approximately $2 billion in bond issuance, including approximately $401 million in refundings;

Approximately $330-$336 million per year in production;

Net withdrawals and use of approximately $212.9 million from the general bond resolutions primarily for bond related expenses, bond reserve fund, operating costs and programs approved by the Board, including approximately $66.4 million for down payment assistance, approximately $37.5 million for the Housing Trust Fund, and approximately $40 million for New Start loans; and

A weighted average Program Asset Debt Ratio (PADR) of 1.17 for all three general bond resolutions and a PADR of 1.12 for the 2013 General Bond Resolution.

3

Next on the agenda was the annual performance evaluation of Director of Internal Audit. After Ms. Oliver stepped out of the room, Chairman Hargett noted that the Ms. Oliver reports to the Committee and it is the Committee’s purview to conduct her annual evaluation. He referenced a 2 page memo the Committee members received and noted it appeared that all are pleased with her performance. Chairman Hargett indicated he reviewed the director level compensations within THDA and considered the raises that may be available to the rest of THDA staff. Chairman Hargett moved that Ms. Oliver’s compensation be increased to $90,966 based on her overall rating of “outstanding performance”. Mr. Bills seconded the motion and acknowledged the outstanding performance of Ms. Oliver and her team. Mr. Bills noted that communication has significantly improved since she joined THDA. Mr. Lillard indicated he reviews all of Ms. Oliver’s audit reports and noted her work and reports are of excellent quality, timely, and that her team should be commended for great work. Chairman Hargett called for a vote and the motion passed unanimously.

With no other issues or business to come before the Committee, the meeting adjourned.

Respectfully submitted, Gathelyn Oliver Director of Internal Audit

Approved the ____ day of January, 2016.

Tennessee Housing Development AgencyAndrew Jackson Building Third Floor502 Deaderick St., Nashville, TN 37243

Bill HaslamGovernor

MEMORANDUM

TO:

FROM:

DATE:

SUBJECT:


Audit & Budget Committee/-,¿---t

Gathelyn olkâícpa, Director of Internal Audit

January 8,2016

Review of THDA Enterprise Risk Management Report for 2015

As Responsibility 11 of the Audit & Budget Committee Charter requires, the Committee is responsible for

reviewing management's annual risk assessment. As the Enterprise Risk Management report dated December

29,2015, has been completed and will need to be reviewed and approved at the January 2016 committee

meeting. A copy of the report with all the supporting spreadsheet schedules is included with this memorandum

for your review.

While the report contains a lot of information, the main point to consider is that each division has prepared their

own self-assessment which was then consolidated and reviewed by Internal Audit. The final report and

supporting schedules document the results of the assessment and provide reasonable assurance that THDA'sinternal controls in effect on a June 30 fiscal year ending basis adequately safeguard assets and when taken as a

whole provide reasonable assurance of the proper recording of financial transactions; compliance withapplicable laws, regulations, rules, contracts and grant agreements; and support the achievement of operational

objectives. While there is always the possibility of additional risks to be noted or that an established control is

ineffective, this process documents the main areas that need to be addressed.

I will be happy to answer any questions you may have concerning the information provided at the January 2016

committee meeting.


Tennessee Housing Development AgencyAndrew Jackson Building Third Floor502 Deaderick St., Nashville, TN 37243

Bill HaslamGovernor


December 29,2015

The Honorable Larry Martin, CommissionerDepartment of Finance and AdministrationState CapitolNashville, TN 37243

And

The Honorable Justin P. WilsonComptroller of the TreasuryState CapitolNashville, TN 37243

Re: Tennessee Financial Integrity Act Guidelines

Dear Commissioner Martin and Comptroller'Wilson:

This annual report addresses the agency-wide risk management and intemal control requirements of theTCA $9- I 8- 101, known as the Tennessee Financial Integrily Act, as amended. In order to assess the effectivenessof our internal control system and of individually significant controls, we conducted an evaluation in accordancewith the guidance set forth under TCA $9-18-103. We understand that this guidance was developed using theestablished comprehensive internal control frameworks entitled Internal Control-Integrated Framework (1994)

and Enterprise Risk Management-Integrated Framework (2004), issued by the Committee of SponsoringOrganizations (COSO) of the Treadway Commission and published by the American Institute of Certified PublicAccountants, and have referred to these frameworks as necessary throughout the evaluation.

The objectives of the Tennessee Housing Development Agency's annual risk management and internalcontrols assessment are to provide reasonable assurance of the following:

. accountability for meeting program objectives;o promoting operational efficiency and effectiveness;. improving reliability of financial statements;o strengthening compliance with laws, regulations, rules, and contracts and grant agreements; and

www.THDA.org - (615) 815-2200 - TollFree: 800-228-THDA

a

Page2

reducing the risk of financial or other asset losses due to fraud, waste, and abuse. Funds, property, andother assets are safeguarded against waste, loss, unauthorized use, or misappropriation.

The concept of reasonable assurancerccognizes that the costs of internal controls should not exceed thebenefits derived from those controls. Reasonable assurance is a high but not an absolute level ofassurance. Inthe course of any review, estimates and judgments are required to assess the expected benefits and related costsof control policies and procedures. Errors or fraud may occur and not be detected due to inherent limitations inany system of risk management and internal control, including those limitations resulting from resourceconstraints, legislative restrictions, and other factors. Risk assessment allows the agency to consider the extentto which potential events have an impact on achievement of objectives and to mitigate the risk of events that couldhave a negative impact.

As head of this DepartmentlAgency, we have performed an entity-wide risk assessment and have fullycomplied with the requirements specified in TCA 9-I8-I02. To reduce the effbct of unacceptable risks, a systemof intemal control has been implemented and tested for operating effectiveness. I acknowledge responsibilityfor establishing, implementing, and maintaining an adequate internal control system to prevent and detect fraud,waste, and abuse and for performing this assessment of the operating effectiveness of the department's riskmanagement and internal controls. The results of this assessment have given me reasonable assurance that theAgency's internal controls in effect on a June 30 fiscal year ending basis, adequately safeguard assets, and whentaken as a whole provide reasonable assurance of the proper recording of hnancial transactions; compliance withapplicable laws, regulations, rules, contracts and grant agreements; and the achievement of operational objectives,subject to the limitations described in the previous paragraph. As head of this agency, I acknowledgeresponsibility for maintaining the internal control system of this agencyldepartment.

The attached documents reflect the results of our agency-wide risk assessment and the controls that are intendedto mitigate the identified risks.

Executive Director

u

www.THDA.ore - (615) 815-2200 - Toll Free: 800-228-THDA

Report Checklist

STAGE I-INITIAL ASSESSMENT

X Step l-Internal Environment

These steps are to be performed to give management a big picture of or to "get-to-know" their organization in order to direct them to their agency's risks, strategies andobjectives.

Has management addressed the following elements of the Internal Environment?

. Risk Management Philosophy

¡ Risk Appetite

o Integrity and Ethical Values

. Commitment to Competence

c OrganizationalStructure

. Assignment of Authority and Responsibility

o Human Resource Standards

X Step 2- Objective Setting

The goal in step 2 is to identify (1) why the agency exists, (2) what needs to be doneand (3) what activities are necessary to achieve its objectives.

Has management addressed the following categories of objectives with respect to itsagency?

Strategic Operational Reporting Compliance

Has management identified the business processes and activities its agencyparticipates in to meet its objective?

STAGE 2-RISK ASSESSMENT

X Step 3-Event ldentification

In Step 3, the goal is to first identify events and then the risks that are produced as a

result of those events that would impede the agency in meeting itsobjectives/performing the activities that are performed to meet those objectives.

Marragr:ttturtt's Guidc to RiskManagement and Internal Control August 2007

Has management identified events that would impede in the agency meetingits objectives

o Has management listed risks generated from those events?

X Step 4-Likelihood/Impact

The goal here is to assess and document management's assessment on the likelihoodand impact of a risk.

o For each risk identified in Step 3 and those identified in the worksheettemplate in Section VI

X Step S-Control Activities and Risk Response

In Step 5, the agency will identify its control activities. This is where the internalcontrol evaluation takes place. These control activities are to serve as risk responses

as well as to ensure that risk responses are carried out.

a

For all risks that are high or medium impact and probable or reasonablypossibly to occur, has the agency addressed control activities/actions tomitigate those risks?Has management tested controls for operating effectiveness?

X Step 6-Final Evaluation

a Has the agency evaluated its residual risks in the aggregate to determine iftotal residual risks are within the agency's risk appetite?

STAGE 3-REPORTING

X Step 7-Reporting Package

a Has management completed the Management Report?

o Has management included this checklist with the report?

a Has management included documentation of their agency-wide riskassessment and internal control evaluation?

Management's Guitle t0 RiskManagement and Internal Control August 2007

Accounting ERM 2015.xlsx

Page 1 of 17

ACCT 2015

Risk and Exposure Control Activity

Strategic Budget does not provide for adequate funding to meet the agency's mission, goals and objectives.

High Remote

Operations Agency failed to operate efficiently within their budgeted parameters.

Medium Remote

Budget not prepared timely. High RemoteUnexpected cut in federal funding. Medium Reasonably

PossibleManagement will review operations and make expenditure reductions as necessary.

Yes

Unexpected decline in revenue collections.

Medium Reasonably Possible

Management will review operations and make expenditure reductions as necessary.

Yes

Unexpected increase in expenditure requirements due to unforeseen casualty losses.

Medium Remote

Agency overspends annual budget authority.

High Reasonably Possible

The Agency can request additional budget authority, search for unused encumbrances to liquidate to finish the year, or stop spending.

Yes

Agency does not operate PBCA program efficient enough to win the new contract from HUD.


Management will review operations and make expenditure reductions as necessary.

Yes

Reporting Expenditures are not recorded to the proper budget control account/allotment code.


Vouchers are reviewed to detect errors prior to approval. Accounting staff performs reconciliations to ascertain proper posting. AP or GL Journal Vouchers are processed to correct errors not caught on the initial review of the voucher.

Yes

SECTION VI CONTROL ACTIVITIES

ACCT Part 1 Strategic, Operations and Reporting Objectives

Impact Likelihood

Control Operating Effectively?

ObjectiveCategory

1. BUDGET

ERM Page 1


Page 2 of 17

ACCT 2015

Risk and Exposure Control ActivityImpact Likelihood


ObjectiveCategory

Appropriations are not recorded to the proper budget control account/allotment code.

Medium Remote

Strategic Ineffective management of cash outflows results in the lack of maximization of State resources.

Low Reasonably Possible

Operations Expenditure not recorded against proper purchase order or contract.


Cash disbursement exceeds invoice amounts.


Agency pays for insufficient goods/services.


Due to untimely payment, agency incurs late fees.


Agency pays for goods and services beyond vendor's quotes.


Agency fails to collect on cash advances.


Subrecipients are not reimbursed timely causing a financial burden for the subrecipient.


Agency pays for goods not ordered. Low Reasonably Possible

Agency overspends grant award. Low Reasonably Possible

Items are purchased that bypass established Procurement Policies and Procedures


A grant payment is advanced from the Trustee checking account and is not reimbursed by F&A.


2. CASH DISBURSEMENTS/EXPENDITURES

ERM Page 2


Page 3 of 17

ACCT 2015



ObjectiveCategory

Agency overspends annual DGA contract authority and can't make grant payments.


Review DGA contracts through the year to determine how the agency is doing. If an amendment is needed, the process is started in plenty of time for it to make it through the process before all authority has been expended.

Yes

Reporting Outgoing cash flow is recorded in wrong period.


Expenditures not recorded in proper fund.


Expenditure not recorded under proper financial statement function.


Claimant submits claim for reimbursement twice and both claims are paid by agency.


Vendor invoices received prior to month-end are incorrectly recognized as an expenditure in the following year.


Vendors are paid from statements as well as invoices, resulting in duplicate payments.

Low Remote

Invoices are not marked paid resulting in duplicate payments.

Low Remote

Expired or unnecessary encumbrances remain on the books due to uncancelled purchase orders.

Low Remote

Expenditures incurred through the petty cash fund are not recorded as expenditures in accounting system before year end.

Low Remote

A manual check is not recorded in the system.

Low Remote

ERM Page 3


Page 4 of 17

ACCT 2015



ObjectiveCategory

Requisitions are not encumbered at year-end under modified accrual funds.

Low Remote

Expenditures are not recorded in accordance with GAAP due to inadequately trained accounting personnel.

Low Remote

Indirect costs are not posted to accounting records when drawdowns are made.

Low Remote

Strategic Cash/Revenue collection efforts are inadequate to fund the agency's missions.

Medium Remote

Operations Agency fails to earn adequate interest on cash deposits.


Bank fails to credit agency's bank account properly.

Low Remote

Federal drawdowns are made late. Low Reasonably Possible

Agency fails to bill for all services rendered.

Medium Remote

Customer billings fail to cover costs incurred.


The Agency may incur an operating loss for one or more programs. Due to the importance of the program, management may choose to continue to operate the program with an operating loss by allocating other Agency resources to the program.

Yes

Agency is not reimbursed for federal expenditures incurred due to late reimbursement request.


Agency is not reimbursed for federal expenditures due to lack of drawdown request.


3. CASH RECEIPTS/REVENUES

ERM Page 4


Page 5 of 17

ACCT 2015



ObjectiveCategory

Federal Funds are drawn before the Federal disbursements are made.


Agency requests duplicate draws of Federal Funds for the same expenditure.


Cash is not deposited in the bank in a timely manner causing the agency to lose potential investment income.

Low Remote

Overpayment to a vendor is not received back from vendor for deposit back into a THDA account.


Reporting Revenues are recorded before earned. Low Remote

Revenues are recorded before available and measurable under modified accrual funds.

Low Remote

Revenue recorded in customer database does not match actual payment made by customer.


Revenues recorded in system do not match amounts deposited or received.

Low Remote

Deposits are not recorded in the proper period.

Low Remote

Revenue is recorded in incorrect revenue category.


Revenue is not recorded in accordance with GAAP due to inadequate training of accounting personnel.

Low Remote

Agency is reimbursed for federal funds before expenditure is incurred resulting in unearned revenue recognition.


ERM Page 5


Page 6 of 17

ACCT 2015



ObjectiveCategory

Deferred revenue is not transferred to earned revenue in the period earned.


Direct deposits are recorded in wrong period.

Low Remote

Person receiving cash fails to stamp check with agency's account number and check is deposited in wrong account.


Check is lost in route to bank resulting in receipts not matching cash deposited.

Low Remote

Cash receipt clerk totals deposit slip incorrectly and bank records incorrect deposit amount.


Date cash received is not recorded on remittance support.


Excess cash collections are recorded as revenue instead of as a liability.


Strategic Inadequate cash on hand to support organization's mission/vision.

High Remote

Operations An agency's uninsured/uncollateralized deposits with an insolvent depository are unrecoverable.

Medium Remote

Fund transfers to other bank accounts are not recorded in bank ledger resulting in insufficient funds upon a bank debit.


Significant time lapse between drawdowns of funds from Treasury and actual receipt/recording of funds.


4. CASH MANAGEMENT

ERM Page 6


Page 7 of 17

ACCT 2015



ObjectiveCategory

A returned check is not followed up on in a timely manner resulting in diminishing probability of collection.


Agency's checks have no void time frame printed on checks resulting in check remaining on outstanding check list for an excessively long amount of time or checks outstanding for a long period of time are not cancelled.

Low Remote

Reporting Fees charged by a financial institution are not reported in the financial records understating expenditures and overstating cash.

Low Remote

A certificate of deposit with an original maturity date of 24 months is incorrectly classified as cash equivalent.

Low Remote

An investment maturity automatically deposited in checking account is not properly recorded in accounting records.

Low Remote

A returned check is not recorded in the accounting records.


Deposits made from a separate collection location is forwarded late to the main office and therefore not recorded in accounting records timely resulting in misstatement of cash on year end financial statements.

Low Remote

Strategic All payables, gains and loss contingencies and other liabilities are not properly accrued, reported, or disclosed.


5. LIABILITIES

ERM Page 7


Page 8 of 17

ACCT 2015



ObjectiveCategory

Operations Sufficient funds are not available to liquidate liabilities.


The agency missed the opportunity to take advantage of discounts by remitting payment beyond the discount date due to late processing.


Reporting A liability for claims for losses that have been incurred and not reported are not accrued or measured using the measurement criteria in accordance with GASB 10.

Low Remote

Accrued liabilities at fiscal year end are overstated in order to increase the level of expenditures in the next fiscal year

Low Remote

Vendor invoices received prior to month-end are not entered into the accounting records until the following year, understating liabilities at year end.


Invoice amounts are recorded into accounting system for wrong amounts.


Calculations per vendor's invoice are incorrect but the total due was accrued as a liability and subsequently paid.

Low Remote

An invoice not belonging to the agency is entered into the accounting system.

Low Remote

Vendor credit advice is never received for goods that were returned.


ERM Page 8


Page 9 of 17

ACCT 2015



ObjectiveCategory

Invoices received in numerous other locations are not sent to the processing office until after year end, understating liabilities.


Long term contract contractor's request for progress payments are accrued as liabilities even though they have yet to complete the first phase of construction.

Low Remote

Utility bills for the last month of the fiscal year not yet received prior to year end are not accrued but recognized as an expense in the following year.


Warrants are for an amount different than supporting invoices.

Low Remote

Compensated absences are not disclosed with the proper additions and reductions.


Strategic The agency is unable to adequately manage and account for their capital assets


Operations Equipment is destroyed in a fire. High RemoteInterdepartmental transfer of equipment is not recorded.

Low Remote

Continuous maintenance needs of equipment causes numerous hours of lost productivity.

Low Remote

Asset cannot be located. Low Reasonably Possible

Management failed to send a completed inventory of office contents to Risk Management.


6. CAPITAL ASSETS/INVENTORY/EQUIPMENT

ERM Page 9


Page 10 of 17

ACCT 2015



ObjectiveCategory

Agency is billed for telephone lines not utilized.


State agency fails to disconnect utilities at a location it has moved from and State continues to pay bills.


Reporting Project expenditures are not posted to the project file which tracks project year to date expenditures.


Destroyed equipment/asset is not removed from accounting system.


Capital asset is not coded correctly at time of purchase resulting in expense of costs instead of capitalization.


Impairments in accordance with GASB 42 are not reported to the Division of Accounts.

Low Remote

Intangible assets are not identified as such and are expensed instead of capitalized in accordance with GASB 51.

Low Remote

Related accumulated depreciation is not removed from the records for disposals.

Low Remote

Strategic Processed transactions and procedures fail to provide timely data to compile financial statements that are accurate and reliable.

Medium Remote

Operations The necessity of numerous offline adjustments causes the financial statements to be completed beyond a reasonable timeframe.

Medium Remote

9. FINANCIAL REPORTING

ERM Page 10


Page 11 of 17

ACCT 2015



ObjectiveCategory

Reporting The agency fails to properly adopt new accounting pronouncements due to uninformed and untrained personnel.

Medium Remote

Fund balance is reserved and Net Position are not restricted in accordance with statutory requirements.


Restrictions on Net Position are discussed with management prior to the restriction being placed. Financial Statements are audited prior to release.

Yes

Financial statements do not articulate. Medium RemoteAgency fails to identify all of their reserve and restriction requirements.

Low Remote

Strategic Recording and collection efforts are inadequate.


Operations Poor record management of receivables results in lost revenues and misstated receivables.


Collections are not applied to the correct customer account.


Agency fails to follow up on interfund receivable for federal expenditures resulting in loss of federal funds due to time lapse.


Lack of collection efforts of delinquent receivables results in more write offs and loss of revenue.


Reporting Cash collections unable to be identified with a subsidiary account.


Prior year's receivable reversal of a significant account is written off without adjusting the reversal.


A payment is recorded in a customer account but not deposited.


10. ACCOUNTS RECEIVABLE

ERM Page 11


Page 12 of 17

ACCT 2015



ObjectiveCategory

Receivables are reduced or written off without proper authorization.


Interest and fees are not calculated properly.


Collections from separate collection site are not recorded in system due to untimely receipt by processing location.


The related estimated uncollectible account is not debited for a write off.


Strategic Receivable account is erroneously credited for more than funds received.


Operations Financial statements fail to portray actual investment balances and activity.

Medium Remote

Quoted market prices are not available for valuing derivatives resulting in the reliance on significant assumptions.

Medium Remote

Investments are incorrectly valued on the financial statements due to lack of qualified accounting personnel.

Medium Remote

11. INVESTMENTS

ERM Page 12


Page 13 of 17

ACCT 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?FEDERAL PROGRAMSOMB Circular A-133 Reporting

All required federal reports are not submitted accurately and timely to the federal awarding agency.


Prepare Year-end list of deadlines. Accounting work is completed in time to comply with the HUD reporting deadlines. Unaudited info is due 60 days after fiscal year end and audited is due 9 months after fiscal year end.

Yes

All required federal reports are not submitted accurately and timely to the federal awarding agency.


Prepare required federal reports for HHF, WAP and LIHEAP as required.

Yes

STATE LAWS AND RULESF&A Policy 5, Application of GASB Statements 3 and 40

Financial statements are not prepared in accordance with GASB Statements 3 and 40, as outlined in Policy 5.


Financial statements are prepared in accordance with GASB 3 and 40. Financial statements are audited by State Audit.

Yes

F&A Policy 7, Petty Cash and Departmental Bank Accounts

Bank account reconciliations are not performed timely.


Bank/trustee account reconciliations are performed monthly. Petty cash is now closed.

Yes


ACCT Part 2 Compliance

Impact Likelihood


ERM Page 13


Page 14 of 17

ACCT 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?Impact Likelihood


F&A Policy 20, Recording of Fed Grant Expenditures and Revenues

All federal grants are not loaded onto the Edison Grants Module.


Effective 08/01/09, Grants are loaded into Edison by THDA.

Yes

All grant related expenditure and revenue transactions are not coded with the appropriate grant(s) at the time the initial transaction is recorded.


Edison grant related expense transactions are reviewed by authorized approvers for proper project/ grant coding at time transaction is approved and workflowed to F&A for further approval. Grant info is entered in the PO when it is set up in Edison and approved. The grant info on the PO flows through to the AP voucher. The AP clerk and the approver review the account coding when entering or approving a voucher. Appropriate speedchart (including grant coding) is coded in interface to Edison for S8RA and S8CA expense payments. Edison codes grant revenue at the time the expenditure transaction is posted based on the grant expense coding. The Billing Process creates an AR item list for federal funds. When grant funds are received, the deposit is made. Then the funds are credited against the appropriate AR item or put on account. Grant expenditures and revenues are reconciled monthly.

Yes

The Edison report Schedule of Grant Activity is not used as the basis for preparing the Schedules of Expenditures of Federal Awards.


SEFA is prepared using the Edison query TN_GR06_SEFA_EXP. Query TN_GR06_SEFA_EXP is sent with SEFA to F&A.

Yes

ERM Page 14


Page 15 of 17



Year-end Accounting Reference Manual from F&A

The Schedule of Expenditures of Federal Awards (SEFA) and Supplementary Information Schedule are not prepared in accordance with the requirements of OMB Circular A-133 .


SEFA is prepared by following instructions in the Year-end Accounting Reference Manual received from F&A. SEFA reviewed by State Audit during audit.

Yes

F&A Policy 25, Deposit Practices Policy

Funds are not deposited immediately as required by TCA 9-4-301 and as defined by F&A Policy 25.


Deposits to state and trustee accounts are made daily. Yes

Arbitrage Five year calculations are not prepared in compliance with IRS regulations. IRS form 8038T and check for IRS rebate payable for five year calculations are not sent to the IRS by the due date.


Controller keeps up with Arbitrage information. Arbitrage calculations are prepared by outside firm. Controller keeps up with Arbitrage payment deadlines after receiving five year calculations. In addition, THDA's arbitrage calculation provider also maintains a list of due dates for arbitrage calculations.

Yes

GASB Statements

GASB statements applicable to the agency are not implemented when required.

High Remote Accounting staff reviews GASB statements when released and determines their applicability to the agency. Accounting staff has online access to GASB Governmental Accounting Research System (GARS)

Yes

Patient Protection and Affordable Care Act (PPACA)

Part-time employees work greater than an average of 30 hours per week over a 12 month period.


Management should regulate the number of hours temporary employees work so that the agency complies with PPACA

N/A

PPACA Vendor assigned temporaries work for periods exceeding 90 days per assignment.


Management should keep up with the number of days vendor assigned temps work do not exceed 90 days per assignment so they comply with PPACA.

N/A

ERM Page 15


Page 16 of 17



PPACA Independent contractors work can be construed to be the same as a state employee and they work greater than an average of 30 hours per week over a 12 month period.


Independent contractors should maintain their independence so as not to be construed to be a state employees. Management should regulate the number of hours they work so they comply with PPACA.

N/A

ERM Page 16


Page 17 of 17

ACCT 2015 ControlOperating

Inherent Risk Control Activity Effectively?Improper journal entries recorded in order to assist with balancing other accounts.


All journal entries and reconciliations are reviewed by the employee's supervisor.

Yes

TARS money orders fraudulently misappropriated.


Money orders are delivered to a locked mailbox. They are received by one employee and copies are made. The copies are used to post to the S8RA system by another employee.

Yes

Unauthorized access to sensitive data. Medium Reasonably Possible

A key card system has been installed on doors to prevent access to non-employees. Sensitive data is also locked in file cabinets, if possible. Sensitive data is placed in secured bins for shredding at the appropriate time. Documents are shredded by a contractor with the State of Tennessee

Yes

Fraud committed through negligence as a result of manager/supervisor not checking claims for payments.


All Edison AP vouchers are reviewed and approved by 1 supervisor. Vouchers over $2,000 are also workflowed to F&A for final approved.

Yes

System is manipulated resulting in payments to non-existent suppliers.


Invoices submitted for payment are signed and approved by a member of management. The process of adding vendors in Edison is performed by the Division of Accounts. The addition of a vendor requires a valid taxpayer id number. SL AP - All Payments are reviewed by Management or a Senior Accountant level before being released. (Compensating control to lack of approval of vendor additions. Staff is limited, therefore it is ineffective to assign vendor edit to another staff member.)

Yes

Personal items are purchased using agency payment/credit card.


All transactions purchased on a payment card are reviewed by a supervisor and approved in Edison.

Yes

Transfer of funds from a trustee account to a personal bank account.


Transfer letters transferring funds to a non-THDA account must be signed by two senior staff level employees (usually CFO and Director of Finance).

Yes

Impact Likelihood


ACCT Part 3 Fraud

ERM Page 17

Civil Rights Compliance ERM 2015.xlsx

Objective Category Risk and Exposure Impact Likelihood Control Activity Control Operating Effectively?

Operations RA requests are not received by the Section 504 Coordinator. Med Remote

RA requests must be approved within 10 calendar days of receipt of information. RA requests are submitted by email via [email protected]. The Section 504 Coordinator and IA Administrative Assistant have access to the email account and check daily. Yes

Operations RA requests are not processed after being received. Med Remote

RA requests must be approved within 10 calendar days of receipt of information. Rental Assistance Specialists require decision information to process certifications and send emails asking for reasonable accommodation decision deadlines. RA requests are tracked using a spreadsheet which is maintained on the Mdrive (S8/Reasonable Accommodations/Request Log). Yes

Operations RA requests are not processed according to procedures. Med Remote

RA requests must be approved within 10 calendar days of receipt of information. RA requests are reviewed and processed by two staff members (Section 504 Coordinator and IA Administrative Assistant) with a set of checks and balances included in the procedures. Yes

SECTION VI CONTROL ACTIVITIES Part 1 Strategic, Operations and Reporting Objectives

1. Reasonable Accommodation (RA Requests) Requests

Page 1 of 9 ERM Page 18


OperationsRA requests contain inaccuracies and are processed based on those errors. Med Remote

Reasonable accommodations require medical certification of need which would identify inaccuracies. Rental Assistance Specialists can review the RA request submitted and identify some inaccuracies in household and bedroom size as well as income sources. Yes

OperationsVAWA requests are not received by the Section 504 Coordinator. Med Remote

VAWA requests must be decided quickly to protect the victim of violence and allow the family to relocate. VAWA requests are submitted by email via [email protected]. The Section 504 Coordinator and IA Administrative Assistant have access to the email account and check daily. Rental Assistance Specialists send follow up emails regarding the status of the request and the tenant's ability to relocate. Yes

Operations VAWA requests are not processed after being received. Med Remote

VAWA requests must be decided quickly to protect the victim and allow the family to relocate. Rental Assistance Specialists send follow up emails regarding the status of the request and the tenant's ability to relocate. Yes

OperationsTitle VI complaints are not received by the Title VI Coordinator. High

Reasonably Possible

Currently, Title VI complaints are submitted by email via to [email protected]. Going forward the complaints will be submitted to a Complaint email.

No‐A work order has been submitted to IT for a new email address [email protected]. Access to the email account will be shared by the Title VI Coordinator and the Director of Internal Audit.

2. Violence Against Women Act (VAWA) Requests

3. Title VI Complaints



Operations Title VI complaints are not processed after being received. High Remote

Title VI complaints are tracked using a spreadsheet which is maintained on the Mdrive (Title VI/THDA Title VI Complaint Log). Yes

OperationsTitle VI complaints are not processed according to procedures. High Remote

Title VI complaints are reviewed and processed by two staff members (Title VI Coordinator and Internal Audit Director) with a set of checks and balances included in the procedures. Yes

Operations No Title VI training is offered to THDA employees. High Remote

The THRC requires annual Title VI training for employees. THDA's Title VI employee training is assigned to the Title VI Coordinator. The training can be outsourced or conducted internally. The Title VI Coordinator tracks attendence and reports completed to the Chief Strategy Officer. Yes

ReportingTracking of THDA employees receiving Title VI training is not maintained. High Remote

THRC requires annual employee training on Title VI. If records are not maintained, information cannot be included in the annual Title VI Implementation Plan. The Title VI Coordinator complies training statistics and reports out to the Chief Strategy Officer. Yes

4. THDA's Annual Title VI Employee Training



OperationsTHDA's Title VI Implementation Plan is not prepared in accordance with THRC requirements. High Remote

Annually, THDA is required to submit an agency Title VI Implementation Plan to the THRC. The Implementation Plan is drafted in Research and Planning with oversight from the Title VI Coordinator. Several staff members, including the Title VI Coordinator attend THRC training which details the requirements for the Plan. The Implementation Plan is reviewed by the Chief of Strategy, Title VI Coordinator, and Director of Research and Planning. Yes

OperationsTHDA's Title VI Implementation Plan contains erroneous information. High Remote

Annually, THDA is required to submit an agency Title VI Implementation Plan to the THRC. The Implementation Plan is drafted in Research and Planning with oversight from the Title VI Coordinator. Several staff members, including the Title VI Coordinator attend THRC training which details the requirements for the Plan. The Implementation Plan is reviewed by the Chief of Strategy, Title VI Coordinator, and Director of Research and Planning. Yes

5.THDA's Title VI Implementation Plan



ReportingTHDA's Title VI Implementation Plan is not prepared or submitted by the deadline. High Remote

Annually, THDA is required to submit an agency Title VI Implementation Plan to the THRC. The Implementation Plan is drafted in Research and Planning with oversight from the Title VI Coordinator. Several staff members, including the Title VI Coordinator attend THRC training which details the requirements for the Plan. The completed Implementation Plan is review by the Chief of Strategy, Title VI Coordinator, and Director of Research and Planning. The deadline for submission is tracked by the Title VI Coordinator and the Chief Strategy Officer. Yes

ReportingTHDA's Title VI Implementation Plan is prepared but not submitted by the deadline. High Remote

Annually, THDA is required to submit an agency Title VI Implementation Plan to the THRC. The Implementation Plan is drafted in Research and Planning with oversight from the Title VI Coordinator. Several staff members, including the Title VI Coordinator attend THRC training which details the requirements for the Plan. The deadline for submission is tracked by the Title VI Coordinator and the Chief Strategy Officer. Yes



Operations Qualified contracts are received by THDA but not processed. MedReasonably Possible

As low‐income housing credit properties reach their opt‐out date, they are eligible to submit a qualified contract to THDA. The QCP details the process to exit the low‐income housing credit program according to IRC Section 42. The QCP documentation is submitted to the Multifamily Advisor by email. The Multifamily Advisor maintains a log of properties who have submitted their applications. No

OperationsQualified contracts are received by THDA but not processed according to guidelines. Med Remote

As low‐income housing credit properties reach their opt‐out date, they are eligible to submit a qualified contract to THDA. The QCP details the process to exit the low‐income housing credit program according to IRC Section 42. QCPs are processed by the Multifamily Advisor and the Paralegal in the Legal Division and reviewed by the Director of Multifamily Development. Yes

Operations Qualified contract are processed with erroneous information. Low Remote

As low‐income housing credit properties reach their opt‐out date, they are eligible to submit a qualified contract to THDA. The QCP details the process to exit the low‐income housing credit program according to IRC Section 42. QCPs are processed by the Multifamily Advisor and the Paralegal in the Legal Dvision and reviewed by the Director of Multifamily Development. Yes

6. Qualified Contract Process (QCP) for Low‐Income Housing Credit Properties



Law, Rule, Regulation Risk and Exposure Impact Likelihood Control Activity to Ensure Responsible Area Control Operating Effectively?

24 Code of Federal Regulations Part 982, Section 8 Tenant Based Assistance Housing Choice Voucher Program and 0770‐01‐05 Housing Choice Voucher

Tenants are not allowed to request a reasonable accommodation. High Remote

RA requests are made by tenants. The tenant can request a form from their Rental Assistance Specialist, the Section 504 Housing Coordinator, or any THDA employee. Yes

THDA does not follow federal and state regulations to process RA requests. High Remote

RA requests are processed by the Section 504 Housing Coordinator and the Administrative Assistant in Internal Audit. Rental Assistance Yes

Tenants are not allowed to make a VAWA request. High Remote

VAWA requests are made by tenants. The tenant can request a form from their Rental Assistance Specialist, the Section 504 Housing Yes

Title VI of the Civil Rights Act of 1964 and Tennessee Code Annotated §4‐21‐203

Program participants are not allowed to make a Title VI Complaint. High Remote

Title VI Complaints forms are available on THDA's webpage in accordance with THRC procedures. Yes

THDA does not enforce Title VI requirements. High RemoteThe Title VI Coordinator reports to the Chief Strategy Officer who routinely reviews her Yes

THDA does not submit a Title VI Implementation Plan. High Remote

The Title VI Coordinator reports to the Chief Strategy Officer who monitors compliance with the draft Implementation Report and the Yes

SECTION VI CONTROL ACTIVITIESPart 2 Compliance

1. Reasonable Accommodation Requests (RA requests) and Violence Against Women Act (VAWA)

2. Title VI Complaints, Employee Training and Implementation Plan



Internal Revenue Code §42 and Regulations Owners are not allowed the ability to opt‐out of the program. High Remote

The QCP process is published on THDA's webpage in accordance with federal regulations. Yes

Owners are not required to follow the regulations to opt‐out. High Remote

The QCP process is handled by the Multifamily Advisor and the Paralegal in the Legal Division. The QCP is reviewed by the Director of Multifamily Development. Yes

3. Qualified Contract Process (QCP)



Inherent Risk Impact Likelihood Control Activity

RA/VAWA requests are approved by someone other Small Remote

Title VI complaints are approved by someone other Small RemoteTitle VI employee training is reported as conducted when it Small RemoteThe Implementation Plan was Small Remote

Program participant could submit a QCP request without Small Remote

2. Title VI Complaints, Employee Training and Implementation Plan

3. Qualified Contract Process (QCP)

SECTION VI CONTROL ACTIVITIESPart 3 Fraud

1. Reasonable Accommodation Requests (RA requests) and Violence Against Women Act (VAWA)Control Operating Effectively?


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CP 2015


Strategic Agency does not administer the federally-funded HOME Program in accordance with the new federal regulations. The new regulations make sweeping changes to HOME with staggered implementation dates.

Small Remote Agency has developed a comprehensive Program Description and HOME Manual to assist staff and Grantees to administer the Program in accordance with the federal regulations. The 2014 and 2015/2016 Program Descriptions have been updated to include these new program requirements, and the Division contracted with ICF Consulting, the HUD TA provider, to update the HOME Manual. Additional revisions to the manual will be completed to bring Manual in accord with 2015/2016 Program Description.

Yes

Operations HOME funds are used to assist households that are not income eligible.


Agency staff provides annual training for HOME administrators; the HOME Manual provides guidance on how to determine eligibility; staff reviews income determinations as part of the program monitoring. Community whistle blowers alert administrators to those perceived as cheating.

Yes

HOME funds are invested in rental units without securing the HOME affordability period.

Low Remote As of July, 2014, the THDA Board approved eliminating all rental production from the HOME program and moving it to the Competitive Grants of the Housing Trust Fund.

Yes

Downpayment assistance programs do not secure the HOME affordability period.

High Remote The HOME funds for downpayment assistance and the HOME legal documents are sent to the closing attorney in escrow to be executed as part of the closing.

Yes

Federal compliance deadlines for 24-month CHDO commitment and 5 year expenditure deadline for HOME funds are not met.


Beginning in FY 2015, HUD will no longer track CHDO commitment as a cumulative amount. CHDO commitments will be tracked by program year. HUD will no longer track CHDO reservations, but will only consider a commitment as a specific project entered in IDIS. In addition, program year funds must be expended on grants awarded in that program year. THDA will not be able to use funds recaptured in a prior year in the current program year. THDA will continue to monitor the monthly report issued by HUD to monitor commitment and expenditure deadlines.

Yes


CP Part 1 Strategic, Operations and Reporting Objectives

Impact Likelihood


Objective Category

1. HOME Program

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Objective Category

HOME grants are made to non-profit organizations that have questionable financial viability.


Grantees are required to provide a current audit or current financial statements with the application for funding. Staff reviews the financials using a spreadsheet developed by THDA's Internal Audit Division to evaluate the financial ratios of the organization. The Internal Audit Division is available if CP staff has additional questions.

Yes

Strategic Agency does not administer ERP in accordance with its established policies.

Small Remote Agency developed the program in conjunction with the nine development districts who administer the program. Agency staff will be developing a program manual to cover program operations for grantees.

Yes

Operating ERP funds are used to assist homeowners who are not age or disability-eligible.

Small Remote Program guidelines limit eligibility to homeowners who are either 60 years and older or have a disability qualified through SSI or SSDI. Agency staff relies upon program administrators to document eligibility based on age or disability.

Yes

ERP funds are used to assist homeowners who are not income eligible.

Small Remote Agency staff provides guidelines and sample applications to assist in determining income eligibility to administrators on the THDA website.

Yes

ERP funds are used without the required matching funds.

Small Remote Draw requests for the ERP program require documentation of matching funds.

Yes

ERP funds are used to assist persons who are not homeowners.

Small Remote Program guidelines limit participation to those who have an ownership interest in the property. Agency staff relies on administrators to document proof of ownership.

Yes

Strategic Agency does not allocate HTF Competitive grants in accordance with published guidelines.

Small Remote A Program Description is developed and approved by the Board to clarify eligible activities and program policies. A revised policy for the Spring 2016 round will be developed that establishes priorities for the use of funds targeted to populations targeted in THDA's strategic objectives: youth transitioning out of foster care and ex-offenders. The updated program description will be submitted to the THDA Board for consideration in January 2016 Beginning with the 2015 Fall Round, the Competitive Grants are solely for rental housing development.

Yes

Operations Projects funded by the HTF Competitive Grants do not serve the low-income, the very low income, individuals with disabilities, the elderly, youth transitioning out of the foster care system, and/or ex-offenders as specified in the project application.

Medium Small Agency staff provides annual training for HTF administrators; the HTF Manual provides guidance on how to determine eligibility; staff reviews income determinations as part of the program monitoring.

Yes

3. Competitive Grants (Housing Trust Fund )

2. Emergency Repair Program (Housing Trust Fund)

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Objective Category

Projects funded by the HTF Competitive Grants do not include the required 50% matching funds.

Medium Small Draw requests for HTF projects require administrators to identify the source of the other funding for the project. Agency Staff tracks HTF draws and the matching funds. Those projects using services as a source of match will be required to report the service dollars prior to project close out.

Yes

HTF projects do no adhere to established rent limits.

Medium Small Agency staff provides training for program administrators at the beginning of the grant. Rent limits are provided in the HTF manual and on the THDA website. Rents are reviewed during monitoring, and there are findings if the rents are not within program guidelines.

Yes

Strategic Agency does not administer Rebuild and Recover in accordance with the Program Description.

Small Remote Disaster grants are only awarded after the Agency is contacted by the local community and an assessment of the level of damage has been made. Grantees are encouraged to select a program administrator experienced in THDA grant programs.

Yes

Operations Projects funded by Rebuild and Recover Grants do not serve low-income households.

Medium Small Agency staff provides technical assistance to Rebuild and Recover administrators and uses the HTF Manual to provide guidance on how to determine eligibility. Draw requests require administrators to identify beneficiaries' income level.

Yes

Projects funded by Rebuild and Recover Grants do not include the required 50% matching funds.

Medium Small Local officials provide documentation of volunteer labor and other services in the immediate aftermath of a disaster as part of the required match. Draw requests for Rebuild and Recover projects allow administrators to identify the other sources of matching funds from the owner, insurance, or donations.

Yes

Strategic Agency does not administer Habitat TN in accordance with the Program Description.

Small Remote At its July 2014 meeting, the THDA Board approved a Program Description for Habitat Tennessee which clarifies eligible activities and program policies. The Board will review this set-aside at the end of three years.

Yes5. Habitat Tennessee ( Housing Trust Fund)

4. Rebuild and Recover ( Housing Trust Fund)

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Objective Category

Operations Habitat Tennessee homeownership projects do not adhere to program requirements for permanent financing, homebuyer education and homebuyer contribution.

Low Small Agency staff has provided training for the program administrator with each grant round beginning in 2007. Homebuyer requirements are provided in the HTF manual. There is a desk audit of each draw request that reviews the required documentation.

Yes

Strategic Agency does not administer the federally-funded ESG Program in accordance with the updated federal regulations required by the HEARTH Act.

Small Remote Agency has developed a comprehensive Program Description and ESG Manual to assist staff and Grantees to administer the Program in accordance with the federal regulations.

Yes

Operations ESG funds are used to pay for activities that do not: support the operation of a shelter; provide street outreach to the homeless; provide prevention and rapid re-housing activities; provide essential and supportive services to the homeless, or to support the operation and administration of a Homeless Management Information System (HMIS).

Medium Remote Agency staff provides annual training for ESG administrators; the ESG Manual provides guidance on eligible activities; staff reviews activities with each draw request.

Yes

ESG funds are not used in accordance with federal definition of homelessness.

Small Remote Agency staff provides annual training for ESG administrators; the ESG Manual provides guidance on the homeless definition; staff reviews activities with each draw request. Documentation on homelessness for a random sample of households is reviewed during monitoring.

Yes

ESG funds are used without the required matching funds.

Small Remote Draw requests for the ESG program require documentation of matching funds. Matching funds are verified during monitoring.

Yes

ESG funds for prevention and rapid re-housing activities are paid directly to clients.

Medium Remote Draw requests for these activities require documentation of payment. Payments made to clients are not eligible and are not reimbursed.

Yes

ESG grantees do not provide data in HMIS to the local Continuum of Care as required by the ESG regulations.

Small Reasonably Possible

ESG applicants are required to provide certification of their participation in the local Continuum from the lead agency. The Continuum lead agencies keep Agency staff informed of any non-participation issues.

Yes

Strategic Agency does not administer the federally-funded NSP Program in accordance with the federal regulations.

Small Remote Agency has developed a comprehensive Program Description and NSP Manual to assist staff and Grantees to administer the Program in accordance with the federal regulations.

Yes

6. Emergency Solutions Grant (ESG) Program

7. Neighborhood Stabilization Program (NSP)

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Objective Category

Operations NSP funds are used to pay for activities that are not eligible under the NSP regulations.

Medium Remote Agency staff provided training for NSP administrators at the beginning of the program; the NSP Manual provides guidance on eligible activities; staff reviews activities with each draw request. All NSP program funds have been expended.

Yes

NSP funds are invested in units without securing the NSP affordability period.

High Small Grantees are not allowed to draw down NSP funds for a project until the Grant Note has been executed; the Deed of Trust and Restrictive Covenant between THDA and the Grantee are executed and sent for recording once the Grantee has purchased the property.

Yes

Downpayment assistance programs do not secure the NSP affordability period.

High Remote The NSP funds for downpayment assistance and the NSP legal documents are sent to the closing attorney in escrow to be executed as part of the closing.

Yes

NSP grantees funded under the 25% set-aside do not have tenants with annual incomes at or below 50% of area median income.


NSP grantees are monitored by Agency staff, and tenant data is entered into HUD's DRGR system. NSP grantees identified as having problems in their rental program are scheduled for a second monitoring visit.

Yes

Strategic Agency does not administer the federally-funded WAP Grant in accordance with published federal regulations.

Small Remote Agency has developed detailed State Model Plan and guidelines to assist staff and grantees to administer the program in compliance with federal regulations.

Yes

Operations WAP funds are used to assist ineligible households.


Agency staff provide training on WAP eligibility and income guidelines. A WAP Policy and Procedure manual has been developed and training is being provided to all sub-grantee agencies prior to program implementation. Staff will review income eligibility as part of program monitoring.

Yes

WAP funds are used for energy efficiencies that are not allowable or not recommended by the energy audit.


Agency has provided program training and a new manual to address this concern. Documentation that supports the validity of all measures included in a home must be provided with the draw request. A desk review will be conducted on this documentation prior to payment being made to the sub-grantee.

Yes

Quality Workmanship. High Reasonably Possible

THDA has developed a detailed policy and procedures manual to address this concern, and emphasizes sub-grantee responsibility for ensuring all work is completely and correctly performed prior to contractor payment. Pictures are required of all completed work, and must be retained in the client file. Poor performers face termination from future program participation.

Yes

8. Weatherization Assistance Program (WAP)

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Objective Category

Reporting Sub-grantee submits incorrect data that does not match invoiced expenditures and results in incorrect federal reporting.

Medium Reasonably possible

THDA has enhanced the existing WAP database to provide increased data reporting and edit checks to ensure data quality. Correct and complete information must be entered into the database, which will be checked for accuracy as part of THDA's desk review for all draw requests.

Yes

Strategic Agency does not administer the federally-funded LIHEAP Grant in accordance with published federal regulations.

Small Remote Agency has developed a detailed state plan and guidelines to assist staff and grantees to administer the program in compliance with federal regulations.

Yes

Operations LIHEAP funds are used to assist ineligible households.


Agency staff provide training on LIHEAP eligibility and income guidelines. A LIHEAP Policy and Procedure manual has been developed and training is being provided to all sub-grantee agencies. Staff will review income eligibility as part of program monitoring.

Yes

LIHEAP funds will be used for the first time to provide weatherization assistance activities.

Medium Remote Agency staff is developing programmatic guidelines and operational procedures for the use of LIHEAP for this purpose. Regarding programmatic questions and issues, the Agency has consulted with both HHS and DoE, the funders of LIHEAP and WAP respectively, as both WAP and LIHEAP are intended to work seamlessly for this purpose. Sub-grantees will receive training on eligible activities and processes for the draw down of funds. Programmtic information will be posted on the Agency web site for ready access.Modifications to THDA CRM database will be made to track production and funding for this purpose.

Yes

Reporting LIHEAP reports are due in a federal database. Small Reasonably possible

Notice is given regarding submission of reports. THDA requires agencies to report categories and benefit levels with each monthly invoice. Additionally, THDA uses software provided by an external vendor (THO) so we can obtain the data and validate the results in house.

Yes

9. Low Income Home Energy Assistance Program

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CP 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?

HOME Regulations 24 CFR Part 92

Costs charged to a project exceed the maximum HOME subsidy limits.


Agency staff provides training to program administrators on an annual basis to review HOME regulations. Agency staff reviews draw requests for each activity, including the total amount of HOME funds committed to the activity. The Agency also uses the base subsidy limits as published in the Federal Register instead of the higher MSA limits. This allows projects to rise to the higher subsidy level in the event of an unforeseen problem.

Yes

Units built or rehabilitated with HOME funds do not meet local codes or the applicable international code.


Agency has provided design, code and rehabilitation standards training for program administrators and inspectors. Qualified inspectors are required as part of overall project design in the review process. Final payments require certification by the inspector that the unit meets the applicable code. Beginning in 2010, approval by the local code inspector has been required for final draw requests in communities with local codes. Administrators must submit documentation at the beginning of the grant from the local codes department specifying what local codes will inspect. The new HOME regulations made extensive changes to property standards and inspections. THDA has hired a certified IBC code inspector reviews and approves rehabilitation work write-ups and new construction plans and specifications. The QC Inspector also oversees a team of contracted inspectors to conduct initial, interim and final inspections on HOME projects state-wide.

Yes


CP Part 2 Compliance

Impact Likelihood


1. HOME

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CP 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?Impact Likelihood


Beneficiaries of HOME assistance or tenants residing in HOME-assisted units are not income eligible.


Agency staff provides training to program administrators on an annual basis; the THDA HOME Manual includes a section on how to determine income eligibility. Staff reviews income information during program monitoring.

Yes

HOME affordability requirements for rental projects are not secured.

High Remote Rental grantees are required to secure HOME affordability requirements with a Grant Note, recorded Deed of Trust and Restrictive Covenant prior to drawing down HOME funds for a project.

Yes

HOME affordability requirements for homeownership projects are not secured.

High Remote Homeownership projects for downpayment assistance require a Grant Note and Deed of Trust as part of the closing; construction financing projects require a Deed of Trust and Restrictive Covenant to draw down HOME funds to build the unit. These documents are released by THDA when the CHDO sells the unit and there is a Grant Note and Deed of Trust between the CHDO and homebuyer to secure the affordability period.

Yes

The project begins construction prior to the completion of the Environmental Review.


Agency staff logs environmental reviews as they are received and the funds released. The Grant tracking system includes check boxes to identify completed environmental reviews. Draw requests are not processed without a completed environmental review.

Yes

HOME projects do not comply with the Lead-based paint regulations.


Agency has provided lead-based paint training for contractors and inspectors; units constructed prior to 1978 require a risk assessment to begin drawing down HOME funds and a passing clearance test prior to the final draw. The HOME Manual includes a chapter on complying with Lead-Based Paint regulations.

Yes

HOME projects do not provide outreach to minority and female businesses or Section 3 contractors.

Small Remote In monitoring HOME projects, Agency staff reviews Grantee efforts to contact minority and female contractors and Section 3 contractors when soliciting bids. The HOME Manual includes a chapter on Equal Opportunity and Fair Housing and a list of minority and female contractors in the State.

Yes

HOME funded homeownership projects of more than 5 units do not include an affirmative marketing plan.

Small Remote The sample policies and procedures in the HOME Manual for homeownership projects includes a section on affirmative marketing. Agency staff reviews affirmative marketing documentation during project monitoring.

Yes

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HOME applications for homeownership projects do not demonstrate a market need for the proposed project.

Small Remote Homeownership applicants are required to submit a market study to demonstrate a need for the project. Staff reviews the market study and determines whether or not the project is responding to a community need.

Yes

ERP Policies Program beneficiaries do not meet income, disability, or age requirements.

Small Remote The THDA/CP webpage for ERP includes guidance on how to determine income eligibility and a sample application to capture demographic information including the age and/or disability of the beneficiary. The draw request form for ERP captures the income level of the program beneficiaries.

Yes

ERP assistance to a program beneficiary exceeds the $10,000 cap for ERP funds.

Small Remote Agency staff reviews each draw request to make sure it does not exceed the $10,000 maximum THDA funds.

Yes

ERP assistance to a program beneficiary does not include the required 50% in matching funds.

Small Remote Agency staff reviews each draw request to make sure the matching funds are included in the total project cost. Agency staff tracks each draw to account for the total of matching funds in each grant. On a case by case basis, Agency staff may allow excess match in some projects to assist match deficits in other projects.

Yes

Matching funds are not from an eligible source.

Small Remote Program guidelines provide guidance on eligible and ineligible sources of match. Staff reviews the source of the match on each draw request.

Yes

Competitive Grant Policies

Program beneficiaries do not meet income, age, and/or disability requirements.


Agency staff provides annual training for administrators; the HTF Manual provides guidance on how to determine eligibility. Draw request form requires administrators to identify income level of beneficiaries. Staff will review income documentation during monitoring.

Yes

Local programs do not provide the required 50% matching funds.

Small Remote Proposals must have an identified source of matching funds at application. Draw down requests require administrators to identify matching funds with each draw. Agency staff tracks matching funds with each draw request. In cases where the matching funds are being provided by case management services, administrators are required to document those services prior to project closeout.

Yes

New construction projects do not meet local codes or the applicable international code at the time of project completion.

Medium Remote Final draw requests for new construction projects must include documentation of a use and occupancy certificate from the local code department.

Yes

2. Emergency Repair Program (ERP) (Housing Trust Fund)

3. Competitive Grants ( Housing Trust Fund)

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Local programs have not adopted a set of policies and procedures to govern the operation of rental programs.

High Remote Agency staff provides training to program administrators at the beginning of the grant. Copies of policies and procedures are required to be submitted to THDA prior to drawing down grant funds. Policies and procedures are reviewed during monitoring.

Yes

Rebuild and Recover Policies

Program beneficiaries do not meet income requirements.


The Rebuild and Recover Program Description defines the income level for the program. Grantees/administrators use the HTF Competitive Grant Manual for guidance on how to determine eligibility. Income level is included on the draw request as part of a desk review in approving the draw request. Staff will be developing a Rebuild and Recover Manual by July 31, 2016.

Yes

Local programs do not provide the required 50% matching funds.

Small Remote Local officials provide documentation of volunteer labor and of other State services in the immediate aftermath of a disaster. On individual units, owner contributions, insurance payments provide additional matching funds.

Yes

New construction projects do not meet local codes or the applicable international code at the time of project completion.

Medium Remote Final draw requests for new construction projects must include documentation of a use and occupancy certificate from the local code department.

Yes

4. Rebuild and Recover (Housing Trust Fund)

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Habitat Tennessee Policies

Program beneficiaries do not meet income requirements.


The HTF Manual provides guidance on how to determine eligibility. Habitat TN submits beneficiary application and income verification with draw request as part of desk audit in approving the draw request.

Yes

Habitat TN does not provide the required 50% matching funds.

Small Remote HTF funds are limited to $15,500 per unit by program design with the balance of the funds needed to construct the unit providing the match. Agency staff tracks matching funds with each draw request.

Yes

The newly constructed homes do not meet local codes or the applicable international code at the time of project completion.

Small Remote Draw requests for Habitat TN include documentation of a use and occupancy certificate from the local code department.

Yes

NSP Regulations- Title III of Division B of HERA or 24 CFR 570, as applicable

NSP funds are not used to purchase properties in areas identified as "highest need."

Small Remote Agency staff allocated NSP funds only to areas of highest need throughout the State and provided maps of the high need census tracts. Each draw request is reviewed to make sure the property being purchased is located in a high need census tract. All NSP funding for property acquisition has been expended.

Yes

NSP funds are not used in accordance with the requirement that 25% of State allocation is used to provide housing activities to those at or below 50% of area medium income.

Small Remote The Agency allocated 25% of its NSP funds to agencies within the Continuums of Care to develop permanent supportive rental housing. This separate set-aside for the very low income eliminated the requirement for the regular round grantees.

Yes

The purchase price for units acquired using NSP funds is not discounted.

Small Remote To draw down funds for the purchase of NSP units, the Grantee must provide an appraisal or other determination of value. The contract to purchase the property is reviewed by Agency staff to verify it is below appraised value or that the purchase contract includes a discount by the Seller. All acquisition activities under NSP have been completed.

Yes

6. NSP

5. Habitat Tennessee (Housing Trust Fund)

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The parcels being purchased with NSP funds are not abandoned or foreclosed properties.

Small Remote In order to draw down funds for acquisition, Grantees must provide documentation of foreclosure or abandoned status of the property. All acquisition activities for NSP have been completed.

Yes

Units built or rehabilitated with NSP funds do not meet local codes or the applicable international code.


Final payments for rehabilitation or construction require certification by a qualified inspector or the local code enforcement agency that the unit meets the applicable code.

Yes

NSP homebuyers or tenants residing in NSP-assisted units are not income eligible.

Small Remote The THDA NSP Manual includes a section on how to determine income eligibility. Staff reviews income information during program monitoring. Program monitoring continues throughout the compliance period.

Yes

NSP affordability requirements for rental projects are not secured.

Medium Remote Rental grantees are required to secure NSP affordability requirements with a Grant Note prior to drawing down NSP funds for a project. A Restrictive Covenant and Deed of Trust are recorded as liens against the property after purchase.

Yes

NSP affordability requirements for homeownership projects are not secured.

Medium Remote Homeownership projects for downpayment assistance require a Grant Note and Deed of Trust as part of the closing; acquisition and rehabilitation projects require a Grant Note to draw down NSP funds for acquisition. A Deed of Trust and Restrictive Covenant is filed as a lien against the property once it is acquired by the Grantee. The Deed of Trust is released by THDA when the Grantee sells the unit and there is a Grant Note and Deed of Trust between the Grantee and homebuyer to secure the affordability period.

Yes

The project begins drawing funds prior to the completion of the Environmental Review.

Small Remote Agency staff logs environmental reviews as they are received and the funds released. Staff tracks Release of Funds to identify completed environmental reviews. Acquisition, rehabilitation and construction activities have been completed.

Yes

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ESG Regulations 24 CFR Part 576

Costs charged to a project are not eligible for reimbursement under ESG guidelines.


Agency staff provides training to grantees on an annual basis to review ESG regulations. Agency staff reviews draw requests for each activity, as well as supportive documentation for all charges. The ESG manual provides guidance with specific regulations.

Yes

For rehabilitation projects, agency may not comply with federal and state guidelines for procurement.

Small Remote In the current year, there are no rehabilitation projects. Rehabilitation has been removed as an eligible activity from the 2015/2016 program description.

Yes

For rehabilitation projects, an agency may not comply with lead-based paint guidelines.

Small Remote In the current year, there are no rehabilitation projects. Rehabilitation has been removed as an eligible activity from the 2015/2016 program description.

Yes

Program beneficiaries do not meet homelessness or at-risk of homelessness definition.


Agency staff provides annual training for grantees; the ESG Manual provides guidance on how to determine eligibility.

Yes

Grantees do not provide the required 50% matching funds.

Small Remote Proposals must have an identified source of matching funds at application. Draw down requests require grantees to identify matching funds with each draw. Agency staff tracks matching funds with each draw request.

Yes

WAP Regulations 10 CFR Part 440

WAP assistance is provided to households that do not meet program eligibility requirements.

Small Remote Agency staff provides mandatory, annual training for sub-recipients; the WAP manual provides guidance on how to determine eligibility. Staff reviews eligibility documentation during monitoring.

Yes

The energy auditor recommends measures that are not eligible under the program, or that do not meet cost saving requirements for installation.


Draw requests must document that all work performed under WAP was correctly identified in the energy audit.

Yes

The assisted units do not meet required standards in the post-audit.


Each sub-grantee must have an approved auditor perform a post-weatherization inspection of 100% of completed units prior to paying the weatherization contractor. The Agency conducts a state inspection on a percentage of the sub-grantee passed units to ensure quality.

Yes

Change orders are approved for additional work or payments in error.


The Agency has revised the change order policy, which is being addressed in a policy and procedure manual, with training to be provided prior to program implementation. In addition, all change order documentation must be provided with the draw requests for review and approval prior to payment being made.

Yes

8. WAP

7. ESG

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WAP Reporting Sub-grantee may not submit data at all or not in a timely manner, so that THDA cannot fully comply with federal reporting deadlines.


THDA has strongly, and frequently communicated to sub-grantees about their reporting responsibilities. THDA staff maintains frequent contact with sub-grantees about reporting deadlines and answering reporting questions. In addition, the WAP Database has been enhanced to provide improved data reporting and case management.

Yes

LIHEAP Regulations 45 CFR Part 96

LIHEAP assistance is provided to households that do not meet program eligibility requirements.

Small Remote Agency staff provides mandatory, annual training for sub-recipients; the LIHEAP manual provides guidance on how to determine eligibility. Staff reviews eligibility documentation during monitoring. In addition, THDA has required confirmation from the software vendor that all income guideline information has been updated for each sub-grantee.

Yes

LIHEAP Reporting

Sub-grantee may not submit data at all or not in a timely manner, so that THDA cannot fully comply with federal reporting deadlines.


THDA has strongly, and frequently communicated to sub-grantees about their reporting responsibilities. THDA staff maintains frequent contact with sub-grantees about reporting deadlines and answering reporting questions. THDA receives data through the software vendor (THO) so that the data is received in house and can be validated.

Yes

9. LIHEAP

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CP 2015 ControlOperating

Inherent Risk Control Activity Effectively?Use of grant funds for other than the specified purpose.

High Remote For each grant program, draw requests go through three levels of review; backup documentation is required, including contracts, receipts or invoices. For construction activities, final payment must include either a use and occupancy certificate from the local code department or certifications by owner, contractor and inspector that the work is complete and payment is due. Draw requests are reviewed by 2 Housing Program Coordinators prior to final approval by Director, Assistant Director, or Program Manager before being

Yes

Collusive practices resulting in the procurement process not being sufficiently competitive.

High Remote HOME and NSP grantees are required to secure at least three bids prior to awarding a construction contract. If there are not three bids, the project must be rebid. HTF grantees are also required to follow procurement procedures, including telephone solicitations for the best cost on materials. The procurement procedures are reviewed by Agency staff during monitoring. DOE has strongly suggested that THDA move away from a single-bid process in WAP and begin using individual measure bids. It is believed that overall, this will provide the best

d h fl f l b d

Yes


CP Part 3 Fraud

Impact Likelihoo

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Inherent Risk Control Activity Effectively?Impact LikelihooProgram beneficiaries under report income for the purpose of receiving assistance.


HOME administrators for homeowner rehabilitation projects are required to hold a public meeting to explain the program requirements, including income eligibility. Applicants are scored and ranked starting with those in the greatest need. Local officials generally know their residents and households further down the priority list tend to be vigilant about who gets assistance. Program administrators review income documentation for eligibility. Community Housing Development Organizations as well as Housing Trust Fund, LIHEAP and WAP administrators also review source documentation to determine eligibility of applicants.

Yes

Use of ESG grant funds for other than the specific intended purpose.

High Remote For each program activity, draw requests are reviewed by Agency staff members before approval by the Community Programs Director authorizing payment. Back-up documentation must support all claimed costs as an eligible and reimbursable ESG activity from the approved contract budget.

Yes

Landlords receiving ESG rental assistance payments on behalf of assisted clients submit false requests.


ESG administrators are required to verify with clients and landlords the actual rental agreement and to document the exact amount of any rental arrears to be supported. Clients must present any new lease agreements to document actual rental agreements. ESG administrators are required to complete a Rent Reasonableness form for each assisted household. The Rent Reasonableness form is maintained in the client record and is reviewed during on-site monitoring visits.

Yes

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Inherent Risk Control Activity Effectively?Impact LikelihooESG-assisted households do not accurately report all resources or sources of income for program eligibility.


ESG administrators collect detailed and comprehensive income and resource information on assisted households including independent documentation of income in writing. This includes pay stubs, unemployment check stubs, child support payment histories, social security and disability payments, VA benefits as well as other income sources. This documentation is made a part of the client file to thoroughly determine income eligibility and is available for review during on-site monitoring visits.

Yes

WAP sub-grantees disregard priority list and provide services to clients lower on the list, or not eligible for services.

Small Remote

Wait list are available for review in the database. Periodic monitoring of the wait list, and clients selected for service, is performed.

Yes

WAP sub-grantees collude with contractors when bidding out the work.

Small Remote The Agency prohibits sub-grantees from sending recommended measures with any work posting in order to prevent dissemination of cost expectations. Additionally, the Agency requires individual bids per contractor for each work announcement.

Yes

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Inherent Risk Control Activity Effectively?Impact LikelihooLIHEAP applicants falsify circumstances in order to qualify for services.

Small Remotepp p f

identity and other eligibility requirements as a condition of eligibility. This documentation is to be retained by the sub-grantee and provided upon request for review. Every applicant on the wait list has their eligibility redetermined annually.

Yes

LIHEAP applicants apply to multiple agencies for assistance

Small Remote The updated LIHEAP THO database is used by all LIHEAP sub-grantees. The database allows agencies and THDA staff to cross-check applicants' personal information to minimize efforts to receive double the LIHEAP assistance.

Yes

Patient Protection and Affordable Care Act Compliance (PPACA).

Small Remote There are not part-time employees or vendor-assigned temporaries working in the Community Programs Division. The Division contracts with an inspection firm to perform on-site inspections as required by the new HOME regulations. The independent inspectors respond to requests from HOME administrators for specific site inspections and will not constitute a regular 37.5 work week.

Yes

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FN 2015


Strategic Ineffective management of cash outflows results in the lack of maximization of agency resources.

High Low

Operations Cash disbursement exceeds invoice amounts.

High Low

Agency pays for insufficient goods/services. Low LowAgency offices are unaccessable and receipts and disbursements cannot be processed

High Low

Agency pays for goods and services beyond vendor's quotes.

High Low

Agency pays for goods not ordered. Low LowAgency processes requests for payments and disbursements in an untimely manner.

High Low

Reporting Outgoing cash flow is recorded in wrong period.

High Low

Expenditures not recorded in proper fund. Medium LowExpenditure not recorded under proper financial statement function.

High Low

Duplicate invoices are paid due to submission for payment from multiple sources.

High Medium Invoices are not paid unless approved/received from A/P staff.

Yes

Vendors are paid from statements as well as invoices, resulting in duplicate payments.

Low Low

Invoices are not marked paid resulting in duplicate payments.

High Low

SECTION VI CONTROL ACTIVITIES FN Part 1 Strategic, Operations and Reporting Objectives

Impact Likelihood

Control Operating

Effectively?ObjectiveCategory


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FN 2015


Control Operating


Strategic Cash/Revenue collection efforts are inadequate to fund the agency's missions.

High Low

Operations Agency fails to earn adequate interest on cash deposits.

High Low

Bank fails to credit agency's bank account properly.

High Low

Cash/checks are lost or misplaced High Low Cash and checks received for deposit are locked in a safe until processed for deposit.

Bond sale proceeds are not received from underwriters.

High Low

Cash is not deposited in the bank in a timely manner causing the agency to lose potential investment income.

High Low

Reporting Revenues are recorded before earned. High LowRevenues recorded in system do not match amounts deposited or received.

High Low

Deposits are not recorded in the proper period. Medium Low

Revenue is recorded in incorrect revenue category.

Low Low

Revenue is not recorded in accordance with GAAP due to inadequate training of accounting personnel.

High Low

Direct deposits are recorded in wrong period. High Low

Person receiving cash fails to stamp check with agency's account number and check is deposited in wrong account.

Low Low

Check is lost in route to bank resulting in receipts not matching cash deposited.

Low Low

Cash receipt clerk totals deposit slip incorrectly and bank records incorrect deposit amount.

Low Low


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FN 2015


Control Operating


Date cash received is not recorded on remittance support.

Low Low

Excess cash collections are recorded as revenue instead of as a liability.

Medium Low

Strategic Inadequate cash on hand to support organization's mission/vision.

High Low

Operations An agency's uninsured/uncollateralized deposits with an insolvent depository are unrecoverable.

High Low

An agency as a public depositor does not ensure that its title as a public depositor is listed on all bank accounts and certificate of deposits resulting in those deposits not qualifying for claim reimbursement from the collateral pool as a result of an insolvency of the depository.

High Low

Fund transfers to other bank accounts are not recorded in bank ledger resulting in insufficient funds upon a bank debit.

High Low

A returned check is not followed up on in a timely manner resulting in diminishing probability of collection.

Low Low

Agency's checks have no void time frame printed on checks resulting in check remaining on outstanding check list for an excessively long amount of time or checks outstanding for a long period of time are not cancelled.

Medium Low

3. CASH MANAGEMENT

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FN 2015


Control Operating

Effectively?ObjectiveCategoryReporting Fees charged by a financial institution are not

reported in the financial records understating expenditures and overstating cash.

Low Low

A certificate of deposit with an original maturity date of 24 months is incorrectly classified as cash equivalent.

High Low

An investment maturity automatically deposited in checking account is not properly recorded in accounting records.

High Low

A returned check is not recorded in the accounting records.

Low Low

Deposits made from a separate collection location are forwarded late to the main office and therefore not recorded in accounting records timely resulting in misstatement of cash on year end financial statements.

Low Medium

Strategic All payables, gains and loss contingencies and other liabilities are not properly accrued, reported, or disclosed.

High Low

Operations Sufficient funds are not available to liquidate liabilities.

High Low

Reporting Invoice amounts are recorded into accounting system for wrong amounts.

High Low

An invoice not belonging to the agency is entered into the accounting system.

High Low

Checks are for an amount different than supporting invoices.

High Low

4. LIABILITIES

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FN 2015


Control Operating


Strategic Investment activity does not ensures solid safety, liquidity, accurate financial reporting and yield.

High Low

Operations Financial statements fail to portray actual investment balances and activity.

High Low

The U.S. interest rate changes by 50, 100 and 200 basis points (BPS) in next 12 months.

High High Continuous monitoring of markets and market conditions.

Yes

Investment personnel are unaware of future cash flow needs of the agency.

High Low

Income from investments are not credited to agency's broker/trustee account immediately when received.

High Low

Reporting Investment income is not posted by trustee/broker to agency's account statement which is the source documentation for entering investment income into accounting system.

High Low

Quoted market prices are not available for valuing derivatives resulting in the reliance on significant assumptions.

Low Low

Investments are incorrectly valued on the financial statements due to lack of qualified accounting personnel.

High Low

Broker/Trustee miscalculates investment income.

High Low

Reporting on derivative use is not in accordance with GAAP.

Low Low

5. INVESTMENTS

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FN 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?FEDERAL PROGRAMSMRB Program Excess earnings on non-purpose investments. High Medium Contract with Kutak Rock to perform annual arbitrage

rebate liability calculations.Yes

STATE LAWS AND RULESF&A Policy 21, Collateral Deposited with the State

Collateral securities accepted are not in registered form.

High Low

Collateral securities are received that are not the type of securities the department is authorized to accept under the particular law authorizing or requiring the department to demand the deposit of such collateral.

High Low

Collateral securities are not fully registered as to principal and interest in such a manner to identify the state and the appropriate agency or department as holder of such collateral and to also identify the individual or concern placing such collateral.

High Low

Control Operating

Effectively?

SECTION VI CONTROL ACTIVITIESFN Part 2 Compliance

Impact Likelihood

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FN 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?

Control Operating

Effectively?Impact LikelihoodThe State Treasurer is not provided with a listing of individuals authorized to initiate collateral transactions on behalf of the agency, and a list of individuals authorized to pick up collateral from the State Treasurer.

High Low

F&A Policy 25, Deposit Practices Policy

Funds are not deposited immediately as required by TCA 9-4-301 and as defined by F&A Policy 25.

High Low

AGENCY SPECIFIC LAWS, RULES, REGS THAT ARE SIGNIFICANT

Agency Investment Policy

Purchase of investment instruments prohibited by investment policy.

High Low

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FN 2015 ControlOperating

Inherent Risk Control Activity Effectively?Failure to write down the fair market value of an investment to avoid recording a loss and reflecting poor investment management.

High Low

Failure to disclose actual risks investments are susceptible to in order to avoid exhibiting management's negligence in ensuring proper collateralization of investments and deposits.

High Low

System is manipulated resulting in payments to non-existent suppliers.

High Low Two signatures required for disbursement of funds. Checks are verified against approved request for payment by staff other than the one that produces check. Electronic Banking ACH payments require an approver who is separate from the person who initializes payments. Both parties use secure login with passwords and secure ID tokens to process payments in system.

Under-banking or failure to bank cash receipts. Low Low

Fraudulent checks are written against agency checking account.

High Low Positive Pay verification is used with agency checking account to flag checks presented that were not recorded as issued in the bank system.

An incidence of fraud has been identified, but processes have not been put in place to reduce the risk of repetition.

Low Low

False invoices accepted resulting in payment for goods not received.

High Low

Vendor address is changed in payable system to intercept and steal check/warrant.

High Low

SECTION VI CONTROL ACTIVITIESFN Part 3 Fraud

Impact Likelihood

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OperatingInherent Risk Control Activity Effectively?Impact LikelihoodEmployee who is embezzling funds makes a transfer of funds from a bank account (2) in one bank to a bank account (1) where the funds were originally stolen from in another bank near the end of the period. The withdrawal from the second bank account is not recorded and due to timing, does not appear on the year end bank statement and the embezzlement is not detected.

High Low

Kickbacks or spotting fees paid to staff from contractors, suppliers and/or brokers.

High Low

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HR 2015


Strategic Inappropriate adverse employment action taken.

High Remote THDA processed 28 terminations through November 27, 2015, only 4 of which were involuntary terminations. Of the involuntary terminations, 1 was due to failure to follow policy, 2 were due to performance issues, and 1 was due to a reduction in force. All the involuntary terminations were carefully reviewed by the Executive Director, HR, and legal counsel to ascertain compliance with all appropriate policies, procedures, and laws. THDA's HR Division, in concert with the State of TN DoHR manages most of the HR processes. THDA's HR Division is staffed by experienced HR professionals who are highly educated. THDA's Administrative Policy Manual includes a process to progressively address disciplinary issues. Extensive learning opportunities are provided through both external and internal resources. Serious issues, especially prior to employment suspension or termination, require internal HR and legal consultation and Executive Director approval. THDA's Sr. HR Advisor has been assigned responsibility for monitoring changes and updates to HR-related laws, rules, and regulations and for sharing this information with Leaders and staff as appropriate.

Yes1. EMPLOYMENT ACTIONS

SECTION VI CONTROL ACTIVITIES HR Part 1 Strategic, Operations and Reporting Objectives

Impact Likelihood


ObjectiveCategory

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ObjectiveCategoryStrategic High turnover. Loss of top producers and

performers.High Reasonably

PossibleTHDA, as with Tennessee State government in general, has a high number of employees nearing or at retirement age. Additionally, as the economy recovers from it's recent struggles, an inability throughout most of 2015 to provide across the board pay increases or pay incentives based on performance presented an ongoing challenge. In 2016, merit pay is being reinstated, based on performance review overall ratings, which will allow the majority of THDA's staff to receive a pay increase in January. Additionally, THDA established a new Professional Development Policy, effective September 1, 2015, that will allow employees to earn 5% to 10% pay increases when they achieve certain educational attainments or nationally recognized certifications. Another attraction with employment at THDA are the excellent benefits available to full-time employees. THDA continues to explore ways in which to engage and reward employees. Significant investments were made again this year with a variety of learning initiatives for staff at all levels (including leadership development initiatives), and with focusing on recruitment and onboarding activities to find and keep the right people, keeping Equal Employment Opportunity/Affirmative Action and diversity in mind. THDA has worked hard to create an employee-centric culture to encourage long-term employment with THDA.

Yes

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HR 2015



ObjectiveCategory

OperationsUnauthorized access to applicant tracking system. Small Remote

THDA has contracted with an outside vendor for an applicant tracking system to fill open positions. Only authorized employees have access to this system. Total system access is available only to key Human Resources staff. Partial access on a short-term, as needed basis is granted and controlled by the assigned Human Resources staff to allow hiring managers to review applicants for specific jobs . Yes

Operations Errors in processing payroll. Medium Reasonably Possible

Edison has now been fully implemented, with multiple approval layers now in place to safeguard accurate transactions. A new risk area was identified this year by the Department of Labor and the TN Department of Human Resources concerning the manner in which State agencies pay exempt employees who work part of a day and have insufficient leave accrued to cover the balance of the day for hours not worked. THDA HR staff are working with DoHR to remedy this risk area; as of November 1, 2015 new steps have been put in place to mitigate this risk.

Yes

Operations Overtime errors. Medium Reasonably Possible

THDA's HR staff carefully audit each payroll and address any discrepancies immediately. HR staff participate in frequent communication with employees and managers as to the appropriate use and recording of overtime.

Yes

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ObjectiveCategoryOperations Indavertent eligibility for benefits for

temporary or contract employees under PPACA due to length of assignment.

Medium Remote THDA does not currently have any regular part-time employees, nor do we currently have any independent contractors working for us. We do occasionally have a retired State employee return to work for us in a special capacity, but benefits for these types of employees are addressed through the formalized 120-day assignment program with the TN Consolidated Retirement System (TCRS). THDA does use temporary employees through temporary agencies; all hiring of temporary employees through an outside agency is handled by HR. This allows for routine monitoring of length of assignment.

Yes

Operations Missing payroll deadlines. Low Remote Four individuals in THDA's HR Division are authorized to enter payroll, thus one can serve as backup to another. Payroll deadlines are maintained on calendars issued by the State DoHR. DoHR would send an alert should THDA not submit payroll. Reminders are sent by HR to all THDA employees each pay period via our on-line newsletter.

Yes

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ObjectiveCategory

Reporting Confidential employee information is accessed by other individuals without authority.

Low Remote All current personnel files are maintained in locked files in the HR suite. In addition to the protection of locking files, the HR suite's main door is closed and locked after hours. HR files are accessed by non-HR THDA staff by appointment or with approval, and the actual access is monitored by an HR representative. Certain files that are protected under state and federal law, such as medical records, are shared only on a needs-to-know basis. Requests for personnel file information by an outside entity would be handled as outlined in the agency's Public Records Policy. Although much of the information is public record, it is preferred that people outside of HR not be able to access such information without approval and monitoring in order to protect the privacy of our employees. Once an employee leaves THDA, the employee's personnel file is forwarded to the State DoHR for storage and for response to public records requests.

Yes3. INTEGRITY OF PERSONNEL DATA

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HR 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc Risk and Exposure Responsible Area?

FMLA; FLSA; Title VII of the Civil Rights Act of 1964; HIPAA; COBRA; ADEA; Wage and Hour Laws; ADA; EPA; FCRA; IRCA; GINA; Other Federal Employment and Labor Laws, and their amendments.

Fines, civil and criminal penalties, attorneys' fees, court costs may be imposed, depending on how stated in the act. Back pay, front pay may be imposed. Different statutes of limitations may apply. Risk of reputation damage or morale impairments are possible within the organization.


THDA HR Division manages most of the HR processes. HR Division is staffed by experienced HR professionals who keep up-to-date on current, new, and changing information related to human resource management. The Senior HR Advisor has been certified as a Senior Professional in Human Resources (SPHR) for several years, and frequently shares her knowledge with the rest of the staff. The HR Division and the organization promotes fairness and consistency. Mandatory anti-harassment training is being provided in house; both THDA's Learning and Development Manager and the Learning Coordinator are certified by the State to present these programs to employees and managers. Current mandatory posters are displayed as required. Checklists are in place. Documents are provided, including Corrective Action form, ADA accommodation request form, etc. that require management approval. Documents are utilized in accordance with federal law, such as the I-9 form. An Administrative Manual and the Intranet provide the organization's policies. Additional policies are developed, recommended, and implemented by the Policy Review Committee staffed by Senior Leadership subsequent to ED approval. An Open Door Policy is maintained by key HR and Leadership staff to allow confidential concerns to be brought to attention. A Leadership Academy for new and emerging leaders was launched this year which included performance

Yes

SECTION VI CONTROL ACTIVITIES HR Part 2 Compliance

Impact Likelihood


1. FEDERAL EMPLOYMENT AND LABOR LAWS

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HR 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc Risk and Exposure Responsible Area?Impact Likelihood


THDA has an Internal Audit Division which investigates complaints related to possible policy or legal violations by staff. HR has been assigned responsibility for investigating complaints related to employment, such as harassment and discrimination. Other state agencies, such as DoHR and the Department of F&A manage some of the processes, such as COBRA and HIPAA.

TN Workers' Comp Statute; TN Whistleblower Laws; TN Maternity Leave Act; TN Drug-Free Workplace Act; Other State Employment and Labor Laws.

Fines, civil and criminal penalties, attorneys' fees, court costs may be imposed, depending on how stated in the act. Back pay, front pay may be imposed. Different statutes of limitations may apply. Risk of reputation damage or morale impairments are possible within the organization.


The same controls are in effect for compliance with State laws that are effective for Federal law, as stated above.

Yes2. STATE EMPLOYMENT AND LABOR LAWS

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HR 2015 ControlOperating

Inherent Risk Impact Likelihood Control Activity Effectively?Creation of nonexistent employee or unapproved inflation of compensation.

High Remote Extensive control and approval processes are in place consisting of multiple approval layers. All employees set up in Edison have multiple review points: authorizing manager, THDA's HR payroll processors, Controller for wage increases or new positions, CFO reconciliations and approval, and two other departments within the state responsible for payroll approval. Currently THDA has four HR professionals authorized to process payroll. With employees entering time and managers approving time, there is a check and balance system in place.

Yes.

Falsification of employment documents, including backdating.


Documents are reviewed by THDA's HR Division, although it is difficult to ensure accuracy concerning some of the information provided by job candidates. When high-level positions are being filled, such as Executive Director or Director of Internal Audit, HR secures a third-party source for background check processes. At this time third party background checks are not conducted on other candidates for THDA employment. We have contracted for an applicant tracking system, which helps eliminate back-dating issues. We are now participating in the Federal E-Verify program for verifying information submitted by new employees on their I-9 forms. Internal HR staff conduct reference checks on top candidates for positions prior to employment offers being tendered.

Yes.

Illegitimate use of workers' compensation benefits.


All work related illnesses or injuries are required to be reported to our HR team; upon receipt of a report, HR collects additional information as appropriate. HR's Workers' Compensation Lead monitors claims. A third-party administrator contracted with the State of TN manages the process and can request surveillance for questionable claims.

Yes.

SECTION VI CONTROL ACTIVITIESHR Part 3 Fraud

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Inherent Risk Impact Likelihood Control Activity Effectively?Enrollment of a non-eligible person in the State health, dental, vision, or life insurance.


Most employees now enroll in Benefits electronically through a self-service feature in our electronic HRIS, Edison. The employee can not enroll until HR has set up the person's profile in Edison. If an employee does need to enroll manually, HR's Benefits Lead or back-up processes enrollment forms for current staff, verifying that the person is an active employee before forwarding enrollment/change information to State Benefits. New enrollment of any dependents in insurance coverage requires State Benefits-mandated documentation of eligibility and relationship (such as marriage licenses, birth certificates, and other named documents). The dependent enrollments won't be processed by State Benefits without appropriate documentation. When an employee terminates State employment, the separation process includes termination in Edison and actions by DoHR, which then lead to DoHR notification to State Benefits that the employee is no longer an active employee. If an employee's dependent becomes ineligible for coverage (such as divorce of a spouse or attainment of age 26 by a child) the employee is supposed to notify HR, so that proper documentation can be submitted to State Benefits. If a child ages out and the notification isn't given, State Benefits has automated programs in place to identify the ineligible child and remove the child from coverage. When HR learns of a divorce or pending divorce, HR staff work with the employee to update appropriate records, including the insurance enrollment. State Benefits periodically reviews dependent status of enrolled dependents.

Yes

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Inherent Risk Impact Likelihood Control Activity Effectively?Illegitimate use of leave benefits. High Reasonably

PossibleTimesheets are automated and are approved in Edison by the Supervisor, Division Director, or HR before being processed. Any time sheet entry for other than Regular Hours Worked must be offset and approved with a separate Request for Leave before the time will process. HR reviews Edison reports as needed and works with THDA managers to identify patterns of excessive absenteeism. THDA policy allows management to request written medical certification by a licensed medical provider when circumstances warrant. Edison automatically accrues and deducts sick/annual/compensatory leave as earned and used, and will go into a leave with out pay status for any hours for which no leave is available.

Yes.

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IA 2015

Risk and Exposure Control ActivityOperational Objective

Staff of THDA are involved in a situation that could be considered a conflict of interest.


All staff prepare annual disclosure forms that are analyzed by IA staff to ensure that no conflict situations exist with a report to the ABC annually. Also Code of Conduct policy and forms are signed by all employees and placed in their personnel file.

Yes.

Auditors become too familiar with projects and staff with audits performed regularly and may overlook potential issues.

Medium Remote Audit projects are rotated as schedule and available staff allows.

Yes.

The IA staff does not exercise independence while conducting their work.


The IA staff will have full and free access to THDA’sBoard of Directors through the Audit & BudgetCommittee (ABC). The audit director is hired throughthe ABC and not the Executive Director. IA is a stafffunction that does not perform any operational duties forTHDA. Objectivity is essential to the IA staff in theproper fulfillment of their duties. This reportingstructure assures complete independence from operatingdivisions. IA staff are reminded through training andthe “International Standards for the ProfessionalPractice of Internal Auditing" to ensure objectivity andindependence while remaining free of conflict of interest,in both fact and appearance.

Yes.

SECTION VI CONTROL ACTIVITIES IA Part 1 Strategic, Operations and Reporting Objectives

Impact Likelihood


ObjectiveCategory

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ObjectiveCategory

An area of an audit program is not efficiently reviewed by IA staff.


The IA Director performs a Risk Assessment on an annual basis taking into account the new programs added; changes in budget; time since last audit/review, etc. In addition the IA Director informs senior staff to report any areas that should be reviewed by IA staff.

Yes.

The Hearings Officer does not receive the informal hearing request from a participant/applicant.

Medium Remote Appeal letters are mailed to a PO Box which only the Hearings Officer and the IA Division staff can access. Letters can also be emailed or faxed directly to the Hearings Officer. Letters could also be hand delivered to the central office's main reception which are routed to the Hearings Officer.

Yes.

Once a hearing decision is made, the Hearings Officer does not notify the participant/applicant of the results in a timely manner.

Medium Remote S8 Housing Choice Voucher Program Summary of Informal Review/Hearing Procedures "Informal Review Process for Applicants "Part 2 and "Informal Hearing Process for Participants" Part 2 state the Hearing Officer will send a letter to the participant/applicant with the results within 14 days from the date of the hearing.

Yes.

Reporting Audit work results in findings that are not reported to management.

High Remote Auditor review process is in place to ensure that appropriate work is performed to support all conclusions made. In addition, audit staff maintain a high degree of professionalism and responsibility for their work.

Yes.

Fraud Issues are not reported. Medium Reasonably Possible

Staff is informed of the Code of Conduct policy and sign a form. Staff are made aware of fraud/harassment and how to report it.

Yes.

Board of Directors (ABC) are unaware of occurrences of fraud.

Medium Remote The ABC receives copies of all issued reports. In addition, the IA Director meets every other month (more often if needed) to discuss any concerns ABC may have regarding reports' results.

Yes.

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IA 2015



ObjectiveCategory

The Hearings Officer documentation and process is not efficient or appears to have been biased.


The IA Director will select a random sample of the documentation and review the process of the Hearings Officer on a periodic basis to ensure it is efficient and the Hearings Officer is acting unbiased. In addition the IA Director will randomly select a hearing and a review process to attend during the year to evaluate the process. In addition if there are issues, the IA Director is made aware of the issues by the Hearings Officer.

Yes.

Strategic Projects listed in the Audit Plan are not completed.


Schedule work throughout the year to address issues included in the Audit Plan and work to complete, while maintaining flexibility to address other unscheduled projects that arise.

Yes.

Disaster occurs and documentation of audit/investigation work is destroyed.


Work is entered into M drive or electronic audit workpapers which are backed up. The Hearings Officer stores the documentation on the M drive in S8RA Software, which is backed up, and maintains physical copies as well.

Yes.

The Hearings Officer is incapacitated for an extended period of time and unable to meet deadlines for hearings and responses.


The Internal Audit Director is trained to serve as a back-up hearing officer and can takeover the job duties of the Hearing Officer if needed.

Yes.

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IA 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?TN's Financial Integrity Act//Enterprise Risk Management

The applicable letters/reports are not submitted by the December 31st deadline and/or division directors do not understand the requirements of this Act.

Medium Remote The IA Director ensures the division directors are informed of their duties and requirements, and ensures there is an understanding of internal controls. The IA Director gathers and evaluates this information to submit to the Executive Director for timely review.

Yes.

TCA 8-4-503 Reporting Unlawful Conduct to Comptroller of Treasury

Unlawful conduct such as a theft, forgery, credit card fraud, or any other act of unlawful taking of public money, property, or services is not reported to office of the Comptroller of the Treasury.


THDA staff is informed of the Comptroller Hotline and the hotline number is displayed in break areas. Also, THDA staff is informed to report issues to IA staff, who are aware of the procedures to inform the Comptroller's office of the situation and work with the Comptroller's office during any required investigation.

Yes.

SECTION VI CONTROL ACTIVITIES IA Part 2 Compliance

Impact Likelihood


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IA 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?Impact Likelihood


HFA Participation Agreement with US Department of Treasury for the Hardest Hit Program Part 4 Section B- Quarterly Review of Internal Controls

Internal Controls for the Hardest Hit Fund (HHF) Program are not effective. Applicants for the HHF program are approved when they are ineligible and/or applicants that are eligible are not approved.


Quarterly reviews are to be conducted by Internal Audit staff to evaluate the effectiveness of internal controls and the eligibility of applicants.

Yes

24 CFR 982.554 & 982.555 -Informal Reviews and Informal Hearings

S8RA applicants/participants are not informed of their denial/termination from the S8RA voucher program. In addition, they are not allowed an informal review/hearing.


The S8RA Administrative plan outlines the process of notification from S8RA program staff and the Hearings Officer. The Administrative Assistant and Hearings Officer have a system of tracking and dating the process.

Yes.

US Government Accountability Office Government Auditing Standards (Yellow Book)

Internal Auditors do not obtain the required Continuing Professional Education as outlined in the Yellow Book.

High Remote Internal Audit staff complete a spreadsheet tracking their annual CPE. The document is saved on the M Drive and reviewed periodically by the Audit Manager.

Yes

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IA 2015 ControlOperating

Inherent Risk Control Activity Effectively?Employees use THDA assets for personal use. Small Reasonably

possibleAll staff have been informed that use of THDA assets for other than business use is prohibited.

Yes.

Theft or loss of assets, particularly "sensitive equipment" such as laptops or other computer equipment.

Medium Remote Computers are tagged by IT with asset labels, and assigned to staff, who are instructed to follow Portable Computer Usage Policy and take laptops home every night, or when leaving the building for an evacuation drill.

Yes.

Supplies ordered are not for appropriate use. Medium Reasonably Possible

Supplies are ordered by the IA Administrative Assistant and are approved by the IA Manager or other designated management representative. An Internal Auditor will receive the supplies. Appropriate segregation of duties is evident.

Yes.

False travel claims submitted. Small Reasonably possible

Travel claims are to be approved by the supervising manager or the IA Director in Edison and supporting documentation is required to support all expenses claimed. Claims are reviewed by Operations before processing.

Yes

Impact Likelihood

SECTION VI CONTROL ACTIVITIESIA Part 3 Fraud

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IT ERM 2015.xlsx

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IT 2015

Risk and Exposure Control ActivityStrategic Current mortgage system fails to support

THDA's current mortgage program.High Remote Maintain a contract with vendor to maintain system to

meet requirements for THDA and budget annually for enhancements/changes.

Yes

Formulas for principal and interest calculations for monthly payments not accurate causing system to produce inaccurate data.

High Remote THDA in its test environment has tested the formulas for monthly payments and other mortgage formulas against the Mortgage Bankers Association formulas which are the standards for the industry.

Yes

Operations System or data recovery of agency software applications or systems not available due to disaster.

High Remote THDA has established a disaster site in its Madison office and continues to add enhancements and redundant infrastructure to protect against a disaster of this kind. Nightly data tapes are stored off-site with Iron Mountain and transactional backups are made of all production SQL databases every 15 minutes.

Yes

SECTION VI CONTROL ACTIVITIES IT Part 1 Strategic, Operations and Reporting Objectives

Impact Likelihood


ObjectiveCategory

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IT 2015



ObjectiveCategory

Client or employee private information is lost or leaves the agency through either intentional or unintentional means.


All THDA laptops use encryption to protect data on the hard drive, in the event it is lost or stolen; Only THDA encrypted and issued USB flash drives are permitted to be used on THDA systems. Additionally, THDA has e-mail filtering devices in place that allow for encrypted e-mails to be sent by all staff to external clients and employees have been given detailed instructions on using this tool. This same e-mail filtering device also employs Data Leak Protection technology, and will automatically detect any outgoing e-mail or attachment that contains a SSN and prevent it from leaving THDA systems. A THDA-wide initiative to instruct users on the proper handling of private information was completed during 2012. All new employees will receive this same training/instruction and annually each employee is required to re-read agency policies and sign accordingly. Additionally, in 2014 agency copiers were upgraded and all scan-to-email functions were set to OCR only, to prevent images from being emailed that may contain PI.

Yes

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IT 2015



ObjectiveCategory

Lost production hours are caused by faulty or antiquated equipment.

High Remote THDA replaces its equipment based on a replacement policy, budgets accordingly, and also maintains an inventory of equipment that can be used as a replacement for faulty equipment if required. Additionally, redundant hardware is in place for all critical servers and WAN infrastructure.

Yes

Electronic interface with THDA servicers is not available due to web service outage.


THDA has the ability to receive data electronically via email from servicers and load data to the mortgage system by the system administrators if required.

Yes

External website or system is unavailable due to software or hardware failure.


Much of THDA's server infrastructure is now virtual, with a pool of hardware resources available to be shared by all virtual servers. Failure of a single system can be recovered almost instantaneously with the VM Ware software in place. All software updates or changes affecting external systems and websites are fully tested in an identical testing environment utilizing a thorough test plan and signed off on by appropriate program staff and IT project management staff before it is placed into production. This minimizes the risk that an update renders something unavailable. Additionally, if a website still fails due to a software error, backup media could be utilized to restore the system to a functional state relatively quickly, i.e. within an hour or two.

Yes

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IT 2015



ObjectiveCategory

Critical application server experiences hardware failure.

High Remote Much of THDA's server infrastructure is now virtual, with a pool of hardware resources available to be shared by all virtual servers. Thus, the likelihood of a single application server failing is remote, as is the potential for the entire virtual environment to fail. Failure of a single system can be recovered almost instantaneously with the VM Ware software in place.

Yes

Reporting Mortgage payment data provided electronically is not what the next payment should be.


THDA has had the vendor develop software to calculate what the next principal and interest breakdown of a payment should be, test against what was sent in by the mortgage servicers, produce an error report to the servicers and not accept the payment.

Yes

Reports containing critical program data are released externally with incorrect numbers of values.


During calendar year 2014, IT has worked with the Research division and program divisions to establish procedures for any data requested for reporting such that the Division Director must sign-off before they are shared outside the division. Additionally, since the Research division has the ability to query agency databases directly they must verify all of their numbers via program divisions and/or the Executive team before releasing such data externally.

Yes

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IT 2015Law, Rule,

Responsible Area?

Regulation, Etc. Risk and Exposure Responsible Area?

(PPACA) Affordable Care ActNONE - IT Currently Does not employ any contract or part-time staff.

SECTION VI CONTROL ACTIVITIES IT Part 2 Compliance

Impact Likelihood


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IT 2015 ControlOperating

Inherent Risk Control Activity Effectively?Business associates attempt to get access to mortgage records belonging to another business associate.


THDA has established separate user ids and passwords for each business partner that can log into its online mortgage system. Password changes are required each 90 days and if this is not done, then the business partner no longer has access.

Yes

An external breech of the THDA systems causing client and/or user data to be compromised.


THDA's network design includes the use of firewalls, Intrusion Prevention Systems, and complex passwords that must be changed every 90 days. Past penetration tests have been successful, will continue annual tests to ensure industry security risks are addressed. Additionally, procedures have been established and are documented to handle the public communication and internal methodology to be used if such a breach were to take place.

Yes

A current THDA IT employee with elevated system rights sabotages a program or application.


All agency vendor-provided applications are backed up nightly, with SQL-based data backed up on 15-minute increments. Attempts to sabotage these can be recovered through restores of either data, application files, or both. Of course, the vendor could also be engaged. Controls for internally developed software were developed and established in 2012 which involves source-control for all programming code using Microsoft Team Foundation Server, software designed for these very purposes.

Yes

A current THDA employee inappropriately uses or leaks Private Information belonging to a customer or partner.


No Private Information can be sent via email un-encrypted. Email filtering devices are in place with automatic rules to block such attempts and notify appropriate IT personnel. Additionally, as concerns data available through systems and data containing Private Information that could be printed, these are controlled through the procedures outlined in the newly developed Private Information Policy. Mandatory agency-wide training for all employees in how to handle Private Information ocrrurs annually each year and is a part of New Hire IT-Orientation.

Yes

A terminated THDA user gains access to THDA systems.

Medium Remote The IT division disables accounts as soon as we are notified by HR or the division directly of a separated employee. This will prevent any unauthorized access to THDA systems.

Yes

Impact Likelihood

SECTION VI CONTROL ACTIVITIESIT Part 3 Fraud

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Page 1 of 8 UST v1 JULY 2012

U.S. Department of the Treasury Hardest Hit Fund (KMTH)

Risk and Control Matrix Tennessee

Keep My Tennessee Home Program

Objective: Provide a minimum framework for the States participating in the KMTH Program to meet the HPA Section 4B requirements. Criteria: HPA Section 4 Oversight; Internal Controls Program, Paragraph B states: “Eligible Entity shall develop, enforce and review on a quarterly basis

for effectiveness, an internal control program designed to minimize the risk of fraud, mitigate conflicts of interest, maximize operational efficiency and effectiveness and ensure effective delivery of Services and compliance with this Agreement, EESA and Applicable Laws to the satisfaction of Treasury (the -Internal Control Program"). The Internal Control Program must include documentation of the control objectives for the Services, the associated control techniques, and mechanisms for testing and validating the controls. Eligible Entity shall monitor its contractors, if any, as part of the Internal Control Program. Eligible Entity shall certify, and provide an independent verification of the effectiveness of the Internal Control Program….”

Risk /

Risk Assessment (L/M/H)

Control Objective (Apply to all KMTH HFAs)

Example Control Activities (Control Activities may be different at each HFA and

should be described within this column)

Controls Operating

Effectively? Eligibility / Underwriting Incorrect eligibility determination ____High ____Medium ____Low

• Applicant eligibility is properly determined and documented in accordance with program and underwriting requirements (HPA Term Sheet and state underwriting guidelines)

• The KMTH Program has documented underwriting guidelines and policies and procedures that describe in detail the eligibility determination and underwriting requirements over all KMTH programs, as amended, that are in accordance with the HPA Term Sheet for each program

• Participating housing counselors and KMTH staff are sufficiently qualified and trained to (1) inquire and obtain the minimum required documentation from potential KMTH borrowers to determine eligibility, (2) summarize and document their recommendations based on review and evaluation of the eligibility underwriting process performed

• The participating housing counselors and KMTH staff understand the specific KMTH program eligibility criteria and require identification of and documentation for each of these criteria in the loan underwriting files

Yes

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Risk / Risk Assessment

(L/M/H)




Controls Operating

Effectively? • Properly trained KMTH staff underwriters perform

reviews of counselor-submitted applications, check for appropriate documentation needed, order additional documentation (credit reports, unemployment status, IRS transcripts, etc.) as needed, recalculate income/ratios, etc., and make recommendations for KMTH loan approval or denial

• Checklists are used for these reviews • All denials are subject to a second level review by the

Underwriting Coordinator and are often subject to a third level review by the Assistant Director of Single Family Programs

• Routine review of KMTH eligibility/underwriting practices are performed and documented by the internal auditors or quality assurance team in a timely manner, and instances of non-compliance with guidelines and requirements are remediated

• Quarterly quality control reviews of a random sampling of underwritten files are performed by the Assistant Director of Single Family Programs

• KMTH Funds, Property and Other Assets Misappropriation of KMTH funds (both program funds and administrative funds) ____High ____Medium ____Low

• KMTH funds, property and other assets are safeguarded against loss from unauthorized use or disposition

• KMTH funds are maintained in Treasury approved bank account (Bank of New York Mellon)

• KMTH funds are properly segregated from non-KMTH funds by the KMTH

• The KMTH program has documented policies and procedures that describe in detail the requirements over KMTH funds, property and other assets

• For KMTH program and administrative funds, property and other assets, duties over custody of cash, disbursement approval, recording, reconciling, and report review are adequately segregated

• The KMTH program maintains acceptable bank accounts for KMTH funds and reconciles the bank accounts on a monthly basis

• Routine review of KMTH funds, property and other assets are performed and documented by the internal auditors or quality assurance team in a timely manner,

Yes

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(L/M/H)




Controls Operating

Effectively? and instances of non-compliance with guidelines and requirements are remediated

• Capital draw requests for KMTH funds are calculated, requested and documented in accordance with the HPA and program guidelines

• Finance Director monitors HHF bank account balances

• Finance Director confers at least monthly with the CFO concerning the bank account balances and the HHF arrearage and monthly payments.

• CFO consults with program staff and accounting staff for data and expense analysis to determine the size and timing of drawdowns, with the understanding that funds should be requested 10 working days prior to the date funds are needed.

• CFO prepares and submits the “Schedule C” and “Form of Capital Draw Request” in accordance with the requirements set forth in the HFA Participation Agreement for drawdowns from Treasury.

• Finance Director reports to CFO when funds are deposited into the bank account.

Reporting Inaccurate, unsupported or untimely reporting to Treasury; and potential non-compliance with laws and regulations ____High ____Medium ____Low

• KMTH Quarterly Performance Reports (QPRs) and Quarterly Financial Reports (QFRs) are submitted timely to Treasury

• Amounts reported on the QPRs and QFRs (financial and non-financial) are complete and accurate, and are reconciled to and supported by appropriate documentation; trial balances, detailed general ledgers, and other documentation from the accounting and other systems used to account for the KMTH program

• The KMTH has developed and implemented an Internal Control Program (ICP) and Internal Antifraud and Compliance Monitoring Program

• The KMTH program has documented policies and procedures that describe in detail the requirements over KMTH reporting functions (both internal reporting and reporting to Treasury)

• The KMTH program prepares and submits complete and accurate QPRs and QFRs to Treasury on a quarterly basis within the time requirements

• The KMTH program posts the completed QPR on its website quarterly

• The Accounting Division prepares a monthly trial balance for the KMTH program, and performs a monthly detailed reconciliation of the KMTH trial balances, financial reports/statements to the KMTH

Yes

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(L/M/H)




Controls Operating

Effectively? (IACMP), and the ICP/IACMP and any revisions thereto was submitted to Treasury

detailed general ledger, bank statements, and other documentation supporting KMTH income and expenses (program and administrative)

• The KMTH program monitors compliance with laws and regulations

• The KMTH program maintains documentation of the ICP and IAMCP, as revised, and proof of submission to Treasury

• The KMTH program’s financial statements are independently audited annually and the KMTH submits a copy of the audit results to Treasury in accordance with the HPA

• The Tennessee Comptroller of the Treasury Division of State Audit audits THDA’s financial statements annually and this is submitted to Treasury within 180 days of fiscal year end.

• The KMTH ensures that a complete bring-down certificate is submitted to Treasury as required by the HPA

• The KMTH ensures that a complete Form of Subsequent Certification is submitted to Treasury as required by the HPA

• Internal Audit, in concert with KMTH staff, reviews anti-fraud and internal controls and upon verification of the absence of material deficiencies, the certification is signed by the executive director and submitted to Treasury on the anniversary of the initial closing of the HPA.

Program Expenses Improper use of KMTH funds ____High ____Medium ____Low

• The KMTH only makes payments to approved servicers for eligible borrowers in the approved amounts for the KMTH program(s)

• Payments made to KMTH servicers are adequately supported and made in compliance with program terms and servicer agreements by the KMTH

• KMTH program expenses are calculated and accounted for in accordance with Generally Accepted Accounting Principles, the HPA, and OMB Circular A-87

• KMTH program expenses are for actual program costs incurred (not estimated or budgeted amounts)

• Appropriate documentation exists to support KMTH program expenses (servicer batch payment records/requests)

• The KMTH program has documented policies and procedures that describe in detail the requirements over KMTH program expenses

• The disbursement policy includes the use of a checklist and required supervisory sign-offs to ensure supporting documentation is verified by another party

• Levels of review of the payment file are incorporated in the disbursement process

• Payment information in the KMTH’s loan processing system is entered appropriately into THDA’s financial accounting system MITAS

• Appropriate levels of review of the loan payment files and documentation are incorporated in the loan approval and disbursement process

• Routine review of program payments are performed and documented by the internal auditors or quality assurance team in a timely manner, and instances of

Yes

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(L/M/H)




Controls Operating

Effectively? • Program expenses are recorded in the time period

which the expense was incurred and are given consistent treatment between accounting periods

non-compliance with guidelines and requirements are remediated

• Once a KMTH loan is approved, the THDA approved title company reviews the public records to verify ownership in the property and to identify any outstanding lien holders.

• The title company then prepares the loan closing package and the loan closing is facilitated by the approved counseling provider agency that submitted the loan application.

• Upon closing, the provider agency returns the closing package for auditing by KMTH staff prior to funding.

• Once the assistance to the borrower is calculated by KMTH staff using the information that has been entered and verified by the related underwriter and verified as well by the assigned closing staff, a separate staff member prepares a disbursement request that is then reviewed by another staff member for quality control before submission to the THDA Finance Division.

• The Director of Finance submits these disbursement requests and the funds are drawn on a line of credit at the Bank of New York funded by U.S. Treasury.

• The borrower has no access to the loan funds. The loan disbursements/mortgage payments are disbursed directly to the loan servicer,

• For payments to homeowners associations, homeowner insurance providers, or county tax offices, a staff member creates a disbursement request and a designated KMTH Mortgage Specialist the payments coordinator submits a disbursement request report to the KMTH Payments and Closings Manager for approval and the Finance Division generates the checks. These checks are verified by the Payments and Closings Manager or the Assistant Director of Single Family Special Programs or Director of Loan

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(L/M/H)




Controls Operating

Effectively? Operations and then given to the administrative assistant designated KMTH Mortgage Specialist who attaches the supporting documentation and mails them to the appropriate recipient.

• The KMTH ensures that the KMTH servicers apply monthly loan payments to the correct borrower loan account in a timely manner

• Batch payments or remittance advice, also known as “B” records are sent to the servicers upon disbursement of funds through the Bank of New York to the servicer. The servicer responds with a “P” record to confirm the application of the disbursed payment to the correct corresponding account.

Administrative Expenses Improper use of KMTH funds ____High ____Medium ____Low

• KMTH administrative expenses are in accordance with the approved program budget for administrative expenses (Permitted Expenses) detailed and approved in Schedule C of the HPA, as amended

• KMTH administrative expenses are calculated and accounted for in accordance with Generally Accepted Accounting Principles, the HPA, and OMB Circular A-87

• KMTH administrative expenses are for actual costs incurred and are identified as direct or indirect costs to the KMTH program, including salaries and benefits

• Appropriate documentation exists to support KMTH administrative expenses (vendor invoices, approved purchase orders, canceled checks, and time and attendance records)

• Administrative expenses are recorded in the time period which the expense was incurred and are given consistent treatment between accounting periods

• The KMTH program has documented policies and procedures that describe in detail the requirements over KMTH administrative expenses

• The disbursement policy includes the use of a checklist and required supervisory sign-offs to ensure supporting documentation is verified by another party

• Levels of review of the payment request are incorporated in the disbursement process and entered appropriately into the KMTH’s financial accounting system

• Appropriate levels of review of the administrative expense payment files and documentation are incorporated in the payment approval and disbursement process

• Periodic review of administrative payments are performed

• Routine review of administrative payments are performed and documented by the internal auditors or quality assurance team in a timely manner, and instances of non-compliance with guidelines and requirements are remediated

Yes

• Fraud and Conflicts of Interest

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(L/M/H)




Controls Operating

Effectively? Inadequate controls to prevent and detect instances of fraud and conflicts of interest ____High ____Medium ____Low

• The KMTH performs tests and review procedures that ensure instances of inappropriate or illegal behavior, potential or actual fraudulent activities, or conflicts of interest are detected and remediated in a timely manner

• The KMTH program has documented policies and procedures that describe in detail the requirements over the prevention and detection of fraud and conflicts of interest

• The internal auditor or quality assurance team is assigned responsibility for monitoring and testing controls for instances of fraud, including selecting sample loan files to check for program eligibility, reviewing financial reports and bank account statements, reviewing external business partner contracts and payments, etc.

• Ensure routine training to KMTH employees and contractors regarding the definition of fraud, what to do when fraud is suspected, and institute an anonymous fraud hotline for individuals to report instances of suspected fraud

• Document the training materials and attendees • All THDA employees are required to sign conflict of

interest statements annually.

Yes

Third party vendors and employees - Inadequate controls to prevent and detect instances of conflicts of interest and undue preference

• The KMTH ensures that external KMTH business partners/vendors and employees (including direct and indirect employees, 1099 contractors and temporary hires) are selected without conflict of interest and without undue preference

• The KMTH ensures that KMTH employees (including direct and indirect employees, 1099 contractors, and temporary hires) are not involved in KMTH loan underwriting or approval decisions for any family member or related party

• Ensure formal RFQ and RFP processes in compliance with state and federal requirements are used in securing participating housing counselors, credit report companies, title companies, etc.

• Ensure routine training to KMTH employees and contractors regarding the definition and prohibition of conflicts of interest

• Include routine checks for instances of conflicts of interest in the internal audits and quality assurance reviews performed

• Add other Control Activities here

ERM Page 82


IT Environment and Data Security Access to KMTH program data and borrower PII is not adequately safeguarded ____High ____Medium ____Low

• Policies and procedures exist for the safeguarding of KMTH data and borrower PII, authorization and addition of system users, termination of user rights, information back-up and recovery, and retention and destruction of KMTH and borrower data

• The KMTH performs vulnerability, penetration and disaster recovery testing on loan system application and data storage systems and has documented these processes and testing outcomes

• Access to homeowner PII is protected against unauthorized access and is limited to appropriate individuals based on job function

• Job functions are properly segregated • Parties granted access to homeowner PII are made

aware of restrictions on copying and disclosing KMTH and borrower information

• The KMTH has documented policies and procedures that describe in detail the requirements over the KMTH IT environment and data security functions

• The KMTH monitors and reviews data security and the IT environment for KMTH related data

• The KMTH limits access to borrower PII to authorized users only

• Ensure routine training to KMTH employees and contractors regarding IT security and safeguarding of KMTH data and borrower PII

• Document the training materials and attendees • Include routine checks to test the IT security and

safeguarding of KMTH data and borrower PII in the internal audits and quality assurance reviews performed

Yes

• Add other Control Activities here

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MD & ARRA 2015

Risk and Exposure Control ActivityStrategic Administration of program or program

documentation inconsistent with federal regs.High Reasonably

PossibleContinuous review of administration and documentation including assistant legal counsel, director, board of directors, and governor's office.

Yes

Strategic Loss of resource. High Remote LIHTC and MTBA programs are nationally established vehicles for providing affordable rental housing, so program cancelation or dramatic cuts are unlikely. Also, a broad spectrum of housing industry stakeholders likely to lobby against cancelation or cuts.

Yes

Strategic Development fails due to insufficient resources. Medium Reasonably Possible

Use of underwriting standards [updated annually] to evaluate reasonableness of costs, involvement of applicant in resolving disputed numbers. Compiling database of cost and expense data from all applications.

Yes

Operations Late release of program documentation. Medium Reasonably Possible

Continuous review of administration and documentation including assistant legal counsel, board of directors, and governor's office.

Yes


MD and ARRA Part 1 Strategic, Operations and Reporting Objectives

Impact Likelihood


ObjectiveCategory

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MD & ARRA 2015



ObjectiveCategoryOperations Agency treats similarly situated applicants

differently either in the application process or in the processes occurring after an allocation has been granted to a specific set of applicants.


Continuous review of administration and documentation including assistant legal counsel, director, board of directors, and governor's office. Involvement of potential applicants in ongoing administration and development of documentation. Involvement of entire Multifamily Division is collectively analyzing and discussing issues as they arise to develop a single response to each issue.

Yes, although there are times when an issue does arise. In those cases, staff discusses the issue, makes a policy decision and applies such decision equitably among the program users.

Operations Potential applicants unable to utilize program resources.

High Remote Continuous review of administration and documentation including assistant legal counsel, board of directors, and governor's office. Involvement of potential applicants in ongoing administration and development of documentation.

Yes

Operations Incorrect scoring/ranking of application. Medium Reasonably Possible

Review of scoring/ranking in accordance with program documentation, cure period for applicants to fix deficiencies, board review of issues when applicant requests. Heightened scrutiny of scoring/ranking by multiple layers of staff. Given the overhaul of the Qualified Allocation Plan for 2013, including the scoring criteria, gives this issue a greater likelihood of occurring. However, staff is very conscious of this and will review the applications for these issues with a greater level of scrutiny.

Yes

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MD & ARRA 2015



ObjectiveCategoryOperations Failure to review application in timely manner. Medium Remote Applications tracked re. submission and review status

including asst. director, director, and assistant legal counsel.

Yes

Operations Allocation of more resource than is available to THDA.


Continuous tracking of resources remaining available including division staff, asst. director, and director. Heightened scrutiny of balances and totals by multiple layers of staff.

Yes

Reporting Incorrect calculation of allocation amount. Medium Reasonably Possible

Use of underwriting standards [updated annually] to evaluate reasonableness of costs, involvement of applicant in resolving disputed numbers, and use of independent CPA audit of development costs.

Yes

Reporting Incorrect annual report submitted to federal gov.

Medium Reasonably Possible - has occurred in the past

Continuous review of data including division staff, asst. director, director, and assistant legal counsel. Heightened scrutiny of balances and totals by multiple layers of staff. This has been an issue in the past, although in most instances, the issues were not staff related, but rather incorrect information being submitted to staff by outside entities.

Yes

ARRA Reporting

Sub-grantee submits data that incorrectly counts number of units or number of jobs created.


THDA has provided multiple trainings and written instructions. As federal guidance has evolved, THDA has provided that information to sub-grantees as soon as possible. THDA carefully reviews submissions for consistency and is in regular contact with sub-grantee staff.

Yes

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MD & ARRA 2015



ObjectiveCategoryARRA Default Grantee incurs an event of default, either by

commission or omission, which requires THDA to notify grantee of such default. If the grantee is unable to cure the default, THDA would have to attempt to recover the ARRA funds from the grantee (likely a foreclosure scenario) or sue for specific performance to force the grantee to perform under the loan documents.

High Reasonably possible

THDA has provided multiple trainings and instructions to the grantees to prevent such issues. Moreover, THDA works very closely with those developments that are having problems. THDA's contractor, First Sterling, also provides asset management currently on THDA's portfolio of ARRA deals, which provides THDA with early warning of issues that may lead to default. Once there is an issue, multiple layers of staff (including, the Executive Director, Senior Program Officer, Chief Legal Counsel, Director and Assistant Legal Counsel for Multifamily Development, and MD staff) reviews such issues to make sure there isn't any way to help the grantee avoid a default.

Yes

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MD & ARRA 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?I.R.C. §42, TREASURY REGS. 1.42

Administration of program or program documentation inconsistent with federal regs.

High Remote Continuous review of administration and documentation including assistant legal counsel, director, board of directors, and governor's office.

Yes

Section 1602 program guidance

Administration of program or program documentation inconsistent with federal guidance.


Continuous review of administration and documentation including assistant legal counsel, director, board of directors, and governor's office.

Yes

TCAP program guidance

Administration of program or program documentation inconsistent with federal guidance.


Continuous review of administration and documentation including assistant legal counsel, director, board of directors, and governor's office.

Yes

Sec. 1512, ARRA; Sec. 1602 ARRTA

Sub-grantee may not submit data at all or not in a timely manner, so that THDA cannot fully comply with federal reporting deadlines.


THDA has strongly, and frequently communicated to sub-grantees about their reporting responsibilities. THDA staff maintains frequent contact with sub-grantees about reporting deadlines and answering reporting questions.

Yes

Sec. 1512, ARRA; Sec. 1602 ARRTA

THDA does not get all sub-grantee data aggregated and properly posted on federalreporting.gov in a timely manner.

Medium Remote THDA has several staff familiar with reporting deadlines and data requirements. THDA Research staff works closely with IT division staff to receive necessary help to get data into correct format should sub-grantees submit late or in the wrong format. THDA also has a good working relationship with TRAM staff to head off any reporting problems.

Yes


MD and ARRA Part 2 Compliance

Impact Likelihood


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MD & ARRA 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?Impact Likelihood


Qualified Allocation Plan Construction Requirements

Completed development fails to comply with federal regs or eligibility requirements (e.g. FHA, ADA, or energy efficiency); or fails to comply with elections made for points regarding physical construction of the development (e.g. 60% brick exterior).


MD has added staff to inspect and monitor developments during the construction/rehabilitation process to ensure all applicable construction requirements of the relevant QAP are satisfied.

Yes

Patient Protection and Affordable Care Act Compliance

1. Part-time employees work greater than an average of 30 hours per week over a 12 month period.2. Vendor assigned temporaries work for periods exceeding 90 days per assignment.3. Independent contractors work can be construed to be the same as a state employee and they work greater than an average of 30 hours per week over a 12 month period.

Low Remote Multifamily has historically not been given permission for part-time employees, temporary employees or independent contractors. To the extent those were to be put in place, continuous review by the assistant legal counsel and director, other executive staff, human resources, and other Multifamily staff would result in the necessary adjustments to schedules to make sure no workers exceeded there allotted work time.

Yes

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MD & ARRA 2015 ControlOperating

Inherent Risk Control Activity Effectively?Allocation made to fictitious development. High Remote Require submission of third party documentation verifying existence

of development.Yes

Allocation of more resource than is available to THDA.


Continuous tracking of resources remaining available including division staff, asst. director, and director. Heightened scrutiny of balances and totals by multiple layers of staff.

Yes

ARRA Reporting: THDA sub-grantees deliberately report more units/jobs created than actually happened.

Medium Remote THDA reviews each sub-grantee’s report and checks appropriateness of numbers compared to amount of money drawn down and activity of other sub-grantees.

Yes

Government Accountability Office programmatic audits


In preparation for any such audit (and there have been some in otherstates), we are preparing policies and procedures for our tax creditreviews; organizing documents and developments for easy accessto information; and conferring with our Davis Bacon and Asset Management outside contractors to confirm their procedures conformwith necessary standards

It hasn't been tested yet, since we have not had anaudit, but we anticipate the controls to operate effectively.

Impact Likelihood


MD and ARRA Part 3 Fraud

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Page 1 of 5

OPS 2015


Strategic Ineffective management of procurement processes resulting in lack of maximization of Agency resources.

Low Remote

Operations Orders placed for goods/services without proper authorization.


Upon receipt of any invoice without a PO the purchaser must submit a written explanation to the CFO. Upon approval from the CFO the invoice will be paid. Employee will be advised to obtain proper authorization in the future.

Yes

Duplicate invoices/statements submitted creating possibility of duplicate payments.


All invoice numbers or statement due dates are noted in PO log and checked for duplicates before issuing PO number.

Yes

Grant payment made to incorrect vendor or contract.


Purchase orders entered by technician are reviewed by approver before submission to AP for payment.

Yes

Insufficient funds in contract/budget to cover PO's issued.


Staff reviews FACP Spreadsheet and Commitment Control in Edison before entering PO.

Yes

Requisitions or contract not submitted and/or approved in timely fashion, leading to delay in vendor payments or receipt of goods/services.

Medium Remote Re-occurring yearly contracts are set with 3 month reminder's for renewal. Notification by email to approvals on short lead time Requisitions or contracts.

Yes

State Payment Card purchases made and/or fees charged that were not in compliance with rules and regulations.


Purchases required to be reviewed and approved by supervisor, agency coordinator, and state administrator on a monthly basis.

Yes

Reporting Expired or unnecessary encumbrances remain on the books due to uncancelled purchase orders.

Low Remote


OPS Part 1 Strategic, Operations and Reporting Objectives

1. PROCUREMENTImpact Likelihood


ObjectiveCategory

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Impact Likelihood


ObjectiveCategory

Strategic Ineffective management of contracting process and/or management of contractual obligations and benefits results in increased liability to Agency or loss of consideration Agency is entitled to receive.

Medium Remote Operations Contract Management System, Contract re-cap email sent to AP and Division requesting contract. PO Review by Contract Specialist.

Yes

Operations THDA employee signs vendor contract without Contract being reviewed and approved by Operations and Legal.

Low Remote

Overpayment on a contract. Low Reasonably Possible

PO Review by Contract Specialist, tracking of contractual payments in Operations Contract

Yes

Failure to exercise renewal options in a contract prior to expiration.

Low Remote Operations Contract Management System automated reminders

Yes

Reporting Failure to submit adequate Contract Request form.

Low Remote Operations Contract Management System requires all fields for be completed.

Failure to record/assign contract #. Low Remote

Failure to accurately track contract. Low Remote

Strategic Ineffective management of private information Low Remote

OperationsEmployee leaves private information on computer screen when visitors come to their office Low Remote

ReportingEmployee views private information on their monitor and it is seen by visitors to their office Low Remote

Employees assigned filter screens for computers and are instructed to close private information when visitors come

Strategic Ineffective management of Keycard policies and procedures resulting in increased liability to Agency.

Low Remote

Operations Unauthorized entry into Agency space. Low RemoteReporting HR fails to report employee exit or

termination.Low Remote

2. CONTRACTS

3. SECURITY

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Impact Likelihood


ObjectiveCategory

Strategic Ineffective management of expense claims in State ERP system resulting in improper reimbursement.


Operations Expense claims are not properly entered, reported, or disclosed.


Reporting Employee enters expense claim without proper documentation.

Low Remote

Strategic Ineffective management of Records Management. Low Remote

OperationsDestruction of records before approved destruction date. Low Remote

Reporting Records requested for litigation purposes. Low Remote

4. EXPENSE CLAIMS

5. RECORDS MANAGEMENT

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OPS 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?FEDERAL PROGRAMS

Failure to use specific federal language that is required in all contracts utilizing federal funds

Low Reasonably possible

Contract reviewed prior to finalization by contract specialist and legal counsel

STATE LAWS AND RULES

Failure to obtain and file initial and follow-up attestation forms from all contractors, as required by TN Public Acts of 2006, Chapter Number 878, and Executive Order 41

Low Reasonably possible

Attestation form incorporated as part of pro-forma contract


OPS Part 2 Compliance

Impact Likelihood


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OPS 2015 ControlOperating

Inherent Risk Control Activity Effectively?Personal items are purchased using agency payment/credit card.


Yes

Employee requests expense reimbursement on travel not performed.

Low Remote

Impact Likelihood


OPS Part 3 Fraud

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PA ERM 2015.xlsx

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PA 2015


Strategic Mis-represent THDA through electronic mediaHigh

Reasonably possible

Provide training / guidance to users. Review material prior to posting.

Yes

Operations Failure to follow THDA's purchasing procedures.

Small Reasonably possible

Review procedures with each purchase. Yes

Operations Photographic equipment theft Low Reasonably possible

Lock storage. Limit access to key. Use sign-out sheets.

Yes

Impact Likelihood

Control Operating

Effectively?Objective Category

SECTION VI CONTROL ACTIVITIES PA Part 1 Strategic, Operations and Reporting Objectives

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PA 2015Control Activity to Ensure Compliance

Risk and Exposure Responsible Area?Operations Inadequate oversight in contracted services Low Reasonably

possibleUse Operation's division contract administration; review contract prior to interim payment with concerned staffs;

review billing at close

Yes

Strategic Failure to follow FOIA request Medium Remote Confer with Assistant Gen. Counsel on FOIA requests. Yes

OperationsFailure to complete IBPS reporting (resident issues) High Remote

Process is well-documented; monthly cross-checking meeting monthly. Yes

Operations Miss life-threatening call deadline High Remote Hourly check for voice mail and e-mail is logged. Yes

SECTION VI CONTROL ACTIVITIES PA Part 2 Compliance

Impact Likelihood

Control Operating

Effectively?Law, Rule, Regulation, Etc.

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PA 2015 OperatingInherent Risk Impact Likelihood Control Activity Effectively?Mis-Use of THDA logo

High low Share logo only with partners and industry contacts identified by Business Development or Single Family and ensure that they

understand appropriate use.

Yes.

Office Supply ordering

Small low Break out ordering tasks: a person makes order, second person approves order, third person accepts order

Yes.

Personal use of Internet

Small possibleFollow IT process of annual commitment to policy;

review in staff meeting

Yes.

Inaccurate use of sponsor funds

Medium low Keep log of requests, donations, compare to cost; second staff reviews.

Yes

SECTION VI CONTROL ACTIVITIESPA Part 3 Fraud

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PC ERM 2015.xlsx

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PC 2015


Operations Program participants do not submit information on their program recipients.

Low Remote Spreadsheets for each program are maintained in the PC folder on the M-Drive to track the receipt of annual information.

Yes

Program participants report incorrect or fraudulent information in their annual report.


Annual reporting information is keyed or electronically entered into program database and editing software is run against the data to review discrepancies.

Yes

Program participants are monitored (annually, bi-annually, or tri-annually) on-site to review annual information submitted on program recipients and errors or inaccuracies are discovered.


On-site review data is entered into program database and editing software is run against the data to review discrepancies and request corrective actions.

Yes

Program participants report data that indicates that ineligible program recipients have been served.

Low Remote Annual reporting information and on-site review data is entered into reporting software. Editing takes place and error messages are produced. Corrective actions are noted in the software program and in the project file.

Yes

Operations Program participants do not send their electronic data.

Medium Remote Reports are run from the program database. To track internally, spreadsheets for each program are maintained on the M-Drive to track the receipt of electronic data. A manual review of data received can take place.

Yes

Program participants send incorrect information through electronic format.

Medium Remote Software programs have editing software that runs against the data, prior to downloading it into the network system.

Yes

1. Compliance Reports

2. Online Data Collection

SECTION VI CONTROL ACTIVITIES PC Part 1 Strategic, Operations and Reporting Objectives

Impact Likelihood


Objective Category

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Impact Likelihood


Objective Category

Server does not accept program participants electronic data submission.


If the server is down, the program participant must contact the Systems Administration Coordinator. Once the system is available, the program participant is responsible for submitting the data.

Yes

Operations Inspection schedule is developed and omits property from the review.

Medium Remote The annual inspection schedule is developed by the Division Director and distributed to the Program Compliance Coordinators

Yes

An on-site review is conducted and the physical condition of the property is not good.


The on-site review information is sent in the form of a noncompliance finding report to the owner for corrections.

Yes

An on-site review is conducted and the program recipient information uncovers an ineligible participant.


The on-site review information is sent in the form of a noncompliance finding report to the owner for corrections. An 8823 is issued if necessary.

Yes

A program participant does not allow PC staff to conduct an on-site review.

Medium Remote Failure to allow PC staff to conduct on-site reviews results in reports of noncompliance and future debarment from Agency programs. An 8823 is issued if this occurs during the compliance period. If the compliance period has expired, they will be referred to THDA's legal department.

Yes

Operations Compliance monitors fail to report events of noncompliance.

Medium Remote A full Quality Assurance Review (QAR) will be conducted by the Program Compliance Manager on at least one report bi-monthly per Program Compliance Coordinator. In addition, mini QARs will be conducted on each report prior to the report being issued by team members.

Yes

PC staff fails to notify IRS of events of noncompliance.

Medium Remote Noncompliance that reaches the federal notification level is entered into the tracking system and followed up weekly by the PC Manager.

Yes

3. On-Site Compliance Reviews

4. Reporting Noncompliance

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Impact Likelihood


Objective Category

PC staff fails to notify THDA staff of events of noncompliance resulting in noncompliant program participants being allowed new activities/funding.

Medium Remote Noncompliance information will be forwarded to the applicable divisions by the PC Director for further actions.

Yes

5. Property Management CertificationManagement Company fails to submit application to become Certified Property Management Company.


Program Compliance divisions will review Addendum A's to monitor for properties not being managed by Certified Property Management Companies.

Yes

Owner fails to hire Certified Management Company to manage their LIHTC property(ies).


Ownership Entity information will be forwarded to the Multifamily Development division by the PC Director for further actions.

Yes

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PC 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc.Risk and Exposure Responsible Area?Section 42 of the IRS Code

On-site compliance reviews are not conducted in agreement with the IRS Guidelines.

Medium Remote Annual and monthly schedules are delegated to PCC and the PC Manager approves work schedules. The schedules are keyed into tracking software that notifies PC Manager when work is not being completed or is delayed. Staff also notifies the PC Manager when a review is cancelled or needs to be rescheduled. PC Manager discuss issues with scheduling with the PC Director.

Yes

Program participants do not follow regulations in accordance to §42 of the Internal Revenue Code.


The Program Compliance Coordinator's job is to follow up with all participants and insure that the guidelines are being met. This is done through the on-site review process and on-line reporting (HCMS). If discrepancies are found, the Program Compliance Coordinator is to issue a letter of noncompliance and corrective actions. Noncompliance issues are discussed with the PC Director and Program Compliance Manager to determine if 8823's are to be issued with the IRS.

Yes

Program Compliance does not issue 8823's to program participants who violate §42 of the Internal Revenue Code and 8823 Guide.


If Program Compliance fails to report 8823's for uncorrected or corrected non-compliance, participants may not adjust the amount of credits due for a specific time and receive credits they are not entitled to receive.

Yes

SECTION VI CONTROL ACTIVITIES PC Part 2 Compliance

Impact Likelihood


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PC 2015 ControlOperating

Inherent Risk Control Activity Effectively?Program participants fail to follow eligibility guidelines and report inaccurate and/or altered data.


The Program Compliance Coordinator is to share the information with the Director of Program Compliance and a meeting is scheduled with the Internal Audit division. If it is determined that further action is needed, the Internal Audit division will conduct an investigation.

Yes

SECTION VI CONTROL ACTIVITIESPC Part 3 Fraud

Impact Likelihood

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RPTS ERM 2015.xlsx

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RP 2015

Risk and Exposure Control ActivityConsolidated Plan

Five Year Consolidated Plan and its associated reporting requirements: Substantial Amendments, Annual Action Plan, Consolidated Annual Performance and Evaluation Report (CAPER), Analysis of Impediments to Affirmatively Furthering Fair Housing Choice (and its successor Assessment of Fair Housing), Minority and Women's Business Report and the Section 3 Report. Failure to complete; inadequate or incorrect data (see below) failure to follow HUD regulations; dependent on other state agencies for some reporting requirements. Compliance problems can result in one or more of these documents not gaining approval by FHEO or HUD overall.


Techniques & processes in place for inter- and intra-agency consultation, plan preparation, & review; plan preparation in consultation with relevant THDA divisions and other state, regional agencies and organizations; additional efforts in relationship building with HUD stakeholders and Consolidated Partners; content review by program division and research and planning division staff, supervision and final content review by RP Director.

Yes

Title VI Plan Failure to prepare in a timely manner and to submit as required by state law; failure to follow guidance from the TN Human Rights Commission for completion of the report; incorrect or incomplete data (see below).


Process in place for timely preparation, review by RP Director, Director of Civil Rights Compliance and Chief Strategy Officer conduct the final review.

Yes

SECTION VI CONTROL ACTIVITIES Research & Planning Part 1 Strategic, Operations and Reporting Objectives

Impact Likelihood


ObjectiveCategory

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RP 2015



ObjectiveCategoryDevelopment District Contracts

Failure to issue or failure to issue in a timely manner. Failure to monitor invoices for appropriate use of funds.


Processes in place for timely issuance of contracts; processes in place for consultation with Development District housing staff for contract development and compliance. Processes in place for standard billing amount for the same activities across the Development Districts and for district-specific expenditures, the review of invoices with narratives of use of funds assists in determining the appropriateness of billed costs.

Yes

Program Data Data integrity: Housing cost index which is required by THDA enabling legislation is completed with flawed data.


Ongoing data validation procedures in place; consultation with program staffs and IT.

Yes

Flawed Data from Research and Planning Division misinforms public.


Ongoing data validation procedures in place; consultation with program divisions and IT division to address data integrity issues and data use issues.

Yes

Data not accessible. Low Reasonably Possible

IT - THDA business continuity plan in place for data accessibility.

Yes

Data not available Medium Reasonably Possible

Research and Planning continues to advocate for program management databases to be put in place for the divisions that are operating without standard program management data.

Yes

IRS Report required relative to the issue of Tax Exempt Mortgage Revenue Bonds.


Process in place for timely preparation and review by Director of RP, and Chief Strategy Officer.

Yes

Housing Cost Index required by THDA enabling legislation not completed timely.


Process in place for timely preparation, RP internal review: Director of RP.

Yes

HHF quarterly reporting to US Treasury not completed timely or with incorrect data.

Medium Possible Process in place for timely preparation, division review, Director, Single Family Assistant Director for HHF.

Yes

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RP 2015



ObjectiveCategory

Research Contracts (MTSU and Foreclosure Data)

Failure to monitor invoices for appropriate use of funds. Failure to utilize resulting information and services

LowReasonably Possible

Process in place to confirm invoices with program staff as well as business office for the Housing Market Contract. For foreclosure trend data, regular publication of information is on our website and is considered a regular deliverable of the division Yes

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RP 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?Consolidated Plan

Failure to comply with HUD regulation could jeopardize $50.0 million +/- in grant funds to the state; $16.0 million to THDA. Note: Consolidated Plan due every five years, next plan is due May 2015; Other components of the plan are due annually: Next annual action plan submission is due in May 2015. Next CAPER is due September 2015; next Analysis of Impediments (AI) is due subject to HUD final regulations on the Fair Housing Assessment. (ECD is lead agency for AI)


HUD regulations monitored; processes in place to ensure timely, complete and accurate submittal of Consolidated Plan documents; intra- and inter-agency consultation and review. Final review by RP Director and Chief Strategy Officer.

Yes

Title VI Plan Risk to agency if failure to prepare accurately and submit to state timely. Risk to agency funds if agency is found to be out of compliance with Title VI requirements.


Agency training efforts to ensure staff comprehension of Title VI obligations. Effective tracking of activities to ensure compliance with Title VI obligations. Processes in place for the timely preparation and intra-agency review with program divisions. Processes in place for review by Director of Civil Rights and Compliance, RP Director, Chief Strategy Officer, and for timely submittal.

Yes

Development District (DD) contracts

Risk to agency if internal failure to issue in a timely manner; Risk to agency if failure to review semi-annual invoices for compliance with contract work elements prior to submittal to Accounting for payment.


Process in place for contract preparation in consultation with DD; process in place for timely review of contract invoices submitted by the DD to THDA; review by staff and periodic review by RP Director.

Yes

RPTS Part 2 Compliance

Impact Likelihood


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RP 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?Impact Likelihood


Program Data Risk to agency if data is flawed, not available or not accessible. Data used in various agency documents and reports by Exec. Director and by Public Affairs.


Internal review within division and with program divisions takes place regularly as new data sets become available; Business Resumption Plan assures accessibility of data.

Yes

Housing Cost Index required by enabling legislation not completed timely.


Ongoing data validation procedures in place; consultation with program staffs and IT.

Yes

IRS Report not completed timely. Medium Reasonably Possible

Process in place to ensure compliance with US Treasury law and to insure timely preparation and submittal. Review by RP Director, Chief Strategy Officer.

Yes

HHF quarterly reporting not completed correctly or timely.


Review processes in place to ensure compliance and timely submission, review by RP director and Single Family assistant director.

Yes


Information to share with public is not completed timely. Low

Reasonably Possible

Review processes in place to ensure timely submission, review by RP director. Yes

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RP 2015 ControlOperating

Inherent Risk Control Activity Effectively?Consolidated Plan activities. Low Reasonably

PossibleAny financial reporting that results in drawdowns and the like on Consolidated Plan covered programs takes place outside of RP. RP reviews for accuracy with HUD allocation and reviews simple mathematical computations.

Yes

Title VI Plan risks. Low Reasonably Possible

Additional scrutiny of the report, with new TN Human Rights Commission Guidance, has been added to ensure proper compliance, effective tracking of information and improved data and information.

Yes

Development District (DD) Contract risks. Low Reasonably Possible

New in 2013-14, is a simplified contract and invoicing process for a few quantifiable, easily verified expectations of these contracts. Additionally, for the remainder of the contract there is a continuation of the changes made in the 2012-13 year of a requirement that Development Districts submit a proposed plan for the expenditure of the Technical Assistance dollars. In addition to invoicing for reimbursement of these funds, they must submit a mid-year progress report. RP staff will review the progress reports and invoices to ensure consistency with the approved proposed Plan. Invoices reviewed in RP prior to submitting to Accounting for payment, clarification of activities requested from DDs on case-by-case basis to insure activities and time billed to THDA for those activities are in compliance with activities described in contract; occasional reviews by RP Director.

Yes

Program Data: Housing Cost Index, IRS report, ARRA reporting, HHF reporting documents & reports issued by agency as described previously.


Data verification takes place regularly when received from program divisions. Staff reviews for variance from historical data.

Yes



Verification of reports and deliverables is regularly performed as these are used for reports on our website to be used by the interested public. Yes

Impact Likelihood

SECTION VI CONTROL ACTIVITIESRP Part 3 Fraud

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S8CA ERM 2015.xlsx

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S8CA 2015

Risk and Exposure Control ActivitySpecial claims are submitted for claims already approved, adjusted, or denied creating requests for duplicate payments.


The Contract Administration Tracking System (CATS) has controls to prevent duplicate claims. An override is possible only with Director's approval through the business analyst.

Yes

Payments are made for contracts not properly funded by HUD or for which HUD has not wired funds.

Medium Remote Written instructions and procedures that require payments to be batched only for contracts with proper payment status from HUD; relevant staff have been trained to monitor the HUD payment status. The Contract Administration Vouchering System (CAVS) automatically populates the payment status via data transfers between CAVS and HUD/TRACS. As systems sometimes fail, a manual process may be used and documented, but only if required.

Yes

A payment is not batched when HUD wires funds to THDA for payment to owner(s); or the THDA's process to upload data into Edison does not work correctly, leading to a missed payment(s); this would impact accounting for the earned interest certification made to HUD annually as well as reporting of fees earned. The customer would be negatively impacted as HAP funds are needed for operations. Payment must be tracked from time funds are wired to payment being made from Edison. And THDA might be responsible to pay a disincentive fee to HUD for late payments.

High Remote During the month, HUD eLOCCS notices regarding wired payments are sent to a distribution list within THDA. The distribution list includes appropriate Accounting and S8CA division staff. The Payments Coordinator or assigned backup is responsible for batching the payment amount for each property/contract listed in the notice. The Director ensures each payment in the eLOCCS notice is accounted for as the HAP coordinator sends the batch to Edison within 1 business day and monitors its payment status. At month's end, the HAP Coordinator reconciles all payments wired from HUD with payments made in Edison. The Director verifies the reconciliation on a monthly basis.

Yes


S8CA Part 1 Strategic, Operations and Reporting Objectives

Operational Objective

Impact Likelihood


ObjectiveCategory

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ObjectiveCategory

Vendor requirements are changed in Edison without proper notice causing payments to be mailed instead of being direct deposited; or causing payment not to be made at all after they're batched by THDA staff.


After payments are batched in the Contract Administration Vouchering System, (CAVS), Edison queries are run to confirm payments. Procedures have been written to require Payments Coordinator to check payment method, and/or notify the Contracts Operations Manager of any issues with the vendor's set up in Edison

Yes.

Duplicate payments are made to an owner. Low Remote After payments are batched in CAVS, Edison queries are run to detect errors and confirm payment statuses. If duplicate payments are found, the duplicate must be deleted or resolved within Edison before payments are actually made. Additionally, for consistency and added control, procedures have been written for the payment process through CAVS and Edison.

Yes.

Incorrect vendor numbers are entered in CAVS when new accounts are set up or existing accounts are changed. This results in payments being deposited to the wrong bank account.

Medium Remote The Contracts Operations Manager is required to complete a checklist each time a new account is set up or an existing account change is requested by an owner/agent. The S8CA Director is required to sign off after confirming correct data entry has been made. After payments are batched and sent to Edison via the VPN, queries are run to confirm payments. Additionally, for consistency and added control, procedures have been written for the payment process through CAVS and Edison.

Yes.

Payments are made to providers not approved by the Tennessee Department of Correction (TDOC).

Small Remote The S8Payments Coordinator follows written procedures for the payment of TDOC funding to housing providers. All provider invoices are reviewed and reconciled to data provided by TDOC staff. All discrepancies are resolved by THDA staff with TDOC data before payment is made. The S8CA Division Director reviews and approves all payment requests made to Accounting for payment. Accounting processes payments to Edison and invoices TDOC for reimbursement.

Yes.

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S8CA 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?Reporting All required federal reports are not submitted

accurately and timely to HUD.Medium Remote Procedures are written for each transaction type that is

reported. Quality assurance is performed for critical items. Additionally, there is a manual process that can be used as a backup to the system generated reports. The business analyst has a reminder in Outlook to generate the invoice and make it available to each person having input into the process. The program Director uses Outlook and a hard copy calendar to monitor timelines and provide reminders during the month. The Director is responsible for delivery of the invoice and report to HUD.

Yes.

Contract renewals and rent adjustments are not conducted in agreement with the annual workplan resulting in disincentives to THDA and possible lack of funding for properties.

Medium Remote Annual workplans are created and submitted to HUD. Workplan changes are submitted to HUD quarterly. Also, the work plans are scheduled in CAVS and monitored monthly (at a minimum) by a coordinator.

Yes

Monthly invoice is not properly calculated resulting in improper payment to THDA. This could result in underpayments to THDA or over-invoicing to HUD.

Medium Remote The monthly invoice is produced by the software system and reviewed by the S8CA Management. Comparisons are made to the monthly Revised Exhibit B from HUD and FMRs are entered annually according to the ACC guidelines. The maximum fee is confirmed by the HUD Contract Administration Oversight Monitor (CAOM) at the beginning of each ACC year.

Yes


S8CA Part 2 Compliance

Impact Likelihood


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S8CA 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?Impact Likelihood


Payments are made for which HUD has not wired funds. (TCA)

Small Remote At the end of each month, a HUD eLOCCS notice regarding wired payments is sent to a distribution list within THDA. The distribution list includes appropriate Accounting and S8CA division staff. A payment control spreadsheet is created by the Asset Manager and provided to Accounting for payment requests through Edison.

Yes

Transfer of all QM duties has been moved from Internal Audit Division to S8CA Division and was tested/implemented in calendar year 2015.

High Reasonably possible

HUD requires as a part of its contract that THDA monitor its work internally through a coordinated Quality Control system. This is one of the key obligations of the HUD contract, thus the execution of QC's impact on its compliance systems are "high." The current QM system involves both quality checks during (Quality Assurance - QA) and after (Quality Management - QM) processes are performed. Management is responsible for performing and tracking quality within THDA's QM Log system. All Quality Control work is guided by a written QC Plan, implemented in 2015.

Yes

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S8CA 2015 ControlOperating

Inherent Risk Control Activity Effectively?Unauthorized access to sensitive data. Medium Remote The S8CA Director approves all staff access to systems. Terminated

employees' access rights are removed in HUD Secure Systems as per written IT checklists, when required. Additionally, the assigned IT Business Analyst performs annual certifications for users rights. Access rights are reviewed and reported to HUD annually.

Yes.Impact Likelihood


S8CA Part 3 Fraud

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S8RA 2015


Strategic Budget does not provide for adequate funding for the S8RA division to operate as it does currently.

High Probable S8RA management and Accounting division staff reviews expenditures and works with Executive team members to develop contingency plans. Adequate resources will be/are provided to implement any such plans that support the agency revenue goals by the effective management of programs and services. Additionally, the division makes every effort to maximize our Administrative Fees by ensuring that we acheive as close to 100% utilization of vouchers as possible.

Yes

Operations Federal funding cut for Housing Choice Voucher (HCV) and Housing Choice Voucher Family Self-Sufficiency (HCV FSS) programs. Each year prorated fees are a potential risk for all agencies administering discretionary spending programs. The risk to the S8RA program would mean a cut in both the fees to administer the program (AF) and Housing Assistance Payments (HAP). Any additional fee cuts would continue to place us significantly below the published fee level and make it challenging to administer the program.

High Probable Cost saving measures are always being considered. Two cost saving measures implemented this year, were completion of space reduction in our East TN Office (Cookeville) and our South Central TN office (Lewisburg). S8RA management and Accounting division staff reviews expenditures monthly and works with Executive team members to identify resources that will generate revenue and at a minimum offset budget deficiences.

Yes

Impact Likelihood

Control Operating


1. BUDGET

SECTION VI CONTROL ACTIVITIES S8RA Part 1 Strategic, Operations and Reporting Objectives

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S8RA 2015


Control Operating


Unexpected expenditures for new program requirements, change in operations, loss of staff or equipment, inadequate HCV FSS grant funding or other unforeseen circumstance.


Each year the Notice of Funding Availability (NOFA) for the Housing Choice Voucher Family Self-Sufficiency (HCV FSS) Program grant is published. We are required to participate in a competitive grant process for a funding renewal opportunity. To ensure continuity of services to those families currently enrolled in HCV FSS program, and due to the limited funding available, HUD is only funding renewal positions of PHA applicants that are currently administering the HCV FSS program that meet performance standards/thresholds established in the NOFA. The HCV FSS program manager is responsible for monitoring and tracking the performance standards and thresholds required by HUD; as well as, ensure timely grant submission in order to receive full program funding each year

Yes

Strategic Ineffective management of cash outflows results in the lack of maximization of HCV funding.


The S8RA division conducts regular audits of all client files and rent payments to ensure that proper rental payments are made.

Yes

Operations Due to untimely Housing Assistance Payments (HAPs), THDA may incur late fees that are to be paid to participating landlords.


The S8RA division engages in month-end reporting and auditing activities to ensure that payments are made on a timely basis. However, the processing of the check run is controlled by a separate State agency (The Dept. of Finance and Administration-F&A); release dates of the payments are in their control.

Yes


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Control Operating


HCV and HCV FSS participants' HAPs are not calculated properly, causing THDA to make greater payments than the landlord or clients are entitled to receive or conversely, causing an undue financial hardship on clients.


Management level staff of the division randomly select and audit client files as a part of the annual HUD-required SEMAP audit. Rental Integrity Monitoring (RIM) audits are also conducted by S8RA managers/coordinators of each field office and the HCV FSS manager quarterly for a select number of files. Client files are randomly selected and audited by S8RA central office management as needed.

Yes

THDA makes HAPs at a higher rate than typical rent amounts for similar unsubsidized units.

High Remote THDA has contracted with Emphasys, who acquired Social Serve this year, to provide a rent comparable system; as well as, an annually updated database of comparable, recently leased properties. The system allows THDA to enter comparable data when needed.

Yes

Reporting HCV financial data is not recorded properly and reported accurately to HUD in accordance with HUD-mandated accounting methods.


The S8RA and Accounting divisions review HCV data together. The Accounting division checks its validity and enters the information into HUD's electronic reporting systems (VMS and FDS) as required. Staff attend training to stay abreast of changes in HUD requirements and systems.

Yes

Strategic Funds received from HUD are inadequate to fund the HCV program.

High Probable The S8RA division monitors leasing activities for the utilization of program funds monthly and makes adjustments as necessary

Yes

Strategic Emphasys Elite, the HCV program's system of record, fails to generate reliable and/or accurate data, misreporting expenditures or client information.


Historical archives are maintained, and there are checks and balances in place during payment processing.

Yes

Operations HCV client files are destroyed by a natural disaster or stolen, making program administration temporarily burdensome.

High Remote Each field office is equipped with secure file rooms to prevent theft or loss. Employees are required to secure files at all times, and file check-out logs are used when a file is removed from a filing cabinet. Completed files are stored in an electronic database through the process of Electronic Content Management, in the programs software-Elite, and inspection data is currently stored in the external vendors database-OnCue360 (formerly SIMS). THDA and external vendor are working to develop and implement an Application Program Interface (API) that will allow data transfer for storage in both systems.

Yes


4. INFORMATION SYSTEMS/DATA PROCESSING

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All computer equipment is destroyed by a natural disaster or vandalism in a field office, making the office temporarily inoperable.

High Remote THDA employees are issued laptops. THDA's Information Technology division, will provide necessary resources to employees for near seemless delivery of services to the community. All data is backed up centrally.

Yes

Reporting HCV data is not properly transmitted to HUD, rendering THDA out of compliance with HUD requirements. HCV FSS data is not properly transmitted to HUD adversely affecting the number of positions funded for the renewal cycle.


The business analyst assigned to S8RA transmits data to HUD at least twice a month and verifies that all data is received without error or ensures that corrections are made for proper submission.

Yes

THDA's systems and systems with F&A do not communicate properly, resulting in late payments of HAPs or absence of payments (thereby accruing late fees or putting clients at risk of losing housing).


S8RA staff make all efforts to complete necessary transactions to ensure ample time for data to be transmitted and processed by F&A and for payments to be issued. S8RA staff performs several checks to ensure that proper payments are made.

Yes

Operations Poor management, work load and/or working conditions lead to low morale and high turn over of S8RA employees.

High Probable Frequent meetings are held with S8RA managers to identify areas of need and concern. Managers receive leadership training and coaching from central office staff and outside trainers for performance management and to support staff. Additionally, new work processes are being put in place to decrease non-required activity associated with workloads.

Yes 5. PERSONNEL/EMPLOYEE COMPENSATION

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S8RA field office employee dissatisfaction with the job, resulting in higher errors in key processes and high turnover.


The S8RA division conducts ongoing audits to assess the quality of work being produced. The division holds meetings in the central office for S8RA staff to take part in policy making and giving suggestions for improvement of the program. Managers hold a minimum of monthly meetings to keep staff engaged and for their input.

Yes

S8RA employees feel unrecognized, resulting in reduced focus on tasks and higher error rates.


THDA encourages each office to identify and celebrate key milestones. Customer Focused Award nominations are encouraged.

Yes

Strategic Systems in place fail to provide accurate financial information about the HCV program, causing the S8RA division to overspend or underspend (which would be in violation of HUD requirements).


Daily back-up of files are performed to ensure that no data is lost. All data is analyzed on a regular basis for accuracy.

Yes

Reporting Financial reports about the HCV and HCV FSS programs are not submitted properly or in a timely manner to HUD.


Accounting and S8RA staff who work with the HCV program meet monthly; as well as, attend trainings on program accounting. Additionally, there are several checks and balances in place for timely and accurate reporting.

Yes

Operations The agency fails to properly adopt new accounting practices for the HCV program due to uninformed and untrained personnel.


Accounting and S8RA staff who work with the HCV program meet monthly; as well as, attend trainings on program accounting. Additionally, there are several checks and balances in place for timely and accurate reporting.

Yes

Strategic Recording and collection efforts for the HCV program's tenants accounts receivable are inadequate.

Medium Remote The Accounting division centrally tracks these payments. Yes7. ACCOUNTS RECEIVABLE

6. FINANCIAL REPORTING

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S8RA 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?24 CFR/HUD Section Eight Management Assessment Program (SEMAP) requirements.

Applicants are not entered in the county waiting list system of record properly and are not placed in the proper order.


Applicants apply on THDA's website through a system managed by Emphasys' Elite software, THDA's HCV system of record.

Yes

Program applicants are not called in the correct order from county waiting lists.


S8RA division management is responsible for ensuring that a sampling of applicants files are auditied annually in each field office as a part of the SEMAP review. Additionally, S8RA managers maintain hardcopy files of all waiting lists printed before and after applicants are called in for appointments to determine program eligibility. This information can also be retrieved from the HCV software database.

Yes

Rent reasonableness: THDA pays higher HAPs for assisted units than the typical market rate.


S8RA staff currently select rent comparables from a database maintained under contract with Emphasys (who recently acquired Social Serve). Central office management conducts quarterly reviews of the database to ensure an adequate number of comparables are available for selection. If data is lacking or not current, THDA's point of contact reaches out to ensure that this is addressed.

Yes


SECTION VI CONTROL ACTIVITIESS8RA Part 2 Compliance

Impact Likelihood

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S8RA 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?

Control Operating Effectively?Impact Likelihood

Program participants' HAP and Total Tenant Payment (TTP) are not calculated properly, causing THDA to overpay or underpay subsidy.

High Probable Client files are currently selected randomly and audited as part of the annual HUD-required SEMAP audit. Managers of each field office also conduct RIM audits each quarter for a randomly selected number of files. Beginning the upcoming year, RIM audits will occur monthly. All S8RA staff performing rent calculations are required to take training on the topic offered by an outside training company; as well as, receive on-going internal training/review from designated division staff.

Yes

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Housing Quality Standards (HQS) are not properly enforced for assisted units.


CGI Federal, is the external vendor responsible for conducting all HQS inspections for THDA. CGI staff responsible for conducting HQS inspections are expected to receive thorough training and perform proper HQS inspection activities. CGI inspects a sample of units statewide as a part of the SEMAP audit; as well as, for quality control. CGI also conducts quality assurance inspections on a sample of units statewide for HQS enforcement activities. CGI makes their QA reports available for THDA review upon request. Audit/quality control inspections are conducted by either CGI supervisory staff or other designee. In all cases, CGI ensures that the audit inspector is different from the inspector who conducted any prior non-Audit inspections. The THDA Internal Audit division provides independent oversight and review of this process; as well as, S8RA division leadership. S8RA division staff monitors daily reports showing inspection results and ensures that timely follow up is made where needed.

Yes

HCV participants do not meet THDA and/or HUD eligibility requirements.


All S8RA staff receive training on eligibility of program participants. Central office staff and field office management conduct audits as necessary.

Yes

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24 CFR 984 Department of Housing and Urban Development-[Docket No. FR-5700-N-13]-Notice of Funding Availability (NOFA) for HUD’s Fiscal Year 2014 Housing Choice Voucher Family Self-Sufficiency Program

The number of HCV FSS program participants (as defined in Section I.B.11 of the NOFA) served by the HCV FSS program as supported by PIC data does not meet the eligibility requirements to support the number of HCV FSS coordinator positions.


The HCV FSS manager monitors the progress of each HCV FSS specialists caseload and total number of participants on a monthly basis to ensure the target goal of at least 250 clients are being served and accounted for in our database as reported to HUD.

Yes

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S8RA 2015 ControlOperating

Inherent Risk Control Activity Effectively?S8RA staff involved in decision making or monitoring may have a personal interest in a HAP contract.

Medium Remote All staff are made aware of THDA's disclosure requirements, and all potential conflicts of interest are investigated. In cases where a potential conflict of interest may occur, clients are either assigned to a non-affiliated staff member or a different field office depending on the clients relationship to the affiliated staff member.

Yes

S8RA staff manipulate the HCV waiting list order or information.


Supervisory level division staff or designee will review waiting lists as a part of the SEMAP review. Regular audits of the waiting lists are conducted by supervisor level division staff as well. In addition, the new automated electronic waiting list system eliminates much possibility of waiting list manipulation.

Yes

S8RA staff and clients enter into personal agreements to manipulate rent calculation data.


Case loads are rotated on a regular basis, and regular audits are conducted to ensure accuracy of data. Also, electronic wage verification systems are used to match data. Staff have access to view financial data and are responsible for ensuring that accurate payments are made. If discrepancies in payments are discovered staff will notify their reporting manager for secondary review. The reporting will continue upward to Internal Audit if applicable.

Yes

SECTION VI CONTROL ACTIVITIESS8RA Part 3 Fraud

Impact Likelihood

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SF 2015

Risk and Exposure Control ActivityStrategic Production is inadequate to sustain viable

program thus risking non-origination of the bonds.

High Remote Measures are taken to ensure an efficient, user friendly and seamless process so that real estate and lending partners choose a THDA product. THDA works to offer competitive programs to the lending community.

Yes

Operations Division fails to provide excellent customer service, streamlined documentation, and efficient delivery of THDA product.

High Remote Staff including, Executive Director, Chief Legal Counsel, CFO, Director of Finance,Chief Administrative Officer- SFP and Director of Loan Operations collaborate to determine maximization of rate to production. Customer Surveys are distributed to Lenders and Realtors to gain information to better serve our lending partners, realtor partners, and first time homebuyers.

Yes

Reporting Division reviews inaccurate data. High Remote Division staff generates reports on a daily basis and compares with the system (MITAS). Division monitors production levels. Staff completes internal audits on files to limit data errors and maintain file accuracy. Research Division also reports data. SF BA and SF Program Development Coordinator run reports to identify error as well.

Yes

Strategic THDA fails to provide attractive interest rate. High Remote The Single Family Strategic team comprising of the Executive Director, Chief Legal Counsel, CFO, CAO and Director of Loan Operations collaborate to determine maximization of rate to production.

Yes

SECTION VI CONTROL ACTIVITIES SF Part 1 Strategic, Operations and Reporting Objectives

Impact Likelihood


ObjectiveCategory

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SF 2015



ObjectiveCategoryOperations THDA fails to appropriately analyze the

market.High Remote The market is analyzed by several key staff members of

the agency as well as the THDA Financial Advisor. Periodic market surveys are generated to compare the market rate to THDA's rate. To mitigate possible non-origination, the division continually monitors the spread between the market rate and THDA's rate. Additionally, THDA must evaluate the MRB production and find a balance between the production and its available resources.THDA has the option when "zero" are available to buydown the rate to a market rate.

Yes

Strategic THDA fails to investigate other lending opportunities.

High RemoteTHDA continually keeps abreast of the changes in the market, regulations, and current lending practices. THDA investigates additional resources to offer competitive lending opportunities to offset any possible decline in MRB lending. THDA works to create new sources of funding for other than MRB lending when available.

Yes

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SF 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?IRS Tax Code SFP Division fails to comply with IRS Tax

code with respect to mortgage loan compliance.

High Remote Staff is highly trained in rules, regs and tax code. Staff reviews every file prior to closing to ensure compliance. Division of Internal Audit performs Quality Control reviews of MRB loans semi-annually to ensure accuracy in reviews by SFP staff. The life of a mortgage loan file in the SFP Division is adequately segregated. Many different staff members review a loan file at various stages of the process.

Yes

Insurer / Guarantors Underwriting and Closing Guidelines

SFP Division fails to discover violations of the Insurer/Guarantor's guidelines thereby risking non insurance of the mortgage loan file.

High Remote Loan file audits are completed by Staff prior to THDA purchasing a loan. If errors are discovered, cannot be remedied, and remain non-compliant, the agency does not purchase the loan. If the violation is discovered post purchase the Origination Agent is liable for the infraction as their working agreement clearly states. Specific post closing audits have been designed based on the Insurer/Guarantors guidelines and the most common discrepancies.

Yes

SECTION VI CONTROL ACTIVITIES SF Part 2 Compliance

Impact Likelihood


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SF 2015Law, Rule, Control Activity to Ensure ComplianceRegulation, Etc. Risk and Exposure Responsible Area?Impact Likelihood


Servicer Compliance with THDA regulations

SFP Division fails to properly monitor the servicing functions as set forth in the Servicing Agreement between THDA's designated servicers and THDA. This is a significant risk because if delinquencies and foreclosures become excessive, it poses serious consequences to the overall Bond structures and our ability to sell them in the market.

High Remote SFP Staff monitors the various functions that the servicers are required to perform in servicing THDA loans. A monthly evaluation of delinquencies, foreclosures and loss mitigation practices are analyzed by SFP staff. Twice a year, SFP staff visits the servicers and does an overall evaluation of their performance as well as audits specific loan files that are in delinquent status. Under the Servicing Agreement the Servicer is liable if errors are discovered or the servicing provided is not compliant with Federal and State laws and THDA requirements and cannot be remedied. Additionally, the Internal Audit Division performs an extensive audit of each servicer once every two years.

Yes

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SF 2015 ControlOperating

Inherent Risk Control Activity Effectively?Fraudulent loans are created and money is disbursed to an unauthorized party.

High Remote There is adequate segregation of duties within the Division. The mortgage loan file is received by the reception area outside of the Division or by electronic delivery which is password protected. The money is allocated by one individual and then reviewed by a random underwriter. The loan is then approved by and underwriter. Originating Agent then closes the loan and submits the closing package to closing staff in the SFP Division. Loan is audited by closing staff prior to purchase. Purchase is completed by two separate staff members. Purchase wires are then submitted to Finance Division for disbursement to the Originating Agent The

Yes

REO properties create an opportunity for disbursement to an unauthorized party.

High Remote When an REO comes in-house, the designated Mortgage Loan Specialist takes the proper steps to evaluate the financial position of THDA for that particular loan, the value and condition of the property, and any action needed to place the property on the market. Staff will then bring that information to the CAO and/or the Program Administrator. They then collectively agree upon the action needed to move forward and determine the appropriate sales price to list the property. Once an offer has been presented to THDA, the Asst.. Director or the Program Administrator authorizes the move forward to close the sale. Once the closing occurs, the check is received by THDA and the designated Mortgage Servicing Specialist posts the amount and the Servicing Liaison processes the gain/loss thereby segregating the duties.

Yes

REO properties create a liability risk. High Remote THDA acquires hazard insurance policies once properties are foreclosed

Yes

SECTION VI CONTROL ACTIVITIESSF Part 3 Fraud

Impact Likelihood

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Tab # 6 Items:

Lending Committee Meeting Materials

Tennessee Housing Development Agency

Lending Committee

January 26, 2016

9:45 a.m. Central Time

AGENDA

1. Call to Order........................................................................................... Cleaves

2. Approval of Minutes for November 17, 2015 Meeting ......................... Cleaves

3. Housing Cost Index Report ........................................................................ Arik

4. Single Family Calendar Year End Report ................................................. Arik

5. Adjourn .................................................................................................. Cleaves


William R Snodgrass – Tennessee Tower Dorothy Cleaves, Chair

312 Rosa L Parks Avenue, Third Floor John Baker

Nashville, TN 37243 Kendra Cooke

Larry Martin

The Nashville Room Ashleigh Roberts

Benjie Shuler


LENDING COMMITTEE

November 17, 2015

Pursuant to the call of Chairman, the Lending Committee of the Tennessee Housing

Development Agency Board of Directors met in regular session on Tuesday, November 17, 2015,

at 9:45 a.m. Central Time in the Nashville Room at the William R. Snodgrass Tennessee Tower,

312 Rosa L. Parks Avenue in Nashville, Tennessee.

The following members were present: Dorothy Cleaves (Chair), John Baker, Kendra

Cooke, Greg Turner (for Commissioner of Finance & Administration Larry Martin), Benjie Shuler,

and Chairman of the Board Brian Bills. The following Committee member was absent: Ashleigh

Roberts.

Chairman Cleaves called the meeting to order and called for consideration of the minutes

from the September 22, 2015 meeting. Upon motion by Mr. Bills, second by Mr. Baker, the

referenced minutes were approved.

Chairman Cleaves called on Lynn Miller, THDA Chief Legal Counsel to present the first

item on the agenda regarding Mortgage Credit Certificate Volume Cap Authorization. Ms. Miller

stated that in December of 2014 THDA carried over $200,000,000 of 2011 volume cap forward

with the intention of implementing a mortgage credit certificate program. The program description

has not yet been completed for this program due to other new initiatives over the past year.

However, there is over $200,000,000 of 2012 volume cap available that will expire December 31,

2015. Staff is seeking approval from the Board to carry this volume cap forward for the purpose

of implementing a mortgage credit certificate (MCC) program and authorization of THDA staff to

submit the Mortgage Credit Certificate Election to the IRS. Further details are contained in Ms.

Miller's memo to the Board dated November 5, 2015 included with the Board package. Upon

motion by Mr. Baker, second by Ms. Cooke, the motion to present this proposal to the Board

carried.

Chairman Cleaves called on Lindsay Hall, Senior Director of Single Family Programs, to

present the next item on the agenda regarding the new T2 Loan Program. Ms. Hall referred to her

memo to the Board dated November 3, 2015. The T2 Loan Program will be a program that will

serve the very low and low income families of Tennessee. As staff began work on the Blight

Elimination Program, the discovery was made that there is a significant inventory of properties in

need of repair and at risk of becoming blighted. The T2 Loan Program would offer first mortgages

for homeowners who are at 80% or less of area median income through a purchase of a property

that has been renovated and purchased by a T2 Program Partner. T2 Program Partners would be

non-profit partners who will apply to be in the program. They will acquire properties through

purchases or donations.

Unallocated funds from THDA's New Start Program would be used for this program.

Eligible borrowers will meet criteria similar to that of other THDA loans:

Income at or below 80% of area median household income limits per county based on

family size

Minimum FICO score of 620

Maximum qualifying ratios of 29/41

Maximum loan to value of 75% for the T2 first mortgage loan

Maximum sales price of $112,500

Staff is requesting approval of the T2 Loan Program and approval from the Board to use

up to $2,000,000 of New Start allocations. Mr. Baker asked if a report could be submitted on an

annual basis to the Committee regarding the amount of funds used for the Program and Ms. Hall

indicated this was possible. Upon motion by Mr. Bills, second by Mr. Shuler, the motion to present

this proposal to the Board carried.

There being no further business, Chairman Cleaves adjourned the meeting.

Respectfully submitted,

/s/ Ralph M. Perrey

Ralph M. Perrey

Executive Director

RESOLUTION OF THE BOARD OF DIRECTORS ADOPTING THE HOUSING COST INDEX AND

AUTHORIZING THE OPERATION OF FINANCIAL ASSISTANCE PROGRAMS JANUARY 26, 2016

WHEREAS, pursuant to Tennessee Code Annotated Section 13-23-114, a part of the Tennessee Housing Development Agency Act (the “Act”), the Tennessee Housing Development Agency (“THDA”) is directed to establish a housing cost index as defined in Section 13-23-103 of the Act; and

WHEREAS, THDA has established a housing cost index for 2016 pursuant to Section 13-23-103(7) of the Act based on calculations as of January 13, 2016, a copy of which is attached hereto and incorporated herein by this reference (the “Housing Cost Index”); and

WHEREAS, the Housing Cost Index shows that primary housing costs exceeded 25% of an average Tennessee household’s gross monthly income; and, the Board, as authorized by Section 13-23-114 of the Act, wishes to approve the continued operation of THDA’s financial assistance programs including, but not limited to, THDA loan programs.

NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE TENNESSEE HOUSING DEVELOPMENT AGENCY AS FOLLOWS:

1. The Housing Cost Index for 2016 which shows that primary housing costs equal approximately 27.93% of an average Tennessee household’s gross monthly income is hereby adopted.

2. The continued operation of THDA’s financial assistance programs including, but not limited to, THDA loan programs, is hereby authorized.


This resolution was adopted by the affirmative vote of no fewer than nine (9) members of the Board of Directors of THDA at its meeting on January 26, 2016.


Andrew Jackson Building, Third Floor 502 Deaderick Street Nashville, TN 37243

Bill Haslam Ralph M. Perrey Governor Executive Director


MEMORANDUM

TO: Board of Directors FROM: Dr. Hulya Arik, Economist DATE: January 13, 2016 RE: Housing Cost Index for 2016 Attached is the calculation of the Housing Cost Index (HCI) for 2016. THDA’s enabling legislation requires the calculation of a housing cost index in accordance with the statutory formula. According to the enabling legislation, “The housing cost index shall serve to determine what percentage of the average Tennessee household’s gross monthly income is required to pay for primary fixed housing costs under then existing market conditions…” (T.C.A. Section 13-23-114). This housing cost index is calculated by dividing the median gross household income by the sum of the following cost factors: (a) the monthly mortgage payment for the average Tennessee household based on a thirty-year mortgage, at the prevailing mortgage interest rate on a mortgage amount sufficient to purchase a median priced home, (b) an average mortgage insurance premium, and (c) an average property tax amount and fire insurance. (T.C.A. Section 13-23-103 (7)). In the calculation of the median priced home, the House Price Index (HPI) from the Federal Housing Finance Agency (FHFA), which offers state level data, is used. The methodology is the same as was used last year. Based on the above calculation, the housing cost index for 2016 is 27.93%, lower than last year’s index of 29.50%. Relatively lower borrowing cost and higher median household income are major factors that led to a lower housing cost index for 2016. The THDA enabling legislation specifically states that when the housing cost index exceeds 25%, “…a majority of Tennessee citizens are excluded from the normal housing market…” As a result, THDA staff recommends adoption of the housing cost index for 2016 via the attached Board Resolution. Approval of this Resolution will make operative the financial assistance programs of the Tennessee Housing Development Agency to aid in providing adequate housing for lower and moderate income persons and families. Attachment

ESTIMATED TENNESSEE HOUSING COST INDEX, 2016 Based On All Home Sales

2008 2009 2010 2011 2012 2013 2014 2015 2016 (1) Median Purchase Price $148,045 $152,278 $150,450 $147,795 $152,582 $153,596 $169,669 $173,448 $174,864 (2) Discount Points 0.47 0.55 0.62 0.72 0.88 1.13 1.21 0.61 0.61 (3) Market Rate 6.46% 6.16% 5.11% 4.84% 4.66% 3.95% 3.99% 4.41% 4.06% (4) Adj. Sales Price $148,741 $153,116 $151,383 $148,859 $153,925 $155,332 $171,722 $174,503 $175,938 (5) FHA Mort. Amount $146,443 $150,750 $149,044 $145,086 $150,023 $151,394 $167,369 $171,342 $172,752 (6) Property Tax Rate 2.93 2.89 2.85 2.99 3.08 3.17 3.21 3.23 3.23 (7) Property Tax/Month $90.27 $91.56 $89.37 $91.94 $98.02 $101.31 $113.50 $116.81 $117.58 (8) Homeowners Insurance $69.34 $76.14 $83.20 $84.66 $90.32 $92.94 $107.07 $115.20 $116.12 (9) P&I/Month $921.77 $919.39 $810.15 $764.73 $774.47 $718.42 $798.08 $859.03 $830.98 (10) Monthly PITI $1,081.39 $1,087.08 $982.72 $941.32 $962.82 $912.67 $1,018.65 $1,091.03 $1,064.68 (11) Gross Income $41,707 $43,023 $44,833 $44,915 $42,066 $42,907 $42,451 $44,379 $45,747 Housing Cost Index (% of Gross Income) 31.11% 30.32% 26.30% 25.15% 27.47% 25.53% 28.79% 29.50% 27.93%

Sources and Methodology:

1. Median home prices calculated from all home sales reported by county property assessors to Tennessee Office of the Comptroller adjusted using the Federal Housing Finance Agency (FHFA) quarterly House Price Index (HPI) for the third quarter of the year prior to index year. For 2016 HCI, 2014 median home prices are adjusted using the third quarter of 2015 HPI from FHFA.

2. Annual average of monthly points from Freddie Mac, Primary Mortgage Market Survey. 3. The average of monthly interest rates (year to date including November) for 30-year fixed mortgages from Federal Home Finance Board. 4. Median Purchase Price adjusted with discount points. 5. Assumes a 3.5 percent downpayment and includes an upfront mortgage insurance premium financed into the final mortgage (1.75 percent of the base

loan amount). 6. Data are from the Tennessee Office of the Comptroller, Division of Property Assessment, http://www.comptroller.tn.gov/pa/CountyInfo.asp. 7. Weighted average statewide residential effective tax rates per $100 of assessed value; 25 percent of assessed value. 8. Monthly homeowners' insurance payments, based on insurance rates of THDA borrowers. 9. Monthly principle and interest (P&I) payments, assuming 30-year fixed payments with the average interest rate. 10. Monthly fixed housing costs including principle, interest, property tax and insurance (PITI). 11. The U.S. Census Bureau, American Community Survey (ACS) 1-year estimates of 2014 median household income (MHI) are used in estimating MHI

for the current year. The percentage change in HUD median family income (MFI) from 2014 to 2015 is applied to calculate the annual change in MHI.

http://www.comptroller.tn.gov/pa/CountyInfo.asp

Highlights from Calendar Year 2015 Single Family Loan Program Report

1. In 2015, THDA funded 2,275 first loans for a total dollar amount of approximately $279

million. The number of first loans increased by 34 percent, and the dollar amount of first

loans increased by 41 percent compared to 2014.

2. In addition to first loans, 2,174 second loans in the amount of $11 million were funded

in the same time period.

3. Only 54 borrowers used the Great Choice program without a second loan.

4. On average, THDA borrowers paid $125,662 for a home, and it was four percent higher

than previous year.

5. The average THDA borrower’s annual income was $50,276. It was slightly lower than

last year’s average income of $50,781.

6. Fifteen percent of borrowers purchased a home in a targeted area. Only two borrower

was a repeat buyer.

7. Approximately 95 percent of all loans funded in 2015 were FHA insured.

8. The average THDA borrower paid $753 per month for principle, interest, tax and

insurance. It was slightly higher than last year’s average PITI of $727.

9. On average, PITI was 19 percent of a borrower’s income. Approximately five percent of

THDA borrowers paid 30 percent or more of their income for PITI.

10. Approximately 76 percent of borrowers were white and 5.2 percent identified

themselves as Hispanic origin.

11. Fifty-four (54) percent of borrowers purchased a home in Middle Tennessee. Percent of

homes funded in East Tennessee increased from 28 percent in 2014 to 30 percent in

2015.

12. THDA did not make any loans in 18 counties: Benton, Clay, Decatur, Hancock, Hardin,

Henderson, Henry, Jackson, Johnson, Lake, Lewis, Moore, Perry, Pickett, Sequatchie,

Unicoi, Van Buren, Wayne.

THDA SINGLE FAMILY LOAN PROGRAM REPORT

Calendar Year 2015

Tennessee Housing Development Agency Andrew Jackson Building 502 Deaderick St., Third Floor Nashville, TN 37243

Hulya Arik, Ph.D.

Economist

DIVISION OF RESEARCH AND PLANNING

January 2016

2

THDA Homeownership Program Highlights for CY 2015

During Calendar Year 2015, THDA offered Great Choice and New Start Programs. Additionally, THDA

offered a second mortgage loan program for Great Choice Plus borrowers who needed assistance with

downpayment and closing costs.

In 2015, THDA funded 2,275 first loans for a total dollar amount of approximately $279 million.

The number of first loans increased by 34 percent, and the dollar amount of first loans increased by 41

percent compared to 2014. In addition to first loans, 2,174 second loans in the amount of $11 million

were funded in the same time period. An average THDA borrower with the annual income of $50,276

paid $125,662, on average, for a home.

In the following sections, the property, borrower and loan characteristics are provided in more

detail.

3

Table 1. THDA Single Family Loans by Program and Year, 2011-2015

All Programs1 Great Choice Great Choice+ Second

Loans Great Rate and Other2

New Start

Total # of Loans ALL GC GC+ Second Other NS

2011 2,160 2,048 112

2012 2,129 2,010 119

2013 2,070 8 100 1,859 103

2014 1,695 101 1,492 17 85

2015 2,275 54 2,174 47

Total Loan $ ALL3 GC GC+ Second Other NS

2011 $226,417,799 $216,846,217 $9,071,582

2012 $236,611,866 $226,268,868 $10,342,998

2013 $241,489,856 $918,118 $11,383,130 $463,002 $220,081,856 $8,643,750

2014 $205,231,696 $10,094,799 $178,486,978 $7,259,070 $1,945,978 $7,444,871

2015 $289,683,508 $5,554,686 $269,074,465 $10,930,789 $4,123,568

Avg. Loan $ ALL GC GC+ Second Other NS

2011 $104,775 $106,571 $80,996

2012 $111,085 $113,516 $86,916

2013 $116,382 $114,765 $113,831 $4,630 $118,344 $83,920

2014 $116,798 $99,949 $119,629 $4,865 $114,469 $87,587

2015 $122,529 $102,865 $123,769 $5,028 $87,735

1 All Programs total include Great Rate, Great Advantage, Great Start, Great Choice, Great Choice Plus and New Start program loans. It also includes the loans with Homeownership for the Brave discount. The second loans funded for the Great Choice Program borrowers who needed assistance with downpmayment and closing costs are not included in total number of all loans. 2 Other Loans include loans funded with Great Rate, Great Advantage and Great Start Programs that ended in October 2013. 3 Total Dollar value of all loans funded includes the dollar value of second loans funded for the Great Choice Plus borrowers who needed assistance with downpayment and closing costs.

4

Table 2. Property Characteristics4 – 2015

NEW OR EXISTING ALL GC GC+ NS

NEW

Average Price $153,814 $97,820 $163,087 $122,868

Median Price $141,900 $94,118 $156,900 $124,000

Number of Homes New 232 4 181 47

% of Homes New 10.20% 7.41% 8.33% 100.00%

EXISTING

Average Price $122,465 $112,795 $122,707 NA

Median Price $119,872 $102,000 $119,900 NA

Number of Homes Existing 2,043 50 1,993 0

% of Homes Existing 89.80% 92.59% 91.67% NA

SALES PRICE ALL GC GC+ NS

Mean $125,662 $111,686 $126,069 $122,868

Median $122,000 $100,500 $122,000 $124,000

Less than $60,000 2.59% 3.70% 2.62% 0.00%

$60,000-$79,999 8.48% 20.37% 8.37% 0.00%

$80,000-$89,999 7.30% 11.11% 7.31% 2.13%

$90,000-$99,999 8.92% 11.11% 8.83% 10.64%

$100,000-$109,999 9.10% 9.26% 8.92% 17.02%

$110,000-$119,999 11.43% 14.81% 11.45% 6.38%

$120,000-$129,999 12.04% 5.56% 12.05% 19.15%

$130,000-$139,999 10.11% 3.70% 10.07% 19.15%

$140,000-$149,999 6.77% 3.70% 6.53% 21.28%

$150,000-$159,999 5.49% 5.56% 5.52% 4.26%

$160,000-$169,999 5.32% 1.85% 5.52% 0.00%

$170,000-$179,999 3.08% 1.85% 3.17% 0.00%

$180,000-$189,999 2.77% 0.00% 2.90% 0.00%

$190,000-$199,999 1.45% 0.00% 1.52% 0.00%

$200,000 and above 5.14% 7.41% 5.20% 0.00%

SQUARE FEET ALL GC GC+ NS

Mean 1,458 1,479 1,461 1,282

Median 1,380 1,389 1,381 1,201

less than 1,000 6.86% 3.70% 6.99% 4.26%

1,000-1,250 26.86% 18.52% 26.45% 55.32%

1,251-1,500 28.84% 33.33% 28.70% 29.79%

1,501-1,750 17.89% 25.93% 17.89% 8.51%

More than 1,750 19.56% 18.52% 19.96% 2.13%

4 The Great Choice Program in this table refers to the loans whose borrowers did not require a second loan for downpayment and/or closing

costs. The Great Choice Plus Program refers to the first loans whose borrowers took second loan for downpayment and/or closing costs. The second loans are not included in the discussion of those characteristics.

5

Table 2. Property Characteristics – 2015, Continued

YEAR BUILT ALL GC GC+ NS

Mean (year built) 1986 1984 1985 2015

Median (year built) 1992 1995 1991 2015

before 1950 8.70% 16.67% 8.69% 0.00%

1950s 7.03% 5.56% 7.22% 0.00%

1960s 8.66% 1.85% 9.02% 0.00%

1970s 10.29% 12.96% 10.44% 0.00%

1980s 12.18% 7.41% 12.56% 0.00%

1990s 16.57% 12.96% 17.02% 0.00%

2000s 23.96% 33.33% 24.24% 0.00%

2011 0.62% 0.00% 0.64% 0.00%

2012 0.40% 0.00% 0.41% 0.00%

2013 0.44% 0.00% 0.41% 2.13%

2014 3.08% 5.56% 2.12% 44.68%

2015 8.09% 3.70% 7.22% 53.19%

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Table 3. Homebuyer Characteristics – 2015

AGE ALL GC GC+ NS

Mean 35 34 35 38 Median 31 32 31 35

less than 25 23.56% 29.63% 23.74% 8.51% 25-29 20.00% 14.81% 20.33% 10.64% 30-34 17.36% 18.52% 17.25% 21.28% 35-39 12.31% 7.41% 12.14% 25.53% 40-44 8.18% 14.81% 7.87% 14.89%

45 and over 18.59% 14.81% 18.68% 19.15%

FIRST-TIME BUYER ALL GC GC+ NS

Yes 99.91% 100.00% 99.91% 100.00%

No 0.09% 0.00% 0.09% 0.00%

GENDER ALL GC GC+ NS

Female 46.51% 25.93% 46.55% 68.09% Male 53.49% 74.07% 53.45% 31.91%

HOUSEHOLD SIZE ALL GC GC+ NS

Mean 2 2 2 3 Median 2 2 2 3

1 Person 35.87% 27.78% 36.48% 17.02% 2 Person 27.91% 31.48% 27.74% 31.91% 3 Person 17.49% 22.22% 17.25% 23.40% 4 Person 12.18% 14.81% 12.14% 10.64%

5+ Person 6.55% 3.70% 6.39% 17.02%

HOUSEHOLD COMP. ALL GC GC+ NS

Single Female 22.55% 9.26% 23.00% 17.02%

Female with child(ren) 15.08% 11.11% 14.44% 48.94%

Single Male 20.84% 22.22% 21.16% 4.26%

Male with child(ren) 5.05% 7.41% 5.06% 2.13%

Single Parent 0.70% 0.00% 0.74% 0.00%

Married Couple 35.78% 50.00% 35.60% 27.66%

Other/Unknown 0.00% 0.00% 0.00% 0.00%

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Table 3. Homebuyer Characteristics – 2015, Continued

INCOME ALL GC GC+ NS

Mean 50,276 44,404 50,906 27,907

Median 49,237 43,963 49,918 27,873

less than $15,000 0.09% 0.00% 0.05% 2.13%

$15,000-$19,999 0.84% 1.85% 0.51% 14.89%

$20,000-$24,999 2.42% 5.56% 2.02% 17.02%

$25,000-$29,999 5.05% 12.96% 4.42% 25.53%

$30,000-$34,999 8.88% 11.11% 8.46% 25.53%

$35,000-$39,999 10.95% 7.41% 10.99% 12.77%

$40,000-$44,999 11.21% 12.96% 11.36% 2.13%

$45,000-$49,999 12.18% 9.26% 12.51% 0.00%

$50,000-$54,999 10.90% 7.41% 11.22% 0.00%

$55,000-$59,999 10.55% 12.96% 10.72% 0.00%

$60,000-$64,999 10.07% 12.96% 10.21% 0.00%

$65,000-$69,999 5.10% 1.85% 5.29% 0.00%

$70,000-$74,999 5.19% 3.70% 5.34% 0.00%

More than $75,000 6.59% 0.00% 6.90% 0.00%

RACE/ETHNICITY ALL GC GC+ NS

White 75.47% 96.30% 75.48% 51.06% African American 22.77% 3.70% 22.72% 46.81% Asian 0.84% 0.00% 0.83% 2.13% American Indian/Alaskan Native 0.13% 0.00% 0.14% 0.00% Nat. Hawaiian/Pacific Islander 0.13% 0.00% 0.14% 0.00% Multi-Racial 0.00% 0.00% 0.00% 0.00% Unknown/Other 0.66% 0.00% 0.69% 0.00% Hispanic 5.19% 7.41% 5.24% 0.00%

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Table 4. Loan Characteristics – 2015

DOWN PAYMENT ALL GC GC+ NS

Yes 97.93% 44.44% 99.22% 100.00%

No 2.07% 55.56% 0.78% 0.00%

# of loans with down payment 2,228 24 2,157 47

% of Acquisition Cost

Mean* 4.21% 16.66% 3.54% 28.34%

Median* 3.50% 12.50% 3.50% 25.00%

LOAN TYPE ALL GC GC+ NS

Conventional Uninsured 2.29% 12.96% 0.00% 95.74%

FHA 94.90% 27.78% 98.62% 0.00%

RD 1.45% 40.74% 0.51% 0.00%

VA 1.27% 18.52% 0.87% 0.00%

Other 0.09% 0.00% 0.00% 4.26%

PITI ALL GC GC+ NS

Mean $753 $626 $764 $431

Median $734 $599 $742 $444

less than $300 0.31% 1.85% 0.18% 4.26%

$300-399 2.90% 5.56% 2.48% 19.15%

$400-499 8.53% 18.52% 6.99% 68.09%

$500-599 13.67% 24.07% 13.52% 8.51%

$600-699 17.54% 20.37% 17.85% 0.00%

$700-799 20.13% 11.11% 20.79% 0.00%

$800-899 14.51% 9.26% 14.95% 0.00%

$900 or more 22.42% 9.26% 23.23% 0.00%

PITI % of INCOME ALL GC GC+ NS

Mean 18.89% 18.04% 18.90% 19.42% Median 18.24% 16.84% 18.28% 18.72%

less than 15% 22.95% 29.63% 23.00% 12.77%

15-19% 35.47% 38.89% 35.05% 51.06%

20-24% 25.54% 16.67% 25.80% 23.40%

25-29% 11.47% 9.26% 11.59% 8.51%

30% or more 4.57% 5.56% 4.55% 4.26%

TARGETED AREA ALL GC GC+ NS

Yes 14.86% 38.89% 14.44% 6.38%

No 85.14% 61.11% 85.56% 93.62%

FIRST TIME HOMEBUYER ALL GC GC+ NS

Yes 99.91% 100.00% 99.91% 100.00% No 0.09% 0.00% 0.09% 0.00%

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Table 5a. Geographic Distribution of Loans (Number and Percent) by Program, 2015

Percentage listed is within the program (column)

TENNESSEE ALL GC GC+ NS

Statewide 2,275 54 2.4% 2,174 95.6% 47 2.1%

GRAND DIVISIONS ALL GC GC+ NS

East 675 29.7% 28 51.9% 624 28.7% 23 48.9%

Middle 1,235 54.3% 21 38.9% 1,198 55.1% 16 34.0%

West 365 16.0% 5 9.3% 352 16.2% 8 17.0%

URBAN-RURAL ALL GC GC+ NS

Central City 669 29.4% 10 18.5% 639 29.4% 20 42.6%

Rural 191 8.4% 23 42.6% 166 7.6% 2 4.3%

Suburb 1,415 62.2% 21 38.9% 1,369 63.0% 25 53.2%

MSA ALL GC GC+ NS

Chattanooga 132 5.8% 0 0.0% 130 6.0% 2 4.3%

Cleveland 66 2.9% 1 1.9% 64 2.9% 1 2.1%

Johnson City 25 1.1% 3 5.6% 20 0.9% 2 4.3%

Kingsport-Bristol 39 1.7% 0 0.0% 32 1.5% 7 14.9%

Knoxville 290 12.7% 12 22.2% 270 12.4% 8 17.0%

Morristown 48 2.1% 3 5.6% 43 2.0% 2 4.3%

Clarksville 91 4.0% 0 0.0% 91 4.2% 0 0.0%

Nashville 1,071 47.1% 9 16.7% 1,047 48.2% 15 31.9%

Jackson 63 2.8% 0 0.0% 63 2.9% 0 0.0%

Memphis 259 11.4% 3 5.6% 248 11.4% 8 17.0%

East TN Non-MSA 75 3.3% 9 16.7% 65 3.0% 1 2.1%

Middle TN Non-MSA 73 3.2% 12 22.2% 60 2.8% 1 2.1%

West TN Non-MSA 43 1.9% 2 3.7% 41 1.9% 0 0.0%

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Table 5b. Geographic Distribution of Loan Dollars by Program, 2015

TENNESSEE ALL5 GC GC+ Second NS

Statewide $289,683,508 $5,554,686 $269,074,465 $10,930,789 $4,123,568

GRAND DIV. ALL GC GC+ Second NS

East $74,115,480 $2,797,710 $66,601,258 $2,702,894 $2,013,618

Middle $174,352,920 $2,354,292 $163,842,572 $6,658,281 $1,497,775 West $41,215,108 $402,684 $38,630,635 $1,569,614 $612,175

URBAN-RURAL ALL GC GC+ Second NS

Central City $80,565,045 $1,037,434 $74,843,913 $3,040,778 $1,642,920

Rural $18,869,670 $2,192,965 $15,862,825 $642,880 $171,000

Suburb $190,248,793 $2,324,287 $178,367,727 $7,247,131 $2,309,648

MSA ALL GC GC+ Second NS

Chattanooga $15,008,213 $0 $14,859,213 $600,189 $149,000

Cleveland $6,881,125 $90,557 $6,713,468 $271,946 $77,100

Johnson City $2,717,935 $425,015 $2,124,348 $86,416 $168,572

Kingsport-Bristol $3,866,259 $0 $3,238,189 $131,846 $628,070

Knoxville $31,170,359 $1,205,763 $29,239,220 $1,187,964 $725,376

Morristown $4,586,097 $244,428 $4,173,669 $169,989 $168,000

Clarksville $10,072,314 $0 $10,072,314 $410,245 $0

Nashville $150,288,804 $1,167,429 $147,697,100 $6,003,541 $1,424,275

Jackson $6,152,003 $0 $6,152,003 $250,546 $0

Memphis $29,782,820 $228,529 $28,942,116 $1,175,227 $612,175

East Non-MSA $7,182,598 $831,947 $6,253,151 $254,544 $97,500

Middle Non-MSA $7,333,521 $1,186,863 $6,073,158 $244,495 $73,500

West Non-MSA $3,710,671 $174,155 $3,536,516 $143,841 $0

5 Dollar Amounts for all loans include the dollar value of second loans funded for the Great Choice Plus borrowers who needed assistance with the downpayment and closing costs.

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Table 6. Loans (# and %) by Program and County –2015

COUNTY ALL GC GC+ NS

ANDERSON 27 1.2% 0 0.0% 27 1.2% 0 0.0%

BEDFORD 12 0.5% 0 0.0% 12 0.6% 0 0.0%

BENTON 0 0.0% 0 0.0% 0 0.0% 0 0.0%

BLEDSOE 2 0.1% 0 0.0% 2 0.1% 0 0.0%

BLOUNT 36 1.6% 1 1.9% 30 1.4% 5 10.6%

BRADLEY 63 2.8% 1 1.9% 61 2.8% 1 2.1%

CAMPBELL 2 0.1% 0 0.0% 2 0.1% 0 0.0%

CANNON 2 0.1% 0 0.0% 2 0.1% 0 0.0%

CARROLL 2 0.1% 0 0.0% 2 0.1% 0 0.0%

CARTER 2 0.1% 0 0.0% 1 0.0% 1 2.1%

CHEATHAM 15 0.7% 0 0.0% 15 0.7% 0 0.0%

CHESTER 2 0.1% 0 0.0% 2 0.1% 0 0.0%

CLAIBORNE 1 0.0% 0 0.0% 1 0.0% 0 0.0%

CLAY 0 0.0% 0 0.0% 0 0.0% 0 0.0%

COCKE 4 0.2% 0 0.0% 4 0.2% 0 0.0%

COFFEE 5 0.2% 1 1.9% 4 0.2% 0 0.0%

CROCKETT 3 0.1% 0 0.0% 3 0.1% 0 0.0%

CUMBERLAND 13 0.6% 4 7.4% 8 0.4% 1 2.1%

DAVIDSON 472 20.7% 4 7.4% 459 21.1% 9 19.1%

DECATUR 0 0.0% 0 0.0% 0 0.0% 0 0.0%

DEKALB 3 0.1% 0 0.0% 3 0.1% 0 0.0%

DICKSON 10 0.4% 0 0.0% 10 0.5% 0 0.0%

DYER 7 0.3% 0 0.0% 7 0.3% 0 0.0%

FAYETTE 5 0.2% 0 0.0% 5 0.2% 0 0.0%

FENTRESS 1 0.0% 0 0.0% 1 0.0% 0 0.0%

FRANKLIN 5 0.2% 0 0.0% 5 0.2% 0 0.0%

GIBSON 10 0.4% 1 1.9% 9 0.4% 0 0.0%

GILES 2 0.1% 0 0.0% 2 0.1% 0 0.0%

GRAINGER 7 0.3% 0 0.0% 7 0.3% 0 0.0%

GREENE 11 0.5% 2 3.7% 9 0.4% 0 0.0%

GRUNDY 1 0.0% 0 0.0% 1 0.0% 0 0.0%

HAMBLEN 24 1.1% 0 0.0% 23 1.1% 1 2.1%

HAMILTON 131 5.8% 0 0.0% 129 5.9% 2 4.3%

HANCOCK 0 0.0% 0 0.0% 0 0.0% 0 0.0%

HARDEMAN 1 0.0% 1 1.9% 0 0.0% 0 0.0%

HARDIN 0 0.0% 0 0.0% 0 0.0% 0 0.0%

HAWKINS 6 0.3% 0 0.0% 6 0.3% 0 0.0%

HAYWOOD 6 0.3% 0 0.0% 6 0.3% 0 0.0%

HENDERSON 0 0.0% 0 0.0% 0 0.0% 0 0.0%

HENRY 0 0.0% 0 0.0% 0 0.0% 0 0.0%

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Table 6. Loans (# and %) by Program and County –2015, Continued


HICKMAN 5 0.2% 0 0.0% 5 0.2% 0 0.0%

HOUSTON 1 0.0% 0 0.0% 1 0.0% 0 0.0%

HUMPHREYS 2 0.1% 1 1.9% 1 0.0% 0 0.0%

JACKSON 0 0.0% 0 0.0% 0 0.0% 0 0.0%

JEFFERSON 24 1.1% 3 5.6% 20 0.9% 1 2.1%

JOHNSON 0 0.0% 0 0.0% 0 0.0% 0 0.0%

KNOX 181 8.0% 6 11.1% 173 8.0% 2 4.3%

LAKE 0 0.0% 0 0.0% 0 0.0% 0 0.0%

LAUDERDALE 9 0.4% 0 0.0% 9 0.4% 0 0.0%

LAWRENCE 2 0.1% 0 0.0% 2 0.1% 0 0.0%

LEWIS 0 0.0% 0 0.0% 0 0.0% 0 0.0%

LINCOLN 2 0.1% 0 0.0% 2 0.1% 0 0.0%

LOUDON 19 0.8% 3 5.6% 15 0.7% 1 2.1%

MACON 3 0.1% 0 0.0% 3 0.1% 0 0.0%

MADISON 58 2.5% 0 0.0% 58 2.7% 0 0.0%

MARION 1 0.0% 0 0.0% 1 0.0% 0 0.0%

MARSHALL 2 0.1% 0 0.0% 2 0.1% 0 0.0%

MAURY 50 2.2% 1 1.9% 48 2.2% 1 2.1%

MCMINN 7 0.3% 0 0.0% 7 0.3% 0 0.0%

MCNAIRY 3 0.1% 0 0.0% 3 0.1% 0 0.0%

MEIGS 1 0.0% 0 0.0% 1 0.0% 0 0.0%

MONROE 9 0.4% 1 1.9% 8 0.4% 0 0.0%

MONTGOMERY 91 4.0% 0 0.0% 91 4.2% 0 0.0%

MOORE 0 0.0% 0 0.0% 0 0.0% 0 0.0%

MORGAN 4 0.2% 1 1.9% 3 0.1% 0 0.0%

OBION 4 0.2% 0 0.0% 4 0.2% 0 0.0%

OVERTON 7 0.3% 5 9.3% 2 0.1% 0 0.0%

PERRY 0 0.0% 0 0.0% 0 0.0% 0 0.0%

PICKETT 0 0.0% 0 0.0% 0 0.0% 0 0.0%

POLK 3 0.1% 0 0.0% 3 0.1% 0 0.0%

PUTNAM 12 0.5% 3 5.6% 8 0.4% 1 2.1%

RHEA 5 0.2% 0 0.0% 5 0.2% 0 0.0%

ROANE 13 0.6% 1 1.9% 12 0.6% 0 0.0%

ROBERTSON 31 1.4% 1 1.9% 30 1.4% 0 0.0%

RUTHERFORD 321 14.1% 0 0.0% 319 14.7% 2 4.3%

SCOTT 2 0.1% 0 0.0% 2 0.1% 0 0.0%

SEQUATCHIE 0 0.0% 0 0.0% 0 0.0% 0 0.0%

SEVIER 20 0.9% 2 3.7% 18 0.8% 0 0.0%

SHELBY 247 10.9% 3 5.6% 236 10.9% 8 17.0%

SMITH 3 0.1% 0 0.0% 3 0.1% 0 0.0%

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Table 6. Loans (# and %) by Program and County –2015, Continued


STEWART 2 0.1% 0 0.0% 2 0.1% 0 0.0%

SULLIVAN 33 1.5% 0 0.0% 26 1.2% 7 14.9%

SUMNER 94 4.1% 0 0.0% 93 4.3% 1 2.1%

TIPTON 7 0.3% 0 0.0% 7 0.3% 0 0.0%

TROUSDALE 3 0.1% 0 0.0% 3 0.1% 0 0.0%

UNICOI 0 0.0% 0 0.0% 0 0.0% 0 0.0%

UNION 1 0.0% 0 0.0% 1 0.0% 0 0.0%

VAN BUREN 0 0.0% 0 0.0% 0 0.0% 0 0.0%

WARREN 8 0.4% 1 1.9% 7 0.3% 0 0.0%

WASHINGTON 23 1.0% 3 5.6% 19 0.9% 1 2.1%

WAYNE 0 0.0% 0 0.0% 0 0.0% 0 0.0%

WEAKLEY 1 0.0% 0 0.0% 1 0.0% 0 0.0%

WHITE 6 0.3% 1 1.9% 5 0.2% 0 0.0%

WILLIAMSON 32 1.4% 3 5.6% 28 1.3% 1 2.1%

WILSON 30 1.3% 0 0.0% 29 1.3% 1 2.1%

14

Table 7. Dollar Amount of Mortgages by Program and County – 2015

COUNTY ALL6 GC GC+ Second NS

ANDERSON $2,739,055 $0 $2,631,869 $107,186 $0

BEDFORD $1,418,056 $0 $1,362,548 $55,508 $0

BENTON $0 $0 $0 $0 $0

BLEDSOE $196,712 $0 $189,012 $7,700 $0

BLOUNT $3,938,188 $90,047 $3,241,290 $131,400 $475,451

BRADLEY $6,840,743 $90,557 $6,413,232 $259,854 $77,100

CAMPBELL $163,196 $0 $156,776 $6,420 $0

CANNON $176,275 $0 $169,375 $6,900 $0

CARROLL $152,668 $0 $146,692 $5,976 $0

CARTER $142,702 $0 $73,150 $2,980 $66,572

CHEATHAM $2,232,345 $0 $2,144,877 $87,468 $0

CHESTER $184,449 $0 $177,229 $7,220 $0

CLAIBORNE $83,794 $0 $80,514 $3,280 $0

CLAY $0 $0 $0 $0 $0

COCKE $276,450 $0 $265,614 $10,836 $0

COFFEE $612,848 $97,805 $494,859 $20,184 $0

CROCKETT $337,800 $0 $324,564 $13,236 $0

CUMBERLAND $1,179,440 $367,345 $686,693 $27,902 $97,500

DAVIDSON $68,956,397 $457,929 $64,922,302 $2,636,941 $939,225

DECATUR $0 $0 $0 $0 $0

DEKALB $273,762 $0 $263,046 $10,716 $0

DICKSON $1,114,229 $0 $1,070,615 $43,614 $0

DYER $689,558 $0 $662,454 $27,104 $0

FAYETTE $711,713 $0 $683,855 $27,858 $0

FENTRESS $64,889 $0 $62,349 $2,540 $0

FRANKLIN $571,743 $0 $549,363 $22,380 $0

GIBSON $1,054,581 $99,155 $918,286 $37,140 $0

GILES $183,637 $0 $176,085 $7,552 $0

GRAINGER $621,788 $0 $597,488 $24,300 $0

GREENE $819,062 $109,184 $682,091 $27,787 $0

GRUNDY $124,670 $0 $119,790 $4,880 $0

HAMBLEN $2,321,673 $0 $2,157,360 $87,813 $76,500

HAMILTON $15,516,433 $0 $14,770,844 $596,589 $149,000

HANCOCK $0 $0 $0 $0 $0

HARDEMAN $75,000 $75,000 $0 $0 $0

HARDIN $0 $0 $0 $0 $0

HAWKINS $472,354 $0 $453,998 $18,356 $0

HAYWOOD $429,598 $0 $412,782 $16,816 $0

HENDERSON $0 $0 $0 $0 $0


15

Table 7. Dollar Amount of Mortgages by Program and County – 2015, Continued


HENRY $0 $0 $0 $0 $0

HICKMAN $476,635 $0 $458,048 $18,587 $0

HOUSTON $44,963 $0 $43,203 $1,760 $0

HUMPHREYS $178,651 $122,448 $54,003 $2,200 $0

JACKSON $0 $0 $0 $0 $0

JEFFERSON $2,434,413 $244,428 $2,016,309 $82,176 $91,500

JOHNSON $0 $0 $0 $0 $0

KNOX $21,124,900 $614,164 $19,555,024 $795,712 $160,000

LAKE $0 $0 $0 $0 $0

LAUDERDALE $823,126 $0 $790,906 $32,220 $0

LAWRENCE $204,274 $0 $196,278 $7,996 $0

LEWIS $0 $0 $0 $0 $0

LINCOLN $213,195 $0 $205,213 $7,982 $0

LOUDON $1,811,358 $246,573 $1,418,648 $56,212 $89,925

MACON $254,346 $0 $244,390 $9,956 $0

MADISON $5,880,300 $0 $5,650,210 $230,090 $0

MARION $91,969 $0 $88,369 $3,600 $0

MARSHALL $189,703 $0 $182,278 $7,425 $0

MAURY $6,400,546 $55,967 $6,034,946 $245,883 $63,750

MCMINN $638,429 $0 $613,409 $25,020 $0

MCNAIRY $267,364 $0 $256,899 $10,465 $0

MEIGS $134,889 $0 $129,609 $5,280 $0

MONROE $846,854 $67,663 $748,691 $30,500 $0

MONTGOMERY $10,482,559 $0 $10,072,314 $410,245 $0

MOORE $0 $0 $0 $0 $0

MORGAN $424,129 $108,163 $303,598 $12,368 $0

OBION $300,282 $0 $288,602 $11,680 $0

OVERTON $629,752 $445,916 $176,640 $7,196 $0

PERRY $0 $0 $0 $0 $0

PICKETT $0 $0 $0 $0 $0

POLK $312,328 $0 $300,236 $12,092 $0

PUTNAM $1,375,092 $338,162 $925,718 $37,712 $73,500

RHEA $509,408 $0 $489,468 $19,940 $0

ROANE $1,436,689 $146,816 $1,239,383 $50,490 $0

ROBERTSON $4,378,906 $128,500 $4,083,450 $166,956 $0

RUTHERFORD $46,299,568 $0 $44,336,706 $1,803,862 $159,000

SCOTT $171,325 $0 $164,822 $6,503 $0

SEQUATCHIE $0 $0 $0 $0 $0

SEVIER $2,580,779 $287,755 $2,203,228 $89,796 $0


16

Table 7. Dollar Amount of Mortgages by Program and County – 2015, Continued


SHELBY $29,462,911 $228,529 $27,505,554 $1,116,653 $612,175

SMITH $399,351 $0 $383,719 $15,632 $0

STEWART $157,604 $0 $151,404 $6,200 $0

SULLIVAN $3,525,751 $0 $2,784,191 $113,490 $628,070

SUMNER $13,798,008 $0 $13,173,226 $534,782 $90,000

TIPTON $783,423 $0 $752,707 $30,716 $0

TROUSDALE $515,477 $0 $495,281 $20,196 $0

UNICOI $0 $0 $0 $0 $0

UNION $99,020 $0 $95,144 $3,876 $0

VAN BUREN $0 $0 $0 $0 $0

WARREN $626,791 $65,786 $540,881 $20,124 $0

WASHINGTON $2,661,649 $425,015 $2,051,198 $83,436 $102,000

WAYNE $0 $0 $0 $0 $0

WEAKLEY $62,335 $0 $59,895 $2,440 $0

WHITE $708,386 $116,746 $569,500 $22,140 $0

WILLIAMSON $6,193,152 $525,033 $5,349,740 $217,254 $101,125

WILSON $5,097,110 $0 $4,830,425 $195,510 $71,175


17

Table 8. Selected Characteristics by County – 2015 Borrower Characteristics Property Characteristics

COUNTY

Age*

HH Size Income* Price Sq. Ft

Year Built

PITI: % Income*

# Loans – – – – – – – – – – – – – – – – – – – – AVERAGE VALUES – – – – – – – – – – – – – – –– –

ANDERSON 27 0.90 29 2 $41,905 $99,304 1,342 1965

BEDFORD 12 0.75 27 2 48122 115642 1393 1999

BENTON 0 0.00 NA NA NA NA NA NA

BLEDSOE 2 0.40 NA 2 NA NA 1268 1999

BLOUNT 36 0.74 37 3 $43,995 $111,714 1,415 1986

BRADLEY 63 1.85 33 2 $44,561 $107,730 1,291 1979

CAMPBELL 2 0.12 NA 1 NA NA 1,629 1964

CANNON 2 0.31 NA 1 NA NA 1,141 1977

CARROLL 2 0.19 NA 2 NA NA 1349 1966

CARTER 2 0.08 NA 2 NA NA 816 1986

CHEATHAM 15 1.00 37 2 $62,438 $145,780 1,533 1986

CHESTER 2 0.36 NA 2 NA NA 1,102 1981

CLAIBORNE 1 0.08 NA 4 NA NA 1,386 1950

CLAY 0 0.00 NA NA NA NA NA NA

COCKE 4 0.28 NA 3 NA NA 1,527 1963

COFFEE 5 0.25 NA 3 NA NA 1,669 1988

CROCKETT 3 0.59 NA 3 NA NA 1440 2004

CUMBERLAND 13 0.59 34 3 $42,519 $91,350 1,468 1981

DAVIDSON 472 1.92 35 2 $54,325 $143,886 1,408 1987

DECATUR 0 0.00 NA NA NA NA NA NA

DEKALB 3 0.45 NA 1 NA NA 1,085 1982

DICKSON 10 0.48 33 3 $53,081 $109,037 1,309 1996

DYER 7 0.49 33 3 $52,319 $96,800 1,682 1975

FAYETTE 5 0.46 NA 1 NA NA 1,685 2002

FENTRESS 1 0.13 NA 1 NA NA 1242 1976

FRANKLIN 5 0.33 NA 3 NA NA 1,504 1997

GIBSON 10 0.52 33 3 $51,620 $102,950 1,558 1988

GILES 2 0.19 NA 2 NA NA 1614 1984

GRAINGER 7 0.68 34 2 $46,112 $86,931 1,439 1981

GREENE 11 0.38 36 3 $42,570 $73,153 1,344 1989

GRUNDY 1 0.18 NA 6 NA NA 1636 1970

HAMBLEN 24 1.07 33 3 $43,111 $95,724 1,343 1983

HAMILTON 131 1.12 36 2 $46,129 $117,123 1,413 1968

HANCOCK 0 0.00 NA NA NA NA NA NA

HARDEMAN 1 0.12 NA 1 NA NA 1,628 1997

HARDIN 0 0.00 NA NA NA NA NA NA

HAWKINS 6 0.25 32 2 $53,840 $76,483 1,509 1993

HAYWOOD 6 0.80 48 3 $42,066 $70,067 1,227 1970

HENDERSON 0 0.00 NA NA NA NA NA NA

HENRY 0 0.00 NA NA NA NA NA NA

18

Table 8. Selected Characteristics by County – 2015, Continued

Borrower Characteristics Property Characteristics

COUNTY

# Loans

Age* HH Size Income* Price* Sq. Ft Year Built PITI: % Income*

– – – – – – – – – – – – – – – – – – – – AVERAGE VALUES – – – – – – – – – – – –– –

HICKMAN 5 0.59 NA 2 NA NA 1,315 1972

HOUSTON 1 0.29 NA 4 NA NA 1761 2000

HUMPHREYS 2 0.27 NA 1 NA NA 1,256 1978

JACKSON 0 0.00 NA NA NA NA NA NA

JEFFERSON 24 1.38 33 3 $41,386 $101,288 1,485 1995

JOHNSON 0 0.00 NA NA NA NA NA NA

KNOX 181 1.09 33 2 $45,812 $115,418 1,318 1978

LAKE 0 0.00 NA NA NA NA NA NA

LAUDERDALE 9 0.88 36 4 $51,490 $89,500 2,125 1973

LAWRENCE 2 0.12 NA 4 NA NA 1,597 1983

LEWIS 0 0.00 NA NA NA NA NA NA

LINCOLN 2 0.15 NA 1 NA NA 1526 2001

LOUDON 19 1.04 37 2 $48,582 $95,828 1,557 1978

MACON 3 0.36 NA 4 NA NA 1,740 1991

MADISON 58 1.78 35 2 $46,074 $99,450 1,566 1991

MARION 1 0.09 NA 1 NA NA 870 1986

MARSHALL 2 0.16 NA 5 NA NA 1,290 1983

MAURY 50 1.82 37 2 $46,403 $125,782 1,457 1980

MCMINN 7 0.35 33 2 $40,363 $89,357 1,496 1997

MCNAIRY 3 0.32 NA 2 NA NA 1423 1995

MEIGS 1 0.20 NA 1 NA NA 1,308 1976

MONROE 9 0.52 29 2 $34,619 $92,501 1,502 1991

MONTGOMERY 91 1.93 34 3 $46,821 $112,705 1,282 1991

MOORE 0 0.00 NA NA NA NA NA NA

MORGAN 4 0.56 NA 4 NA NA 1,461 2005

OBION 4 0.35 NA 3 NA NA 1,406 1986

OVERTON 7 0.77 32 3 $40,818 $88,129 1,404 1987

PERRY 0 0.00 NA NA NA NA NA NA

PICKETT 0 0.00 NA NA NA NA NA NA

POLK 3 0.47 NA 4 NA NA 1,741 1991

PUTNAM 12 0.47 34 3 $44,788 $114,350 1,556 1987

RHEA 5 0.44 NA 2 NA NA 1,661 1984

ROANE 13 0.60 35 2 $46,172 $108,390 1,486 1978

ROBERTSON 31 1.35 32 3 $55,113 $138,300 1,395 1987

RUTHERFORD 321 3.60 33 2 $55,106 $141,408 1,459 1998

SCOTT 2 0.21 NA 2 NA NA 1,690 2013

SEQUATCHIE 0 0.00 NA NA NA NA NA NA

SEVIER 20 0.57 36 3 $50,548 $126,370 1,528 1988

SHELBY 247 0.84 37 2 $48,590 $118,023 1,706 1982

SMITH 3 0.48 NA 3 NA NA 1,844 1967

19

Table 8. Selected Characteristics by County – 2015, Continued

Borrower Characteristics Property Characteristics

COUNTY

# Loans

Age* HH Size Income* Price* Sq. Ft Year Built PITI %

Income*

– – – – – – – – – – – – – – – – – – – – – AVERAGE VALUES – – – – – – – – – – – –

STEWART 2 0.41 NA 2 NA NA 1,109 1958

SULLIVAN 33 0.52 40 2 $44,218 $114,479 1,354 1977

SUMNER 94 1.63 34 2 $58,353 $144,079 1,510 1984

TIPTON 7 0.39 34 3 $41,984 $109,700 1,460 1995

TROUSDALE 3 0.93 NA 2 NA NA 1,840 2011

UNICOI 0 0.00 NA NA NA NA NA NA

UNION 1 0.12 NA 2 NA NA 1,188 1960

VAN BUREN 0 0.00 NA NA NA NA NA NA

WARREN 8 0.53 28 4 $38,281 $76,313 1,415 1992

WASHINGTON 23 0.52 34 2 $45,050 $114,939 1,324 1982

WAYNE 0 0.00 NA NA NA NA NA NA

WEAKLEY 1 0.08 NA 2 NA NA 1749 1996

WHITE 6 0.59 31 3 $46,520 $114,333 1,604 1964

WILLIAMSON 32 0.90 34 2 $58,669 $196,118 1,630 2002

WILSON 30 0.85 32 3 $62,839 $167,214 1,643 1997

TENNESSEE 2,275 35 2 $50,276 $125,662 1,458 1986

*In the counties with 5 or less loans, the information about the borrower’s age, the income of the borrower and the acquisition cost are suppressed to protect the anonymity of the borrowers.

21

Map 1: Service Index by County, 20159

9 The service index is computed as a ratio derived from the distribution of all THDA loans and the distribution of eligible households in Tennessee, which are households whose median income fell between 30% and 100% of the state’s median income. This calculation is different than the previous years because we included both the renter and owner households in eligible population. This is more accurate because first-time homebuyer requirement is waived for borrowers who are purchasing a home in a targeted area and the veterans. Therefore, the current homeowners are also part of eligible population. Comprehensive Housing Affordability Strategies (CHAS) data was utilized in the analysis. We used 2008-20182 CHAS data to determine the eligible households for all the counties.

Tab # 7 Items:

Grants Committee Meeting Materials


Grants Committee January 26, 2016


AGENDA

1. Call to Order ............................................................................................. Baker

2. Approval of Minutes for November 17, 2015 Meeting ........................... Baker

3. Program Description for the Housing Trust Fund 2016 Spring Competitive

Round .......................................................................................................... Watt

4. HOME Beneficiary Report ..................................................................... Mansa

5. Federal Housing Trust Fund Update .......................................................... Watt

6. GHHI Presentation ................................................................................... Baker

7. Adjourn ...................................................................................................... Baker


William R Snodgrass – Tennessee Tower John Baker, Chair

312 Rosa L Parks Avenue, Third Floor Kendra Cooke

Nashville, TN 37243 Tre Hargett

Ron Jones

The Nashville Room Justin Wilson

TENNESSEE HOUSING DEVELOPMENT AGENCY GRANTS COMMITTEE

November 17, 2015

Pursuant to the call of the Chairman, the Grants Committee of the Tennessee Housing Development Agency Board of Directors met November 17, 2015, at 10:00 A.M. at William R. Snodgrass, Tennessee Tower, Nashville Room, Nashville, Tennessee.

The following members were present: John Baker, Kendra Cooke, Jonathan Rummel for Secretary of State Tre Hargett, and Ann Butterworth for Comptroller Justin Wilson. Board Chairman Brian Bills was also present.

Mr. Baker called the meeting to order and called for consideration of the minutes from the September 22, 2015, meeting. Upon motion by Mr. Baker, second by Ms. Cooke, the minutes were approved.

Mr. Baker then called for consideration of the funding for the 2016 Fall Housing Trust Fund Competitive Grants. Mr. Watt noted that 33 applications were received, requesting over $9.6 million in funding with a little over $2.3 million available in funding. Eight applications were determined to be ineligible. Staff recommended full funding for the top six applicants on the matrix attached to the memo dated November 3, 2015 from Mr. Watt. Upon motion by Mr. Baker, second by Mr. Bills, motion carried to recommend approval of the 2016 Fall Housing Trust Fund Competitive Grant Round Matrix.

Mr. Baker then called for consideration of the 2015-2016 HOME Program Description. Ms. Holloway referenced her memo dated November 2, 2015, and reviewed the staff proposed changes to the program description. The changes are as follows:

• Combine 2015 and 2016 allocations into one application round. The awarding of the 2016 HOME funds would be subject to the 2016 HOME allocation from HUD and the approval of the 2016 Action Plan.

• Allocate all of 2016 HOME funds to the CHDO round if the federal allocation is less than $1 million.

• Allow applications for 2015-2016 CHDO funding from CHDOs with projects located in the Local Participating Jurisdictions.

• Incorporate the change in the definition of commitment for CHDO projects as required in the new HOME regulations.

• Include language in Sections C.2 Homeownership Programs and Section G.4 Affordability Period approved by HUD describing the HOME Resale and Recapture provisions.

• Add Universal Design/Visitability requirements.

• Add up to 10 points to the CHDO matrix for Energy Conservation/Universal Design.

• Add 10 points to the Urban/Rural matrices for applications from communities with approved Growth Plans. Counties not subject to the Tennessee Grown Policy Act would also receive these points.

Upon motion by Mr. Baker, second by Ms. Cooke, motion carried to recommend approval of the 2015-2016 HOME Program Description with the changes as described.

2

Mr. Baker then called for consideration of the 2016 Emergency Solutions Grant (ESG) Program Description. Mr. Watt noted that THDA expects to receive approximately $3 million in FY2016 funding, plus $1.2 million that was not awarded through the 2015 grant round. He referenced his memo dated November 3, 2015 and reviewed the following staff proposed changes to the ESG Program Description:

• Make funding available to all 95 counties in the State, and accept applications from those communities that receive their own allocation of ESG funding directly from HUD.

• Decrease the Small City set-aside from 52% to 38% and include Knoxville/Knox County as part of the set-aside.

• Eliminate the Targeted Set-Aside of $100,000 for the network housing agencies established by the Tennessee Department of Mental Health and Substance Abuse Services, and allow those agencies to apply for up to $150,000 of funding in the competitive grant round.

• Expand the pool of eligible applicants to include local governments as permitted under the federal ESG regulations.

• Require Local Government Certification only for applications with emergency shelter activities.

• Eliminate rehabilitation of emergency shelters as an eligible activity.

• In the rating scale, eliminate the Critical Need Score and the Score for Domestic Violence Shelters, and replace those categories with a Performance Score and a Coordination with Continuum of Care Priorities Score.

A discussion ensued regarding the proposed elimination of rehabilitation of shelters as an eligible activity and whether the elimination would negatively impact any applicants. Mr. Watt pointed out that only 4 applications for this activity were submitted and noted that construction activity of this type adds new regulatory and administrative burdens to the program. He indicated that staff felt that ESG funds would be better utilized for other eligible activities, given the availability of other resources available for rehabilitation of emergency shelters. Upon motion by Mr. Baker, second by Ms. Cooke, motion carried to recommend approval of the 2016 Emergency Solutions Grant Program Description with the changes as described.

Mr. Baker then called for consideration of an extension request from Doors of Hope for its 2014 ESG Contract from December 31, 2015 to May 31, 2016. Maridel Williams, Executive Director of Doors of Hope, addressed the committee and noted that the focus of the agency is to assist individuals recently released from correctional facilities or rehabilitation centers for substance abuse. She explained that due to the ever increasing housing shortage in Rutherford County, the agency has seen an upswing in applications, and is requesting an extension so a part-time staff person can be hired to assist these individuals locate appropriate housing. Staff recommended an extension to June 30, 2016. Upon motion by Mr. Baker, second Ms. Cooke, motion carried to recommend approval of extending the Doors of Hope 2014 ESG contract to June 30, 2016.

There being no further business to come before the Committee, the meeting was adjourned.

Respectfully, Ralph M. Perrey Executive Director Approved this ____ day of January 2016

Bill Haslam Ralph M. Perrey Governor Executive Director

www.thda.org – (615) 815-2200 – Toll Free: 800-228-THDA

Tennessee Housing Development Agency Andrew Jackson Building, Third Floor

502 Deaderick Street, Nashville, TN 37243

MEMORANDUM

TO: Grants Committee and Board of Directors

FROM: Don Watt, Director of Community Programs

DATE: January 12, 2016

RE: 2016 Housing Trust Fund Competitive Grant Program Description __________________________________________________________________________________________

At the January 2014 meeting, the Board authorized staff to continue to make changes in the Housing Trust Fund Competitive Grant Program Description for the application due dates, the contract terms, and the draw down requirements without bringing the Program Description back to the Committee for approval. However, any proposed changes in the scoring criteria, eligible or ineligible activities, and program requirements would require Committee and Board approval. Staff is recommending approval of the attached program description for the 2016 Spring Round of Housing Trust Fund Competitive Grant Program with the following substantive changes:

1. In order to align with THDA’s Strategic Plan, the Program Description identifies (1) Youth Transitioning Out of the State’s Foster Care System and (2) Ex-Offenders as eligible populations to be served by the HTF Competitive Grant resources.

2. The Program Description identifies setting standards for projects targeted to Individuals with Disabilities in order to demonstrate that the housing is integrated into the community as described by the Centers for Medicare and Medicaid Services. These standards have been developed as a best practice to align with the community integration mandate of the U.S. Supreme Court’s Olmstead decision. Applications targeted to individuals with disabilities will be evaluated for compliance with these standards in the program design category.

3. The Program Description modifies the definition of “Housing for the Elderly” to align with federal fair

housing definition of “elderly”. The change increases the age of all occupants from 60 to 62.

4. In alignment with HUD regulations and THDA’s Administrative Plan for the Housing Choice Voucher Program, the Program Description also adds a section which prohibits assistance across any type of housing assisted with Competitive Grant resources for individuals with certain criminal background histories.

5. The scoring matrix was revised to emphasize project design and the capacity of the applicant and to

reward true innovation. The high value of innovation points in past program descriptions led to the


award of some innovation points to nearly all applications. Under the revised program description, points will only be awarded for true innovation.

Scoring Category Fall 2016 Round Proposed Spring

2016 Round Capability: Project Design & Capacity 50 70 Need 25 20 Innovation 25 10

6. The scoring matrix Need category was revised to prioritize projects which are serving those that set-

aside 100% of the units for those households that are extremely low income (0-30% AMI), very low income (0-50%) AMI, youth transitioning out of the foster care system, and ex-offenders. The scoring matrix Need category also prioritizes projects located in counties which have not been the location of housing funded under the HTF Competitive Grants program since January 1, 2012, as well as those projects which serve a larger need in the community outside the specific project scope.

________________________________________________________________________________________________________________________ 2016 Spring Round Competitive Grant Page 1 (Revised 1/2016)

2016 HOUSING TRUST FUND SPRING ROUND

COMPETITIVE GRANT APPLICATION Program Description and Application Package

The Tennessee Housing Development Agency (THDA) is seeking creative and innovative proposals for a FY 2016 Spring Round of Competitive Grants under the Housing Trust Fund. The amount available for the FY 2016 Spring Round is approximately $1.52.3 million. The purpose of this Program Description is to explain program requirements and the application process.

Applications for the FY 2016 Spring Round must be received by THDA on or before 4:30 PM CST on Thursday, March 10, 2016. THDA anticipates notifying successful applicants by May 31, 2016. The Spring Round Competitive Grant contracts will begin July 1, 2016 and will end June 30, 2019. Applicants should be aware that the “cure period” has been eliminated. Submission of a complete application is a threshold criterion.

The application package follows this Program Description. The Program Description and application in WORD-format are also available at www.thda.org. At the THDA website, click on BUSINESS PARTNERS, then GRANT ADMINISTRATORS for links to the HTF Competitive Grants and the FY 2016 Spring Program Description and application. If you have questions please call (615) 815-2030.

A. ELIGIBLE APPLICANTS

THDA will accept applications for the FY 2016 Spring Round from cities, counties, development districts, public housing authorities, other Departments within State Government, and private, non-profit organizations. Non-profit organizations must be organized under Tennessee law as evidenced by a current Certificate of Existence from the Tennessee Secretary of State, and must submit Attachment One: Non-Profit Checklist with supporting documentation.

Competitive Grant funds will be awarded to successful applicants in the form of a grant. Applicants with prior Competitive Grants must also have requested (submitted an official Request for Payment Form with supporting documentation) the following percentages of their grants by March 3, 2016, to be eligible for the FY 2016 Spring Round Competitive Grant program:


COMPETITIVE GRANT YEAR

SPEND DOWN REQUIREMENT

2014 Fall and earlier 100%

2014 Spring 75%

2015 Fall 50%

2015 Spring 25%

2016 Fall Not eligible

To meet the “requested” threshold criteria, THDA must have received an official, complete Request for Payment Form with supporting documentation from an Applicant with a prior Competitive Grant.

B. ELIGIBLE ACTIVITIES All housing financed using HTF Competitive Grant resources must be rental and address the housing needs of households who are low, very low, and/or extremely low income as defined in Section F (1).

The following rental housing activities are eligible:

• New construction of rental housing units.

• Acquisition of rental housing units.

• Rehabilitation of rental housing units.

• Conversion of non-residential units to residential units.

• Combinations of the above. The rental housing provided may be either permanent or transitional as defined below:

• “Permanent Housing” is community-based housing with a tenant on a lease (or a sublease) for an initial term of at least one year that is renewable and is terminable only for cause.

• “Transitional housing” is housing that is designed to provide individuals and families with interim stability and support for up to 24 months in order to assist the household successfully move to and maintain permanent housing. Transitional housing must include a lease, sublease, or occupancy agreement.

Applicants proposing rental housing programs will need to complete Attachment Two: Rental Housing Feasibility Worksheet to demonstrate a need for the Competitive Grant funds and the financial feasibility of the project.

C. TARGET POPULATIONS

1. Low, very low and extremely low income households

Rental housing for households at or below 80% of Area Median Income (AMI) is eligible. THDA will provide a preference for applications with a 100% set-aside only for households who are extremely low income (0-30% AMI) or with a 100% set-aside only for very low income (0 – 50% AMI).


2. Special Needs Housing for Individuals with Disabilities

Special needs hHousing for Individuals with Disabilities is rental housing for persons with a physical, emotional, or mental disability. All households must have incomes less than 80% of AMI.

A “person with disabilities” means a household composed of one or more persons, at least one of whom is an adult, and the household must include an individual who is disabled. A person is considered to have a disability if the person has a physical, mental or emotional impairment that is expected to be of long-continued and indefinite duration; substantially impedes his or her ability to live independently; and is of such a nature that such ability could be improved by more suitable housing.

A person will also be considered to have a disability if he or she has a developmental disability, which is a severe, chronic disability that is attributable to a mental or physical impairment or combination of mental and physical impairments; is manifested before the person attains age 22; is likely to continue indefinitely; results in substantial functional limitations in three or more of the following areas of major life activity: self-care, receptive and expressive language, learning, mobility, self-direction, capacity for independent living, and economic self-sufficiency; and reflects the person’s need for a combination and sequence of special interdisciplinary, or generic care, treatment, or other services that are of lifelong or extended duration and are individually planned and coordinated.

Housing funded for this population must meet the qualities of settings that are eligible for reimbursement under the Medicaid home and community-based services that were established by the Centers for Medicare and Medicaid Services (CMS) in the final rule dated January 16, 2014:

https://www.federalregister.gov/articles/2014/01/16/2014-00487/medicaid-program-state-plan-home-and-community-based-services-5-year-period-for-waivers-provider.

The final rule requires that all home and community-based settings meet certain qualifications, including:

• The setting is integrated and supports full access to the greater community;

• Is selected by the individual from among setting options;

• Ensures individual rights of privacy, dignity, and respect, and freedom from coercion and restraint;

• Optimizes autonomy and independence in making life choices; and,

• Facilitates choice regarding services and who provides them.

Additionally for provider owned or controlled residential settings, the following additional requirements apply:

https://www.federalregister.gov/articles/2014/01/16/2014-00487/medicaid-program-state-plan-home-and-community-based-services-5-year-period-for-waivers-provider




• The individual has a lease or other legally enforceable agreement providing similar protections;

• The individual has privacy in their unit including lockable doors, choice of roommates, and freedom to furnish or decorate the unit;

• The individual controls his/her own schedule, including access to food at any time;

• The individual can have visitors at any time; and,

• The setting is physically accessible.

3. Housing for Youth Transitioning Out of the State’s Foster Care System

Rental housing for youth transitioning out of the foster care system is eligible. All households must have incomes less than 80% of AMI. The head of the household must be at least 18 years of age and no more than 24 years of age at time of application for tenancy. All housing must provide flexible, voluntary support services designed to help the individual stay housed and live a more productive life in the community.

4. Housing for the Elderly

Elderly populations are households with one or more individualswhere all household members are at least 60 62 years of age. Housing for the elderly does not include hospices, nursing homes, or convalescent facilities.

5. Housing for Ex-Offenders

Rental housing for ex-offenders who are either homeless or at risk of homelessness and for those who are eligible for release by the Tennessee Board of Probation and Parole but who remain in custody due to having no other residential options is eligible. Housing for elderly offenders who are eligible for release by the Tennessee Board of Probation and Parole but who remain in custody due to no other residential options is encouraged. Certain ex-offenders, as described below, may not be eligible to reside in housing of this type developed with HTF Competitive Grants.

D. PROHIBITED ACTIVITIES

1. Pledge Competitive Grant funds as support for tax exempt borrowing by local grantees.

2. Provide off-site improvements or neighborhood infrastructure or public facility improvements.

3. No portion of the Competitive Grant funds or the required local match may be used for administrative expenses by local governments.

4. Provide assistance to private, for-profit or to private non-profit owners of rental property. The Grantee must be the owner of the proposed rental project at award.

5. Homeowner rehabilitation projects.


6. Homeownership activities, including down payment assistance programs and the development of units for homeownership.

7. Rental housing that is a treatment, hospice, nursing home, or convalescent facility.

E. MATCH

Proposals must include a 50% match for the Competitive Grant funds. The matching funds can be provided by grants from other agencies; federal sources such as the Community Development Block Grant (CDBG) program or USDA Rural Development; contributions by local church groups or local agencies; contributions by individuals; bank loans; or a funding pool established by a local lender for the applicant. Supportive services required for projects serving individuals with disabilities, ex-offenders, or youth transitioning out of the foster care system may also qualify as match. THDA HOME grants or other THDA program funds to communities or non-profit agencies will not be an eligible source of the matching funds. However, HOME grants from local participating jurisdictions to non-profit agencies would be an eligible source of match.

THDA will prioritize applications with a firm match commitment, the value of which is clearly documented in the application by the entity providing the match source.

F. PROGRAM REQUIREMENTS

1. INCOME LIMITS

Competitive Grants for rental projects may be used to benefit low-, very low- or extremely low income households.

A. “Low income household” means an individual or family unit whose gross annual income does not exceed 80% of the area median income, adjusted for family size;

B. "Very low income household" means an individual or family unit whose gross annual income does not exceed 50% of the area median income, adjusted for family size.

C. “Extremely low income household” means an individual or family unit whose gross annual income does not exceed 30% of the area median income, adjusted for family size.

For rental property, the income limits apply to the incomes of the tenants, not to the owners of the property.

Competitive Grants use the income limits established by the U.S. Department of Housing and Urban Development for the HOME Program, and household income as defined by the Section 8 Rental Assistance Program. Current limits are in Attachment Three: Income Limits. The income of the household to be reported for purposes of eligibility is the sum of the annual gross income of the beneficiary, the beneficiary's spouse, and any other family member residing in the home or rental unit. Annual gross income is "anticipated" for the next 12 months, based upon current circumstances or known upcoming changes, minus certain income exclusions.


Owners of rental property are required to ensure occupancy of units by low-, very low- or extremely low- income tenants during the five year compliance period. Tenants whose annual incomes increase to over 80% of area median may remain in occupancy, but must pay no less than 30% of their adjusted monthly income for rent and utilities.

2. CRIMINAL BACKGROUND The Housing Trust Fund Competitive Grants Program will follow HUD regulations with regard to the provision of housing for the ex-offenders. HUD regulations prohibit housing assistance to the following groups of ex-offenders:

A. Ex-offenders who have been evicted from federally-assisted housing for drug-related criminal activity with an effective date of eviction within the last three (3) year period.

B. An ex-offender household that includes a member who has ever been convicted of a drug-related criminal activity involving the manufacturing or production of methamphetamine on the premises of federally–assisted housing.

C. An ex-offender household that includes a member who is subject to a lifetime registration requirement under a state sex offender registry program.

3. COMPLIANCE PERIOD

All grants for rental housing projects will have a compliance period of five years. Prior to drawing down Competitive Grant funds, owners of rental projects will be required to sign a grant note, deed of trust and restrictive covenant to enforce the compliance period. The grant is forgiven at the end of the five year period.

4. PROPERTY STANDARDS Property standards must be met when Competitive Grant funds are used for a project. Any rental units constructed or rehabilitated with Competitive Grant funds must meet all applicable local codes, rehabilitation standards, and zoning ordinances at the time of project completion. Following project completion, all properties assisted with Competitive Grant funds must meet Housing Quality Standards throughout the compliance period.

In the absence of a local code, new construction of multi-family apartments of 3 or more units must meet the State-adopted edition of the International Building Code; new construction of single-family rental units or duplexes for rental must meet the State-adopted edition of the International Residential Code for One- and Two-Family Dwellings; and rehabilitation of existing rental units must meet the State-adopted edition of the International Existing Building Code.

Energy Code. New construction projects must also meet the current edition of the International Energy Conservation Code.

Visitability. Additional points will be awarded to applicants proposing single-family rental or multi-family new construction projects that include design features to make the units accessible. These options include a step-free entrance; free passage of 32-36” for interior/exterior doorways; and easy use by individuals confined to a wheelchair.


Universal Design. Additional points will be awarded to applications that incorporates the inclusion of features that meet the needs of the greatest number of residents within a community. Universal design differs from accessible design, which is primarily intended to meet the needs of persons with disabilities. Universal design, however, is inclusive of adaptable design as universal design incorporates structural features that will a residence to be adapted to an individual’s current or future needs. Universal design features include, but are not limited to:

• Stepless entrances

• Minimum 5’ x 5’ level clear space inside and outside entry door

• Broad blocking in walls around toilet, tub and shower for future placement of grab bars

• Full-extension, pull out drawers, shelves, and racks in base cabinets in the kitchen

• Front mounted controls on all appliances

• Lever door handles

• Loop handle pulls on drawers and cabinet doors

More information on Universal Design may be found at The Center for Universal Design at North Carolina State University: http://www.ncsu.edu/ncsu/design/cud/index.htm.

5. RENT LEVELS

Every rental unit assisted with Competitive Grant funds is subject to rent controls designed to make sure that rents are affordable to low-income households. The maximum rents used for Competitive Grants are the High HOME rents. However, property owners are encouraged to charge tenants, in a rental property assisted with Competitive Grant funds no more than 30% of gross monthly income for rent. See Attachment Four: HOME Program Rents.

Rents are controlled for the length of the compliance period, and are determined on an annual basis by HUD. The published rents include utilities. The cost of utilities paid by tenants must be subtracted (using applicable utility allowances) from the published HOME rents to determine the maximum allowable rents.

Each Grantee should be aware of the market conditions of the area in which the project is located. The High HOME rents are maximum rents which can be charged. Each project should show market feasibility not based upon the High HOME rents, but rather upon area housing markets and HTF occupancy requirements which require occupancy by low- or very-low-income tenants. Rents shall not exceed the published High HOME rents, adjusted for utility arrangements and bedroom size. However, because these rents must also be attractive to low- or very low income tenants, actual rents may be lower than the High HOME rents to keep within 30% of the tenant’s monthly income. Programs should be designed so they take into consideration the market feasibility of projects funded.

Rents for group homes must be calculated based on the pro-rata share of the High HOME Rent for the group home size. The pro-rata share is calculated by dividing the number of persons in the assisted household by the number of persons (assisted and unassisted) living in the group home.

http://www.ncsu.edu/ncsu/design/cud/index.htm


6. GRANTEE'S ON-GOING OBLIGATIONS FOR RENTAL PROPERTY The rental housing requirements during the compliance period are the responsibility of the Grantees. They are responsible for:

A. Initial and annual income certification of tenants; B. Adherence to the HTF rent limits;

C. Compliance with THDA Property Standards; and

D. Reporting to THDA.

G. PROCUREMENT

It is important to keep the solicitation of bids for goods and services, materials, supplies and/or equipment open and competitive. Cities, counties and non-profit organizations and other eligible applicants must follow their procurement policies. At a minimum, there must be an established selection procedure, and grantees are expected to obtain at least three bids. There must also be a written rationale for selecting the successful bid or proposal.

H. MARKETING REQUIREMENTS

One goal of THDA’s Housing Trust Fund Competitive Grants Program is to raise the profile of affordable housing at the local, state and federal level, and to demonstrate that decent housing impacts all facets of community development. Each Grantee must implement marketing and public relations plans to accentuate the achievements of the program. THDA’s Public Affairs Division will assist in the development of these plans. Grantees are required to submit data and beneficiary stories to THDA.

I. FAIR HOUSING AND EQUAL OPPORTUNITY

Each Grantee funded under the Housing Trust Fund Competitive Grants Program must comply with both state and federal laws with regard to fair housing and equal opportunity (FHEO). FHEO requirements have been developed to protect individuals and groups against discrimination on the basis of: race, color, national origin, religion, age, disability, familial status, or sex.

In particular, owners and program administrators will need to be aware of discrimination issues with regard to: housing opportunities; employment opportunities; business opportunities; and benefits resulting from activities funded in full or in part by Housing Trust Fund dollars.

THDA requires that each Grantee establish procedures to inform the public and potential tenants of federal Fair Housing laws and the Grantee's affirmative marketing program; outline procedures by which Grantees will solicit applications from potential tenants; and maintain records of efforts to affirmatively market rental units.

J. APPLICATION AND EVALUATION PROCEDURE

Submissions for funding should be limited only by imagination, availability of matching funds, availability of support services, and a demonstrated need for the proposed project in a given area.


Proposals for funding in the FY 2016 Spring Round are limited to a maximum of $500,000. There is no minimum grant amount. THDA expects that the combination of Competitive Grant funds and the required matching funds will be sufficient to allow the proposed project to be completed in a timely manner. Proposals that address the housing needs of very low or extremely low income households, including very low income elderly, youth transitioning from foster care and ex-offenders, especially elderly offenders who are eligible for release by the Tennessee Board of Probation and Parole but who remain in custody due to no other residential options and who meet other requirements specified in the Program Description, or very low income special needs populations will receive additional points in the scoring matrix. Proposals with an identified, firm commitment for the matching funds will be more attractive, and those proposals with a commitment for match resources which exceeds the 50% requirement will be the most attractive.

THDA will evaluate each application to determine if the proposal meets program criteria, including submission of a complete application; proposal of an eligible activity; proposal of a project that is ready to get underway except for the gap in financing to be provided by the Competitive Grant funding; and proposal of a project that in the opinion of THDA is physically, financially and administratively feasible.

Applications will not be considered if the following threshold items are not included within the application:

• Application signed by the Chief Executive of the organization or the President/Chairman of the Board of Directors.

• Copy of the latest audit or audited financial statement.

Additionally, applications from nonprofit organizations will not be considered if the following threshold items also are not included within the application:

• A Certificate of Existence dated within the specified time frame.

• Documentation of an IRS designation under Section 501(c)3 or Section 501(c)4 of the federal tax code.

• Copy of the Charter and By-laws of the organization

• Copy of a resolution by the Board of Directors approving the submission of the application.

• A list of the current Board of Directors that meets the Board composition requirements stated in the by-laws.

• One page explanation of how the Board of Directors is involved in the operation of the applicant, including how often the Board meets, how the Board monitors and provides oversight for the applicant’s programs.

• Copy of the minutes from the most recent meeting of the Board of Directors.

• Business plan or strategic management plan that demonstrates the applicant’s short term and long term goals, objectives, and plans to achieve them.

• Documentation of operating funds from all sources.

• Explanation of other programs operated by the organization and associated sources of funding.

• One page explanation of the organization’s experience in providing housing, particularly to the population group targeted in the application.


Organizations seeking funding for housing targeted to ex-offenders must already be approved by and in good standing with the Tennessee Department of Corrections (TDOC) and listed on that Department’s List of Approved Transitional Housing Providers.

In addition to the above requirements, applications from organizations seeking to use HTF Competitive Grant funds to provide rental housing for ex-offenders must provide a copy of the policies and procedures guiding the operation of their program and a copy of the program’s application for tenancy.

Housing providers must abide by all TDOC rules and regulations and all State and Federal statutes and laws as applicable to the populations being served.

A Review Committee will score and rank all applications meeting the threshold criteria. Applications will be ranked in descending numerical order based on the categories in the HTF Competitive Grant Matrix. The Review Committee will present its recommendations to the Grants Committee and the Board of Directors for consideration at their May 2016 meetings.


HTF COMPETITIVE GRANT MATRIX Up to 100 Points

1. CAPABILITY Up to 50 70 points

• The program design is complete, and all necessary components are identified in the application. Up to 25 35 points o The proposal demonstrates adherence to program guidelines. o Sites have been identified and applicant has site control. o The project is financially feasible with sufficient revenue for

the on-going operation of the housing during the compliance period. o The feasibility worksheet is complete and demonstrates a need for HTF

Competitive Grant funds. o The proposed rents charged to tenants are reasonable given the income of the

targeted population or rental assistance is committed to lower the contribution of the tenant toward rent and utilities.

o If new construction, the housing will include design features to make the units accessible, such as a step-free entrance; 32-36” interior and exterior free passage; and easy use by an individual confined to a wheelchair. For projects targeting individuals with disabilities or youth aging out of foster care, a commitment for the delivery of supportive services is in place.

o For projects targeting ex-offenders, a plan for the screening of ex-offenders and a plan and commitments for the funding of support services is are in place

o For projects targeting individuals with disabilities, the proposed housing meets the goals of the Final Rule for the qualities of settings that are eligible for reimbursement under the Medicaid home and community-based services that have been established by the Centers for Medicare and Medicaid Services (CMS) on January 16, 2014.

o The applicant demonstrates the likelihood and feasibility to secure matching funds. Firm commitment letters are included in the application.

• The applicant demonstrates sufficient capacity to Up to 25 35 points successfully carry out the proposed project. • The applicant has experience in providing housing to the targeted population.

a low or very low income population. • The applicant has a demonstrated capacity to manage rental housing.

to manage rental programs. • The applicant’s budget reflects multiple sources of funding. • If the applicant has previous experience under THDA’s HTF Competitive Grants

or HOME programs, the applicant has demonstrated success in: o drawing down funds; o completing a project in a timely manner; o operating a program within THDA guidelines; and, o responding in a timely fashion to client concerns or complaints,

contractor concerns or complaints, and requests by THDA staff for information and/or client stories.


2. NEED Up to 2520 points

Income Targeting Up to 5 points → The applicant will set aside 100% of the units for

individuals at 30% of AMI or less 5 points

→ The applicant will set aside 100% of the units for


→ The applicant will set aside 100% of the units for


Targeted Populations in THDA Strategic Plan Up to 8 points → The applicant will set-aside 100% of the units to be

created for youth transitioning out of foster care 8 points

→ The applicant will set aside 100% of the units for ex-

offenders, particularly elderly ex-offenders 8 points

Larger Community Need Up to 2 points → The project meets a larger need in the community

beyond providing housing for the targeted population, such as (but not limited to):

(1) the project removes a major blight in the community

(2) the project ties into a larger community effort outside the specific project scope

2 points

Prior Funding Up to 5 Points The THDA Competitive Grants Program has not

awarded funding since January 1, 2012, for a project located in the county in which the proposed housing will be located

5 points

3. INNOVATION Up to 25 10 points The proposal demonstrates a creative approach to affordable housing for low, very low income, or extremely low income households through unique partnerships, a variety of funding sources, use of alternative energy sources or energy conservation measures, inclusion of universal design elements, the addition of design elements to make the unit visitable for individuals with physical disabilities, the targeting of individuals who are homeless through a housing first approach, and other innovative means to address housing needs.


ATTACHMENT ONE: NON-PROFIT CHECKLIST

ATTACHMENT CHECKLIST FOR ALL NON-PROFIT ORGANIZATIONS

1. Legal Name of Organization: ____________________________________________________

2. IRS Tax Exempt Number: ____________________________________________________

3. A current Certificate of Existence from the Secretary of State's office. The certificate must be purchased from the Secretary of State's office and must be dated no more than 90 days prior to the application deadline date.

4. Documentation of an IRS designation under Section 501(c)(3) or Section 501(c)(4) of the federal tax code. A 501(c)(3) non-profit applicant may not submit an application until they have received their designation from the IRS. A 501(c)(4) non-profit applicant must provide documentation satisfactory to THDA, in its sole discretion, that the non-profit has filed the necessary materials with the IRS and received a response from the IRS demonstrating 501(c)(4) status.

5. Copy of Charter, By-laws and resolutions approving the submittal of this application.

6. One page explanation of how the Board of Directors is involved in the operation of the applicant, including how often the Board meets, how the Board monitors and provides oversight for the applicant’s programs.

Attach the minutes of the most recent Board meeting at which this application and/or proposal were discussed.

7. Business plan or strategic management plan that demonstrates the applicant’s short term and long term goals, objectives, and plans to achieve them.

8. Documentation of operating funds from other sources, including how much annually and from what sources.

9. Explanation of any other programs, other than the proposed HTF program, operated by the applicant, including the program(s) and its funding source(s).

10. One page explanation of the applicant's experience in housing, particularly in providing housing to very low income households.

11. Attachment Five: Individual Disclosure Forms completed by the applicant's Executive Director, Chairman of the Board and any staff directly involved with decision making for the project.

12. Attachment Six: Corporate Disclosure Form signed by the Chairman of the Board or Executive Director on behalf of the applicant.


For Organizations targeting ex-offenders:

13. A copy of the policies and procedures guiding the operation of the rental housing program.

14. A copy of the organization’s application to potential residents for housing

15. Documentation confirming the organization is included on the Tennessee Department of Correction’s List of Approved Transitional Housing Providers.

THDA HOME Investment Partnerships Program Beneficiary Report

Fiscal Year: July 1, 2014 – June 30, 2015

Tennessee Housing Development Agency 502 Deaderick St., Third Floor

Nashville, TN 37243-0900 (615) 815-2200

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Tennessee Housing Development Agency (THDA) As the State’s housing finance agency, the Tennessee Housing Development Agency (THDA) is a self-sufficient, independently funded, publicly accountable entity of the State of Tennessee. THDA’s mission is to ensure that every Tennessean has access to safe, sound, affordable housing opportunities. More information about THDA programs can be found online at www.thda.org.

502 Deaderick St., Third Floor Nashville, TN 37243-0900 (615) 815-2200

Prepared by Morgan Mansa, Research and Planning Division

Leading Tennessee Home by creating safe, sound, affordable housing opportunities.

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TABLE OF CONTENTS

Executive Summary ....................................................................................................................... 4 Introduction ............................................................................................................................................. 6 State of Tennessee HOME Program......................................................................................................... 6 HOME Allocations and Funds Available ................................................................................................... 9 Distribution of HOME Funds by Funding Category ................................................................................ 10 HOME Activities ..................................................................................................................................... 11 HOME Activities by Grand Division ........................................................................................................ 12 Details of HOME Beneficiaries ............................................................................................................... 13 Household Characteristics ..................................................................................................................... 13 Income, Occupancy and Other Types of Assistance Received ............................................................... 14 Race and Ethnicity .................................................................................................................................. 16 Conclusion ............................................................................................................................................ 17 Tables, Charts and Maps Map 1 Tennessee HOME Investment Partnerships Grantees, by Type, 2015 ................................. 8 Chart 1 Annual Federal Allocations for the State of Tennessee’s HOME Program, 2006-2015 ....... 9 Table 1 Annual Allocations for the State of Tennessee’s HOME Program, 2010-2015 .................... 9 Table 2 HOME Program Funds by Grand Division, 2010-2014 ....................................................... 10 Table 3 HOME Program Funds by Category, 2010-2014 ................................................................ 11 Table 4 HOME Projects Completed during FY 2014-15 by Activity Type and Program Year .......... 11 Table 5 Cumulative HOME Projects Completed by Activity Type and Program Year ..................... 11 Table 6 HOME Activities Completed in FY 2014-15 by Grand Division and Program Year ............. 12 Table 7 Cumulative HOME Activities Completed by Grand Division and Program Year ................ 13 Table 8 Household Size of HOME Beneficiaries in FY 2014-15 by Household Type ....................... 14 Table 9 Cumulative Data on Household Size of HOME Beneficiaries by Household Type ............. 14 Table 10 Distribution of HOME Program Beneficiaries in FY 2014-15 by Income ............................ 15 Table 11 Cumulative Distribution of HOME Program Beneficiaries by Income ................................ 15 Table 12 Distribution of HOME Program Beneficiaries in FY 2014-15 by Tenant Type & Income ... 15 Table 13 Cumulative Distribution of HOME Program Beneficiaries by Tenant Type & Income ....... 15 Table 14 HOME Beneficiaries in FY 2014-15 by Race and Ethnicity ................................................. 16 Table 15 Cumulative HOME Beneficiaries by Race and Ethnicity ..................................................... 16

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2014 - 2015 HOME Beneficiary Report Executive Summary

The 2014 - 2015 HOME Beneficiary Report provides information regarding HOME allocations received by the State of Tennessee, the activities completed with HOME funding, and the households served by the HOME Program from July 1, 2014 through June 30, 2015.

General Data:

• Tennessee received an allocation of $8,984,790 in 2015, which is an 11 percent decrease from the 2014 allocation of $10,096,577 and a 5.2 percent decrease from the 2013 allocation of $9,474,797.

• During FY 2014-15, THDA distributed the state’s 2012 allocation of $9,924,071 as well as $1,488,312 of 2011 funds and $231,639 in program income for a total of $11,644,022. The state also received an allocation of $9,474,797 for program year 2013 and had $98,797 in program income for a total of $9,573,594. Although these funds were awarded in FY 2013-14, all of the contracts except those from 2012 Community Housing Development Organization (CHDO) funds started in FY 2014-15. For 2014, the HOME program received an allocation of $10,096,577. In addition to the 2014 allocation, THDA had $129,241 in program income and $417,288 of reallocation funds for a total of $10,643,106.

Activities Data:

• During FY 2014-15, 87 affordable housing units were completed with HOME allocations ranging from program years 2010 - 2012. Sixty-nine percent of those projects (60 units) were rehabilitation projects. New construction followed with 14 percent (12 units), acquisition only with 10 percent (nine units), then acquisition and rehabilitation with seven percent (six units). There were no acquisition and new construction projects during this reporting period.

• Seventy-nine percent of the projects were completed in East Tennessee, 15 percent of the projects were completed in Middle Tennessee, and the remaining six percent were completed in West Tennessee.

Beneficiary Data:

• During FY 2014-15, 86 of the 87 households reported beneficiary data. One unit during the reporting period was vacant. Forty percent of the households reporting beneficiary data were categorized as Elderly and 38 percent are Single/Non-Elderly. The remaining 22 percent of households were a combination of Related/Single Parent, Related/Two Parent, and Other.

• Sixty-six percent of the beneficiaries were very low-income households.

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• Fifty-one percent of the occupied households were renter-occupied while the remaining 48 percent were owner-occupied. Less than one percent was not applicable because there was one unoccupied unit during this reporting period.

• Eighty-one percent of the households were reported as White, 17 percent reported Black/African American, and one percent reported as Other/Multi-Race. There were no beneficiaries of Hispanic origin.

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Introduction

The U.S. Department of Housing and Urban Development’s (HUD) HOME program is the largest federal block grant to state and local governments designed exclusively to create affordable housing for low-income households. The HOME program is implemented through state and local governments called participating jurisdictions or “PJs”. PJs may be states or units of general local government, including consortia and urban counties. The Tennessee Housing Development Agency (THDA) administers the HOME program for the State of Tennessee to promote the production, preservation, and rehabilitation of housing for low-income households. During this reporting period, the State of Tennessee’s HOME funds were awarded for homeowner and rental projects through a competitive application process for cities, counties, and non-profit organizations outside of local PJs, which receive their own HOME allocations directly from HUD.

This report provides information regarding HOME allocations received by the State of Tennessee, the households served by the HOME program, and the activities completed with funding from program years 2010 – 20121. HOME activities are required to be completed within four years of the date the State of Tennessee enters into a grant agreement with HUD; however, THDA limits its contracts with its sub-recipients to a three-year term. Therefore, program years 2013 and 2014 were active during the reporting period, as well as projects with funding dating back to 2010 through extended contracts. As a result, the number of completed units and the beneficiary data available for program years 2010 – 2014 are reported as of June 30, 2015 and do not represent the final number of units or total beneficiary data from projects resulting from those program years.

Funding for the HOME program decreased in 2015, following a funding increase in 2014. Tennessee received an allocation of $8,984,790 in 2015, which is an 11 percent decrease from the 2014 allocation of $10,096,577 and a 5.2 percent decrease from the 2013 allocation of $9,474,797. Despite this decrease in funding, the State of Tennessee’s HOME program has made substantial contributions to affordable housing for low-income Tennesseans. During FY 2014-15, HOME funds contributed to the completion of 87 housing units.

On December 16, 2011, HUD published a new proposed regulation for the HOME Program which made significant changes to the HOME rule. Because the new HOME rule applied to any grant with 2012 funds, THDA opted not to accept any applications for 2012 until the new rule was released. The new rule was not published until July 24, 2013; therefore, THDA did not award any HOME funds during FY 2012-13. These changes delayed our implementation of HOME funds however after the reporting year of this HOME Beneficiary Report, THDA will be aligned with the regular funding timeline.

State of Tennessee HOME Program

The State of Tennessee’s HOME funds are made available to cities, counties and non-profit organizations outside of local Participating Jurisdictions (PJs) on a competitive basis. Current PJs, which receive their own HOME funds directly from HUD include: the Northeast Tennessee/Virginia Consortium (the cities of Bristol, 1 A program year refers to the year in which the program was funded by HUD and follows the federal fiscal year cycle, which is October 1st through September 30th. THDA reports HOME activities and beneficiary data based on the state’s fiscal year cycle, which is July 1st through June 30th. Throughout this report, FY 2014-15 will refer to the state’s fiscal cycle, July 1, 2014 – June 30, 2015.

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Johnson City, Bluff City, Kingsport, Sullivan County and Washington County, excluding the town of Jonesborough), Chattanooga, Clarksville, Jackson, Knoxville, Memphis, Nashville-Davidson, Knox County and Shelby County. Map 1 on the following page shows the State of Tennessee by jurisdiction type.

Map 1. Tennessee HOME Investment Partnerships Grantees, by Type, 2015

HOME Allocations and Funds Available

Chart 1 shows Tennessee’s federal HOME allocations for the past 10 years. Table 1 shows the federal HOME allocation for program years 2010 – 2014. The table additionally shows the year-to-year percent change in HOME funds over the reporting period. The HOME program may reallocate recaptured funds or program income from one HOME program year to the next. The “Funds Made Available” column represents the federal allocation plus any reallocated funds resulting from program income or recaptured funds at the time of this report.

Chart 1. Annual Federal Allocations for the State of Tennessee’s HOME Program, 2006-2015

Table 1. Annual Allocations for the State of Tennessee’s HOME Program, 2010-2015

Program Year

Federal Allocation

Change from Previous Year’s

Allocation

Funds Made Available

FY 2014-15 Units

Completed

Cumulative Units

2010 $17,461,612 -0.2% $19,470,994 14 293 2011 $15,406,004 -11.8% $17,517,430 65 337 2012 $9,924,071 -35.6% $10,883,072 8 8 2013 $9,474,797 -4.5% $21,217,616 - - 2014 $10,096,577 6.6% $12,074,278 - - 2015 $8,984,790 -11.0% To be determined - -

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mill

ions

($)

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The distribution of HOME funds across Tennessee’s three grand divisions is represented in Table 2. During the reporting period, Middle Tennessee received 47 percent of HOME funds, followed by East Tennessee with 33 percent, then West Tennessee with 19 percent. HOME funds are distributed regionally based on the eligible population, which accounts for the differences among the grand divisions’ allocations. The allocation amounts do not include funds retained for the state’s administrative costs or funds that were uncommitted at the time of this report.

Table 2. HOME Program Funds Awarded by Grand Division

Grand Division 2010 2011 2012 2013 2014 Total East $7,233,994 $6,984,123 $2,544,865 $2,949,096 $5,560,786 $25,272,864

Middle $6,831,374 $6,108,142 $4,875,000 $3,726,712 $7,896,404 $29,437,632 West $2,766,781 $2,636,705 $3,650,256 $1,000,000 $3,225,949 $13,279,691 Total $16,832,149 $15,728,970 $11,070,121 $7,675,808 $16,683,139 $67,990,187

Distribution of HOME Funds by Funding Category

Until 2012, HOME funds were allocated based on three categories: Regional, Special Needs and CHDOs. Regional allocations were made to groups of counties that corresponded to Tennessee’s nine Development Districts. These allocations were made based upon the regional distribution of low-income households outside of local PJs and accounted for 75 percent of THDA HOME funds available. Special Needs projects included housing designed for persons with an unusual need due to a condition that can be either a permanent or a temporary disability. Ten percent of the available funds were reserved for applicants proposing special needs projects. As federally mandated, 15 percent of the total allocation was reserved for CHDOs.

In 2012, the Urban/Rural Allocation replaced the Regional Allocation, which comprises 75 percent of the total HOME funds available. Forty-four percent of the Urban/Rural Allocation funds is available to urban counties and 56 percent is available to rural counties.2 Additionally in 2012, the Special Needs category became the Supportive Housing Development category, which requires on-going, on-site services for persons with a disability that is either permanent or temporary. Ten percent of the total HOME funds available is reserved for the Supportive Housing Development category. Fifteen percent of the total allocation is still reserved for CHDOs.

Table 3 represents the distribution of HOME funds across each of the program categories (Regional and Urban/Rural, Special Needs and Supportive Housing Development, and CHDO) for program years 2010 – 2014. The funding amounts in the table below do not include funds retained for the state’s administrative costs or funds that were uncommitted at the time of this report.

2 Urban counties include: Anderson, Blount, Bradley, Carter, Coffee, Dyer, Gibson, Hamilton, Hamblen Haywood, Madison, Maury, Montgomery, Putnam, Roane, Rutherford, Sumner, Unicoi, Williamson and Wilson. All other counties, excluding the PJs that receive their own HOME funds directly from HUD, are considered rural counties.

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Table 3. HOME Program Funds Awarded by Category, 2010 - 2014

Program 2010 2011 2012 2013 2014 Total CHDO $2,643,432 $2,720,368 $2,604,544 - $1,431,172 $9,399,516

Special Needs (Supportive

Housing) $1,521,096 $656,249 $1,030,361 NA 969,914 $4,177,620 Regional

(Urban/Rural) $12,667,621 $12,352,353 $7,435,216 $7,675,808 $14,282,052 $54,413,050 Total $16,832,149 $15,728,970 $11,070,121 $7,675,808 $16,683,138 $67,990,186

HOME Activities

The HOME program funded various activities ranging from rehabilitating single family homes and manufactured housing, to homeownership activities, to creating or improving supportive needs rental housing. Recipients of HOME funds are able to tailor the program to support the unique needs of each county. For reporting purposes, HOME activities are grouped under one of five broad categories including: rehabilitation, new construction, acquisition only, acquisition and rehabilitation, and acquisition and new construction. Table 4 shows the distribution of completed activities during FY 2014-15 and the program years from which they were originally funded. Table 5 shows the total number of activities completed with funding from each specified program year.

Table 4. HOME Projects Completed during FY 2014-15 by Activity Type and Program Year

Program Year

Rehabilitation Only

New Construction

Only Acquisition

Only

Acquisition and

Rehabilitation

Acquisition and New

Construction Total 2010 3 11 - - - 14 2011 57 - 8 - - 65 2012 - 1 1 6 - 8 Total 60 12 9 6 - 87

Table 5. Cumulative HOME Projects Completed by Activity Type and Program Year

Program Year

Rehabilitation Only

New Construction

Only Acquisition

Only

Acquisition and

Rehabilitation

Acquisition and New

Construction Total 2010 206 40 9 7 17 279 2011 191 37 18 17 9 272 2012 60 12 9 6 - 87 Total 457 89 36 30 26 638

12

Rehabilitation

A total of 60 rehabilitation only projects were completed during FY 2014-15. These units account for 69 percent of all projects completed during the reporting period. Of the 60 rehabilitation projects completed, 33 were homeowner rehabilitation projects and 27 projects were for rental rehabilitation.

New Construction

A total of 12 new construction only projects were completed during FY 2014-15.These units account for 14 percent of all projects. Eleven of the new construction projects completed were rental units while the remaining one was a homeownership project.

Acquisition Only

A total of nine acquisition only projects were completed during FY 2014-15. These units account for 10 percent of all projects. All of the acquisition only projects were homeownership projects.

Acquisition and Rehabilitation

Six acquisition and rehabilitation projects were completed during FY 2014-15. These units account for seven percent of all projects. All of the acquisition and rehabilitation projects were rental projects.

Acquisition and New Construction

There were no acquisition and new construction projects completed during FY 2014-15.

HOME Activities by Grand Division

During FY 2014-15, 87 units were completed with the majority of completed HOME activities taking place in East and Middle Tennessee. Of the total units completed, 79 percent occurred in East Tennessee, 15 percent occurred in Middle Tennessee and six percent took place in West Tennessee. Table 6 shows the completed units in FY 2014-15 by grand division. Table 7 shows the cumulative total activities completed from each program year that remained active during the reporting period and in each of the grand divisions.

Table 6. HOME Activities Completed in FY 2014-15 by Grand Division and Program Year

Grand Division 2010 2011 2012 Grand Total East 11 55 3 69 Middle 3 7 3 13 West - 3 2 5 Grand Total 14 65 8 87

13

Table 7. Cumulative HOME Activities Completed by Grand Division and Program Year

Grand Division 2010 2011 2012 Grand Total East 126 181 3 310 Middle 132 117 3 252 West 35 39 2 76 Grand Total 293 337 8 638

Details of HOME Beneficiaries

During FY 2014-15, 87 households were assisted with the State of Tennessee’s HOME funds. One of the 87 completed units during FY 2014-15 was reported as vacant; therefore, beneficiary data is only applicable for the 86 occupied units. Beneficiaries of HOME funds must be low- or very low-income households.3 THDA provides income determination guidelines to grantees to ensure all recipients of HOME funds meet income limits. The income of HOME beneficiaries and other demographics for projects funded between 2010 and 2014 are included in the following sections.

Household Characteristics

The majority of households that received HOME assistance during the reporting period were elderly households, followed closely by single, non-elderly households. One-person households were served more frequently than any other size of household during the reporting period. Together, households with a single or elderly head of household comprised 77 percent of HOME Beneficiaries during FY 2014-15. Table 8 shows the beneficiary household sizes and types for activities completed during FY 2014-15. Table 9 shows the cumulative beneficiary characteristics from all completed activities with funding from program years 2010 through 2012.

3 Very low-income households are defined as those households whose annual income is 50 percent or less of the area median income (AMI) for the county in which the household resides. Low-income households are defined as those households whose annual income is between 50 percent and 80 percent of the AMI for the county in which the household resides.

14

Table 8. Household Size of HOME Beneficiaries in FY 2014-15 by Household Type

Household Size

Single, Non- Elderly Elderly

Related / Single Parent

Related / Two Parent Other

Not Available

Grand Total

1 25 21 - - - - 46 2 4 8 5 - 1 - 18 3 2 2 5 1 1 - 11 4 2 2 2 1 - - 7 5 - - - 2 - - 2 6 - 1 - - - - 1 7 - - 1 - - - 1

N/A - - - - - 1 1 Grand Total 33 34 13 4 2 1 87

Table 9. Cumulative Data on Household Size of HOME Beneficiaries by Household Type

Household Size

Single, Non- Elderly

Elderly Related / Single Parent

Related / Two Parent

Other Not Available

Grand Total

1 123 122 1 0 5 0 251 2 25 70 24 6 23 0 148 3 17 16 52 15 7 0 107 4 11 5 20 31 6 0 73 5 4 3 7 14 4 0 32 6 1 4 2 9 0 0 16 7 1 1 2 0 0 0 4 8 0 1 0 2 0 0 3

N/A 0 0 0 0 0 4 4 Grand Total 182 222 108 77 45 4 638

Income, Occupancy Type and Other Forms of Assistance Received

Out of the 87 occupied households receiving HOME assistance during FY 2014-15, 66 percent were very low-income and 33 percent were low-income households. Due to unit vacancy, one percent was not available. The number of very low-income households served by the HOME program during this reporting period decreased compared to the prior year. During FY 2013-14, only 80 percent of occupied households receiving HOME assistance were very low-income. As seen from the tables below, the percentage of very low-income households served by the HOME program during FY 2014-15 is the same as the cumulative total over the last five program years, despite the decrease in very-income households served compared to last year. Table 10 shows the number of very low- and low-income households served during FY 2014-15. Table 11 shows the cumulative total of beneficiaries served from funding from program years 2010 through 2012.

15

Table 10. Distribution of HOME Program Beneficiaries in FY 2014-15 by Income

Beneficiary Income Number of Households Percentage of Households Very Low-Income 57 66% Low-Income 29 33% Not Available 1 1% Total 87 100%

Table 11. Cumulative Distribution of HOME Program Beneficiaries by Income

Beneficiary Income Number of Households Percentage of Households Very Low-Income 419 66% Low-Income 215 34% Not Available 4 1% Total 638 100%

During FY 2014-15, 51 percent of the units created were occupied by renters and 48 percent of the units were occupied by owners. One percent of the units were vacant. Sixty-six percent of renter occupied units and owner occupied households were occupied by very low-income households. Table 12 shows the distribution of tenant type by income level during FY 2014-15. Table 13 shows the cumulative data for units funded from program years 2010 through 2012.

Table 12. Distribution of HOME Program Beneficiaries in FY 2014-15 by Tenant Type & Income

Tenant Type Very Low-Income HHs Low-Income HHs Not Available Total

Renter 27 17 0 44 Owner 30 12 0 42 Vacant 0 0 1 1 Total 57 29 1 87

Table 13. Cumulative Distribution of HOME Program Beneficiaries by Tenant Type & Income

Tenant Type Very Low-Income HHs Low-Income HHs Not Available Total Renter 118 35 0 153 Owner 301 180 0 481 Vacant 0 0 4 4 Total 419 215 4 638

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Rental assistance is the only type of assistance reported for the HOME program. Forms of assistance that could support homeowners are not included in HOME beneficiary data. Of the 44 renter occupied units receiving HOME funds, 22 of the households do not receive any federal, state or local rental assistance. All of the remaining 22 renter occupied units receiving HOME funds also received rental assistance through the Section 8 housing choice voucher program.

Race and Ethnicity

Race and ethnicity data for the HOME program is determined by the race and ethnicity of the head of household. The majority of the HOME beneficiaries are Non-Hispanic White, followed by Black/African American. The breakdown of HOME beneficiaries by race and ethnicity is provided in the tables below. Table 14 shows the race and ethnicity for HOME beneficiaries during FY 2014-15. Table 15 shows the cumulative race and ethnicity data for all HOME beneficiaries that were funded from program years 2010 through 2012.

Table 14. HOME Beneficiaries in FY 2014-15 by Race and Ethnicity

RACE NUMBER PERCENTAGE White 70 80% Black/African American 15 17% Asian 0 0% American Indian/Alaska Native 0 0% Other Multi-Racial 1 1% Vacant 1 1% Total 87 100%

ETHNICITY NUMBER PERCENTAGE Hispanic 0 0%

Table 15. Cumulative HOME Beneficiaries by Race and Ethnicity

RACE NUMBER PERCENTAGE White 497 78% Black/African American 132 21% Asian 0 0% American Indian/Alaskan Native 1 0% Other Multi-Racial 4 1% Vacant 4 1% Total 638 100%

ETHNICITY NUMBER PERCENTAGE Hispanic 11 2%

17

Data from FY 2014-15 and the cumulative data show that a majority of HOME beneficiaries are Non-Hispanic White. This percentage is fairly consistent with the proportion of low-income White households with housing problems in Tennessee. Housing problems are defined as spending more than 30 percent of household income on housing, lacking kitchen/plumbing facilities, or overcrowding. According to 2008 – 2012 Comprehensive Housing Affordability Strategy (CHAS) data, approximately 76 percent of the households who are low-income and have housing problems in areas covered by the state’s HOME program are White, 18 percent are Black/African American, three percent identified as Hispanic, and five percent are other races. The allocation of HOME funds are fairly proportional, based on race and ethnicity, to the low-income households with housing problems in Tennessee, although Hispanic and Asian households are slightly underserved compared to CHAS data.

Conclusion

Over 295,000 households in the areas covered by the state’s HOME Program are extremely low-, very low-, and low-income and fit the criteria for having housing problems, according to the CHAS data. The HOME program is designed to help those most in need, including those households with very low- and low-incomes with housing problems. HOME funds have contributed to assisting an additional 87 households in FY 2014-15 and 638 households over the last five years. The HOME program will continue to target funds to promote the production, preservation and rehabilitation of housing for low-income households in Tennessee.

HOME Beneficiary Report, FY 2014-15MORGAN MANSA, THDA RESEARCH & PLANNING

THDA JANUARY BOARD MEETING

87 Housing Units CompletedFunding from Program Years 2010-2012

3

HOME Units Completed During FY 2014-15, by Activity Type

60

129

6 0

Rehabilitation New Construction Acquisition Only Acquisition &Rehabilitation

Acquisition & NewConstruction

4

HOME Activities Completed During FY 2014-15, by Grand Division

69

13

5

East

Middle

West

99%Occupancy

Rate

40%Elderly

Households

38%Single-PersonHouseholds

20%Families with

Children

9

HOME Program Beneficiaries During FY 2014-15, by Income

57

29

1

Very Low-Income Low-Income NA / Vacant

10

HOME Program Beneficiaries During FY 2014-15, by Race

White

Black/African American

Other Multi-Racial

Vacant

11

For More Information

Access the HOME Beneficiary Report:

http://thda.org/research-planning/consolidated-planning

Questions About the HOME Beneficiary Report:

[email protected]

Questions About the HOME Program:

[email protected]

http://thda.org/research-planning/consolidated-planning






M E M O R A N D U M TO: THDA Grants Committee and Board of Directors FROM: Don Watt, Director, Community Programs Division DATE: January 13, 2016 RE: National Housing Trust Fund With the Omnibus Budget Act passed by Congress and signed by the President, the National Housing Trust Fund is poised for its initial funding. The National Housing Trust Fund was established under the Housing and Economic Recovery Act of 2008 (HERA) to provide grants to State governments to increase and preserve the supply of rental housing for extremely low-and very low-income families, including homeless families, and to increase homeownership for extremely low- and very low income families. As required by HUD’s interim regulations, at least 80% of each annual grant must be used for rental housing activities and no more than 10% of the funds may be used for homeownership activities. However, if funding levels are beneath a certain threshold, all funds must be used for rental housing activities. National HTF monies may be used for the production or preservation of affordable housing through acquisition, new construction, reconstruction, and/or rehabilitation of non-luxury housing with suitable amenities. All National HTF-assisted rental housing must meet a minimum affordability period of 30 years. All National HTF–assisted homeownership housing must meet a minimum affordability period of 10, 20, or 30 years based on the HTF investment per unit. By statute, the source of funding from the program will derive from Fannie Mae and Freddie Mac. Both GSEs are required to determine the resources that will be made available and notify the Treasury Department of this amount by February 29, 2016. HUD will then publish the formula allocation to states by mid-April 2016. HUD has indicated that each state generally will receive an amount at or slightly above the minimum $3 million allocation with agreements expected to be entered into during the summer. Based on anticipated initial funding levels and federal requirements, HUD has indicated that all housing will be limited during this initial year for households at 30% of AMI or less. As a result, we anticipate that all units created will be rental housing. In preparation for this new program’s start, the Governor has designated the Tennessee Housing Development Agency as the grantee of this resource for Tennessee. THDA will begin its process early in 2016 to solicit input from our partners for the use of the National HTF in Tennessee. We will use this information to develop an Action Plan for submission in May to HUD in conjunction with the State’s Annual Action Plan for HOME, ESG, HOPWA, and CDBG resources.


Holistic Service Delivery The Green & Healthy Homes Initiative (GHHI) is dedicated to breaking the link between unhealthy housing and unhealthy families. The GHHI model was designed to integrate stand-alone housing intervention programs so that a family receives a coordinated intervention. As a result, families don’t have to navigate the service delivery system on their own, and they don’t have to risk losing a service they qualify for, simply because they don’t know about it (i.e., “No Wrong Door”). This model produces sustainable, green, healthy, and safe homes, which results in improved health, economic, and social outcomes for families. Moreover, the model was designed to be flexible – it can be used to address home hazards like asthma, lead, and mold, in addition to improving energy efficiency and age-in-place outcomes. Key Tenets • Adapt the model to address the needs, concerns, and

priorities of the site we’re working with • Align local policies, groups, and resources to allow for the coordination of activity • Be deliberate and thoughtful in how we collect data and in selecting the data we collect Phase 1: Establishing the Network and its Priorities The first step in implementing the GHHI model for your community for representative stakeholders to send a Letter of Intent to GHHI. From there, the stakeholders will complete the GHHI Site Application form which allows the GHHI team to craft a scope of work for an “Onboarding” contract.

Once onboarding begins, the first step is a creation of an Asset Map, done by interviewing local stakeholders. The Asset Map is used to understand the range of services, funding sources, skills, and priority areas present within a community. Next, we convene a Learning Network, which is a local collaborative of the individuals, organizations, elected officials, etc. – identified in the Asset Map – who are consistently delivering stabilizing services, whether through direct intervention to families or through advocacy, policy change, or philanthropic investment. Their participation in the network is self-determined by their interest and their capacity.

The Learning Network will identify the priority areas it wants to target with the coordinated service delivery system that’s being developed. To this end, the Network will use the Asset Map to identify the programs, funding sources, etc. that already address these priority areas. The Network will then work together to produce a Program Workflow. The Workflow is designed to illustrate how a family would get coordinated access to the services being provided that address the Learning Network’s priorities.

Phase 2: How We Grow and Sustain Outcomes The GHHI model was designed to be flexible to the evolving needs and priorities of a jurisdiction. The GHHI National Office will train and manage an individual known as an Outcome Broker. The Outcome Broker is responsible for coordinating and growing the Learning Network, including scheduling Network meetings, identifying funding opportunities that represent the sustainable resources needed to address a priority area, and completing funding applications.

Because the Learning Network is responsible for setting the direction and priorities of the local site, the structure of the Learning Network can be shaped to fit the organizations that are a part of it. One successful model is the creation of subcommittees and intervention teams. Intervention teams are made up of the organizations that provide direct services to families. In their work with families, they provide feedback to the subcommittees about any impediments that slow down service delivery, such as needed policy changes and additional funding requirements. The subcommittees are made up of working groups such as Policy, Data, and Funding. They focus on addressing the intervention teams’ areas of concern and opportunity.

Finally, we want to formalize support from elected officials, government agency directors, and philanthropic leaders for the comprehensive service delivery system that’s being implemented. This occurs through the signing of a Site Compact, in which local leaders agree to support and further the goal of the GHHI model’s No Wrong Door objective.

Case Study: Austin, Texas Local Priorities In-home accessibility, mold removal, energy efficiency, and housing

affordability Core Team Austin Neighborhood Housing and Community Development (NHCD)

Local Learning Network Austin NHCD, Austin Energy (local utility), American YouthWorks, Austin Area Urban League, Austin Habitat for Humanity, Interfaith, Action of Central Texas, Meals on Wheels and More, 1House at a Time, Texas Ramp Project, Travis County HHS, Austin Code Compliance

Community Buy-In GHHI and NHCD led two community meetings to solicit feedback and generate buy-in for implementing the GHHI model

Identify Resources that Address Priorities

Federal, city, and utility funding for architectural barrier removal (accessibility), healthy home improvements (mold), deteriorated pipe replacement (lowered bills), and energy efficiency upgrades

Workforce Development GHHI trained inspectors from local nonprofits to assess homes holistically

Coordinating Assistance NHCD developed a common application with a “menu of services”

Stretch Goals Any violations identified by Code Compliance are referred to the Learning Network; the Health Department refers all Elevated Blood Lead Level cases to the Learning Network

Implementation Nonprofits conduct outreach to families while delivering “traditional” services (e.g., Meals on Wheels). A family works with the nonprofit or Austin NHCD to fill out the application and to get qualified. A cross-trained inspector from a local nonprofit assesses the family’s home holistically, both for the hazards identified in the application and others. The nonprofit creates a scope of work and submits it to Austin NHCD, which approves/denies the work. If approved, the nonprofit addresses the hazards, using either in-house crews or contractors, where needed. After the work has been completed, Austin NHCD’s Construction Team inspects the home against the approved scope of work. Being launched in a pilot neighborhood to get started quickly.

www.ghhi.org | 410.534.6447 | @Healthy Housing | Facebook.com/GHHINational

GHHI Asthma Intervention & Impact At-a-Glance Green & Healthy Homes Initiative (GHHI) implements an integrated, whole-house intervention that produces sustainable green, healthy, and safe homes. GHHI’s approach has a proven impact on asthma outcomes and costs.

Asthma Intervention Strategy (based upon Comprehensive Environmental Assessment)

• Integrated Pest Management • Venting of kitchen, bathroom and dryer • Mattress and pillow cover installation • Air filtering installation in child’s bedroom • HEPA-Vacuum and Indoor Allergen Kit

distribution • Other Asthma Trigger Reduction Measures

• Removal or steam cleaning of carpets • Mold remediation • Air conditioner/dehumidifier installation • Furnace filter replacement • Multiple Resident Education home visits

Impact on Asthma As part of its direct services program, GHHI conducted a Healthy Homes Demonstration Project which evaluated the impact on children with asthma, ages 2-14. The findings have been approved for publication in the Journal of Environmental Justice.

66% reduction in asthma related client hospitalizations

28% reduction in asthma related emergency room visits

50% increase in children never having to visit the doctor’s office due to asthma episodes

62% increase in asthma-related perfect school attendance (0 absences due to asthma episodes)

85% increase in participants never having to miss a day of work due to child’s asthma episodes

Client Referrals

Client Intake & Program Enrollment

Integrated Intervention

Environmental Health Education

Follow-up Education and Data Collection Visits

Comprehensive Assessment

Home Visits


Asthma Pay For Success Feasibility Study Organizational Background

The Green & Healthy Homes Initiative (GHHI) implements an integrated, whole-house intervention that produces sustainable green, healthy, and safe homes. A fellow EPA National Asthma Leadership Award in 2015 with Le Bonheur’s CHAMP program, GHHI’s approach has a proven impact on asthma outcomes and costs, by comprehensively addressing the triggers in the home environment. Headquartered in Baltimore, MD, GHHI is a national leader in the healthy housing sector, providing technical assistance to over twenty-five cities on healthy homes strategies and implementation, cost benefit analysis, policy, and government efficiency.

What is pay for success (PFS)?

PFS models (also called “social impact bonds”) are partnerships that focus on the results that a social service causes, rather than funding based solely on the delivery of services. In its most basic form, investors pay the upfront costs for providing social services and government agencies or institutions repay investors with a return on their investment (“success payments”) if the program achieves agreed-upon outcomes (such as decreased healthcare expenditures).

Primary benefits of PFS:

Flexibility Only pay for what works Accountability Funding stability for service providers Focus on prevention Sustainable philanthropy Investors can get return on investment Rigorous program evaluation Cost savings to society/healthcare orgs Fosters cross-sector collaboration

GHHI & Pay for Success

GHHI has been leading an effort since mid-2014 to create a PFS structure in Baltimore with the Johns Hopkins Healthcare System. In this initiative, investors will fund GHHI to provide services for Priority Partners (Hopkins’ Medicaid managed care organization) patients. In turn, Hopkins will repay the investment if projected improvements in the patients’ asthma create provable dollar savings. GHHI also received a grant from the White House Social Innovation Fund to lead PFS feasibility studies with healthcare organizations and service providers in five cities, including Memphis.

2


Memphis Feasibility Study GHHI is leading technical assistance with support from Milliman, Inc., (actuarial services) and Health Management Associates (Medicaid and health policy). The project incorporates CHAMP services, the Medical Legal Partnership, and Habitat for Humanity services into a comprehensive intervention. This comprehensive approach is beneficial because environmental control is part of NAEPP guidelines for asthma management, and the Community Guide to Preventive Services found that multi-trigger, multi-component home-based interventions had a return of $5-$14 to $1. The feasibility work that runs from June 2015 to an anticipated date of May of 2016 includes the identification of the target population, financial modeling, return on investment projections, intervention design, payor analysis, evaluation design, funder profiles, and stakeholder engagement. Pay for Success Field As of December 2015, eight PFS projects have been launched, with one now inactive. PFS has focused thus far on juvenile justice, early education, adult recidivism, homelessness, foster care, and maternal/child health. There are dozens in development currently, and a major bipartisan bill to provide $300 million at the federal level to support PFS. Agencies such as CMS, HHS, HUD, DOE, DOL, and Dept. of Education are working on incorporating PFS. In 2016, including the CNCS projects, 13 asthma-related PFS transactions will be in development (GHHI is involved in 11).

Considerations for Healthcare Organizations • PFS is a model that allows health plans and state Medicaid programs to address the social determinants of

health that are outside of traditional clinical care and focus on evidence-based preventative services. • There are multiple other PFS opportunities around healthy housing: asthma-related medical utilization & school

absence reduction, trip & fall injury prevention, lead hazard reduction, radon gas mitigation. • PFS is a method of proving the cost-effectiveness of evidence-based interventions, with the idea that healthcare

organizations can pay directly for the interventions thereafter. Considerations for Service Providers

• PFS financing is a new source of capital to fund and scale interventions such as housing rehabilitation and home visiting outside of traditional federal, local, or philanthropic grants

• With the focus on outcomes, PFS financing allows for more flexibility in utilizing funding to ensure the most effective delivery of services

Considerations for Funders • PFS transactions include rigorous evaluation of outcomes, and success payments from the entities (government,

healthcare payers) that benefit from the services funded by the capital • Variety of roles funders can play (upfront capital, risk mitigation, deal development, evaluation)

Project Update and Next Steps • Project partners have identified the target population, finished preliminary payer analysis, completed the

comprehensive intervention design, put together a project budget, secured TennCare data to use as a baseline for savings projections, and completed a data management plan.

• Milliman will be utilizing CHAMP data and TennCare data to conduct savings projections analysis that will be inputted into the project financial model.

• The project intervention design and other components will be incorporated into a prospectus and pitch deck to present to potential funders. A scan of potential funders (private, philanthropic, national and local) is beginning.

• Project partners would like to engage Medicaid Managed Care Organizations that have coverage in Memphis/Shelby County and TennCare about being the payer(s) for the PFS transaction.

Tab # 8 Items:

Tax Credit Committee Meeting Materials


Tax Credit Committee January 26, 2016


AGENDA

1. Call to Order ................................................................................................................... Bills

2. Approval of Minutes from November 17, 2015 ............................................................. Bills

3. Waiver Request from LDG for Noncompetitive Credits ............................................... Blade

4. 2017 Low Income Housing Tax Credit Qualified Allocation Plan Discussion ............ Blade

5. Adjourn ............................................................................................................................ Bills

LOCATION COMMITTEE MEMBERS William R Snodgrass – Tennessee Tower Brian Bills, Interim Chair 312 Rosa L Parks Avenue, Third Floor David Lillard Nashville, TN 37243 Larry Martin Ashleigh Roberts The Nashville Room

TENNESSEE HOUSING DEVELOPMENT AGENCY TAX CREDIT COMMITTEE

November 17, 2015

Pursuant to the call of the Chairman, the Tax Credit Committee of the Tennessee Housing Development Agency Board of Directors met, in regular session, on Tuesday, November 17, 2015, at 9:00 A.M. Central Time at the William R. Snodgrass—Tennessee Tower, The Nashville Room, Nashville, Tennessee.

The following Committee members were present: Brian Bills (Chair), State Treasurer David Lillard and Greg Turner for Commissioner Larry Martin. Committee members absent were Ashleigh Roberts. The following Board members also attended: John Baker, Courtney Hess and Pieter van Vuuren.

Seeing a quorum present, Chairman Bills called the meeting to order and called for approval of the minutes from the two previous meetings. By an offer of a motion from Mr. Bills, second by Mr. Lillard the minutes from the July 27, 2015 meeting were approved. Then with an offer of a motion by Chairman Bills and second by Mr. Lillard, minutes were approved from the September 22, 2015 meeting.

Chairman Bills continued to the next agenda item, the 2016 Low Income Housing Tax Credit Qualified Allocation Plan—CNI County Cap Amendment and recognized Ralph M. Perrey, Executive Director to offer an alternative to this amendment. Mr. Perrey explained to the Committee members the details of the substitute amendment presented as potentially a better resolution to the problem:

Initially staff had agreed to make a commitment of tax credits available to support the HUD Choice Neighborhoods grant to Memphis.

Staff had originally proposed giving those applications extra weight within the general pool.

The issue was then raised that in the event that Shelby County Cap had already been met their cap by the time they got in the cascade of the general pool that would preclude staff’s ability to honor the commitment to the Choice Neighborhoods.

Staff is proposing to change the order of the cascade to allow for funding first and then move the Choice Neighborhood applications to second category in the cascade (the non-profit set aside is required to be first).

This amendment assures that staff will be able to honor the Agency’s commitment to Choice Neighborhoods.

Chairman Bills moved to present to the full Board of Directors for approval and adoption of the amendment as presented, second was offered by Mr. Lillard. Motion carried.

Chairman Bills continued to the last agenda item, the 2016 Multifamily Tax-Exempt Bond Authority Program Description, recognizing Judith Smith, Multifamily Development Administrator, to present this item. Ms. Smith noted the list of proposed changes for the 2016 Multifamily Tax-Exempt Bond Authority Program Description is outlined in the Draft Summary dated November 4, 2016 included in the Tax Credit Committee Meeting materials, which includes

2

staff’s recommendation to adopt the issues that previously approved for 2016 QAP with the most notable change being the $150 million allocation of Multifamily Tax Exempt Bond Authority to local issuers for multifamily developments for the coming year,. By offer of a motion by Chairman Bills, second by Mr. Lillard, motion carried to present to the full Board of Directors for approval and adoption of the proposed changes as presented.

With no further business, the meeting was adjourned.

Respectfully submitted, Ralph M. Perrey Executive Director Approved the ___ day of January 2016.




M E M O R A N D U M TO: THDA Board of Directors FROM: Michael Blade Director & Assistant Legal Counsel for Multifamily Development DATE: January 15, 2016 SUBJECT: January 26, 2016 Tax Credit Committee Meeting The January Tax Credit Committee meeting will have a short agenda. There is one item that may require action, and a brief discussion of some potential concepts for the 2017 Low-Income Housing Tax Credit Qualified Allocation Plan will follow. Attached please find the following:

1. Request to exceed the per development cap for noncompetitive Low-Income Housing Tax Credits.

Please contact me, Ed Yandell, or Judith Smith if you have questions.


Bill Haslam Ralph M. Perrey Governor Executive Director MEMORANDUM: TO: THDA Board of Directors FROM: Michael Blade Director and Assistant Legal Counsel for Multifamily Development DATE: January 13, 2015 SUBJECT: Request for Waiver of LIHTC Per Development Cap The Low-Income Housing Tax Credit 2016 Qualified Allocation Plan (the “2016 QAP”) limits the maximum amount of Low-Income Housing Tax Credit (“LIHTC”) to be allocated to any single development to $1.1 million per year. Proposed developments that satisfy certain criteria may combine an allocation of THDA Multifamily Tax-Exempt Bond Authority (“MTBA”) with an allocation of noncompetitive LIHTC. Noncompetitive LIHTC does not count against the approximately $15 million/year of competitive LIHTC that THDA is authorized to allocate.

The following request from Mark Lechner of LDG Development describes a proposed 240 unit development that, in Mr. Lechner’s estimation, would need up to $1.3 million per year of noncompetitive LIHTC in order to be feasible.

Staff is requesting that the Tax Credit Committee and the Board of Directors authorize staff to allocate up to, but not more than, $1.3 million per year of noncompetitive LIHTC to the proposed development. Any allocation in excess of the established per development limits would be contingent upon submission of all required applications and supporting documentation, satisfaction of all applicable requirements of the 2016 PD and 2016 QAP, and staff’s concurrence that the development requires an allocation of noncompetitive LIHTC greater than the established per development limits.

Any future requests to waive the per development cap for MTBA or noncompetitive LIHTC would be brought before the Tax Credit Committee on a case-by-case basis.

Tennessee Housing Development Agency Andrew Jackson Building Third Floor 502 Deaderick St., Nashville, TN 37243

(615) 815-2200

Tñrs" ß3He 1 s ?015

Mark LechnerThe Paddock at Grandview, LP7469 S 4th StreetLouisville, KY 40208

Development

December Lsth, 2015

Board of DirectorsTennessee Housing Development Agency502 Deadrick St, 3'd FloorNashville, TN 37243

Board of Directors

In applying for 4o/o non-competitive tax credits with THDA, The Paddock at Grandview, LP

is asking for a waiver on the annual tax credit cap of $1.1 million. In underwriting our proposed240-unit new construction development, the eligible basis allows for annual tax credits up to $L.3million.

The Paddock at Grandview, LP is asking for a waiver of the annual tax credit cap up to $1.3million. This will allow the development to pay off deferred developer fee within 1-2 years.

Thank you for ur consideration,

LDG

1469 South 4Lh Street Louisville, Kentucky 40208 (502) 638-0534 (502) 638-9197 www.ldgdevelopment.com

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competitive

* L]HTC

with 4%, non-competitive funding

Þ -possibly usingleftover credits tofund a smallerproject, i.e.transition housing(this option willmost likely be theresult of apartnership with amission drîven notfor profrt with Þxcredît experience)

* Loans

financing

* Secr.rre PBVfortheproject, which willsignificantly lowertheout of pocket rents duefrom the participants

grants

* CDBG

.f. Layer

Assumptions1 . That an entity wiìl be able to layer their financing of this project utilizing

multiple programs administered by THDA and DCS, in an effort toreduce the overall cost to operate the facility- These cost savingswould then be passed on to the tenants by way of subsidized rents;allowing them to be abte to afford to live in a very stable environment-

2. THDA will be able to get approval to offer left over tax credit allocationto servedollars for the

External Factors1 . Finding a syndicator wilting to purchase the tax credits for a smaller

project2. Securing project based vouchers (HUD/THDA/other housing authorities)

to maximize the amount of possible housing payment assistance-3. Establishing lending partnerships that can provide very low/no cost

flnancing options.4. to school and i.e. bus, walki

Foster Care

'l

"Transform thelives of those we

are catted toserye ,,

-Ratph Perry

October, 2015 Quarterty Business Report

FY'14 Children that aged out,and EFCS by Region

RegiOn Aged our Eligibte Accepted EFCS

421

984

360

779 312

Middle TN

East TN

Total forTN

(...

LIHTC: Students Exceptions

file a joint tax return

they are not a dependent of a third party

training program

formerly in foster care

Pubtic Higher Education inTennessee

o 5() f¡x) 2OO M¡lÊs

11,.T

LIHTC: QAP

Points earned for housing youths out of Foster Care

A sma[4, % of Units in a larger deal

Location, Location, Location

+

Leftover LIHTCs

201 5: 598 ,242

201 4: 599,049

Tennessee Scholar House

How witt the units be paid for?

Wrap-AroundServices

Possible Services

Sufficiency Program

Possible Partnerships

"Transformi ng the livesof those that we are

catted to serye"through:

INTERNSHIPS

State HFAs with lnternship Programs

New York

Catifornia

Virginia

rr /llr¡ ¿

I¡II

VHDA.

lnternships offered at VHDA

Learning

É[

Michete Watson-Director, Homeownership Strategic Retations

Virginia Housing Development Authority

VHDA"rl /lll¡.1 I

ItI

É+

Proposed THDA lnternshipOpportunities

THDA - in partnership with TSU -has had one intern in early 2015, reporting to

Donna Duarte, the Director of Civit Rights Comptiance

Potential DeveloperPartnershipsAtco Management

McCormick, Baronand Satazar

Penrose Properties, LLC

Woodbine CommunityOrganization

Monroe Harding