Florida Housing Coalition Annual Conference
Preservation of Affordable Housing
September 27, 2011
Fannie Mae and Freddie Mac
 Preservation Programs
- Expiring Section 8 HAP Contracts
- Less than 10 Years of Restrictions
 Bond Credit Enhancement – 4% LIHTC
 9% LIHTC Mortgages
 Green Refinance Plus – Fannie Mae
Preservation Programs – Immediate Funding
 Debt Service Coverage Ratio – 1.20x – 1.25x
- HUD Risk Share – 5 basis point reduction
 Loan to Value – 80%
- HUD Risk Share – increase LTV by 5%
 Amortization – 30 to 35 years
 Term – typically a minimum of 10 years
 Minimum Occupancy – 85% Physical & 80% Economic
 Recourse – Non-recourse except for standard carve-out provisions
 Supplemental Loans - Available
Bond Credit Enhancement – 4% LIHTC
 Immediate and Forward Commitment
- Forward requires LOC from “A” – “AA” Rated Bank
until construction/rehab and stabilization
 General Underwriting
-
Debt Service Coverage Ratio – minimum of 1.15x (1.20x for VRB)
Loan to Value – maximum of 85% adjusted value or 90% of market value
Minimum Term – 15 years
Amortization – 30 to 35 years
Fixed or Variable Rate Bonds (Fannie Mae – only Fixed)
 Processing Time – 90 days or less
 Supplemental Loans – Available
 HUD Risk Share – Normally available and may improve terms
9% LIHTC Mortgages
 Immediate and Forward Commitment
- Same LOC Requirement if Forward Commitment
 General Underwriting
-
Debt Service Coverage Ratio –1.15x
Loan to Value – 90%
Minimum Term – 15 years
Amortization – 30 to 35 years
Fixed or Variable Interest Rate
 Processing Time – 75 days or less
 Supplemental Loans – Available
 HUD Risk Share – Normally available and may improve terms
Fannie Mae Green Refinance Plus
 Benefits
- 4%-5% more proceeds for energy retro-fitting
- One Stop Customer Service – Fannie Mae Lender interacts with HUD/FHA
 General Underwriting
-
Loan to Value – 85%
Minimum Debt Service Coverage Ratio – 1.15x
Term – 10 years or more
Amortization – 30 years
Fixed Interest Rate with no I/O period
 Other Terms
-
Affordability Restrictions must remain for Term of Loan
Subsidy Layering Review may be required
Green PNA is required
Standard Appraisal and Phase I ESA required
Case Study #1 – Bonds with 4% LIHTC
Forward Commitment
Acquisition/Rehab

CWCapital LLC served as the Freddie Mac
TAH Seller/Servicer on $6,400,000 of NIBP
bonds purchased by Treasury.

Bond proceeds were used to rehabilitate a 14story, 200 unit elderly housing development.

Principal and interest on the mortgage loan
was secured by a direct pay Credit
Enhancement Agreement issued by Freddie
Mac.

Initial Bond Issuance was split between Gap
Bond amount of $2,850,000 and Permanent
Bond amount of $6,400,000 and both were
credit enhanced by Freddie Mac.

The all-in cost of capital for the financing was
4.638%.

Freddie Mac HUD Risk Share program
utilized to improve terms.
$6,400,000
Florida Housing Finance Corporation
New Issue Bond Program
CWCapital was
Seller/Servicer
Case Study #1 – Bonds with 4% LIHTC (continued)
SOURCES OF FUNDS - Permanent
NIBP Bond Proceeds
$ 6,400,000
Tax Credit Equity
$ 5,488,000
Home Loan
$ 3,923,000
Seller Subordinate Loan
$ 2,500,000
Borrower Contribution
$
Total Sources
$18,661,000
350,000

Originally constructed in 1971 and consists
of an existing 200-unit elderly housing
development.

The Project includes 81 efficiency units and
119 1B/1B units and was affiliated with the
Methodist Church.

The cost of the rehab was $6,418,000 or
$32,090 per unit. The Project will receive a
new 20-year, Section 8 HAP contract for
84% of the units upon expiration of the
existing contract in 2012.

Rehabilitation will be floor-by-floor, and is
expected to be completed within 15
months.
USES OF FUNDS - Permanent
Purchase Price – Land and Building
$ 4,600,000
Hard Construction Costs - Rehab
$ 6,418,000
Soft Construction Costs / Financing
$ 7,267,000
Transition Reserve/Contingency
$
Total Uses
$18,661,000
376,000
Case Study #1 – Bonds with 4% LIHTC (continued)
Interest Rate Stack
0.400%
0.960%
0.208%
All-In Cost
4.638%
FRE Guaranty
Servcing Fee
3.070%
Estimated Bond Rate
Issuer / Trustee
Case Study #1 – Bonds with 4% LIHTC (continued)
Flow of Funds
Treasury
Bonds
Issuer
Bond
Proceeds
Bond Proceeds
Bond Mortgage
Loan
Borrower
Principal and Interest
Trustee
Loan Payment
CWCapital LLC
Proceeds used to rehabilitate
Revenue
Credit Enhancement
Agreement
Project
Case Study – Rehab with Tenants in Place – 9% LIHTC
Immediate Delivery
Acquisition/Rehab

CWCapital LLC served as the Fannie Mae
DUS Lender on an immediate delivery loan
of $7,800,000.

Loan proceeds plus tax credit equity were
used to rehabilitate a 180-unit garden
apartment property with residents in place.
Fannie Mae Immediate Delivery

Tax Credit Equity Installments plus loan
proceeds to fund the renovations.
Fixed Rate in Place Rehab with 9% LIHTC

CWCapital was
Fannie Mae DUS Lender
Completion and Operating Deficits Guaranty
required.

Fannie Mae HUD Risk Share program
utilized to improve terms.
$7,800,000
Case Study – Rehab with Tenants in Place – 9% LIHTC (continued)
SOURCES OF FUNDS - Permanent
Loan Proceeds
$ 7,800,000
Tax Credit Equity
$10,786,000
Existing Reserves
$
Total Sources
$18,889,000
303,000
USES OF FUNDS - Permanent
Purchase Price – Land and Building
$ 7,000,000
Hard Construction Costs - Rehab
$ 7,920,000
Soft Costs / Financing
$ 2,981,000
Reserve/Contingency
$
Total Uses
$18,889,000
988,000

Originally constructed in 1981 and consists
of an existing 180-unit family and seniors
development.

The Project includes 148 family units and
32 age-restricted units.

The cost of the rehab was $7,920,000 or
$44,000per unit. The Project received a
new 20-year, Section 8 HAP contract for
100% of the units in 2011.

Rehabilitation is expected to be completed
within 15 months and the borrower
provided an interim bridge loan to fund
the timing gap from tax credit equity
installments.