RRHA of Illinois2014

State of the StateBarry Ramsey

Housing Program Director

Rural Development

• Sequestration and 2014 Budget Impacts• RD Portfolio Overview (Then & Now)• Collaboration with IHDA & HUD (Physical

Inspections)• Utility Aggregation• Underwriting Acquisition/Rehab’s• 2015 Outlook• Q&A’s?

Rural Development

Sequestration…and the 2014 Budget• Last year, sequestration triggered

a 5% cut of all domestic discretionary funding, not counting an additional 2.77% across the board cuts ($837m)

• RA renewal shortfalls in September 2013 for Illinois affected 41 properties unable to accept their October 1 project worksheets. Then, guess what...government shutdown!

• Funds were temporarily restored in November, but quickly ran out and another 30 properties were unable to accept their December 1 project worksheets!!

2013 2014 2015 2016 2017 2018 2019 2020$800

$850

$900

$950

$1,000

$1,050

$1,100

$1,150

$1,200

$1,250

$1,300

Renewal Forecast ($m)

Budgeted ($m)

Rental Assistance USDA has proposed actions for reducing RA costs – The renewal cost of

RA in 2014 will exceed $1 Billion; several policies to offset RA costs are in effect and proposed for FY 2015: NOW: No incentive offers have been made to prepaying projects since August

2012. Guidance will be published outlining plans to make offers which can be funded. Additional RA won’t be part of the offer unless available;

NOW: State Directors may not transfer unused RA to another property (except for LOPE letter holders who are displaced tenants);

NOW: No additional RA for MPR rehabs or transfer of ownership requests; NOW: RA funds from prepaid and foreclosed properties is now converted into RA

renewals from “retired units”; NOW: RA funding in 2015 will be subject to domestic discretionary sequestration

spending caps; PROPOSED: Renewals proposed for just one fixed dollar amount annually rather

ongoing contracts (included in House Subcommittee’s Budget); PROPOSED: $50 minimum rents (including utilities); PROPOSED: Access to Social Security Administration’s and Internal Revenue

Service’s data for USDA financed property tenant household income verifications (currently restricted to HUD).

MFH Budget SummaryMFH Programs ($m) FY 2011

EnactedFY 2012 Enacted

FY 2013 Enacted

FY 2014 Enacted

FY 2015 Proposed

#MFH Loans for REO Sales - - - - -##Guaranteed 538 31 130 150 150 150Direct 515 RRH Loans 69 64 29 29 29###Rental Assistance 954 904 837 1,011 1,089*MPR Rehab Demo (Outlay) 13 2 16 20 20MFH Vouchers 16 11 9 12 8*Housing Preservation Grant 10 3 3 3 -*Farm Labor Housing Loans 19 21 21 24 43*Farm Labor Housing Grants 9 7 8 8 3

#No funds are designated for Agency financing on REO properties (other than regular section 515 loan funds for general use)##Guaranteed loans are paid from Lender fees – no cost to the Government and the NOFA was published today (5/21/2014)###House Appropriations bill includes $1.02B in RA for 2015 after sequestration*These NOFA’s are in clearance, a 515 NOFA will not be published for new construction so these funds will be provided through the MPR NOFA.

RD PORTFOLIO (THEN & NOW)

12.8% of units have prepaid or sold for cash, 16.2% of units have been consolidated into scattered site projects, 11.5% in additional RA was provided (760 more units) from new

projects or incentive offers to prevent prepayments, Today, 71.2% of units in Illinois include RA funded by USDA (up

from 70% last year due to projects without RA which prepaid)

CASELOAD 1995 2014 Change

RRH Properties (IL) 785 557 -29.0%

RRH Total Units (IL) 11,808 10,302 -12.8%

Rental Assistance Units 6,576 7,336 +11.5%

% Units with RA 55.7% 71.2% +15.4%

Project Size (IL) 15.0 units 18.5 units +23.3%

RD PORTFOLIO (THEN & NOW)

47

471

39

Category 1

Category 2

Category 3

57

468

56

Category 1

Category 2

Category 3

ILLINOIS

581 properties (8/2011)

557 properties (5/2014)

Category 1 = needed, but able to prepay (-10);

Category 2 = needed, core properties to preserve (+3);

Category 3 = not needed, not viable to preserve (-17)

Collaboration with USDA, IHDA & HUD Physical Inspection Pilot = acceptance of another Agency’s

reports Illinois is an inspection “pilot” State for 2014 IHDA has agreed to accept USDA-RD inspections on tax

credit and HOME properties with an extended use agreement for compliance

USDA-RD will continue to inspect these IHDA properties on a triennial basis (up to 5 years on RD properties without IHDA or HUD assistance)

HUD Inspections will be accepted by USDA-RD when completed for all sites (annual, biennial or triennial inspections depending on the REAC score)

Scattered site properties with partial HUD assistance will likely be excluded from the inspection pilot in 2015.

Utility Aggregation As electric rate aggregation becomes more wide-

spread and more tenants make this choice, reviewing actual electric usage for tenants will become more difficult;

• For 2014 reviews of utility allowances – you will now have 2 choices to complete the review:1. Obtain copies of ALL bills for electric service –

delivery AND usage from tenants

2. Contract with a service provider that monitors kilowatt hours, rates, etc. and can accurately calculate tenant’s actual usage and charges.  This service provider will provide a summary of average usage. 

Utility Aggregation www.pluginillinois.org/Suppliers.aspx

lists 52 electricity Suppliers approved by the ICC for residential choices.

Distribution charges are still payable to Ameren and ComEd.

It is now more difficult than ever to calculate an accurate utility allowance!

Are you shocked at the number of supplier choices?

You may have “Hormephobia”

Underwriting Acquisition/Rehab Deals We just heard from today’s panel about

“Busting the Myths”. Here are a few “Truths”: Loans assumed on new rates/terms are underwritten

by Illinois Area and State staff but concurrence is required by RD headquarters;

Non-contiguous properties can be combined in similar markets;

After rehab, the combined property will have one basic rent for all similar units taking into account HOME, Tax Credit, FLHB and any other program restrictions;

Basic rents after rehab must not exceed CRCU (conventional rents for comparable units) as determined by an appraisal;

Underwriting Acquisition/Rehab Deals “Truths” (continued):

The purchase price and equity paid to the seller is not restricted by RD when no additional hard debt service will be repaid from project rents;

Additional hard debt repaid from project rents (HOME, Trust Fund, third party loans, PRLF, MPR, 515 or 538 program loans) will restrict the sales price to a hypothetical market value with no government restrictions or favorable financing, as determined by the appraiser;

The return to owner (RTO) assumed from the seller will remain unchanged with the possible exception of a RTO increase equal to 8% of the deferred developer fee.

2015 Outlook - Fiscal year 2015 sequestration

orders to OMB have been issued by the President effective October 2014

Budget Resolution has already been passed by Congress for 2015

Specific USDA appropriations bills have not been introduced by Congress for 2015 (draft)

A temporary “continuing resolution” for appropriations is likely if history is an indicator

RA funding would be subject to “across the board” cuts

Furloughs and office closures are possible

Questions & Answers?I’ll take questions, but I have RD trivia questions

too (we love trivia at the RRHA conference)!

• True/False – Form 3560-29 “Notice of Payment Due Report” (Project Worksheet) always reflects data as of the first of the month?

• True; 4.11C (HB-3-3560)

Questions & Answers?

• True/False – RD has granted permission to a complex to rent to ineligible tenants. Regardless of income, an above moderate (ineligible) household’s net tenant contribution will be the note rate rent?

• True; 7.4D2 (HB-2-3560)

Questions & Answers?

• True/False – a 5 day or 10 day Notice of Termination of Tenancy is subject to RD’s Tenant Grievance and Appeal Procedure?

• False; Exhibit 6-7 (HB-2-3560)

Questions & Answers?

• True/False – out of pocket medical expense deductions are limited to elderly households (age 62 or disabled any age)?

• True; 6.9C5 (HB-2-3560)

Questions & Answers?

• True/False – a single family dwelling that was owned by a tenant applicant would be counted as an asset if it were given to a family member 12 months prior to filing an application?

• True; 6.10D (HB-2-3560)

Questions & Answers?

• True/False – disability compensation is included in annual income?

• True; Attachment 6-A (HB-2-3560)

Questions & Answers?

• True/False – Managers of tax credit properties may choose to delay tenant selection until a tax credit eligible applicant is available even though other eligible applicants are on a waiting list?

• True; 6.22A (HB-2-3560)

Questions & Answers?

• True/False – net family assets include items such as cash, real estate holdings, and personal property valued over $5,000?

• False; Attachment 6-D (HB-2-3560)

Questions & Answers?

• True/False – for a PASS loan account, a 6% late fee is charged when a payment received on the 10th of the month includes insufficient overage?

• True; 4.4 (HB-3-3560)

Questions & Answers?

• True/False – If a project has unused RA units for six months, the Area Director may approve a transfer of those units to another project?

• False; 9.15 (HB-2-3560) & UL dated 5/1/2013

Questions & Answers?

• True/False – a co-tenant who is 17 years old receives a $480 income deduction?

• False; Attachment 6-C (HB-2-3560)

Questions & Answers?

• True/False – management must retain rejected tenant applications for three years?

• True; 6.17B (HB-2-3560)

Questions & Answers?

• True/False – form RD 3560-30 Certificate of No Identity of Interest is considered current until a borrower or management agent advises of a change?

• True; only the RD 3560-31 IOI Disclosure/Qualification form requires an update every 3 years.

Questions & Answers?

• True/False – Income from assets must be imputed when the household assets exceed $5,000?

• True; Attachment 6-D (HB-2-3560)

Questions & Answers?

• BONUS: What dollar adjustment to annual household income is used for a mother born on July 30, 1947 (tenant), and her 34 year old disabled son?

• $400?• $480?• $880?

Questions & Answers?

• BONUS: What dollar adjustment to annual household income is used for a mother born on July 30, 1947 (tenant), and her 34 year old disabled son?

• $400?• $480?• $880 $400 elderly + $480 dependent

under age 17, or individual with a disability or full-time student. 6.9C1 (HB-2-3560)

Thank you!USDA is an equal opportunity provider and employer. 

If you wish to file a Civil Rights program complaint of discrimination, complete the USDA Program Discrimination Complaint Form, found online at http://www.ascr.usda.gov/complaint_filing_cust.html, or at any USDA office, or call (866) 632-9992 to request the form. You may also write a letter containing all of the information requested in the form. Send your completed complaint form or letter to us by mail at U.S. Department of Agriculture, Director, Office of Adjudication, 1400 Independence Avenue, S.W., Washington, D.C. 20250-9410, by fax (202) 690-7442 or email at program.intake@usda.gov