[Federal Register Volume 61, Number 100 (Wednesday, May 22, 1996)]
[Notices]
[Pages 25752-25762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12795]
[[Page 25751]]
_______________________________________________________________________
Part III
Department of Housing and Urban Development
_______________________________________________________________________
Availability of Additional Units for the Housing Finance Agency Risk-
Sharing Program; Notice
Federal Register / Vol. 61, No. 100 / Wednesday, May 22, 1996 /
Notices
[[Page 25752]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-4064-N-01]
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner; Availability of Additional Units for the Housing Finance
Agency Risk-Sharing Program
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Notice of the Availability of Additional Units for the Housing
Finance Agency Risk-Sharing Program.
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SUMMARY: This Notice announces the availability of an additional 10,000
units for the Housing Finance Agency Risk-Sharing program and invites
qualified Housing Finance Agencies (HFAs) that are not yet approved to
participate in the program (new applicants) to apply for approval to
participate in the program. HFAs that are currently approved to
participate in the program will be notified by certified mail that they
may request additional units by letter to the Department.
The Housing Finance Agency Risk-Sharing program is authorized under
section 542(c) of the Housing and Community Development Act of 1992, as
amended. Section 8 of the Housing Opportunity Program Extension Act of
1996 extends section 542(c) by authorizing the Secretary to enter into
HUD mortgage insurance commitments processed by State and local HFAs
for an additional 12,000 multifamily units for Fiscal Year 1996. Ten
thousand of those units are being made available by this invitation.
The balance of the 12,000 new units (2,000) are being retained by HUD
Headquarters to meet the immediate needs of current risk-sharing
participants so that they can maintain essential risk-sharing
operations and staff resources.
APPLICATION DEADLINE: The deadline for receipt of applications from new
applicants to participate in this program is 4:00 pm, Eastern Daylight
Savings Time on July 22, 1996. Applications received after the date and
time stated herein will not be accepted and will be returned to the
sender. HFAs are encouraged to submit applications prior to the end of
the 60-day period, as applications will be reviewed and approved as
they are received. Applicants should obtain a copy of the program
handbook (Handbook 4590.01 REV-1) and the program regulations at 24 CFR
part 266 to become familiar with program requirements. If there are
differences between the handbook and this Notice, the requirements of
this Notice shall prevail. Qualified agencies may call Jane Luton at
202-708-2556 for a copy of the handbook and regulations. This is not a
toll-free number. Hearing- or speech-impaired persons may access that
number by calling toll-free the Federal Information Relay Service at
(800) 877-8339.
ADDRESS FOR SUBMISSION: Applications for participation in the program
must be identified on the envelope or wrapper and be submitted as
follows: Director, Office of Multifamily Housing Development,
Application for Housing Finance Agency Risk-Sharing Program, U.S.
Department of Housing and Urban Development, 451 Seventh Street, SW.,
Room 6142, Washington, DC 20410.
HFAs shall submit an original and three copies (a FAX copy is NOT
acceptable) of the application to the above address by the application
deadline.
Note: Any new applicant that is not a HUD-approved mortgagee at
the time of its application to participate in the program (see
2.(ii) under Application Requirements below) must submit an
Application for Approval as a HUD-Approved Mortgagee. Such
applications must be identified on the envelope or wrapper as such
and submitted by the application deadline to the following address:
Director, Office of Lender Activities and Land Sales Registration,
Application for Housing Finance Agency Risk-Sharing Program, U.S.
Department of Housing and Urban Development, Room 9156, Washington,
DC 20410.
APPLICATION FEE: New applicants must submit an application fee of
$10,000 through FEDWIRE. The Federal Deposit System offers individual
and corporate remitters the ability to move funds electronically from
their bank account to the Treasury. The remitter identifies the payment
and the Department of Housing and Urban Development as the government
agency to be credited on the funds transfer message. Instructions for
your bank to follow to complete a FEDWIRE are listed in Attachment A.
FOR FURTHER INFORMATION CONTACT: Jane Luton, Director, New Products
Division, Office of Multifamily Housing Development, Room 6142, U.S.
Department of Housing and Urban Development, Washington, D.C. 20410.
Telephone: (202) 708-2556; (This number is not toll-free.) Hearing- or
speech-impaired persons may access that number by calling toll-free the
Federal Information Relay Service at (800) 877-8339.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The information collection requirements contained in this Notice
have been approved by the Office of Management and Budget (OMB), under
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), and assigned
OMB Control Number 2502-0500. An agency may not conduct or sponsor, and
a person is not required to respond to, a collection of information
unless the collection displays a valid control number.
Purpose and Program Summary
Section 542(c) of the Housing and Community Development Act of 1992
authorized the Department to implement a multifamily mortgage insurance
risk-sharing pilot program with qualified State and local Housing
Finance Agencies (HFAs). On December 3, 1993, the Department
promulgated interim regulations implementing the pilot program, the
purpose of which was to demonstrate the effectiveness of providing new
forms of Federal credit enhancement for the development of affordable
multifamily housing by State and local HFAs. On December 5, 1994, the
Department promulgated final regulations for the program. To date, the
Department has allocated 30,000 units which were available for Fiscal
Years 1993, 1994, and 1995 to 31 participating HFAs. These HFAs have
received HUD Firm Approval Letters (notifications that units have been
reserved for proposed projects) for over 14,000 units.
The program has been designed to increase the supply of affordable
multifamily housing through partnerships between HUD and State and
local housing finance agencies. Qualified HFAs are authorized to
originate, underwrite, and close loans for multifamily housing projects
requiring new construction and substantial rehabilitation as well as
certain acquisitions and refinancings. HUD will endorse such loans for
full mortgage insurance upon presentation of appropriate
certifications. HFAs will be responsible for the full range of loan
management, servicing, and property disposition activities associated
with these projects.
Through a Risk-Sharing Agreement between HUD and the HFA, the HFA
contracts to assume a portion of the risk on each loan it underwrites.
HUD, in turn, commits to pay 100 percent of the outstanding principal
mortgage balance upon default of the loan and filing of a claim. The
HFA will issue a debenture for the amount of the claim pending the
final settlement of the loss. HUD and the HFA will share in any loss in
accordance with the amount of risk assumed by each under the Risk-
Sharing Agreement.
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HFAs will be approved on one of the following three levels: (1)
Level I; (2) Level II; or (3) a combination of Level I and Level II.
The primary distinction between Level I and Level II is in the level of
risk apportionment an HFA agrees to accept. HFAs participating at Level
I are those that will assume 50 percent or more of the risk associated
with a loan default. These HFAs may use their own underwriting
standards and loan terms and conditions without further approval from
HUD. HFAs participating at Level II will assume less than 50 percent of
the risk and must have their underwriting standards and loan terms and
conditions approved by HUD.
This document contains information concerning: (a) Deadline and
address for submission of applications; (b) eligibility requirements;
(c) allocation of units; (d) application requirements; (e)
establishment of dedicated account; (f) application review procedures;
(g) approval of applications; and, (h) authorization to use the unit
set-aside.
Eligibility
To participate in the program, an HFA must meet the qualifications
set forth in 24 CFR 266.100 and the requirements in 24 CFR 266.105 (a).
Allocation of Units
HUD will set aside units for approved HFAs as follows:
(1) Unit set-aside. Each approved HFA will receive a set-aside of
units based upon an assessment of their previous multifamily housing
experience, their current capacity to utilize the number of units
requested, the population size of the HFA's jurisdiction in comparison
to other new applicants and participating HFAs, and the number of units
requested by the HFA. The unit set-aside will be reserved in a Risk-
Sharing Agreement executed by the HFA and HUD.
(2) Headquarters reserve. HUD may hold back a small portion of the
10,000 units for future use in FY 1996 to meet unforeseen needs of
current and new HFA participants.
(3) Credit subsidy. The set-aside of units will be subject to the
availability of credit subsidy which will be obligated and allocated in
accordance with outstanding Department instructions.
Application Requirements
New applicants must submit an application containing the following
information:
(1) Name, title, telephone and fax numbers. Provide the name,
title, telephone and fax numbers of the person most familiar with the
material contained in the application in case HUD needs to contact the
HFA for clarification and/or further information.
(2) Evidence of eligibility. The HFA must provide evidence that it
meets the following:
(i) Be a HUD-approved mortgagee in good standing;
(Note: HFAs that are not HUD-approved mortgagees at the time of
their application to participate in this program must submit,
concurrently, separate applications for approval to participate in
this program and for approval to operate as a HUD-approved
mortgagee. An application for approval to operate as a HUD-approved
mortgagee must be submitted to HUD in accordance with the
requirements established under 24 CFR 202.10 through 202.19);
(ii) Has at least five years experience in multifamily
underwriting; and
(iii) Carries the designation of ``top tier'' or its equivalent, as
evaluated by Standard and Poors or any other nationally recognized
rating agency; OR
(iv) Has a current overall rating of ``A'' for its general
obligation bonds from a nationally recognized rating agency; OR
(v) For HFAs not qualifying as (iii) or (iv), the Housing Finance
Agency Questionnaire (Attachment B to this Notice)
(3) Application fee. Evidence that the application fee of $10,000
has been wire-transferred to the U.S. Treasury. This fee will not be
refunded once the application has been accepted for review.
(4) Units requested. A statement indicating the number of units the
HFA is requesting as well as the number of units the HFA proposes to
process to firm approval letter by September 30, 1997.
(5) Risk-sharing arrangement. HFA declaration of the risk-sharing
arrangement it has selected, i.e., Level I, Level II or both Level I
and Level II.
(6) Legal opinion. A letter from the HFA's legal counsel providing
its opinion, after careful review of the HFA's program, that the HFA
has the necessary powers and ability to comply with all program
requirements. The opinion for an HFA with an overall rating of ``A'' on
its general obligation bonds must also state that the general
obligation will extend to the HFA's responsibilities under the Risk-
Sharing Agreement and any debenture issued by the HFA to the
Commissioner. If the opinion of counsel does not include this
statement, the HFA must establish a dedicated reserve account in the
amount of $500,000 in accordance with the requirements in 24 CFR
266.110 (b).
(7) Underwriting procedures, loan terms and conditions, investment
policies and business and financial practices. A description of the
following: (i) The manner in which the HFA will process mortgage loans,
including its underwriting procedures and loan terms and conditions as
follows: (A) The approval process and fee schedule, (B) maximum
mortgage term, (C) minimum debt service coverage, (D) maximum loan-to-
value ratio, (E) maximum loan amount, (F) minimum equity requirement,
(G) minimum income-to-expense ratio, (H) prepayment requirements, (I)
title requirements, (J) escrow and reserves (including replacement
reserves), and (K) hazard insurance requirements; (ii) loan management,
loan servicing and property disposition activities; (iii) the manner in
which the HFA's and mortgagor's reserves and escrows (including letters
of credit) will be established and controlled; and (iv) a description
of the HFA's investment policies and overall business practices.
(8) Underwriting staff. Identification, background description and
years of experience of individuals with final underwriting approval
authority (e.g., chief underwriter) and the individual responsible for
project management, loan servicing and property disposition (e.g.,
asset manager). These functions may not be contracted out by the HFA.
(9) Default history. A description of the default history
(including workouts) for all HFA-financed multifamily projects.
(10) Oversight. A description of oversight by State or local
government agencies.
(11) Financial statements. Copies of audited financial statements
for the HFA's last three fiscal years.
(12) Certification. A certification (Attachment C to this Notice)
signed by an authorized official from the HFA that certifies to the
following:
(i) The HFA will at all times comply with the financial
requirements of 24 CFR 266.110 and, where applicable, maintain required
reserves in a dedicated account in liquid funds (i.e., cash, cash
equivalents, or readily marketable securities) in a financial
institution acceptable to HUD;
(ii) The Department of Justice has not brought a civil rights suit
against the Agency and no suit is pending;
(iii) There has not been an adjudication of a civil rights
violation in a civil action brought against the Agency by a private
individual, unless the Agency is operating in compliance with a court
order, or implementing a HUD-approved compliance agreement designed to
correct the areas of non-compliance; and,
[[Page 25754]]
(iv) There are no outstanding findings of noncompliance with civil
rights statutes, Executive Orders, or regulations as a result of formal
administrative procedures, or the Secretary of HUD has not issued a
charge against the Agency under the Fair Housing Act, unless the Agency
is operating under a compliance agreement designed to correct the areas
of noncompliance.
(13) Sample debenture form issued by the HFA.
(14) The Housing Finance Agency Questionnaire (Attachment B) The
Questionnaire is to be completed only by HFAs that do not carry the
designation ``top-tier'' or its equivalent, or do not currently receive
an overall rating of ``A'' for their general obligation bonds from a
nationally recognized rating agency.
Establishment of Dedicated Account
Prior to execution of the Risk-Sharing Agreement, HFAs that do not
have a top-tier rating, have not received an overall rating of ``A'' on
their general obligation bonds or those whose opinion of legal counsel
(required above) did not state that the general obligation will extend
to the HFA's responsibilities under the Risk-Sharing Agreement and any
debenture issued by the HFA to the Commissioner must establish a
specifically identified dedicated account (see Attachment D). This
account must consist entirely of liquid assets (i.e., cash, cash
equivalents, or readily marketable securities) and be located in a
financial institution acceptable to HUD. Such an institution has assets
of not less than $100,000,000; is organized under the laws of the
United States or a State thereof; and is regulated and examined by the
Comptroller of the Currency, Federal Deposit Insurance Corporation or
the Federal Reserve Board, has a long-term bank deposit rating of ``A-
1'' or better by Moody's Investors Service or ``A+'' rating by Standard
and Poors. Reserve requirements are set forth in 24 CFR 266.110 of the
regulations.
Application Review Procedures
1. Additional Information. If HUD requires additional data from a
new applicant, the new applicant will have 5 business days from the
date of notification to submit such data to the appropriate HUD
official. (If notification is by mail, an HFA will be presumed to
receive notification five business days from the date of such
notification.)
2. Review Criteria. HUD will review each application to determine
if the applicant meets all the requirements of the regulation and this
Notice and demonstrates the ability to underwrite, originate, process,
close, service, manage, and dispose of multifamily loans in a prudent
manner.
3. Acceptability Standards. HUD will review the submissions of HFAs
which do not have a top-tier rating or have not received an overall
rating of ``A'' on their general obligation bonds in accordance with
the above Review Criteria and the standards set forth below:
(i) Demonstrated capability to carry out program responsibilities,
including: (A) continuity of management; (B) staff qualifications and
experience; and (C) the HFA's established track record of performing
multifamily loan processing, servicing, loan management (including
capability to enforce regulatory agreements and to perform workouts),
and property disposition for the types of loans eligible under this
program.
(ii) Adequacy of the HFA's administrative capabilities to ensure
sound underwriting and loan management.
(iii) Soundness of the HFA's multifamily portfolio, including
default experience.
(iv) Strength of the relationship between the HFA and the State or
local government.
(v) The HFA's fiscal soundness, including (A) amounts and sources
of revenues for housing activities and its investment policies for fund
balances (if any); (B) how it proposes to meet any monetary obligations
required under this program; and (C) the adequacy of funding to commit
to the level requested in the application.
Approval of Applications
1. Notification. HUD will notify new applicants of approval or
disapproval within 60 days of the deadline for applications.
2. Approval Levels. HFAs will be approved to operate under one of
three requested risk-sharing arrangements as follows:
(i) Level I--the HFA is approved to originate, service and dispose
of multifamily mortgages using its own underwriting standards and loan
terms and conditions. The HFA assumes 50 to 90 percent of the risk in
increments of 10 percent.
(ii) Level II--the HFA is approved to originate, service and
dispose of multifamily mortgages where the HFA uses underwriting
standards and loan terms and conditions approved by HUD, and
A. When the loan-to-replacement cost ratio for new construction and
substantial rehabilitation projects or the loan-to-value ratio for
existing projects are greater than or equal to 75 percent, the HFA
shall assume at least 25 percent of the risk.
B. When the loan-to-replacement cost ratio for new construction and
substantial rehabilitation projects or the loan-to-value ratio for
existing projects are less than 75 percent, the HFA shall assume 10
percent or 25 percent of the risk, at the HFA's option.
(iii) Combined Levels I/II--For HFAs which plan to use Level I and
Level II process, the underwriting standards and loan terms and
conditions to be used on Level II loans must be approved by HUD as
described in (ii), above.
3. Risk-Sharing Agreement. When an HFA is determined by HUD to be
qualified to participate in the program, the Department will grant
tentative approval to the HFA and forward the Risk-Sharing Agreement
(similar to that shown in Attachment E) to the HFA for signature. The
Risk-Sharing Agreement will set aside the number of units for the HFA.
It will also set forth other obligations of the HFA. The HFA must
return the executed document, along with evidence that the dedicated
reserve account has been established (where appropriate).
Authorization to Use Unit Set-Aside
After receipt of the signed Risk-Sharing Agreement, HUD will return
a copy of the Risk-Sharing Agreement executed on behalf of the
Department and notify the HFA that it may begin using its unit set-
aside. No HFA will be authorized to process loans for mortgage
insurance until it has received HUD-approved mortgagee status, been
approved under the Risk-Sharing program, has executed a Risk-Sharing
Agreement and, where required, provided evidence to the Department that
it has established a dedicated reserve account.
Other Matters
Environmental Finding. A Finding of No Significant Impact with
respect to the environment has been made in accordance with HUD
regulations at 24 CFR part 50 implementing section 102(2)(C) of the
National Environmental Policy Act of 1969 (42 U.S.C. 4332). The Finding
of No Significant Impact is available for public inspection and copying
between 7:30 a.m. and 5:30 p.m. weekdays at the Office of the Rules
Docket Clerk, 451 Seventh Street, SW., Room 10276, Washington, DC
20410.
Executive Order 12612, Federalism. The General Counsel, as the
Designated Official under section 6(a) of Executive Order 12612,
Federalism, has determined that the policies and procedures contained
in this Notice will
[[Page 25755]]
not have substantial direct effects on States or their political
subdivisions, or the relationship between the federal government and
the States, or on the distribution of power and responsibilities among
the various levels of government. As a result, the Notice is not
subject to review under the Order.
Executive Order 12606, The Family. The General Counsel, as the
Designated Official for Executive Order 12606, The Family, has
determined that this Notice will likely have a beneficial impact on
family formation, maintenance and general well-being. Accordingly,
since the impact on the family is beneficial, no further review is
considered necessary.
Accountability in the Provision of HUD Assistance. The Department
has promulgated a final rule to implement section 102 of the Department
of Housing and Urban Development Reform Act of 1989 (HUD Reform Act).
The final rule is codified at 24 CFR part 12. Section 102 contains a
number of provisions that are designed to ensure greater accountability
and integrity in the provision of certain types of assistance
administered by the Department. On January 16, 1992, the Department
published at 57 FR 1942, additional information that gave the public
(including applicants for, and recipients of, HUD assistance) further
information on the implementation, public access, and disclosure
requirements of section 102. The documentation, public access, and
disclosure requirements of section 102 are applicable to assistance
awarded under this Notice as follows:
(1) Documentation and Public Access. The Department will ensure
that documentation and other information regarding each application
submitted pursuant to this Notice are sufficient to indicate the basis
upon which assistance was provided or denied. This material, including
any letters of support, will be made available for public inspection
for a five-year period beginning not less than 30 days after the award
of the assistance. Material will be made available in accordance with
the Freedom of Information Act (5 U.S.C. 552) and HUD's implementing
regulations at 24 CFR part 15. In addition, HUD will include the
recipients of assistance pursuant to this Notice in its Federal
Register notice of all recipients of HUD assistance awarded on a
competitive basis. (See 24 CFR 12.14(a) and 12.16(b), and the notice
published in the Federal Register on January 16, 1992 (57 FR 1942), for
further information on these requirements.)
(2) HUD Responsibilities--Disclosures. The Department will make
available to the public for five years all applicant disclosure reports
(Form HUD-2880) submitted in connection with this Notice. Update
reports (also Form HUD-2880) will be made available along with the
applicant disclosure reports, but in no case for a period less than
three years. All reports, both applicant disclosures and updates, will
be made available in accordance with the Freedom of Information Act (5
U.S.C. 552) and HUD's implementing regulations at 24 CFR part 15. (See
24 CFR part 12, Subpart C, and the notice published in the Federal
Register on January 16, 1992 (57 FR 1942), for further information on
these disclosure requirements.)
Prohibition Against Advance Information on Funding Decisions. HUD's
regulation implementing section 103 of the Department of Housing and
Urban Development Reform Act of 1989, codified as 24 CFR part 4,
applies to the funding competition announced today. The requirements of
the rule continue to apply until the announcement of the selection of
successful applicants. HUD employees involved in the review of
applications and in the making of funding decisions are limited by part
4 from providing advance information to any person (other than an
authorized employee of HUD) concerning funding decisions, or from
otherwise giving any applicant an unfair competitive advantage. Persons
who apply for assistance in this competition should confine their
inquiries to the subject areas permitted under 24 CFR part 4.
Applicants or employees who have ethics related questions should
contact the HUD Office of Ethics (202) 708-3815. Hearing- or speech-
impaired individuals may access this number via TTY by calling the
Federal Information Relay Service at 1-800-877-8339. (With the
exception of the ``800'' number, these are not toll-free numbers.) For
HUD employees who have specific program questions, such as whether
particular subject matter can be discussed with persons outside HUD,
the employee should contact the appropriate Field Office Counsel, or
Headquarters counsel for the program to which the question pertains.
Prohibition against Lobbying Activities. The use of assistance
under this Notice is subject to the disclosure requirements and
prohibitions of section 319 of the Department of the Interior and
Related Agencies Appropriations Act for Fiscal Year 1990 (31 U.S.C.
1352)(the ``Byrd Amendment'') and the implementing regulations at 24
CFR part 87. These authorities prohibit recipients of Federal
contracts, grants, or loans from using appropriated funds for lobbying
the Executive or Legislative Branches of the Federal Government in
connection with a specific contract, grant, or loan. The prohibition
also covers the awarding of contracts, grants, cooperative agreements,
or loans unless the recipient has made an acceptable certification
regarding lobbying. Under 24 CFR part 87, applicants, recipients and
subrecipients of assistance exceeding $100,000 must certify that no
Federal funds have been or will be spent on lobbying activities in
connection with the assistance.
Catalog of Federal Domestic Assistance Program. The Catalog of
Federal Domestic Assistance program title and number is 14.188,
Housing Finance Agency Risk-Sharing Program.
Authority: Section 542(c) of the Housing and Community
Development Act of 1992, as amended, 12 U.S.C. 1707.
Dated: May 16, 1996.
Stephanie A. Smith,
Acting General Deputy Assistant Secretary for Housing, Federal Housing
Commissioner.
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Attachment B--Housing Finance Agency Questionnaire
Responses to this questionnaire fulfill the documentation
requirements pursuant to 24 CFR 266.10(d)(4)(iii). All Housing
Finance Agencies (HFAs) seeking approval to participate in the HFA
Risk-Sharing program who do not have ``top-tier'' designation or an
overall rating of ``A'' on their general obligation bonds from one
of the nationally recognized rating agencies must complete this
questionnaire.
The questionnaire addresses 5 different aspects of the HFA and
are consistent with conditions set forth in Section 542(d)(2) of the
Housing and Community Development Act of 1992. Applicants should be
careful to craft responses so that they clearly address the issues
set forth in the body of this Notice. Responses should represent a
summary of the detailed information that may be found in the HFA's
operating, administrative and quality control manuals or guidelines.
In order to ensure that the Department can expeditiously review and
approve applications, ALL NARRATIVE RESPONSES ARE LIMITED TO 15
PAGES. Responses to questions related to the portfolio (item II) may
be presented in tabular form, where appropriate, and attached as
exhibits to the 15 page narrative responses. The Department
encourages HFAs to prepare responses in a manner similar to that
which might be used for the HFAs Annual Reports and reports to the
Board of Directors.
I. Organizational History
Describe the history and organizational background of the HFA.
Indicate how long it has been in existence, when it began to finance
multifamily loans, and an overall description of its multifamily
lending activities.
Describe the HFA's relationship to the State or local
government, as appropriate. Clearly indicate whether or not State or
local government officials serve on the HFA's board of directors and
describe, if any, the role State or local officials play in the
HFA's program operations.
Discuss any State or local appropriations for the past 5 years
and any anticipated appropriations over the next 3 years to support
the HFA's multifamily housing goals.
II. Portfolio Information
Indicate how many multifamily loans have been financed within
the past 10 years (dates specified), by year. Include the number and
type of projects (family, elderly, assisted living, cooperative,
etc.) and units in each, type of loan (first mortgage, second, gap
loan, credit support, new construction, rehabilitation, refinancing
with or without repairs, etc.) and original mortgage amounts,
outstanding principal balances, status (current, default,
foreclosed, workout) and location (urban/suburban/central city/
rural).
For the multifamily loans currently in the HFA's portfolio,
indicate how many are HFA owned, owned by other public agencies,
nonprofit organizations, privately owned and other ownership types.
III. Staff Capacity
Describe general background and indicate years of experience of
individual responsible for the overall underwriting decision (e.g.,
chief underwriter) and for project management, loan servicing and
property disposition (e.g., Director of Asset Management). Note that
these functions may not be contracted out by the HFA.
IV. Operating Procedures
A. Cost Certification
Describe the HFA's cost certification process. Explain how it
will prevent fraud and misrepresentation, ensure legitimate costs
and completion of repairs prior to acceptance of certification.
Describe how mortgage excesses and mandatory prepayments will be
handled.
B. Loan Approval
Describe the loan approval process. Describe circumstances if
any, under which the chief underwriter's recommendations can be
overridden.
Describe any situations where loans are not referred to a
committee, what they are and to whom they are referred.
C. Loan Servicing
Describe the HFA's overall loan servicing system and the
procedures for enforcing the Regulatory Agreement.
Describe the computerization of its portfolio, project audits/
reviews and procedures for resolving deficiencies.
D. Workout Procedures
State the number of workout plans developed by the HFA over the
last five years, elements of the agreement and current status. If
there is no previous experience with workouts, describe plans, tools
or strategies proposed to establish workout agreements.
V. Financial Capability
Describe the amount and sources of funds the HFA has available
to support multifamily housing programs. If funds are earmarked for
specific projects or programs, or otherwise have a contingent
liability, indicate how much and for what purpose. Indicate how much
of the funds are unrestricted, how those funds are governed (e.g.,
approval of the board of directors or state or local government) and
the eligible uses of these funds. Identify any funding sources
available to supplement less than break-even projects.
Indicate the overall percentage of total unrestricted funds to
total debt and the percentage of liquid unrestricted funds to total
mortgages outstanding.
Describe the collateral the HFA will use if it does not have the
authority to pledge its full faith and credit to back debentures
issued against claims.
Describe how the HFA intends to fund the dedicated account, its
procedures for ensuring required balances are in place at all times
and that the amounts are increased at each loan closing. Describe
the funding source (all funds in the account must be liquid) for the
dedicated account and identify the financial institution in which
the HFA proposes to maintain these funds.
Describe the circumstances or conditions under which other
governmental entities or public bodies have access to the HFA's
funds.
Describe briefly, the types of financial and quality control
audits performed on the HFA. Indicate the State or local HFA or
authority that has responsibility for conducting the annual
financial audit and when that audit is conducted.
Describe the mechanism for disposing/resolving audit findings.
Identify any periodic reports required for the board of
directors and/or other organizational oversight body.
Describe the procedures in place to generate financial reports,
changes in fund balances, and changes in financial position.
Describe procedures in place for the prompt notification to HUD of
negative changes in the HFA's financial position.
Attachment C--Certifications Housing Finance Agency Letterhead
I __________ (name of authorized official) hereby certify that I
am the __________ (title) of the __________ (name of housing finance
agency) __________ ``the Agency'', and that I am authorized to make
the certifications set forth below on behalf of the Agency.
I hereby certify that:
(1) The Agency will at all times comply with the financial
requirements of 24 CFR 266.110 of the Risk-Sharing Program and,
where applicable, maintain required reserves in a dedicated account
in liquid funds (i.e., cash, cash equivalents, or readily marketable
securities) in a financial institution acceptable to HUD.
(2) The Department of Justice has not brought a civil rights
suit against the Agency and no suit is pending;
(3) There has not been an adjudication of a civil rights
violation in a civil action brought against the Agency by a private
individual, unless the Agency is operating in compliance with a
court order, or implementing a HUD-approved compliance agreement
designed to correct the areas of noncompliance; and
(4) There are no outstanding findings of noncompliance with
civil rights statutes, Executive Orders, or regulations as a result
of formal administrative procedures, or the Secretary of HUD has not
issued a charge against the Agency under the Fair Housing Act,
unless the Agency is operating under a compliance agreement designed
to correct the areas of non-compliance.
Dated:-----------------------------------------------------------------
----------------------------------------------------------------------
Name of Agency
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Attachment D--Housing Finance Agency Risk-Sharing Program Section
542(C)
Dedicated Reserve Account
The following information is required to evidence establishment
of a dedicated reserve account in an initial amount of $500,000 to
be used solely in connection with the Housing Finance Agency (HFA)
Risk-Sharing Program. Thereafter, the HFA shall make additional
deposits at each loan closing in accordance with 24 CFR 266.110.
Duplicate originals of the attached agreement and one copy must
be forwarded by the HFA to a financial institution with whom it
intends to establish a Dedicated Reserve Account. In each of the
attached agreements and on the copy, such financial
[[Page 25759]]
institution will certify to the existence of the dedicated reserve
account by inserting the date the account was established, the
account number, and the account balance. Upon completion of the
certification, the financial institution shall sign and return an
original and one copy to the HFA which, in turn, will forward the
original to HUD. The HFA should retain a duplicate copy for its
records. This information must be submitted to Linda D. Cheatham,
Director, Office of Multifamily Housing Development, Room 6134, 451
Seventh Street, S.W., Washington, D. C. 20410 prior to the HFA's
approval to participate in the program.
Agreement for HFA's Dedicated Reserve Account
HFA Name---------------------------------------------------------------
Address----------------------------------------------------------------
(Street Number)
----------------------------------------------------------------------
(City, State and Zip Code)
Date-------------------------------------------------------------------
----------------------------------------------------------------------
(Name of Institution)
----------------------------------------------------------------------
(Street)
----------------------------------------------------------------------
(City, State, and Zip Code)
You are authorized and requested to establish a Reserve Account
to be specifically designated ``(HFA Name)/HUD Risk-Sharing''. This
account may be drawn upon by the Department of Housing and Urban
Development (hereinafter ``HUD'') and may be used by the HFA only
with the prior written approval of HUD for the purpose of meeting
the HFA's risk-sharing obligations under this program.
This letter is submitted to you in duplicate originals. Please
execute the duplicate originals of the certification below,
acknowledging the existence of such account, so that we may present
an original signed by you to HUD. Specimen signatures of HFA
representatives and identification of authorized HUD signatory
positions are enclosed.
----------------------------------------------------------------------
(Signature of HFA authorized official)
To Be Completed By the Financial Institution
To: The Department of Housing and Urban Development
The undersigned institution certifies to HUD that the above
account was established on ________ in the amount of ________ in
this institution under account number ________ and agrees with the
HFA named above and HUD to honor withdrawals from the account as set
forth above and agrees to send quarterly statements regarding the
account to both HUD and the HFA. The financial institution further
certifies that it:
(1) has assets of not less than $100,000,000;
(2) is organized under the laws of the United States or a State
thereof;
(3) is regulated and examined by the Comptroller of the
Currency, Federal Deposit Insurance Corporation or the Federal
Reserve Board; and
(4) has a long-term bank deposit rating of ``A-1'' or better by
Moody's Investors Service or ``A+'' by Standard and Poor's.
----------------------------------------------------------------------
(Name of Institution)
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
Authorized HUD Signatory Positions
Persons in the following positions are authorized to withdraw
from the HFA/HUD Risk-Sharing Account on behalf of HUD and/or
approve on behalf of HUD, the withdrawal of funds from the Account
by the HFA:
Director, Office of Multifamily Housing Development
Deputy Director, Office of Multifamily Housing Development
Director, Office of Multifamily Asset Management and Disposition
Associate Director for Program Management, Office of Multifamily
Asset Management and Disposition
Associate Director for Program Operations, Office of Multifamily
Asset Management and Disposition
Specimen Signatures of HFA Authorized Officials
Based upon prior approval from HUD, the following individuals
are authorized to withdraw funds from the HFA/HUD Risk-Sharing
Account on behalf of the HFA:
(Name)-----------------------------------------------------------------
(Title)----------------------------------------------------------------
(Name)-----------------------------------------------------------------
(Title)----------------------------------------------------------------
Attachment E--Sample Risk-Sharing Agreement and Addendum
(subject to revision)
This Risk-Sharing Agreement (hereinafter referred to as
``Agreement'') is entered into on this ______ day of ______,
19______, by and between ______ whose address is ______ and its
successors (hereinafter referred to as ``HFA'') and the undersigned
Secretary of Housing and Urban Development and his/her successors
and assigns acting by and through the Assistant Secretary for
Housing-Federal Housing Commissioner (hereinafter referred to as
``Commissioner'').
WHEREAS, the Housing and Community Development Act of 1992
authorizes, under Section 542(c) thereof, the development of a Risk-
Sharing Pilot Program under which the Commissioner will enter into
Risk-Sharing Agreements with qualified housing finance agencies and
provide for full mortgage insurance through the Federal Housing
Administration of loans for affordable housing originated by the
qualified housing finance agencies;
WHEREAS Section 8 of the Housing Opportunity Program Extension
Act of 1996 extends Section 542(c) through the end of Fiscal Year
1996;
WHEREAS, under the authority of Section 542(c), the Commissioner
has published implementing regulations at 24 CFR Part 266.
WHEREAS, the HFA seeks to participate in the Risk-Sharing
Program, in accordance with Section 542(c), the regulations issued
pursuant thereto and the terms set forth herein, in order to obtain
full insurance on loans made by the HFA for affordable multifamily
housing for persons in its community;
WHEREAS, the Commissioner seeks to enter into this Agreement
with the HFA in order to test the effectiveness of Federal credit
enhancement for loans for affordable multifamily housing through a
system of risk-sharing agreements with the HFA; and
NOW THEREFORE, in consideration of the foregoing, the parties
agree as follows:
Article I--Allocation/Credit Subsidy
In furtherance of this Agreement,
A. The Commissioner has set aside ______ units of affordable
multifamily housing to be originated by the HFA.
B. The Commissioner reserves the right to modify the number of
units set forth in this Agreement to: (1) Allocate additional units
in excess of the number set aside above, or (2) to reduce such
allocation based on the Commissioner's review of the HFA's use of
its prior set-aside(s). Any such changes shall be incorporated by an
addendum to this Agreement.
C. Credit subsidy is required for all insured projects,
including projects insured pursuant to this Agreement. Credit
subsidy is subject to availability in accordance with the
Commissioner's outstanding instructions. The HFA shall be notified
that the Firm Approval Letter will be delayed if credit subsidy has
been exhausted.
Article II--Definitions
As used in this Agreement the term:
``Addendum'' means that document attached to this Agreement,
which shall be used for reserving units and establishing the risk
share percentage for specific projects, modifying the number of
units set aside to the HFA and for other purposes.
``Amendment'' means a modification of the terms and conditions
of this Agreement requiring the consent of both the Commissioner and
the HFA or a modification by HUD to 24 CFR Part 266.
``Contract of Insurance'' means the agreement evidenced by the
endorsement of the Commissioner upon the credit instrument given in
connection with a mortgage, incorporating by reference the
regulations in 24 CFR Part 266 and the applicable provisions of
Section 542(c).
``Credit Subsidy'' means the cost of a direct loan or loan
guarantee under the Federal Credit Reform Act of 1990 as defined in
Subpart B of Title 13 of the Omnibus Budget Reconciliation Act of
1990 (Pub. L. 101-508, approved November 5, 1990).
``Dedicated Account'' means an account maintained in a financial
institution acceptable to the Commissioner which consists entirely
of liquid assets (i.e., cash or cash equivalents or readily
marketable securities.)
``Exhibit'' means a document which provides names, titles and/or
specimen signatures of principal staff of the HFA.
``Firm Approval Letter'' means a letter issued by the
Commissioner or his/her designee to an HFA upon the positive
completion of the HUD-retained reviews described in 24 CFR Section
266.210. The letter will apportion units and obligate credit subsidy
to the property and provide that, so long as the HFA complies with
any conditions included therein or attached
[[Page 25760]]
thereto, is in good standing, makes the required certifications at
the time of the HUD closing, and absent fraud or misrepresentation
by the HFA, the Commissioner shall endorse the property mortgage for
insurance.
``Mortgage'' means such single first lien upon the real estate
as is commonly given to secure advances on, or the unpaid purchase
price of, real estate under the laws of the jurisdiction where the
real estate is situated, together with the credit instrument, if
any, secured thereby.
``Mortgagee'' refers to the original lender under a Mortgage and
its successors approved by the Commissioner.
``Project'' means the mortgaged property and all assets wherever
situated, used in or owned by the owner of the Mortgaged property in
the business conducted on the Mortgaged property.
``Reservation'' means the number of units from an HFA's set-
aside committed upon issuance of a Firm Approval Letter. The number
of units reserved may be adjusted upon endorsement, for a specific
project to be insured under Section 542(c).
``Set-aside'' includes the total number of units allocated for
use by an HFA under Section 542(c) which allocation may be increased
or decreased from time to time by the Commissioner in accordance
with the Commissioner's administrative instructions.
Article III--Certifications
In consideration of the endorsement for full insurance by the
Commissioner of loans covering the units set aside in Article I,
Paragraph A of this Agreement, and in order to comply with the
requirements of the risk-sharing program established by Section
542(c) and the regulations adopted by the Commissioner pursuant
thereto, the HFA agrees and certifies for itself, and its
successors, that in connection with any mortgage insured under
Section 542(c) and so long as the Commissioner is obligated to
insure mortgages pursuant to this Agreement that:
A. The HFA has been approved by the Commissioner as a Level I
____ and/or Level II____ [check one or both, as appropriate]
Participant as defined in 24 CFR Sections 266.5 and 266.100(b).
B. The individuals (principal staff) employed by the HFA as the
persons responsible for the overall underwriting decision and for
project management, loan servicing and property disposition with
respect to loans insured or to be insured under Section 542(c) are
listed in Exhibit A to this Agreement. The HFA agrees to notify the
Commissioner promptly in writing any time the HFA changes principal
staff.
C. The individuals, whose names, titles and specimen signatures
appear in Exhibit B have authority to sign loan documents on behalf
of the HFA and otherwise commit the HFA under the Section 542(c)
Risk-Sharing Program. The HFA agrees to notify the Commissioner
promptly in writing of any changes of individuals authorized to sign
loan documents on behalf of the HFA and provide the Commissioner
with specimen signatures of such new individuals.
D. The HFA shall allow periodic auditing and review by the
Commissioner, the Inspector General and the General Accounting
Office or their duly authorized agents regarding the HFA's
participation in the risk-sharing program.
E. The HFA shall permit an inspection and examination of its
financial records and records associated with loans insured under
Section 542(c) by the Commissioner and/or his duly authorized agents
upon reasonable notice.
F. The HFA has fully disclosed and provided copies of all of its
underwriting standards and procedures, loan terms and conditions to
the Commissioner, and, if the HFA operates as, or originates or
processes any loans as a Level II agency, it has obtained the
Commissioner's prior written approval to utilize such underwriting
standards and procedures, loan terms and conditions. The HFA's
originating, underwriting, closing, project management, servicing
and property disposition procedures utilized in processing and
servicing the loans insured or to be insured under Section 542(c)
are incorporated herein by reference and made a part hereof.
G. The HFA shall notify the Commissioner before implementing any
amendment to the HFA's underwriting standards and procedures, loan
terms and conditions and will provide the Commissioner with copies
of any amendments within ____ business days before implementation of
such amendments by the HFA. If the HFA operates as, or originates or
processes any loans as a Level II agency, it shall also obtain the
prior written approval of the Commissioner before implementing any
amendment to its underwriting standards and procedures, loan terms
and conditions.
H. If the HFA (a) does not meet the qualification requirements
of 24 CFR 266.110(a) (i.e., top-tier rating or equivalent
designation or has an overall ``A'' rating on its general obligation
bonds), or (b) has an overall ``A'' rating but cannot provide the
necessary legal opinion of counsel requisite to participation in the
risk-sharing program, it has established a specifically identified
Dedicated Account (meeting the requirements of 24 CFR 266.110(b) and
the administrative requirements of the Commissioner) in __________
(insert name of financial institution) a financial institution which
has assets of not less than $100,000,000, is organized under the
laws of the United States or a State thereof and is regulated and
examined by the Comptroller of the Currency, Federal Deposit
Insurance Corporation or the Federal Reserve Board, and has a long
term bank deposit rating of ``A-1'' or better by Moody's Investors
Service or ``A+'' by Standard and Poor's. The Commissioner may
determine that higher levels of reserves may be necessary.
I. If at any time the HFA loses the designation or rating, as
applicable, set forth in 24 CFR 266.110(a), or can no longer provide
the legal opinion requisite to participation in the program, it
shall, within 5 business days, provide the Commissioner with notice
of the loss of its designation or rating or of its inability to
provide the statement noted above. Within 15 business days after the
loss of the HFA's designation or rating or its inability to provide
the requisite legal opinion, the HFA shall establish a Dedicated
Account funded in accordance with Paragraph H above. The HFA must
calculate the deposits to this Dedicated Account in accordance with
the requirements of 24 CFR 266.110(b) so that the account reflects
all loans in the HFA's portfolio insured under Section 542(c).
J. Within 90 days following the end of its fiscal year, the HFA
shall furnish the Commissioner with a complete annual financial
audit based upon an examination of the books and records of the HFA
prepared and certified in accordance with the requirements of the
State or locality in which the HFA is located.
K. The HFA shall at all times comply with the financial
requirements of the Section 542(c) program and it shall notify the
Commissioner of any pending or actual changes in its financial
status that would adversely affect the HFA's operating or financial
status within 5 business days after becoming aware of such pending
or actual changes.
L. Within 90 days following the end of its fiscal year, the HFA
shall furnish the Commissioner, along with a copy of the audit
specified in Paragraph J above, a certification signed by an
authorized official of the HFA that there have been no changes that
would adversely affect the HFA's organization, business activities,
financial status and other information submitted with its
application to participate in the Section 542(c) program and that
the HFA has complied with all eligibility requirements for
participation in the program during the past year. If there has been
a change in information submitted with the HFA's application
relating to the HFA's organization, business activities, financial
status or other information submitted with its application, the
certification will state the nature of the change.
M. The HFA shall comply with the Fair Housing Act, as
implemented by 24 CFR Part 100; titles II and III of the Americans
with Disabilities Act of 1990, as implemented by 28 CFR Part 35;
Section 3 of the Housing and Urban Development Act of 1968, (12
U.S.C. Section 1701u), implemented by 24 CFR Part 135, the Equal
Credit Opportunity Act, implemented by 12 CFR Part 202; Executive
Order 11063, as amended, and implemented by 24 CFR Part 107;
Executive Order 11246, as implemented by 41 CFR Part 60; other
applicable Federal laws and regulations issued pursuant to these
authorities; and applicable State and local fair housing and equal
opportunity laws. In addition, the HFA shall require that mortgagors
which receive Federal financial assistance must also certify to the
HFA that, so long as the mortgage is insured under Section 542(c),
it shall comply with title VI of the Civil Rights Act of 1964, as
implemented by 24 CFR Part 1; the Age Discrimination Act of 1975, as
implemented by 24 CFR 146; and section 504 of the Rehabilitation Act
of 1973, as implemented by 24 CFR Part 8.
N. During the period that the Commissioner is the insurer of any
mortgage endorsed under Section 542(c), the HFA shall remain the
mortgagee of record and shall perform all functions in connection
with loans originated under the 542(c) program
[[Page 25761]]
including loan servicing (including workouts), property management
and property disposition functions. The Commissioner shall have no
obligation to recognize or deal with anyone other than the HFA in
its role as mortgagee of record with respect to the rights and
obligations of the HFA under the contract of mortgage insurance and
this agreement.
O. The HFA shall retain records pertaining to origination and
servicing of all mortgages insured under Section 542(c) for as long
as the mortgage insurance remains in effect. In the event of a
default and mortgage insurance claim, all records pertaining to the
insured mortgage, the mortgage default and insurance claim shall be
retained three (3) years after the date of final settlement as final
settlement is described in 24 CFR Section 266.654.
P. The HFA shall maintain a Lender's Fidelity Bond/Surety Bond
and Errors and Omissions Insurance in a form and amount satisfactory
to the Commissioner.
Q. The HFA shall issue Debentures as defined in 24 CFR Section
266.638 acceptable to the Commissioner as collateral for the full
amount of its risk-sharing obligation under this agreement pending
final settlement of any insurance claim. The Debentures shall be
backed by the full faith and credit of the HFA. If the HFA operates
as a department or division of the State in which it is located, or
as a unit of local government, and the HFA cannot pledge the full
faith and credit of the HFA, the HFA shall collateralize its
obligation through a letter of credit, reinsurance, or other form of
credit acceptable to the Commissioner.
R. Any reinsurance obtained by the HFA to cover its portion of
the risk shall: (i) Be subordinate to the HUD-insured mortgage; (ii)
not affect reimbursement to the Commissioner, notwithstanding the
timing of the actual settlement between the HFA and the reinsurer;
(iii) not be used to reduce any reserve or fund balance requirements
established by the Commissioner; and (iv) not result in the Federal
Government incurring any liability as a result of the reinsurance
agreement.
S. With respect to any project mortgage endorsed for insurance
under Section 542(c), the HFA shall furnish to the Commissioner
project information in a format specified by the Commissioner in HUD
Handbook 4590.01. Basic underwriting and closing information shall
accompany the initial and final closing dockets submitted for each
project. Information relating to project management, servicing and
disposition shall be submitted to the Commissioner on a periodic
basis after endorsement in accordance with the requirements set
forth in Handbook 4590.01.
T. The HFA shall enforce the Regulatory Agreement between the
HFA and mortgagor and take action against the mortgagor for
violation of any provision(s) thereof.
U. The HFA shall perform annual physical inspections of all
projects insured under Section 542(c) and shall submit a copy of the
inspection report to the Commissioner (i.e., showing and certifying
that the project is in safe and sanitary condition). If a project is
not in safe and sanitary condition, the HFA will provide the
Commissioner with a summary of required actions, with target dates,
to correct unresolved findings.
V. The HFA shall analyze the project's annual audit and within
30 days of the date of the audit, provide the Commissioner with a
summary of unresolved findings disclosed in the audit and a summary
of actions planned, with target dates, to correct unresolved
findings. The HFA shall analyze the project's annual audit and
within 6 months of the date of the audit, provide the Commissioner
with a summary of unresolved findings disclosed in the audit and a
summary of actions planned, with target dates, to correct unresolved
fundings.
W. The HFA shall submit semi-annual reports to the Commissioner
for all projects insured under Section 542(c) setting forth the
original mortgage amounts and outstanding principal balances on
mortgages the HFA has underwritten, the status of all projects
(e.g., whether current, in default, acquired, under workout
agreement, in bankruptcy, etc.). For projects where the mortgagor
has declared bankruptcy, the HFA will submit information containing
the date the bankruptcy was filed and the date the HFA requested the
Court to dismiss the bankruptcy proceedings.
X. All appraisal functions will be completed by Certified
General Appraisers licensed in the state in which the property is
located, and all appraisal functions will be completed in accordance
with the Uniform Standards of Professional Appraisal Practice.
Y. In the event of a default on a multifamily mortgage insured
under Section 542(c) which results in the Commissioner having to pay
a claim under a Contract of Insurance to the HFA, the HFA will, upon
determination of the loss, assume the percentage of loss specified
in an Addendum to this Agreement (such Addendum being made a part of
this Agreement) and in the endorsement panel of the mortgage note,
and reimburse the Commissioner, pursuant to administrative
instructions of the Commissioner, the amount based on that
percentage pursuant to 24 CFR Section 266.654. (The HFA's percentage
of loss specified in the Addendum for a particular project must be
consistent with the percentage of loss associated with the HFA's
approval level specified in Paragraph A of Article III of this
Agreement. A loan which refinances an HFA-financed loan which was in
monetary default (as that term is defined in 24 CFR Section 266.626)
12 months prior to the application for refinancing hereunder, the
HFA's percentage of loss specified in the Addendum shall be at least
50 percent of the risk). An HFA-financed loan which goes into
default after the submission of an application for refinancing of
such loan under Section 542(c) will not be eligible for insurance
under Section 542(c).
Z. The HFA shall require that the mortgagor keep the
improvements now existing or hereafter erected on the mortgaged
property insured against loss by fire and such other hazards,
casualties, and contingencies, as may be stipulated by the
Commissioner upon the insurance of the mortgage and other hazards as
may be required from time to time by the HFA. All such insurance
shall be evidenced by a standard Fire and Extended Coverage
Insurance Policy or policies, in amounts not less than necessary to
comply with the applicable coinsurance clause percentage, but in no
event shall the amounts of coverage be less than eighty per centum
(80%) of the actual cash value of the insurable improvements and
equipment of the project, and in default thereof the HFA shall have
the right to obtain such insurance in accordance with the mortgage.
Such hazard insurance policies shall be endorsed with the standard
mortgagee clause with loss payable to the HFA. The hazard insurance
policy shall be deposited with the HFA.
AA. The HFA shall ensure that loans insured hereunder shall be
on properties which comply with the affordable housing requirements
defined in 24 CFR 266.5.
Article IV--Mortgage Insurance Endorsement
Absent fraud or material misrepresentation on the part of the
HFA, the Commissioner shall endorse any mortgage presented for
mortgage insurance by the HFA in accordance with the provisions of
Section 542(c), subject to the Commissioner's right to adjust the
amount of mortgage insurance in accordance with 24 CFR Section
266.417, so long as the HFA is in good standing with the
Commissioner, has been issued a Firm Approval Letter pursuant to 24
CFR Section 266.300(c) and/or Section 266.305(c), and complies with
any conditions therein or attached thereto, and submits with each
loan to be endorsed a closing docket in accordance with 24 CFR
Section 266.420(b) and written certifications that:
a. The property covered by the mortgage is free from all liens
other than the lien of the FHA insured mortgage, except that the
property may be subject to such inferior lien or liens, as approved
by the HFA, as long as the insured mortgage has first priority for
payment.
b. All contractual obligations in connection with the mortgage
transaction, including the purchase of the property and the
improvements to the property, have been paid. An exception is made
for obligations that are approved by the HFA and determined by the
HFA to be inferior to the lien of the insured mortgage.1
---------------------------------------------------------------------------
\1\ Pursuant to 24 CFR Section 266.415(b), this certification is
made at final closing only.
---------------------------------------------------------------------------
c. The property owner has submitted and the HFA has approved an
Affirmative Fair Housing Marketing Plan which complies with the
provisions set forth in 24 CFR Part 200, Subpart M.
d. Equal employment requirements were followed by the property
owner pursuant to Executive Order 11246 as implemented by 41 CFR
Part 60.
e. The property owner has executed the regulatory agreement
which complies with the provisions set forth in 24 CFR Section
266.505.
f. The property has been processed, prudently underwritten
(including a determination that a market exists for the project),
cost certified (if the loan is being submitted for final
endorsement) and closed in full compliance with the HFA's standards
and requirements and are in full compliance with HUD standards
established in connection with approval of advances for
[[Page 25762]]
insurance and cost certification. (Note: For mortgages originated
under Level II, the certification will state ``in full compliance
with the underwriting standards and loan terms and conditions as
approved by the Commissioner.'') Further, the loan shall be serviced
and the property managed in accordance with procedures disclosed and
made a part of this Agreement.
g. For periodic advances cases, that each advance made was
proportionate to construction progress as evidenced by HFA
inspection prior to approval of the advance.
h. The HFA's Dedicated Account, if required, has been
established and has been increased by the amounts required pursuant
to 24 CFR Section 266.110(b).
i. For properties subject to Davis-Bacon requirements under 24
CFR Section 266.225, laborers and mechanics employed in the
construction of the project have been paid not less than the
prevailing wages determined by the Secretary of Labor in accordance
with 24 CFR Section 266.225(a).
Article V--Sanctions
Upon a violation of any of the provisions of this Agreement by
the HFA, or upon commission of any violation cited in 24 CFR Section
266.120, or of the administrative requirements established by the
Commissioner for the Section 542(c) program, the Commissioner or his
designee may declare a default under this agreement and impose any
of the sanctions set forth at 24 CFR Section 266.125. Any sanction
imposed by the Commissioner will be in accordance with the
provisions of 24 CFR Section 266.125(d). Any sanction involving a
suspension or withdrawal of the HFA's participation in the Section
542(c) program will not affect any mortgage insurance endorsement in
effect on the date of the suspension or withdrawal action.
Article VI--Amendments/Modifications
A. This Agreement shall not be modified or amended without the
consent of both parties hereto, except for changes made by the
Commissioner to items covered by Article VII, and amendments or
modifications that may be made by the Commissioner as set forth in
the attached Addendum to this Agreement which: (1) Specify the
number of units set aside to the HFA, and (2) other changes that
conform to statutory or regulatory amendments. No such modification
or amendment will adversely affect the interest of a HFA for any
project for which a Firm Approval letter has been issued.
B. The HFA hereby agrees that its written consent to an Addendum
executed by the Commissioner which modifies this Agreement to list:
(1) Changes in its principal staff or individuals with authority to
sign loan documents; (2) changes to existing HFA underwriting
standards and procedures, loan terms and conditions; and/or (3) a
change in the financial institution in which the Dedicated Account
is deposited, will not be necessary if such change(s) was requested
by the HFA in writing.
Article VII--Incorporation of Regulations
The regulations set forth in 24 CFR Part 266 are incorporated
into this Agreement by reference and made a part hereof. The HFA
shall, at all times, comply with the applicable regulations and with
all other applicable Federal laws, rules and regulations.
Article VIII--Warranty
The HFA warrants that it has not, and will not, execute any
other agreement with provisions contradictory to, or in opposition
to, the provisions hereof, and that, in any event, the requirements
of this Agreement and the regulations set forth in 24 CFR Part 266
and any administrative requirements established by the Commissioner
are paramount and controlling as to the rights and obligations set
forth herein and supersede any other requirements in conflict
herewith.
Article IX--Miscellaneous
The Article headings set forth in this Agreement are not
intended to be a limitation on what materials are included within
each Article.
This Agreement shall bind, and the benefits shall inure to, the
parties, their successors and assigns so long as any Contract of
Insurance remains in full force and effect.
The invalidity of any clause, part or provision of this
Agreement shall not affect the validity of the remaining portions
hereof.
In witness hereof, the undersigned have caused this Agreement to
be duly executed as of the date and year first written above.
Department of Housing and Urban Development
By:--------------------------------------------------------------------
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------
Housing Finance Agency
By:--------------------------------------------------------------------
Name:------------------------------------------------------------------
Title:-----------------------------------------------------------------
Warning: U.S. Criminal Code, Section 1001, Title 18 U.S.C.,
``Whoever, in any matter within the jurisdiction of any department
or agency of the United States knowingly and willfully * * * makes
any false, fictitious or fraudulent statements or representations,
or makes or uses any false writing or document knowing the same to
contain any false, fictitious or fraudulent statement or entry,
shall be fined not more than $10,000 or imprisoned not more than
five years, or both.''
Addendum to Risk-Sharing Agreement
HQ [ ]
FO [ ]
Number-----------------------------------------------------------------
This addendum modifies the Risk-Sharing Agreement, and/or any
addendum thereto, by and between __________ (HFA) whose address is
__________ and the Assistant Secretary for Housing--Federal Housing
Commissioner (the Commissioner) dated the ____ day of __________,
199____.
The purpose of this addendum is to [check one]:
A. ( ) Reserve units and to establish the risk-share percentage
between the HFA and Commissioner for Project Number ________ located
at __________.
Units reserved ________
Risk-share apportionment
HUD ______/HFA ______
B. ( ) Modify the present set-aside of units.
The number of units presently set-aside is ______, which is ( )
increased by ______ units, ( ) decreased by ______ units to a total
of ______ units.
C. ( ) New principal staff or individuals with authority to sign
loan documents or commit the HFA under the Section 542(c) program
are:
D. ( ) New provisions, or changes to existing, HFA underwriting
standards and procedures, loan terms and conditions are incorporated
by reference into the Risk-Sharing Agreement and are as follows:
E. ( ) The name and address of the new financial institution in
which dedicated account is deposited is:
----------------------------------------------------------------------
(Name of Financial Institution)
----------------------------------------------------------------------
(Address)
F. [Reserved for other purposes.]
Department of Housing and Urban Development
----------------------------------------------------------------------
Authorized Agent
Date-------------------------------------------------------------------
Exhibit A
The following individuals (principal staff) are employed by the
HFA as the persons responsible for the overall underwriting decision
and for project management, loan servicing and property disposition
with respect to loans insured or to be insured under Section 542(c):
----------------------------------------------------------------------
(Name and Title)
----------------------------------------------------------------------
(Name and Title)
Exhibit B
The following individuals, whose names, titles and specimen
signatures appear below, have the authority to sign loan documents
on behalf of the HFA and otherwise commit the HFA under the Section
542(c) Risk-Sharing Program.
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(Name and Title)
----------------------------------------------------------------------
(Signature)
----------------------------------------------------------------------
(Name and Title)
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(Signature)
[FR Doc. 96-12795 Filed 5-21-96; 8:45 am]
BILLING CODE 4210-27-P
