HUD MAP
CHAPTER 5, 6 & 9
UPDATE
May 2012
SMAC Hilton Head, SC
Rob Hazelton – Principal - Dominion Due Diligence
PENDING PCNA ML
• Emphasizes Consistency
• Aims to Improve PCNA Quality
• Connects Asset Management with the PCNA
• Facilitates Improved HUD Staff Review Time
• A Step in HUD’s Commitment to Execution
PROPOSED PCNA ML
(page 1 of 3)
• All Programs - Single Scope of Work with 20-Year R4R
• ASTM Standard E2018-10 is being adopted
• Broad allowance for upgrades and modernizations
• Clarifies Capital Expense vs. Maintenance Expense
• 6 month (180 day) shelf-life
PROPOSED ML
(page 2 of 3)
• Potentially shortening loan
examinations of >30 year sites
term
without
forensic
• Minimum PUPA $250/unit
• Only PCNA Enumerated Repairs and Replacements may
be drawn from escrow
• Crackdown on Accessibility Review, level of requried due
diligence and clarification of term “Adaptable”
PROPOSED PCNA ML
(page 3 of 3)
• Accessibility conditions must be Critical Repairs
• “Corrective Action Plan” for accessibility-related repairs to
defer them from Critical timing
• No R4R expenses for first 2 years (except routine item)
• Minimum R4R Balance = 5% of the 20-year total for 105%
funding at end of 20-year term.
ACCESSIBILITY REPAIRS
CRITICAL or NON-CRITICAL ?
•
•
CURRENTLY: Per MAP Guide and FAQs, accessibility repairs are to be
defined as either Critical or Non-Critical Repairs based upon the nature of the
violation and exigent threat to health and safety.
PROPOSED:
a. ALL accessibility repairs are Critical Repair by FHEO definition.
b. Can be deferred to 12-months with a “Corrective Action Plan”
c. May be deferred longer with HQ involvement/waiver (few exceptions)
IS 30-YEARS OVER THE HILL?
Why HUD’s recent cautiousness to the 30+ year old?
 Many Estimate Useful Life (EUL) values for large multifamily
systems expire between 30 and 50-years
 Risk mitigation notion that a 30+ year old property warrants a
shorter loan term (issues of remaining economic life)
 Accessibility compliance (UFAS) issues
 Many of these older properties have large cashouts
 HUD’S New “Early Warning System” of PCNA review
MULTIFAMILY FORENSIC
ENGINEERING STUDY
 Pre-Inspection Conference Call is a necessity
 Obtain, coordinate and/or review applicable forensic &
intrusive studies of questionable or aged systems
 Site inspection requests: Clarify areas of inspection &
availability of service providers and staff
 Determine UFAS applicability (resident profile)
 Coordinate findings within PCNA report and R4R tables
PLUMBING
SCOPING
PLUMBING PIPE
CORROSION
INFRARED
STUDIES
BUILDING ENVELOPE STUDIES
However, remember when doing needs assessments of the
30+ year old properties, that one-size does not fit all. One
scope of forensic studies is not the same for all properties.
The forensic/intrusive inspection needs of a wood-framed 2story garden style apartment complex, and a 10-story
masonry apartment building are likely to be drastically
different.
1. MAP 5.28 STREAMLINED PROCESSING
HUD’S
FOCUS ON
AFFORDABLE
HOUSING
2. LIHTC TAX CREDIT PILOT
3. RENTAL ASSISTANCE
DEMONSTRATION
LIHTC Streamlined Process
(MAP Guide 5.28)
 Guidance to Defer Submission of Final Architectural
Plans and Specifications
o ~ 80% set of construction documents
o Outline specification only
o Costs within 95% accuracy
o 2-Stage 3rd Party AEC Reporting
 Concerns
o Time commitment from 80% to 100%
o Loose designs cause $$ swings
o VE issues / Changes in Design or Amenities
The “80% Complete Set”
 Architectural, Civil documents (at minimum)
 Project Manual (ML 2010-41 CSI MasterFormat)
 Geotechnical report
 ALTA Survey
 Architectural plans must include:
o
o
o
o
o
All building type plans
All unit type enlarged plans
Plans for amenity structures
Map Appendix 5E
Disallowed: “Or equal(s)” and “Allowances”
HUD Form 2328
How to fill out the HUD Form 2328 (exp. 01/31/2013)
 Complete all information on the form
 Provide a short description for EACH trade item. The




“Trade Description” column must be completed
Ensure structure cost only above line item 32, with all
civil land improvement costs in lines 35 trough 40
Ancillary structure costs only in line item 33
Whole dollar amounts only
Soft Cost (Fee) Structure:
 General Requirements: 3% - 8%. Breakdown required for
>8%
 Builders Overhead: 2% Statutory Limit
 Builders Profit: 3% to 8%, depending upon size and complexity
 Performance Bond: >1%
TAX CREDIT PILOT PROGRAM THE HEAVY F
The new Tax Credit Pilot program allows the following types of
transactions to occur, both of which require a version of a PCNA:
 Section 223(f) acquisition and/or refinance and moderate
rehabilitation of affordable properties, with rehabilitation levels up
to $40,000 per unit in hard costs.
 Extension of the 3-year waiver rule for LIHTC properties, allowing
for Section 223(f) permanent financing of newly constructed or
substantially rehabilitated affordable projects that are complete
and stabilized.
HEAVY 223-F:
COST RECOMMENDATIONS
 Repairs must be DETAILED
 Quantity Survey Cost Estimates, also known as line-
item/quantity cost estimates, are necessary.
 The Tax Credit Pilot Mortgagee Letter and Housing Notice
both identify the “repair work will be subject to monthly
inspections and lender control over draws.”
 Lump sum costs should be avoided.
HEAVY 223-F:
DESIGN RECOMMENDATIONS
 Complete Plans and Drawings are not always needed.
 Specifications are always needed, but could be just AIA A201
and an outline specification.
 Per MAP Guide 5.28, firm submission can be made with
“deferred submittal” of complete drawings. However, at the
time of submission the construction documents must be
detailed enough to be cost estimated to an accuracy of 2%.
Recommend 80%+ complete.
Case Study #1
9% LIHTC Sub-Rehab
Scope of work included:
-
-
Flatwork/Parking Repairs
Site Lighting/Security Upgrades
New Siding / Weatherization
Roof, Window, Door Replacement
K & B replacements (50% of units)
HVAC and DHW Replacement
Electric Panel Replacement
Interior Finish Replacement
Architectural Submission
-
-
Outline/Narrative Specification
Interior Unit Matrix
Site Plan (sketched w/repairs)
1 Drawings for ADA ramp at CH
Case Study #2
4% LIHTC Moderate Rehab
Scope of work included:
-
-
Flatwork/Parking Repairs
Brick façade repair / Weatherization
Roof Replacement
Common hall upgrades
K & B replacements (55% of units)
UFAS Upgrades to 8 units
Elevator Upgrades
Central Boiler Replacement
Architectural Submission
-
-
Outline/Narrative Specification
Interior Unit Matrix
UFAS Unit drawings (8.5”x11”)
Site Plan (sketched w/noted repairs)
PIH NOTICE 2012-18
RENTAL ASSISTANCE DEMO
 Initial Authorization for conversion of 58,750 assisted public
housing units
 Supports leveraging with mortgage insurance/LIHTC equity to
facilitate much needed repairs
 Competitive application process begins August 1st
 Application Attachment 1B: Financing Letter of Intent
 Sizing of capital needs per the HUD-OAHP Mark-to-Market
program, Green Initiative Scope of Work
2011-2012 NEW HUD TOPICS
• National Loan Committee and Hub Loan Committee
• Asset Management Involvement in all deals
• “Cashout” - The new dirty word?
• Breaking Ground and the “Early Warning Process”
• Green PCNA Scope of Work (RAD, others?)
• New MAP Guide, with revised ESA guideance
ASBESTOS
 New MAP Guide requires an asbestos survey pursuant to
“ASTM E2356-10 Standard Practice for
Comprehensive Building Asbestos Surveys”
 ASTM methodologies require:
 Licensed inspector be used (whether or not sampling
performed).
 If no sampling, all must be PACM.
 NOB and Trace material analysis by different method.
 Screening inspection not compliant, unless
presumptions made.
NEPA DISCUSSIONS
 SHPO on refinance transactions
 Noise Studies on 223(f) projects
 Beware of “Floodways”
 Executive Order 11880 and 11990
 Railroad concerns with LEAN
 Other Recent Issues?
REMEDIATION PLANS
 Complete removal of contamination
 Remediation to de minimis levels
 Meet non site-specific LSTF authority standards
 No active or passive remediation remaining
 No need for Eng./Institutional Controls/Monitoring Wells
 Incomplete removal of contamination
 Justification for incomplete removal of contamination must
be submitted along with the remediation plan, including
documentation that:
 the cost of the incomplete removal of contamination,
including any life cycle costs for O&M, and
 the cost of any enforcement requirements of LSTF
authorities, are sufficiently below the costs of complete
contamination removal.
VAPOR ENCROACHMENT
HUD’s Vapor Intrusion Screening
Requirement
 The Phase I ESA must include an initial vapor (soil gas) intrusion screen.
 Must be performed using Tier 1 “non-invasive” screening pursuant to ASTM E
2600 - 10, as amended.
 Purpose:
 To determine if there is a potential for subsurface vapors from volatile organic
compounds (VOC), semi-volatile SVOC) and inorganic volatile compounds to
occur below existing/proposed structures.
 Vapors. If the Tier 1 Vapor Screen resulted in an REC then the Phase II ESA shall
include either :
 a Tier 2 Screen pursuant to ASTM E 2600,
 a Tier 3 Vapor Intrusion Assessment (VIA) as discussed in ASTM E 2600, or
 go directly to Tier 4 “mitigation”