Office of Multifamily Housing UpdateWestern Lenders

Priya JayachandranActing Director, Program Administration Office

April 15, 2015

Agenda

• HUD Leadership Changes• Multifamily for Tomorrow • Draft MAP Guide Overview• 2014 FHA Production Results• New FHA Affordable Initiatives• Update on Interest Rate Reductions• Energy Efficiency Initiatives• Rental Assistance Demonstration

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HUD Leadership

• Secretary-- Julian Castro• Deputy Secretary-- Nani Coloretti• Principal DAS, Housing– Ed Golding• Deputy Assistance Secretary, Multifamily– Ben

Metcalf

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To effectively address the next generation of challenges in the housing market, HUD’s Multifamily Housing Programs is pursuing four initiatives as part of the

Multifamily for Tomorrow transformation.

UNDERWRITER MODEL1

ACCOUNT EXECUTIVE MODEL2

WORKLOAD SHARING3

STREAMLINED ORGANIZATIONAL STRUCTURES4

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New 5 Region Field Structure

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Multifamily for Tomorrow Milestones

• HQ and Southwest Region up and running• Midwest Region nearly complete• All staff assignments completed• Frontline training almost done

• Southeast Region on deck• Hiring kicked off this month• Frontline training scheduled to start

• Northeast and West on track for Winter/Spring

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“…the overall energy in the Dallas/Fort Worth office seems to now have a totally different quality to it – a sense of freshness, excitement and growth that I have, frankly, never really seen before at HUD.…I see HUD’s transformation efforts as a model worth emulating.”

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Multifamily For Tomorrow Feedback

“It was not a simple transaction; complications included affordability restrictions, a Section 8 HAP contract, and more. Despite the challenges the HUD underwriter was responsive and easily approachable throughout the review…This experience and positive outcome is proof

of the success that can be achieved through the MFT initiative.”

“It was a record setting process…the loans were engaged, screened, underwritten by our team, submitted to HUD for review and approval, and then [we] engaged all of the legal teams to close the loans [and] closed the loans…that entire process took 93 days. That would not have been possible had it not been for the Single Underwriter Model…”

Draft MAP Guide Publication

• Makes technical corrections and edits, • Integrates previously published policy changes, and

clarifies policy that has been unclear,• Incorporates the organizational and operational

changes of Multifamily for Tomorrow, and • Introduces proposed new policy improvements for

public feedback and discussion.

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Proposed MAP Guide Changes

• Loan Ratios• Large Loan Threshold• Substantial Rehab Cap Adjustment• Updated Three Year Rule

Total Basic FHA MF Production Volume 2015 YTD versus 2014

Fiscal Year # of Firm Commitments issued

Total $ Volume (Billions)

FY14 YTD 616 $6.2

FY14 Actual 1,092 $11.0FY15 YTD 416 $4.3

’15 annualized 832 $8.6

FHA MF Production Volume – Tax Credit Deals 2015 YTD versus 2014

Fiscal Year # of Firm Commitments issued

Total $ Volume (Billions)

FY14 YTD 176 $1.4

FY14 Actual 335 $2.5FY15 YTD 145 $1.1

’15 annualized 290 $2.3

FHA TAX CREDIT PILOT PROGRAMCurrent Production Data (As of March 30, 2015)

Projects in Pipeline 146Units Affected 16,038

Pilot Hubs with Projects 9

Lenders with Projects 28 (of 52 total)

Average Days to Close 104 (Excludes Applicant Delays)

Tenant Types 28% Elderly, 72% FamilyProject Types 25% 3 Year Rule, 22% Resyndication, 53% Assisted

MF Production Volume New Constr/Sub Rehab Firms Issued

Fiscal Year # of Firm Commitments issued

Average Loan Size (millions)

Total Loan Volume ($Billions)

‘08 88 $11.6 $1.0‘12 162 $15.7 $2.5 ’13 185 $14.0 $2.6’14 185 $12.7

$2.3FY15 YTD 104 $13.8 $1.4

’15 annualized 208 Expect Total $2.9 Billion

MF Production Volume 223(f) Firms Issued

Fiscal Year # of Firm Commitments issued

Average Loan Size (millions)

Total Loan Volume ($Billions)

‘08 237 $3.7 $0.88 ‘12 597 $8.9 $5.31 ’13 728 $7.5 $5.46

’14* 694 $9.6 $6.66 *

* FY14 Included $750 million of FY2013 holdover.

FY15 YTD 234 $8.8

’15 annualized 468 Expect total of $4.2 Billion

FY 2012 MF Production Volume 223(a)(7) Firms Issued

Fiscal Year # of Firm Commitments issued

Average Loan Size (millions)

Total Loan Volume ($Billions)

‘08 84 $2.8 $0.88 ‘12 585 $8.3 $5.31 ‘13 843 $6.9 $5.46 ‘14 143 $9 $1.3

FY15 YTD 88 $11.6 $1.0

’15 annualized 176 Expected Total $2.0 Billion

MF Pipeline Snapshot last year compared to now

Program October 2012# of apps in pipeline (received, not rejected, withdrawn, or closed)

April 2014 # of apps in pipeline(received, not rejected, withdrawn, or closed)

April 2015 # of apps in pipeline(received, not rejected, withdrawn, or closed)

NewConstr/Sub Rehab

185 220 245

223(f) 364 414 271

223(a)(7) 429 63 57

TOTAL # of DEALS

978 697 573

MF Pipeline Snapshot last year compared to now

Program Average Loan Size (millions)

October 2012

Average Loan Size (millions)

Nov 2014

Average Loan Size (millions)

NowNewConstr/Sub Rehab $16.7 $16.1 $17.5

223(f) $10.9 $9.5 $8.7

223(a)(7) $8.4 $8.4 $11.2

Timing– how long?Program / Stage

# of Firms issued Dec-Mar 2014

Average (and median) Calendar days App rec’d to Firm issuance (April 2014)

# of Firms issued Dec-Mar 2015

Average (and median) Calendar days App rec’d to Firm issuance (April 2015)

223(a)(7) - FIRM50 95 average

(50 median)52 44 average

(38 median)

223(f) – FIRM – total elapsed days

163 120 average(93 median)

149 96 average(74 median)

NewC/Sub Rehab2-stage Processing

33 295 (Preapp rec’d to Firm Issued)

27 366 (Preapp rec’d to Firm Issued)

NewC/Sub RehabDirect to FIRM

16 125 40 97

“FHA MF/HC Endorsements FY ’14”

Interest Rate Reductions (IRRs)

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# of Loans

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 20140

10

20

30

40

50

60

70

80

IRR's Recorded by Quarter

Interest Rate Reductions

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Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q120150.00

0.50

1.00

1.50

2.00

2.50

3.00

Average Drop in Interest Rate

Status of IRR Program for 202s

• Expect to issue guidance to field offices this month, including:– Flexibility on debt service savings– Hold harmless for IRRs on 202s that have

previously refinanced– Permit borrowing of operating or reserve funds to

allow non-profits to pay certain costs

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2010 2011 2012 2013 2014$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

$400.0 $500.0 $500.0

$1,000.0

$2,500.0

Billions

FHA LIHTC Volume 2010-2014

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New Affordable Initiatives• FHA/MAP• Dedicated LIHTC Teams• Dedicated FHA/RAD teams. • Expanding Pilot to 221d4 in California

• FHA/Risk Share• Nationwide rollout of Federal Financing Bank (FFB). • Small Buildings Risk Sharing (SBRS) Initiative this spring.

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Other New Initiatives• Pay.gov• CNAe tool• ASAP system• Section 8 Renewal Guide• 2530 Updates• 4350.1 Handbook Update

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Promoting Energy Efficiency• Improving Access to Capital and Resources• Commercial PACE • Better Buildings Challenge incentives• Enhanced underwriting through Fannie Mae Risk Share and

FHA

• Promoting Best Practices in Asset Management• Utility Allowance guidance• Data Collection and Benchmarking• Energy Star Certification

• Facilitating Standardization and Alignment• New Capital Needs Assessment (CNA) E-Tool

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Rental Assistance Demonstration• Cap Lifted to 185,000 • Second component extended• Expect 30-40% new RAD units will seek FHA

financing• Closed/converted 129 projects = 13,205 units so far,

with average $40,000/unit investment• Expect RAD will leverage $6 Billion of new

investment in public housing.• www.hud.gov/rad

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RAD Case Study: Lexington, NC

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Before RAD:• Capital needs backlog between all three

properties averaged $41,000/unit• Without financing solution, LHA was at risk

of losing a property

After RAD:• Converting and preserving all 268 units• Most LHA residents will only have to move

once – into the updated units• LHA retains majority ownership of the land

and the buildings with 51% interest in a newly formed partnership

• This transaction leverages LHA’s $1,000,000 in capital fund contribution to raise over $20 million in other sources

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RAD Case Study: Southern Nevada

“The RAD program has provided to the SNRHA the flexibility needed to respond to the capital needs of an aging and tired property, and more importantly, protecting and offering choices to the Landsman Gardens families.” - John Hill, Executive Director

Before RAD• Built in 1971, Al Landsman Gardens had dangerous levels of

mold, as well as asbestos and lead paint present• No workable financing solution to remediate• Units at risk of demolition

After RAD• All 100 units preserved and rehabilitated• This was the first RAD transaction to use FHA financing (221(d)

(4) Mortgage)• Deal completed with fast turn around to protect “Difficult to

Develop Area” tax credit boost of 130%

RAD Case Study: Elgin, IL

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Before RAD:• 149 a mix of efficiency, one, and two bedroom units in a

senior building built in 1969• High demand for affordable senior housing but limited

market for the efficiencies

“This will help transform affordable housing in the city of Elgin…They said it couldn't be done but it can be done. You

can see great things happening.“ Damon Duncan, President/CEO

After RAD: • Gut rehab paired with new construction on adjacent lot• One for one replacement of EHA units and the addition of 14

market rate units• Combines LIHTC, Illinois State Housing Tax Credits, FHA 221(d)4

mortgage, soft secondary financing

Looking Forward

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Thank you

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