Rural Housing Service
Multi-Family Housing
Program Overview
NCSHA’s HFA Institute Conference
Washington, DC
January 15, 2015
What we do
• Rural Development provides affordable rental
housing to low and very-low income rural
Americans through:
– About 14,700 properties with USDA as the direct
lender, housing over 420,000 families and elderly.
– More than 650 guaranteed loans for housing of
nearly 35,000 families.
– Deep subsidies to support tenants with
insufficient income to afford to pay rents on their
own.
2
Main MFH Programs
Section 515 Direct- Direct Loan
Section 538 Rural Rental Housing- Loan Guarantee
Section 521- Rental Assistance
Multi-Family Housing Preservation and
Revitalization Restructuring Program- Direct Loans
and Grants
Section 515 Direct Loan Program
• Section 515 loan funds may be used for the financing of new
construction properties; rehabilitation of existing program
properties; or purchase and rehabilitation of multi-family
and other related non-program properties in rural areas.
• Loans offer reduced interest rate of 1% through interest
credit, to help keep the housing affordable. Loans are for 30
years with up to 40 year amortizations.
Section 538 Guaranteed
Rural Rental Housing Program
• Under Section 538, MFH provides a guarantee of up to 90% of
a loan to construct or rehab affordable rental property in rural
areas.
• Tenant incomes may be up to 115% of the area median
income upon initial occupancy.
• Loans may be amortized up to 40 years, lowering debt service
payments to make the property affordable.
• Qualifies for Ginnie Mae securitization and CRA credit which
doesn’t count against lender’s legal lending limit.
Section 521 Rental Assistance (RA) Program
• The RA program provides rental subsidy to assist
very low- to low-income tenant households
paying more than 30% of their Adjusted Annual
Income.
• MFH pays the owner of a multi-family housing
complex the difference between the tenant's
contribution (30 percent of adjusted income) and
the monthly rental rate.
Multi-Family Housing Preservation and
Revitalization Restructuring (MPR) Program
• The MPR Program provides a flexible mix of
tools to invest in the preservation of Section
515 properties.
• The available financing tools include:
– Debt Deferral
– Revitalization Zero Percent or “soft second” Loans
– Revitalization Grant
– Section 515 Direct Loans
7
MFH Challenge - Current Portfolio
• Aging properties
• Insufficient property reserves for rehabilitation
and modernization
• Federal budgetary limitations
• Leveraging third party funds (tax credits)
Solution - Rehab existing portfolio through tax
credits, MPR and Section 538
Example: Alabama’s 12 Property Portfolio financing structure
included:
•
•
•
•
$4.5 million of debt deferral
$8.1 million of Section 515 loans;
$0.5 million of Zero Percent loans;
$2.5 million of Section 538 Guaranteed loans to help
with seller’s equity and other costs; and
• $7,215,638 million of 4% tax credit with bonds.
Result: MFH was able to rehab 336 units of affordable housing!
MFH ChallengeTransfer of Properties
• Delay in processing transfers
• Inconsistent underwriting
• Lack of transparency in transfer process
Solution – Process Improvement
• Engage MFH team and stakeholders to streamline the transfer
process to reduce processing times and transaction costs
• Update MFH’s handbooks and underwriting tools to ensure
consistent, transparent policies
• First step: Create a preliminary assessment tool to allow
buyers and sellers to structure their transfer transactions
based on clear agency guidelines. Revise our underwriting
requirements to better reflect industry standards. Reduce
uncertainty and speed approval process!
Any Questions?
Contact: Bryan Hooper, Deputy Administrator of RHS- Multi-Family Housing
at (202) 720-3773, or bryan.hooper@wdc.usda.gov.