RULE 109.00.04-001 - HOME Program Policy and Operations Manual

RULE 109.00.04-001. HOME Program Policy and Operations Manual

I.Introducticn

The Arkansas Development Finance Authority ("ADFA" or the "Authority"), a public bocy politic and corporate, with corporate succession, was created May 1, 1985, in part to assist lcw-incore and under-served Arkansans in the financing, development and preservation of affordable housing. ADFA receives and administers funds provided by the HCME Investment Partrerships Act (the HCME Act, Title II of the Cranstxn-Qcnzalez National Affordable Housing Act). The HCME Investment Partnerships Program ("the HCME Program") was created to provide funds to expand the supply of affordable housing for very lcw-incore and lcw-inccme persons.

ADFA embraces its responsibility to administer the HCME Program that has been entrusted to it. ADFA will administer the HCME Program creatively, effectively and efficiently under the housing aonditicns that exist in the state of Arkansas (the "state") ard with all practical safeguards against waste or fraud. ADFA will practice and advocate innovation, flexibility and expansion in program design to address unrret housing needs throughout the state.

To that end, this Policy and Cperations Manual is presented to provide an overview of ADFA policies and procedures as they pertain to the HCME Program. This manual is not meant to be a substitute for HCME Program regulations, but as a supplement to them. It is not exhaustive regarding all considerations affecting the use of HCME Program funds. While careful consideration and due care has been used in develcping the manual, HCME Program participants are encouraged to consult with HCME Program staff persons to ensure correct inter-pretaticn of policies and regulaticns. ADFA reserves the right to implement additional policies as needed.

IIPurpose of the HOME Program

The HCME Program regulations consist of 24 CFR Part 92, dated September 16, 1996. The general purposes of the HCME Program include:

* expanding the supply of decent and affordable housing for low and very low-income Americans;

* strengthening the abilities of state and local goverrrrents to design and implement strategies for achieving adequate supplies of decent, safe and affordable housing;

* extending and stcengtnening partnerships among all levels of government and the private sector, including for-profit and nonprofit organizations, in t±e production and operation of affordable housing.

As the administrator of the state of Arkansas' HCME Program funds, ADEA has designed its programs into four main categories; the HCME Rental Housing Program, the Homeowner Housing Programs, the Homebuyer Program, and Tenant-Based Rental Assistance ("TBRA").

IIIGeneral Requirements of the HOME Program

A. Equal Opportunity and Fair Housing

The state shall rot exclude ainy organization or individual firm participaticn under any program funded in whole or in part by HCME Program funds on the grounds of age, disability, race, creed, color, national origin, familial status, religioner sex. The following federal regjirHtents as set forth in 24 CFR 5.105(a), Nbndiscriiriinaticn andEqual Cfcpartunity, are applicable to HOME Program developments:

Fair Housing Act

24 CFR 100

Executive Order 11063, as amended (Equal Opportunity in Housing)

24CFR 107

Title VI of the Civil Rights Act of 1964 (Nbndiscriiriinaticn in Eederal Programs)

24 CFR 1

Age Discrimination Act of 1975

24 CFR 146

Section 504 of the Rehabilitation Act of 1973

24 CFR 8

Executive Order 11246, as amended (Equal Employment Opportunity Programs)

41 CFR 60

Section 3 of the Housing and Urban Development Act of 1968A

24 CFR 135

Executive Order 11625, as amended (Minority Business Enterprises) A

Executive Order 12432, as amended (Minority Business Enterprises) A

Executive Order 12138, as amended (Women's Business Enterprise)A

In addition to the above requirements, all HOME Program participants must ensure that their Equal Opportunity and Fair Housing policies related to activities funded by the HCME Program are consistent with the current Consolidated Plan adopted by their jurisdiction.

B. Allocation of Funds

HCME Program funds committed to the state of Arkansas will be allocated as promulgated in the State of Arkansas' Consolidated Plan. In addition, the state may spend up to ten percent (10%) of its HCME Program allocation for administrative and planning expenses. ADFA through its pilot program may now allocate HCME Program funds to developments located within local parricipating jurisdictions. To date, these areas include little Rock, Kbrth little Rock, Pine Bluff and Fort Smith.

A Section 3 requires that the employment and other economic opportunities generated by federal financial assistance for housing and community development programs shall, to the greatest extent feasible, be directed toward low and very low income persons, particularly those who are recipients of government assistance for housing.

A Executive Orders 11625, 12432 and 12138 require that participating jurisdictions and local programs must prescribe procedures acceptable to HUD for a minority outreach program to ensure the inclusion, to the greatest extent possible, of minorities and women entities owned by minorities and women in all contracts. Local programs must also develop acceptable policies and procedures if their application is approved by ADFA.

HCME Program allocations for the Rental Housing Program and the Homeowner Program, and allocations to irrprofit entities, for-profit entities and CHDO activities, will be in the form of repayable or forgivable loans. Allocations for the Tenant-Based Rental Assistance Program (TBRA) will be in the form of grants.

Applicants trust request at least one hundred thousand dollars ($100,000) in HOVE Program funds to be considered for a HCME Program allocation, with the exception of TERA projects. The maximum lean amount that can be requested for affordable housing developments is . The maximum amount that can be requested for project delivery costs is ten percent (10%) of the final allocation amount.

Applicants who choose to use a consultant must include the consultant fee, if any, in an amount not to exceed ten percent (10%) of the requested HCME Program allocation in the proposed development budget. Applicants who choose not to use a consultant may apply for an amount not to exceed ten percent (10%) of the requested HCME Program allocation as reimbursement of project delivery costs. Any amounts requested for project delivery costs may be in addition to the requested HCME Program allocation amount. The HCME Program allocation may not include both a consultant fee and a project delivery cost reimbursement.

CLayering

Layering is the combining of other federal resources on a HCME-assisted development that results in an excessive amount of subsidy for the development. Such activity is prohibited. ADFA will analyze each application to ensure that only the mirrirrun amount of assistance is allocated to the development. In no case may the amount of HCME Program funds allocated exceed the maximum allocation limit as defined in Section IV. B (Maximum Amount of HCME Funding Per Applicant) and maxirrun per-unit allocation as defined in Section V.H (Maximum Per-unit HCME Assistance) of this manual.

D. Affirmative Marketing

Any entity applying for HCME Program funds must adopt affirmative marketing procedures and requirements for all HCME-assisted housing and submit the affirmative marketing plan with the HCME Program application. The affirmative marketing plan and requirements for HOME-assisted housing must be approved by ADFA prior to any HOME Program funds being committed to a development. Affirmative marketing requirements and procedures must include:

1 methods for informing the public, owners and potential tenants about fair housing laws and the policies of the local program;

2 a description of what owners and/or the program acministrator will do to affirmatively market housing assisted with HCME Program funds;

3. a description of what owners and/or the program acmirdstrator will do to inform persons not likely to apply for housing without special outreach;

4 maintenance of records to document actions taken to affirmatively market HCME-assisted units and to assess rrarketing effectiveness; and

5. a description of how efforts will be assessed and what corrective actions will be taken when requirements are not met.

E. Environmental Review

In irrplementing the HOVE Program, the environmental effects of each activity must be assessed in accordance with the provisions of the National Environment Policy Act of 1969 and the related authorities listed in HUD's regulations at 24 CFR Parts 50 and 58.

ADEA, as the HOVE Participating Jurisdiction, and the units of local government funded by ADFA will be responsible for carrying cut environrrental reviews. ADEA will approve the release of funds for local governments and must request the release of funds from HUD for any developments of CHDOs or nonprofit organizations. HOVE Program funds are approved as a conditional commitment until the environmental review process has been completed, with the option to proceed, modify or cancel the project based upon the results of the review. ADFA reserves the right to require a Phase I Environmental Study for rental projects as part of the environmental review process.

F. Lead-Based Paint Requirements

The Lead-Based Paint Regulations described in 24 CFR Part 35 require that lead hazard evaluation and reduction activities be carried cut for all develcprents constructed before 1978 and receiving HCME Program assistance. Applications for rehabilitation funds for existing buildings constructed prior to 1978 trust include a lead hazard evaluation, by appropriate lead-certified personnel. The application trust also include detailed lead hazard reducticn plan, in accordance with the regulaticns, and separately identify wLt±dnt±erehabilitaticn budget, the costs associated with reduction of lead hazards in accordance with the regulation and guidelines. All HCME Program fund allocations will be contingent upon the applicant agreeing to complete lead hazard reduction, evidenced by a clearance report performed by appropriate lead-certified personnel. The Authority will allowup to two thousand five hundred dollars ($2,500) per unit for lead-based paint testing, assessment, and clearance report. Ina development where HCME Program funds will be used on only a portion of the units, the lead-based paint requirements apply to ALL units and oorrmon areas in the development.

G. Contractor Requirements

All contractors and subcontractors working on all HCME-funded develcpments in excess of twenty thousand dollars ($20,000) trust have an active license issued by the Arkansas Contractor's Licensing Board (the "State Licensing Board") as applicable and meet all requirements of contractors in the state of Arkansas, including securing Builder's Risk insurance. Contractors tray not "share" a license. That is, ADEA will not allow cine contractor to work frcm another contractor's license.

All homeowner rehabilitation projects trust have a general ccntractor that is properly licensed by the State Contractor's Licensing Board. Projects under bAenty thousand dollars ($20,000) trust have a general contractor or a qualified construction supervisor. Any questions regarding licensing issues and a list of licensed contractors tray be directed to the State Licensing Board at the following address:

Arkansas Contractor's Licensing Board

621 East Capitol

Little Rock, AR 72202

(501) 372-4661

Any contractor who has been debarred by any entity or had a contractor license suspended by any entity within the previous twelve (12) months will be prohibited frcm participating in the HCME Program. All general contractors working on all HCME-funded developments must obtain one of the following:

(1) a payment and performance bend; or

(2)a letter of credit.

H. Labor Standards

Davis-Bacon wage compliance and ether federal laws and regulations pertaining to labor standards apply to all contracts for rehabilitetdcncrcoristaucticnof tAelve (12) ormoreHjYE-assisted units in a development. Davis-Baccn and related laws include:

* Davis-Bacon and Related Acts (40 USC 276a-276a-7)

* Contract Work Hours and Safety Standards Act (40 USC 327-333)

* Copeland (Anti-Kickback) Act (18 USC 874; 40 USC 276c)

* Fair Labor Standards Act of 1938, as amended (29 USC 201, et seq.)

The ccnstructicn contract for any HdVE-assisted activity trust contain the applicable wage provisions and labor standards. Davis-Bacon does not apply to projects using solely volunteer labor or to sweat equity projects. ADFA will monitor all developments subject to Davis-Bacon requirements to ensure compliance with all applicable regulations.

IInspections

Inspections are required with all activities that are funded through the BCME Program. ADFA currently has inspectors that will be available as needed. There are currently four (4) required inspections that are identified below:

Stage 1

Excavation

IVetals

Termite treatment

Rough-in plumbing

Earthwork

Waterproofing (vaporbarrier)

Footing

Slab

Stage 2

Plumbing top-out

Electrical rough-in

Framing

Roof

Interior wall systems

Exterior wall systems

A^antilaticn

Insolation

Stage 3

Flooring systems

Painting

Doors

Cabinets

HVAC

Electrical top-cut

Special construction (elevators, etc.)

Appliances

Stage 4

Final Inspection

Rental housing develcpment inspections may be scheduled more frequently, as warranted.

* Pre-oonstruction Meetings - ADFA inspector must attend any pre-construction meetings for nulti-family developments;

* Rehabilitation Projects - when a project is ready for a draw en funds, the property trust be inspected to verify that the work has been completed. ADFA will only make payments on work that has been completed and inspected by an ADFA inspector.

You rray fax or trail your payment request, with all of the required documentation, to ADEA using the following contact information:

Arkansas Development Finance Authority

Attn: HOVE Program Department

P.O. Box 8023

Little Rock, AR 72203-8023

FAX (501)682-5859

ADFA staff will coordinate with recipients of HOME Program funds and inspectors to schedule all inspections.

J. Change Orders

ADFA recognizes that changes in a development occur from time to time. It is important that HOME Program participants submit change orders on the proper ADFA form. All change orders must beapproved by the ADEA Staff. No payment of HOME funds will be made on change orders that have not been approved by ADFA. Any changes to the original amounts of HOME Program assistance must be reflected by an Amended and Restated Mortgage and Promissory Note. Each Single-Family HOME Program Agreement will include provisions for possible funding of change orders en a limited basis.

K. Debarment and Suspension

ADFA will require participants in lower-tier transactions covered by 24 CFR 24 to certify that neither it nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any entity frcma federally funded transaction. Any participant that remains en a debarred or suspended condition shall be prohibited from participation in the ADFA HOME Program as long as they are classified in this manner.

LFlcod Plains

HOME Program funds may generally not be invested in housing located in an area identified by the Federal Emergency Management Agency as having special flcod hazards. ADEA discourages developments located in special flood hazard areas but, in seme instances and with written permission from ADEA, houses located in a flood plain may be assisted. It is the responsibility of the applicant to evaluate any remedies to remove any properties from the flood plain and ensure the feasibility of the proposed plan. ADEA. is willing to consider the proposed remedy and trust approve the proposal in writing prior to approval of any HOME Program allocation. The ccrrrrunity must be currently participating in the National Flood insurance Program, and flood insurance must be obtained and maintained for the full period of

pffrtrtttMfy

M. Procurement

All solicitation of bids for goods and services to be paid with HOME Program funds must be conducted openly and competitively.

N. Submitting a HOME Program Application

ADFA will evaluate each application to determine if the proposal meets threshold criteria. Threshold criteria includes submission of a complete application; proposal of an eligible activity; proposal of a development that, in the cpinicn of ADFA, is physically, financially and ad-arinistratively feasible; provision of written verif icaticn in support of the proposed activity frem the chief elected official of the area where t±e activity wi!2te undertaken; and proposal of a development that meets the requirements of 24 CFR Part 92, as amended. See the HCME Program application for a complete list of threshold items at the ADFA website:

www.state.ar.us/adfa

Applications will be taken en a continuous basis until available funds have been allocated. ADFA will score HCME Program applications on the following basis:

* Af fordable Housing Experience. Capacity must be demonstrated by including an application that identifies all necessary components to accomplish the development, e.g., effective control of sites for acquisition and ccnstructicn developments, the financial capacity to repay the HCME loan and other financial arrangements, as well as comprehensive program design. ADFA' s HCME Program staff will conduct reviews of:

a Previous performance under the HCME Program, the LIHTC Program, the Below-Market Interest Rate Program and the Financing Adjustment Factor Program (not applicable to new applicants), including disbursements, ncnitoring and findings;

b Relevant experience in admirLstering housing programs;

c Relevant experience in developing and managing housing programs and;

d Sizeof staff relative to all other program re^xxsibilities.

* Housing Meed Factor. The need factor pertains to percentages of the state's lower income households, the percentage of households with housing costs greater t±ian thirty percent (30%) of area median family income adjusted for family size, and the current census population count of areas proposed for housing development. Consideration will be given to cormunities experiencing substantial population changes.

* Financing. ADFA places a strong emphasis en projects that will include the use of funds from other sources. Funds leveraged on a HCME-funded activity may not be used as leverage en subsequent projects. There must be written decumentatien to substantiate leveraged funds in an application, and the funds must be from a verifiable source. Because an application qualifies for HCME Program funds does not mean that they will automatically receive LTHICs. All costs will be examined for reasonableness, and applicants may be denied if costs are deemed unreasonable.

* Readiness. The purpose of the application process is to allocate funds to eligible applicants for proposed projects. Applicants applying for HCME Program funds must begin their developments within ninety (90) days of the notice to proceed. Developments that do not begin within ninety (90) days are subject to have all HCME Program funds recaptured and reallocated to other eligible activities unless otherwise approved by ADFA. ADFA realizes that there may be extenuating circumstances that may delay the beginning of a project. Such circumstances will be reviewed en a case-by-case basis.

The following charts outline the scoring criteria and the number of points possible in each category that will be used by ADFA when scoring each HCME Homeowner and Rental Program applications:

HOME Rental Housing Program Scoring Criteria

Category Points Pose

sible

Affordable Housing Experience

  

* New applicant has a minimum of three (3) years developing successful affordable housing (15), or

25

* Prior use of HCME funds (Project completed in a timely manner; at least 75% of previous funds disbursed; units occupied; adherence to Agreements and requirements, etc.). (15)

  

* IMPORTANT NOTE: Participants that have not spent 75% or more of previous HOME allocations are not eligible to apply.

  

* Applicant has qualified, experienced development team. (5)

  

* Applicant has staff capacity to complete program objectives. (5)

  

Housing Need Factor

  

* Number of HOME-assisted units: 100% of units designated as HOME-assisted units will receive (10); less than 100% of units designated as HCME-assisted units will be scored on a prorated basis.

30

* Project is located in a designated place as defined in the Consolidated Plan. (5) (See application for list of designated areas.)

  

* Planned units contain rrcdem amenities for convenient living. (5)

  

* Project will provide units for person with special needs. (10)

  

Financing

  

* Percentage of HOME funds to total development budget. Prorated based on the percentage of HOME funds used. Maximum points possible. (10)

25

* Financial feasibility of the project (ability to repay HOME loan; credit worthiness; usual customary and reasonable costs; total cost per unit; HOME funds per unit). (10)

  

* Letter from other funding source indicating a firm cnrmitment of funds. Letter must be current (less than twelve (12) months old) . (5)

  

Readiness

  

* All pre-constructicn phases are complete. (10)

20

* Infrastructure (roads and utilities) is in place and iimBdiateLy available. (5)

  

* There is no planned relocation associated with the project. (2.5)

  

* Applicant submits a plan for disbursing 25% or more of HOME funds within ninety (90) days of allocaticn. (2.5)

  

Maximum Points Possible

100

Minimum Score to Qualify for Funding

80

Homeownership Program Scoring Criteria

Category Points Possible

Capacity Factor

  

* Applicant has experience developing successful affordable housing, and/or, successful use of prior HOME funds.

30

* Prior HOME project (s) completed in a timely manner; at least 75% of previous funds disbursed; units occupied; adherence to Agreements and requirements, etc.

IMPORTANT NOTE: Participants that have not spent 75% or more of previous HOME allocations are not eligible to apply.

  

* Applicant has staff capacity to complete program objectives.

  

Housing Need Factor

  

* Project is located in a designated place as defined in the Consolidated Plan. (See application for list of designated areas.)

30

* Planned units contain modem amenities for convenient living.

  

* Results of market study indicate specific need (new construction).

  

Financing

  

* Letter from other funding source (s) indicating a firm commitment of funds. Letter must be current (less than twelve (12) months old) .

Points awarded will be based on the amount of leveraged funds invested in the affordable housing compared to the amount of HCME funds.

20

Readiness

H

* All pre-oonstructicn phases are complete, including: architectural plans, engineering, market study (newconstruction), acquisition, utilities at site, construction schedule, etc.

20

* There is no planned relocation associated with the project.

  

* Applicant submits a plan for disbursing 25% or more of HOME funds within ninety (90) days of allocation.

  

Maximum Points Possible

100

Minimum Score to Qualify for Funding

80

O. Performance Standards

Successful applicants trust disburse twenty-five percent (25%) of the total HCME Program funds within ninety (90) days of the notice to proceed. Seventy-five percent (75%) of total HCME Program funds allocated must be disbursed on the development within one year from the date of the notice to proceed. If these performance standards are not met, any unspent HCME Program funds may be recaptured and reallocated to fund other affordable housing developments. Applicants approved for funding that do not complete the required number of units will be considered in default of their HCME Agreement and jeopardize future funding through the HCME Program.

For applicants also applying for low Income Housing Tax Credits (LIHIC), the ninety (90) day performance standard will begin upon the LIHIC reservation. For developments applying for both HCME Program funds and LIHIC, any allocation of HCME Program funds is contingent upon the successful reservation of LIHIC.

Miltiple HCME applications may be submitted by HCME participants for funding. A participant may not have more than five (5) HCME projects underway at any given time period. An additional application maybe submitted once 75% of HCME funds on any previously approved application (s) have been expended. A HCME program participant is defined as either an owner, developer or consultant.

Q. Amendments to Applications

Any changes to any material aspect of the development must be presented as an amendment to the initial application for HCME Program funds. The request for amendment will go through the normal review and approval process as outlined in Section R, "HCME Program Application Process Path", of this manual.

R. HOME Program Application Process Path

S. HOME Program Allocation/Disbursement

Following ADFA Board approval of the ROME Program application, the following processes will apply

1 Disbursement of ROME Program funds will occur only when all of the following conditions have been met:

aRequired environmental review process trust be satisfactorily completed.

bProject closing documents shall reflect a project completion date acceptable to ADFA and the recipient of the HCME Program funds. The HCME Program Agreement will outline the payment of the HCME Program funds, (e.g., how the funds will be disbursed, by escrow or pro-rata share, etc.) The HCME Program Agreement trust contain provisions for the timing of HCME Program fund disbursements.

cADFA Staff trust complete all TDIS set up procedures.

dADFA must issue a notice to proceed. To ensure that all HCME Program requirements have been met, no work shall begin until all documentation has been executed and ADFA issues a notice to proceed.NO APPLICATIONS WILL BE ACCEPTED ON A PROJECT WHERE CONSTRUCTION HAS ALREADY BEGUN.

eA pre-ccnstructicn conference is held. For rental activities the pre-ccnstructicn conference must be conducted with the development team and an ADFA representative . For homeowner activities the pre-construction conference trust be conducted with the applicant/consultant, the homeowner and the contractor and ADFA Inspector.

2 Cost incurred prior to HCME Program fund allocation shall not be reirrbursed (except in the case of an eligible soft cost or an interim construction loan approved by ADFA).

3. Retainage will be released thirty (30) days after the final inspection is approved and upon ADFA's receipt of all completion documentation.

For rental activities, the following ocnpleticn dcajrentaticn will be required prior to ADFA' s release of retainage:

aPlaced in Service form.

bCertification of release of liens.

cCompletion form - (HUD form 40097) .

dHazard insurance.

eDate of occupancy.

fCertification of final inspection.

For harecwner activities, the following ccnpleticn documentation will be required prior to ADFA's release of retainage:

a Project ccnpleticn report b HUD form 40096. c Certification in release of liens. d Certification of final inspacticn. e Pluibing certif icaticn. _____f Electrical certification._____________________________________________________________

If any HOME Program funded project has an available balance after development completion and release of retainage, ADEA will reallocate such balance of HOME Program funds to other eligible activities according to ADEA' s adopted HOME Program allocation process.

TUSDA Rural Development and Low Income Housing Tax Credit Funding

One of the purposes of the HOME Program is to encourage governments to use HOME Program funds efficiently and to encourage partnerships between public and private entities . m keeping with this mission, ADEA requires that recipients leverage their H3ME Program allocation to the greatest extent possible with funds from other sources. Two such sources may include Rural Development and Low Income Housing Tax Credits.

To obtain information about the programs offered by Rural Development, please contact USDA Rural Development, Attention: IMulti-Eamily Department, 700 West Capitol, Little Rock, AR 72201.

To obtain more information about ADEA' s Low Income Housing Tax Credit Program, please contact ADEA, Attention: lYLlti-Eamily Department, 423 IMain Street, Suite 500, Little Rock, AR 72201.

U. Gap Financing

A variety of financing is often available to and used by developers of affordable housing. In fact, affordable housing developments are almost always funded by multiple sources. This is particularly true for HUYE Program funded developments in light of the fact that the H3ME Program is a "gap financing" source that assists in making the housing units affordable to low-income persons. HOME funds are not intended to be used to finance an entire development.

While the maximum HOME Program funding is four hundred thousand dollars ($400, 000) ADEA. will calculate the "gap financing" amount and fund only that amount. For mortgage subsidy projects, the maximum subsidy is the lesser of $25,000 or 20% of the purchase price. Note: Applicants must provide a copy of the final appraisal prior to disbursement of funds.

* Up to eighty percent (80%) of the total HOME-assisted units must be occupied by persons or families whose adjusted income does not exceed sixty percent (60%) of the area median family income.

SOURCES AND USES

  

SOURCES

     

USES

  

Loan(s)

     

itqjisitim

  

$200,000

1st Mortgage

  

$1,000,000

Cbnstructicn

  

$1,100,000

Cash

  

$100,000

Site Improvements

  

$100,000

Other

     

Soft Costs

  

$50,000

Total Sources

  

$1,100,000

Total Uses

  

$1,450,000

Gap Between Sources and Uses : $350,000 Maximum HOME Program Funding : $300,000

VRecapture of Funds

It is imperative that funds allocated to participants be used as quickly as possible aixl in the most efficient manner. ADFA will recapture allocated funds that have not been used in accordance with applicable performance standards. Applicable performance standards include performance standards adopted by ADFA (see section 0. - PERFORMANCE STANDARDS) and HOME Program regulatory corrmitment and disbursement requirements. These funds will t±ien be placed back into the pool of funds that are available to fund other developments.

W. Monitoring

Curing the period of af fordability, ADFA must perform on-site compliance and mcnitoring in-specticns of all rehabilitation of single-family and rtulti-family developments utilizing HOME Program funds to determine compliance with the Final Rule and current ADFA HOME Program Policy and Procedures Manual.

XClosing of Transactions

ADFA will select and/or approve a closing entity to provide closing services for allHOME Program transactions using ADEA-approved documents. The services will be available and required in the county where the development is located. HOME Program staff will provide closing instructions for all HOME Program funded transactions to the closing entity. ADFA will be responsible for payment of costs associated with closing the HOME Program portion of the transacticn en both herreewner and rental activities.

YAudit

ADFA requires that recipients have an annual audit conducted of federal funds received in accordance with Generally Accepted Accounting Principals (GAAP) as required in 24 CFR Parts 84 and 85 respectively.

Z. Conclusion

ADFA seeks to partner with individuals and organizatiens that will carry cut the express goals of increasing and improving decent, safe and affordable housing for all Arkansans.

The

HOME

Rental

Housing

Program

IVThe HOME Rental Housing Program

Recipients utilizing funds in the HCME Rental Housing Program trust closely adhere to all HCME regulations as well as to NDFA' s program-specif ic guidelines and adopted policies . ISbtAathstanding these requirerrents, program participants may structure their development and application for HCME Program funds to meet the specific rental needs of their cartrunity.

KM\ will accept applications in the HCME Rental Housing Program in the categories of new ccnstructicn develcprents and rental rehabilitation projects.

A. Eligible Applicants

Multiple HOME applications may be submitted for funding. A participant may not have more than five (5) HOME projects underway at any given time period. An additional application may be submitted once 75% of HOME funds on any previously approved application (s) have been expended. NDFA will accept applications for rentals at a minimum of five (5) units, from local goverrrrents, public housing authorities, Gocrmunity Housing Development Organizations ("CHDOs") and other nonprofits and for-pjofit entities.

Eligible applicants may receive technical assistance by attending an information/training session prior to submitting an application. Sessions will address HCME Program and KM\ guidelines as well as application procedures. .applicant eligibility will be based en the designated responsible entity submitting the application. An eligible designated responsible entity is the entity responsible for project development, but may include all of its related affiliatBlertities.

B. Amount of Home Funding per Applicant

Each applicant must request at least one hundred thousand dollars ($100,000) and no more than four hundred thousand dollars ($400,000) per application for affordable housing development. The maxirrum amount that can be requested for project delivery costs is ten percent (10%) of the final allocation amount. The allocation is generally meant to be used as gap financing, and is not intended to fund an entire development. The maxirrum contribution of HCME funds is forty thousand dollars ($40,000) per unit. ADFA limits the overall per unit cost for rental projects to $100,000 per unit.

Rental Housing Activity

Minimum Period of Affordability in Years

Rehabilitation or acquisition of existing housing per unit of amount of HCME Program funds: Under $15,000

5years

$15,000 to $40,000

10 years

Rehabilitation involving refirancing: Over $40,000

15 years

New ccnstructicn or acquisition of newly constructed housing

20 years

CEligible Activities

HCME Program funds can be used to fund the following rental activities:

* l^nabiHterdmcf existing structu^ tures is eligible.

* Reoonstoucticn - Reoonstouct^^ gible. Any structure not ecaxrrically feasible to rehabilitate or has proj ecbed per unit rehabilitaticn costs equal to or greater than twenty-five thousand dollars ($25,000) will be considered for reoonstructicn.

* New Oonstruction - New developments trust contain five (5) or more units. Units may be on scattered sites. Developers may not fund an entire development using HCME Program funds.

D. Matching Requirements for Rental Development

Rx-prc±itpoxperty owners are required to porvide a cne-to-cne (1:1) oatxhingconraibuticnof funds (e.g., one hundred thousand dollars ($100,000) in HCME Program funds must be matched by one hundred thousand dollars ($100,000) in funds provided by the for-profit owner). Norprofitpoxperty owners are required to provide point five-to-cne (0.5:1) rcatching contribu-tion of funds (e.g., one hundred thousand dollars ($100,000) in HOVE Program funds must be matched by fifty thousand dollars ($50,000) in funds provided by the nonprofit owner).

Community Housing Development Organizations (CHDOs) are exempt from the matching requirerent.

EEligible Projects

Eligible projects irclirte:

* Multiple buildings en a single site; or

* single arrrultiple units en scattered sites.

These developments may be privately or publicly owned. To qualify as a "development" the property must consist of one (1) or more buildings en a single site, under ccmrcn ownership, management, and financing.

HOME Program funds may be used for a mixed income development as long as HOME Program funds are used solely for affordable housing units occupied by low-income tenants. Common area costs must be prorated based upon the number of HOME-assisted units and non-HCME-assisted units.

A building that is designed, in part, for other than residential housing oay qualify as affordable housing under the HCME Program as long as HCME Program funds are used for the residential portion and those units meet the rent and income limitations of the HCME Program. The rent and income limits are established and published annually by HOD. Rental units must be occupied as follows:

* A minimum of twenty percent (20%) of the total HCME-assisted units must be occupied by persons or families whose income does not exceed fifty percent (50%) of the area median family income; and

* Up to eighty percent (80%) of the total HCME-assisted units must be occupied by persons or families whose adjusted income does not exceed sixty percent (60%) of the area median family income.

Where HCME Program funds are used in conjunction with Low Income Housing Tax Credits ("LTHTC") or UMt^ State Department of Agriculture ("U3DA") Rural Development funds, the more stringent occupancy regulaticns will apply.

FEligible Obsts

HQYE Program funds may be used for certain development costs as dictated by 24 CFR Part 92 and are outlined below:

1 Project delivery costs. Any nonprofit entity or local government receiving a HZMS Program allccaticnrray include project delivery costs (in an amount not to exceed 10% of the final HCME Program allocation) in the development budget. Project delivery costs are eligible only for costs directly associated wit±Lt±eHM:PKjgramfunc^develcpTBnt. Acertifica-ticn of costs trust be submitted with all requests for pooject delivery costs. Participants must submit an itemized budget for project delivery costs as part of the initial application. Project delivery costs must be allocated on a prorated basis among HCME Program assisted units.

Project delivery costs must be supported by source documentation maintained on file by the recipient of HCME Program funds. Requests for payment must be verified by the Gertif icaticn of Costs and signed by the recipient.

* Accpycf adel^ilBdbinfcrclcsingdDaireTtfees, telephone bills, etc., Mghlightingthe amounts to be paid directly to the vendor or reirrbursed to the HCME Program participant and substantiated by a canceled check, a copy of the bank statement or other proof of payment. The detailed bill should, atamininuri, include vendor identification, ade-scripticnaf the services received, thequantity (hours, units, etc.) and the price for services received.

* No handwritten invoices will be accepted.

* All invoices must have an authorized signature of the carpany' s executive director, or his or her designee, approving the payment, the month it is being paid, dated and canceled so that the invoice cannot be paid again.

* ADEA. will reirrburse salaries for support personnel (e.g., clerical, temporary employee, etc.) at their docurrented regular rate of pay.

* A copy of any contracts for professional services, (e.g., consultants, architects, ccntractors, etc.), if applicable, trust be provided in the initial applicaticn and should include a proposed payment schedule.

* Satisfactory docurentaticn of fringe benefits being paid. Examples of fringe benefits include:

-Vacation/Sick/Holiday/Compensatory Time;

-Pensions;

-veteran's Benefits;

-Group Insurance;

-Life Insurance/Long-term Disability;

-Accidental Death and Dismemberment Insurance;

-Profit Sharing Plan; and

-Association/Union Dues.

The use of prorated payment percentages is acceptable and must be outlined in the initial application or invoice as well as each billing statement submitted for reimbursement. The applicant must provide the sources of other funds used to pay project delivery costs, if any.

2 Hard Posts. The actual cost of constructing or rehabilitating housing. These costs include the following:

* construction, rehabiliteticncrreconstructicnof affordable housing units;

* site improvements (including utility connection costs, but not the costs to provide udlitiestothesite) ;

* demolition (trust be dene in conjunction with a specific affordable housing proj ect) ; and

* accpisiticn.

3. Soft Posts. HOME Program funds may be used to pay project soft costs. Soft costs must be "usual, customary, reasonable, and necessary" and may include:

* finance related costs, i.e., credit reports, tit^ repcrte and ucdates, appraisal fees, origination fees and discount points, and construction interest;

* current market study (not more than twelve (12) months old) ;

* project audit costs;

* professional services (architectural and engineering services provided for a spe-cificpcoject) ;

* consultation fees (not associated with organizational startup) . DEVELOPERS CANNOT HIRE THEMSELVES AS CONSULTANTS ON ANY HOME-FUNDED PROJECT OTHER THAN ON A THIRD-PARTY BASIS.

4. Relocation Posts. The cost of permanent or temporary relocation of tenants.

5. Bridge Loans. Interim construction loans used to finance the HOME assisted development with prior notification to ADEA..

MOTE: While ADEA does not have a predetermined, specific limit on cost per square foot, the developer should be aware that the per unit cost per square foot will be closely scrutinized for reasonableness, and an application for funding will be denied if costs are deemed unreasonable.

GIneligibl e Projects

Ineligible rental projects include:

* public housing units;

* developments assisted under Title VI of NAHA (prepayment of mortgages insured by HUD);

* properties used for cartrercial purposes;

* emergency shelters with limited occupancy requirements;

* developments where developers/contractors do not have a valid Arkansas contractor's license, and

* developments that do not have a written verification in support of the proposed development from the chief elected official of the area where the development will be located.

H. Relocation

ADFA discourages developments involving displacement or relocation. Prior to application, contact ADFA if you are planning any development that may involve displacement or relocation.

IApplication Review Process

Applications for HCME Program funds will be accepted on a continuous basis. Applications will be taken at any time during the year as long as funds are available. Applicants for HCME Program funds will be allocated funding according to the criteria found in the application for funding, the steps in approving an application include:

1 Review of the application by HCME Program staff for completeness using the criteria cut-lined in the HCME Program applications and program guides. A deficient application will result in written notificaticn outlining the deficiencies. the applicant will then have an opportunity to correct any deficiencies within a designated time frame of thirty (30) business days. The applicant is reminded that HCME Program funds are awarded for funding on a first-ccrre, first-served basis, and only completed applications will be considered for funding allocation.

2 Any application receiving recorrmendation for approval by the HCME Program Staff Housing Review Committee will be presented to ADFA' s Board Housing Review Committee for further review, evaluation and ultimate approval or rejection.

3. Applications will be underwritten with a minimum Debt Coverage Ratio (DCR) of 1.10, including debt service on the HCME loan.

J. Methods of Repayment

ADFA has developed three (3) forms of standard loan terms and conditions for repayment of Rental Housing Program loans to be evidenced by fully executed promissory notes.

1 Promissory notes will be payable at a three percent (3%) interest rate for a term of twenty (20) years. Monthly payments will become due and payable not later than one (1) year from the anticipated placed in service date shown on Schedule of Activities, included as Attachment B of the HOME Agreement.

2 On developments utilizing both HOME Program funds and Low Income Housing Tax Credits

(LIHTC), the terms of the HOME Program Loan will be at the applicable federal interest rate for proj ects to qualify for the 9 percent credit and be eligible for the 130 percent basis if it is located in a Qualified Census Tract (QCT) or Difficult to Develop Area (DDA). The annual loan repayments will be equal to one-half (1/2) of the net operating income (NOI) or surplus cash for a term of twenty (20) years with balance due at loan maturity. If HOME funds are provided at an interest rate below the applicable federal rate, they may still be counted in the eligible basis and the project may receive a 9 percent credit if the project meets stricter occupancy requirements (40% of units for persons at or below 50% AMI). However, such projects are not eligible for the 130 percent basis if it is located in a QCT or DDA. These projects will have terms at three percent (3%) with annual repayment equal to one-half (1/2) net operating income (NOI) or surplus cash for a term of twenty (20) years with a balloon payment becoming due and payable to ADFA at loan maturity, (see Glossary for definition of Net Operating Income and Surplus Cash).

3. On developments utilizing HOME Program funds and USDA Rural Development funds, the terms of the HCME Loan will be a one percent (1%) interest rate for a term of twenty (20) years, amortized over fifty (50) years, with a balloon payment becoming due and payable to ADFA at loan maturity.

The

Homeowner

Housing

Program______________

VThe Homeowner Housing Program

The Homeowner Housing Program was designed to address one of the most prevalent affordable housing needs experienced by medium- and small-sized corrmunities in the state of Arkansas-^the need for the rehabilitation of existing single-family, owner-occupied properties and single-family new construction to promote hare cwnership.

A. Eligible Applicants

ADFA will accept applications for owner-occupied rehabilitation and new construction projects f rem units of local govemrents or other irnprofit organizatiens (collectively, the "ELigible Applicant"), en a first core, first served basis until all funds are carmitted. For-profit entities may not apply for HOME Program funds to perform hareowner rehabilitation but may apply for HQYE Program funds for new construction projects. Applicants may receive technical assistance by attending an inf omHticn/training session prior to sutardtting an application. Sessions will address HCME and ADFA guidelines as well as application procedures.

The Eligible Applicant is the entity responsible for the HCME application, project development, project irtplementation and accountability for uses of all HCME funds. The Eligible Applicant will also be responsible for performing required compliance and monitoring of all KME activities for the full applicable affcrdabilityperiod.

ADEA. will grant HCME Program funds to the approved Eligible Applicant as outlined in the HCME Program Agreement. The Eligible Applicant will then loan funds to homeowners, as approved by ADFA, for eligible HCME activities. The homeowner will be required to execute a Promissory Note, Mortgage, and Deed Restriction through an ADFA-approved closing entity.

B. Amount of HOME Program Funding per Applicant

Each Eligible Applicant must request at least one hundred thousand dollars ($100,000) and no more than four hundred thousand dollars ($400,000). Additional applications may be submitted if currently funded project expenditures of HCME Program funds comply with established performance standards.

CElligibleActivities

Eligible Applicants may apply to perform single-family housing rehabilitation (including re-constructicn), new constructicn, and/or provide mortgage subsidies. A minimum of five (5) units must be submitted with each application, and all five units must be approved before HCME funds will be allocated.

D. Eligible Owner

An eligible owner must be lew-income. A lew-income owner is defined as an owner whose annual gross household income does not exceed eighty percent (80%) of the median in-cone for the area, adjusted for family size. (Reference HLD' s "Technical Guide for Income Determination.")

* While HCME uses the Section 8 definition for low-income, there are no HUD prescribed methods for verifying income eligibility. Applicable Income Verification forms will be provided by ADEA. Participants will use these forms for calculating and verifying incomes. For homeowner applicants applying for repayable HCME Program Loans, ADFA. will perform a credit inquiry to determine the homeowner's ability to repay the repayable portion of the HCME Program Loan.

* Without exception, HCME Program funds cannot be used on projects where the income of the owners is greater than eighty percent (80%) of the median income for the area adjusted for family size.

The homeowner must provide proof of fee simple title and owner occupancy for a period of at least five (5) years. A family or individual owns the property if they have fee sirtple title to the property, and there are no restrictions or encurtfcrances that would unduly restrict the good and marketable nature of the ownership interest. An executed and recorded warranty deed in the name of the owner is required as proof of ownership. To ensure proper ownership, a title search nust be performed prior to funding the activity. Existing mortgages may be acceptable, but will be reviewed for acceptability en a case-by-case basis.

E. Death of Owner

In cases where an owner-occupant dies before the af fordability period expires and/or a HCME Program promissory note is paid in full, the following remedies will be exercised by AD FA:

1 HCME Program Loan With No Heirs. If ADFA has the first positionAon the property, it will seek to sell the property to an income eligible borrower.

2 HCME Program Loan With Heirs. If ADFA has the first positionAon the property, and an heir qualifies to become an owner-occupant, with ADFA's prior written approval, the heir rray purchase or have title transferred to the them. If an heir does not qualify as eligible to receive HCME Program assistance, the heir will have the opportunity to sell the property to an income eligible borrower or in the case of sale of the property to a ncninccme eligible borrower, the heirs will be required pay off any remaining balance of HCME Program funds. If an heir does not sell the property, ADFA will foreclose and seek to sell the property to an income eligible borrower.

3. Loan Repayment Conditions With Heirs. If ADFA has the first positicrAcn the property, the heirs will have the option c£ paying off the loan. If theheirsareunabletopaycff the total loan and qualify as an eligible owner-occupant, the heir rray assure the loan upon verification of eligibility and ability to repay the loan aocordirg to terms negotiate heirts).

F.Eligible Properties

The geographic location of properties included in the application will be reviewed to ensure the applying entity has the necessary capacity to perform the proposed activities within the designated geographic location.

Eligible properties must be modest in value. The estimated value of the HCME assisted property - AFTER REHABILITATION - must not exceed the HUD 203 (b) mortgage limit for the area for the type of property being assisted (e.g., single family, condominium). In addition, the cost of repairs must be reasonable compared to the value of thehouse (i.e., the level of rehabilitation is intended to aUcw continued owner occupation for at least the affcrdability period as regulated by the HCME Program). The rehabilitation must be financially and structurally feasible.

A formal appraisal is not required to establish value. Use of an alternative valuation method or market analysis must be documented in the application.

A If ADEA is in a subordinate position on the property, ADEA will coordinate its efforts with the first mortgage lien holder.

GEligible Obsts

HOME Program funds may be used only for eligible costs as defined under the federal HOME Program. HOME Program funds may be used to cover soft and hard costs associated with a project. These costs include the following:

1 Eligible hard costs. Eligible hard costs are the actual costs associated with the rehabilitation of the cwner-cccupie! housing units and include the following:

* demolition costs, and

* construction, rehabilitation, or reccnstructicncosts.

2 Eligible soft costs. Soft costs must be "usual, reasonable and necessary" and may include the following:

* finance related costs;

* credit reports;

* title reports and updates;

* appraisal fees;

* origination fees and discount points ;

* project audit costs;

* affirmative marketing and fair housing costs ;

* temporary relocation costs ;

* professional services (architectural, engineering, and other services provided for a specific project. Otherwise, the professional service costs may be considered to be adininistrativecosts.) ;

* surveys; and

* hazard insurance.

3 Temporary Relocation Posts.

4 Project Delivery Posts. Project delivery costs include staff time, overhead, fringe benefits, consultant fees, etc., which can be directly attributed to a specific project. Any entity receiving a HOME fund allocation may include in its application an amount for project delivery costs (in an amount not to exceed 10% of the final HOME Program allocation) in the development budget. For instance, if a recipient receives a three hundred thousand dollar ($300,000) HOME Program allocation, it may request an additricralt±ii±y thousand dollars ($30,000) for project delivery costs. Project delivery costs are eligible only for costs directly associated with the HOME funded development or activity. .Applicants must submit a budget for project delivery costs within the application for funding. The approved applicant must submit a certification of the project delivery costs ircurred that is signed by the appropriate approving official of t±e participating entity with each request fcrpoojeot delivery funds. Project delivery costs must be allocated on a pro rata basis among the HOME-assisted units.

Proper docurentation is essential for the payment of project delivery cost fund requests and must be kept on file with the approved HOME Program participant. Project delivery costs must be supported by source documentation maintained on file by the recipient of HOME funds. Requests for payment of project delivery costs must be verified by the cost certification (signed by the recipient) and not by the supporting dccurrentaticn maintained by the recipient. Supporting documentation will be reviewed and verified by ADEA staff performing compliance and rronitoring reviews.

Acceptable supportive documentation includes:

* A copy of a detailed bill highlighting the costs to be reimbursed to the HOME Program participant. (The detailed bill must be substantiated by a cancelled check, a copy of the bank statement or other proof of payment.) The detailed bill should, at a minimum, include vendor identif icaticn, a description of the services received, thequantity (hours, units, etc.), and the price for services received.

* No handwritten invoices will be accepted.

* All invoices must have an authorized signature of the HOME Program participant's Executive Director, or his or her designee, approving the payment and verifying that the services were received or satisfactorily performed, the month the cost is being paid, dated, and cancelled to prevent the invoice from being paid twice.

* ADEA will reimburse salaries which are "reasonable and customary" for support personnel of the H3YE Program participant directly providing project delivery costs to the affordable housing being assisted at a rate cotmensurate with their regular hourly wages.

* Acopyof any contracts for professicnal services (i.e., consultants, architects, contractors, etc.), if applicable, rrustbe provided in the initial appHcatimcuQiningthe services to be rendered, the cost of the proposed services, and the proposed payment schedule or terms.

* The use of prorated payment percentages is acceptable and must be outlined in the initial application as well as each billing statement submitted for reimbursement . The applicant must provide the sources of other funds used to pay project delivery costs, if any.

H. Maximum Per-unit Home Assistance

ADEA will not allocate H3YE funds to projects that have total development costs (including HCME funds and any other resources) which exceed the 203 (b) mortgage limits for that respective county. Mortgage subsidies may be provided at a maximum of $25,000 or 20% of purchase price, whichever is lower in the purchase of single family houses. Total development costs include profit, overhead and developers' fees and must be in compliance with 24 CER Section 92.254.

Type of HOME Activity

Total Allowable HOME Assistance

Homeowner Rehabilitation

$25,000

Homeowner Reconstruction

$80,000

New Construction (For Sale)

$80,000

* Rehabilitaticn. Rehabilitation projects with projected costs in excess of twenty-five thousand dollars ($25,000) will be required to perform reconstruction instead of rehabilitaticn.

* Reconstruction, misconstruction projects, up to twenty-five thousand dollars ($25,000) in HDYE funds will be provided as a forgivable loan. Any reconstruction costs in excess of twenty-five thousand dollars ($25,000), but not more that a total of eighty thousand dollars ($80, 000) in HDYE funds will be provided in the form of a direct repayable loan to the homeowner, in reccnstructicn, the total allowable HCME assistance cannot exceed eighty thousand dollars ($80,000). If the proposed reccnstructicn costs exceed eighty-thousand dollars ($80, 000), the homeowner will be responsible for providing the amount over eighty thousand dollars ($80, 000) .

* New Construction. The eighty thousand dollars ($80, 000) maximum new construction financing will be in the form of adirect repayable loan to the applicant fcr construction of a single housing unit. In essence, this loan provides funding allowing the applicant to complete the construction process. The terms of the direct repayable loan at a three percent (3%) interest rate from ADEA will be set according to the payment terms as outlined in Section "K" entitled "Types of Financial Assistance." A financial feasibility and marketing plan must be submitted in addition to all normal requirements of HCME applications for new construction. If HCME funds are requested for use in providing mortgage subsidies, the marketing plan must include a plan for the use of those HCME-funded mortgage subsidies.

IMinimum Property Standards

Minimum property standards must be met at project completion when HOME Program funds are used for a project. ADEA has developed "rehabilitation standards" which will be provided to approved applicants.

At a minimum, the requirements set forth in the Section 8 Housing Quality Standards must be rret for all moderate rehabilitation projects.

Substantial rehabilitation projects funded with HCME Program funds must also meet all local codes, rehabilitation standards, zoning ordinances, the cost effective energy conservation and effectiveness standards (24 CER Part 39) and the Arkansas Energy Code.

The objective of the HCME Program is to build quality homes that have aesthetic appeal in construction and design. Tb that end, ADEA maintains a book of plans that is available for use by participants to assist in the planning process. Single-family units constructed, with HOME funds as part of the homebuyer program must be a minimum of 1,200 sf heated and cooled with a minimum of three bedrooms and two bathrooms.

JIneligible Projects

Ineligible projects include (1) properties that are not owner occupied, (2) rental properties, and (3) projects where contractors do not have a state contractor's license or cannot obtain abuilder's risk insurance policy for the full amount of the caistructicn contract.

K. Types of Financial Assistance

Homeowners may be eligible for one or both of the following forms of assistance, providing their monthly housing expense does not exceed forth percent (40%) of their adjusted monthly gross income (housing expenses include principal, interest, taxes, insurance and utilities):

1 A forgivable loan.

2 A repayable loan.

In ccnjuncticn with a forgivable and/or repayable loan and with ADEA.' s prior approval, HCME Program funds may be used to refinance an existing mortgage loan with a current balance less than five thousand dollars ($5,000).

Homeowner new construction assistance is funded under the following terms:

1 the loan will be in the form of a direct repayable loan to the applicant at three percent (3%) per annum. The loan will be repayable upon the sale and closing of each unit minus any approved subsidy.

Homeowner rehabilitaticn/reccnstructicn assistance is funded under the following terms:

1 A maximum of $25,000 in HOME Program funds may be provided as a zero percent (0%) forgivable loan with a prorated amount forgiven each month over the term of the forgivable loan, which coincides with the applicable affcrdability period. Although the HOVE Program Final Rule does not impose an affcrdability period for owner-occupied rehabilitation, ADFA does require an af fordability period for owner-occupied rehabilitation proj ects. The forgivable loan requires no monthly repayment, but must be repaid if the homeowner fails to maintain compliance with all terms and conditions outlined in the agreement ;

2 An amortized direct loan, which requires monthly repayment of principal and interest, may be approved. The interest rate will be one percent (1%) per annum. Loan terms will coincide with the ADFA imposed affcrdability period for homeowner rehabilitation determined by the total amount of HOME Program funds invested in the unit. Repayment of reconstructed units will be 50% repayable and 50% forgialbe loan. With ADFA's prior approval, HOME-assisted properties may be refinanced in order to allow the owner to obtain a lower interest rate, provided that the owner receives no cash proceeds from the transaction and the total indebtedness does not exceed the value of the property.

With ADFA's prior approval, the HOME Program loan may be assumed by a new owner if the new owner:

ais low-inccme (i.e., income is equal to or less than eighty percent (80%) of area median income, adjusted for family size) ;

bwill occupy the property as the principal residence; and

cis certified by ADFA as eligible to receive HOME Program assistance.

The minimum applicable affcrdability periods for single-family loans shall be as follows:

Total Loan Amount

Number of Years

$1,000 - $15,000

5

$15,000 - $40,000

10

Over $40,000 +

15

In all cases where HOME Program assistance is provided, a note and mortgage will be recorded in favor of ADFA. ONLY ADFA-APPROVED LIEN DOCUMENTS WILL BE USED. HOME Program assistance may be in a junior position to private lender financing as long as the combined loan-to-value does not exceed one hundred percent (100%). Recipients and subrecipients must apply all rules consistently and fairly, regardlesscf the form of assistance. All nortgage payments shall be paid by the homeowner on a monthly basis to ADFA at the following address:

Arkansas Development Finance Authority

c/o Accounting Department

P. 0. Box 8023

Little Rock, AR 72201

L. Resale and Recapture Provisions

RECAPTURE:

ADFA will recapture that portion of HOME Program investment unforgiven by the elasped affordability period or recapture the maximum net proceeds from sale of property (whether recapture is effected through foreclosure or no foreclosure action). Net proceeds recovered will be used to:

(1) Reimburse the HOME Program (approved activity) for the outstanding balance of HOME funds not repaid or forgiven during the applicable affordability period at the the time of recapture.

(2)Reimburse the HOME Program (administration) for "holding costs" or other costs associated with the recapture action (legal fees, insurance, taxes, realtor fees, appraisal/EPO costs, etc.) If net proceeds recaptured are less than the outstanding balance of HOME funds invested in the property (for all approved activities and holding costs incurred), the loss wil be absorbed by the HOME Program and all HOME Program requirements would be considered to have been satisfied. If net proceeds recaptured are greater than the outstanding balance of HOME funds invested in the property (for all approved activities and holding costs incurred), the balance of net proceeds would be distributed to the homeowner (or his/her estate). If the recapture of proceeds is effectuated through a completed foreclosure action, and the property is legally owned by ADFA, the balance of net proceeds recaptured will inure to ADFA.

RESALE:

For those cases where the affordability requirements are violated as a result of the death of the HOME beneficiary and there is an eligible person who qualified and is desirous of assuming the HOME assistance invested in the property, ADFA will permit sale of the HOME-assisted unit to the qualifying, eligible person, contingent upon ADFA's prior review and approval. The subsequent owner will be required to adhere to all applicable affordability requirements for the unexpired term of the original affordability period.

M. Relocation

PDFA discourages projects involving <�±Lsplacarent or relocation. Prior to application, contact KM\ if you are planning any project that may involve dLsplacarent or relocation.

N. American Dream Downpayment Initiative (ADDI) Funds

The American Dream Downpayment Initiative (ADDI) was signed into law by President Bush on December 16, 2003, under the American Dream Downpayment Act (Public law 18-186) (ADDI statute). Funds made available under the ADDI statute will be allocated to eligible HCME Investment Partnerships Program Participating Jurisdictions (PJ) to assist lew-income families become first-time homebuyers. The PJs in Arkansas administering the ADDI funds include the Arkansas Development Finance Authority and the City of Little Rock.

The goals of the ADDI funds are as follows:

* Increase the overall horeewnership rate

* Create greater opportunity for hemeownership among lower income and minorities

* Revitalize and stabilize ccrmunities

ADFA will make available ADDI funds for downpayment and closing cost assistance toward the purchase of single-family housing (i.e., 1-4 family residence, cordiminiununit, or cotbinaticn of manufactured housing and lot) by low-income families (80% of area median income or less) who are first-time hemebuyers. under ADDI, a f irst-time hemebuyer is an individual and his or her spouse who have not owned a home during the three-year period prior to purchase of a home. In addition, the unit must meet all applicable State and local building codes or minimum housing quality standards in the absence of local codes. The purchase price cannot exceed the HUD 203 (b) Mortgage Limits.

ADFA will provide the ADDI funds in the form of a forgivable loan (soft second mortgage) in an amount up to $5,000 for downpayment and closing costs in conjunction with ADFA's HomeToCwn (Mortgage Revenue Bond) Program through ADFA-approved participating lenders located throughout Arkansas. The miriirrum amount of ADDI assistance is $1,000. In the event the unit purchases (per-1978 units) has lead-based paint hazards, additional HCME funds may be used in conjuncticn with the downpayment assistance for rehabilitation to eliminate identified lead hazards.

The assistance will be forgiven in equal annual installments over the period of af fordability. The hcrrebuyer must maintain the house as their principal residence for the full af fordability period. The homebuyer will be required to complete a homebuyer education course through an ADFA approved hcrrebuyer counselor. If the property is sold during the af fordability period, ADFA will recapture the amount of ADDI/HCME funds that have not been forgiven. The hemebuyer will also be required to execute a Promissory Note and Second Mortgage for the amount of assistance provided in accordance with established HCME Program af fordability periods (see Table below

AFFORDABILITY PERIOD

HOME Subsidy

Af fordability Period

Less than $15,000

5years

$15,000 - $40,000

10 years

Over $40,000

15 years

Community

Housing

Development

Organi zat ions_________

VI. Community Housing Development Organizations

ADFA will make reasonable efforts to identify Community Housing Developcrent Organizations ("CHDOs") that are capable, or can reasonably be expected to becocre capable, of carrying out elements of the jurisdiction's approved consolidated plan and to encourage such community based organizations to do so. Requirements for qualifying as a CHDO are found at 24 CFR 92.300.

ADFA will reserve not less than fifteen percent (15%) of the HOME allocation for investment only in housing to be developed, sponsored, or owned by CHDOs. The funds must be provided to a CHDO, its subsidiary or a partnership of which it or its subsidiary is the managing general partner. If a CHDO owns the project in partnership, it or its wholly-owned for-profit or nonprofit subsidiary must be the managing general partner. In acting in any of the capacities specified, the CHDO must have effective project control.

All forms of assistance provided to the CHDO will be in the form of a loan and must be repaid to ADFA, excluding any mortgage subsidy assistance provided to the home buyer. The HOME Program Agreement between ADFA and the CHDO must state specifically the proposed HOME-eligible activities to be performed to benefit low-income persons and families. CHDOs are not required to provide rratching funds for rental rehabilitation and rental newconstructicn activities.

Certification or recertification of CHDO status is performed on a continuous basis. The certifications are approved for a period of one (1) year. An application for certif ication or recertif ication must include a "CHDO Checklist" contained in CPD 97-09. Nonprofit applicants may not submit an application for CHDO status until they have received their 501 (c) (3) designation from the Internal Revenue Service and can provide verification of such designation with their CHDO application.

It is the CHDO's responsibility to submit an application for recertif ication at the end of the original certification period of one (1) year. The CHDO will not be notified by ADFA of the lapsed certif ication. An expired certification will be voided at the end of a thirty (30) day period after the date of expiration. This grace period will not be extended under any circumstances.

If a CHDO is located within a local participating jurisdiction (PJ), ADFA will direct those organizations to their respective local PJ for technical assistance and operating fund requests. If the local PJ does not have funding available for a CHDO-eligible housing project within their jurisdiction, the CHDO may apply to ADFA for CHDO set-aside with an accompanying support letter from the local PJ.

Tenant-Based

Rental

Assistance__________

VII. Tenant-Based Rental Assistance

HOME Tenant-Based Rental Assistance ("TBRA") Program is a rental subsidy program designed to help an eligible tenant with rent and utility costs, as well as to pay security and utility deposits. The TBRA. Program directly assists individual households (rather than providing subsidies to owners or projects) to make housing affordable. The Section 8 Rental Voucher Program is a form of TBRA. HOME funded TBRA programs work in a similar manner. TBRA payments make up the difference between the amount the family can afford to pay for housing costs (rent and utilities) and the actual rent of thehousing selected by the family.

TBRA funds may be used to pay rent and utilities, security deposits and utility deposits for those eligible and selected for rental assistance. The assistance trust be tenant-based, NOT based en the project. Tenants must be free to use their assistance in any eligible unit in the geographical area of the public housing authority. Even tenants who receive TBRA assistance in order to avoid economic displacement in a HOME project can move irrmedi-ately. Public housing authorities may use the Rental Voucher Program as a model for the HOME TBRA Program.

ADEA shall contract with the public housing authority to administer the HOME TBRA Program.

A. Eligible Applicants

All HOME Program funds used for rental housing activities and tenant-based rental assistance trust be used to assist families at or below sixty percent (60%) of the median income, adjusted for family size. An applicant awarded HOME Program funds for the purpose of providing TBRA must select households in accordance with locally established preferences.

B. Eligible Units

Tenants receiving HOME TBRA rrust use the assistance in units that:

* meet Section 8 Housing Quality Standards (Inspections are made at initial occupancy and annually during the length of t±e contract.) ;

* have affordable rents as defined and adjusted annually by HUD;

* may be publicly or privately owned; however, TBRA may not be used in units that receive other forms of rent subsidy, i.e. public housing or Section 8 Substantial Rehabilitation as defined annually by HOD; and

* rrust meet lead-based paint requirements.

Unlike Section 8, cooperatives are considered owner-occupied housing under the HOME Program. Therefore, HOME TBRA may not be used to assist resident owners of cooperatives . It is the responsibility of the HOME Program recipient to determine whether or not these housing standards are rret by irrplementing their own inspection process. However, ADEA reserves the right to inspect units and monitor for compliance with HOME Program requirements.

CProject Delivery Costs

Recipients may submit a written request for project delivery costs directly associated with provision of tenant-based rental assistance not to exceed one hundred twenty dollars ($120)

costs will be based on an estimate of the number of tenants (new and continuing) to be assisted during the year. TERA project delivery costs are not '"unlimited" and are based en the number of tenants indicated in the HCME Program Agreement. Additionally, the participant is eligible to receive $10 per rrcnth for continued project delivery processing.

D. Amount Of Subsidy

The amount of subsidy is set by ADFA pursuant to the federal HCME Program regulations.

* Maximum Subsidy. ADFA may pay up to the difference between a "rent and payment standard." preapproved by ADFA and thirty percent (30%) of the family's monthly adjusted income. .

* Minimum Tenant Contribution to Rent. The minimum tenant contribution to housing cost

(rent and utilities) is the greatest of thirty percent (30%) of the family's nrnthly adjusted income or fifty dollars ($50). The Rental Voucher Program meets the HOME regulation requirements regarding maximum subsidy and minimum tenant contribution.

E. Protection for Tenants

When HCME Program assistance expires, tenants who were selected from the public housing authority's waiting list may return to the waiting list and cpalifyfcrt±esaretanant selection preferences as when they were selected for the HCME assistance. Public housing authorities must plan ahead for expiring contracts.

Prohibited Lease Provisions. The cwner' s lease may not include certain provisions, which in general have the effect of waiving a tenant's rights in advance. All cwner's leases must be in cotpliance with 24 CFR Part 92.253. A sample lease addendum is available to successful applicants.

F.Recertification

The incomes of tenants receiving rental assistance must be recertified at least annually. Rent and assistance is adjusted accordingly based on the circumstances in effect at the time of recertif icaticn. If a participating tenant's income goes above the Section 8 Low Income Limit at recertif icaticn, assistance must be terminated.

GProject Revisions

Recipients should provide a copy of any project revisions to ADFA, including revisions of tenancy, income, rental assistance, vacancy, etc.

H. Portability

Tenants must use the tenant-based rental assistance within the public housing authority's jurisdiction unless the tenant relocates to accept employment or training that leads to employment . In this case, inspecticn and reoertificaticn requirements still apply.

IMatch Requirements

TERA typically requires a twenty-five percent (25%) rcatching requirement; however, the match requirement for Arkansas is waived.

J. Length of Assistance

HCME TBRA rental assistance contracts with individual households may not exceed two (2) years. ADFA requires that TERA subsidy contracts not exceed one (1) year. Contracts can be renewed, subject to availability of HCME funds. The one-year period begins on the first day of the lease and will end upon termination of the lease (if the TERA payment is made directly to the landlord).

Glossary

Adjusted Income

Adjusted income is annual (gross income) reduced by deductions for dependents, elderly households, rredical expenses, disabled assistance expenses and child care (these are the same adjustment factors used by the Section 8 Program). Adjusted income is used in the HCME Program to compute the actual tenant payment in tenant-based rental assistance programs.

Affordability

As used in this guide, affordability refers to the requirements of the HCME Program that relate to the cost of housing both at initial occupancy and over established timeframes, as prescribed in the HIME Final Rule. Affordability reqaire-ments vary depending on the nature of the HCME-assistedactivity (i.e., hcmeownership or rental housing).

Annual (Gross) Income

The HCME Program allows the use of one of the three definiticns of income: Section 8 annual income (as defined under 24 CFR Part 5); annual income as reported en the U.S. Census Long Form; and adjusted gross income as defined for the purposes of reporting on IRS Form 1040.

Commitment

The written, legally binding agreement between the participating jurisdiction (or other entity) and the project owner providing the HCME Program funds to aproject. For tenant-based rental assistance, the commtrrent is the rental assistance contract between tte participating jurisdiction (or other entity) and the tenant or owner. Once a commitment occurs, HOD expects construction to start era purchase to oxur within twelve (12) months. HUD recognizes the commitment when the project is set up in the Integrated Disbursement and Information System.

Community Housing Development Organization ("CHDO")

A private, nonprofit organization that meets a series of qualifications prescribed in the HCME Program regulations. CHDOs must receive at least fifteen percent (15%) of a participating jurisdicticn' s annual allocation of HCME Program funds. CHDO's may own, develop or sponsor HCME Program-financed housing.

Consolidated Plan

A plan prepared in accordance with the requirements set forth in 24 CFR Part 91, which describes comrunity needs, resources, priorities and proposed activities to be undertaken under certain HUD programs, including the HOME Program.

Development

A site or an entire building or two (2) or more buildings, together with the site or sites en which the building are located, that are under cemrcn ownership, management and financing and are to be assisted with HCME Program funds-under ccftmitment by the owner-as a single undertaking.

Development Fees

Compensation to the developer for developing the property, includes overhead and profit, cen-sult/prcoessing agent fees, project admriistra-ticn, the value of personal guarantees and a portion of any reserves determined by the housing credit agency to be in excess of industry norms.

Eligibility Criteria

Property characteristics, tenant income limits and rraximm rent levels, which qualify a project as eligible for the LLHIC.

Equity

The value of a property less the amount of outstanding debt en it.

Financing Plan

The proposed f inarcing for a project.

General Partner

A partner who is liable and responsible for ccm-pleting a project as proposed, rranaging the partnership and guaranteeing funding required to catplete the project. A general partner oversees construction, leasing and property rcanagement; rraintains the books and records of the partnership; and submits periodic reports to the limited partners en the project's financial status.

General Partnership

A form of ownership in which all partners participate raaterially in the partnership's operations and share liability.

HOME Program-Assisted Units

Units within a HOME Program project where HOME Program funds are used and rent, occupancy and/or resale restrictions apply.

HOME Program funds

All appropriations for the HOME Program, plus all repayments and interest or other return en the investment of these funds.

Housing Investment Partnerships Act ("HOME Program")

The act that created a fornula-based allocation program intended to support state and local affordable housing programs. The goal of the program is to increase the supplyof affordable rental and ownership housing through acquisition, cen-structicn, reccnstructicn, andrtcderatecrreha-bilitation activities (Title I, National Affordable Housing Act of 1990).

HUD

U.S. Department of Housing and Urban Development.

Interest Subsidy

The amount of subsidy required to reduce the interest rate en a lean to a belcw-market rate ever the term of the lean.

Limited Partner

A passive investor in a limited partnership who, in ©change for ccntributing equity to the project, receives a pro rata share of cash flew and tax benefits and the right to approve the sale or refinancing of the property and removal of the general partner in the event of gross negligence or breach of contract.

Limited Partnership

An ownership vehicle comprising limited and general partners that allows for central management but has no tax liability, instead passing tax benefits through to its limited and general partners.

Low-Income Family/Person

Family or person whose annual (gross) income does not exceed eighty percent (80%) of the median inccrte for the area (adjusted for family size). HUD may establish, en an exception basis, income ceilings higher or lower than eighty percent (80%) of the median income for an area.

Managing General Partner

The general partner responsible for the day-today management of a limited or general partnership.

Moderate Rehabilitation

The cost of a rehabilitation project that costs $25,000 or less.

National Affordable Housing Act of 1990 ("NAHA")

Enacted by Congress to authorize the HOME Investment Partnership Act program, the National Homeownership Trust program, and programs to amend and extend certain laws relating to housing, cocrmunity and neighborhood preservation and related programs.

Net Operating Income/ (Surplus Cash)

The operating income derived by the project owner from development cash flow (excluding interest income earned en tenant security depos-

its and reserve accounts) which exceeds operating expenses. Operating expenses include: salaries of on-site property managers, management fees, accounting services, lean repayments, amounts deposited into a replacement reserve account, travel expenses, legal services, insurance expenses, utility expenses, of f ice supplies, rental and maintenance (but not purchase) of office space, and developers' fees, each specifically related to the development (See ADFA Form to calculate NOI and surplus cash payments included in the Forms section of this manual).

New Construction

For purposes of the HOME Program, new construction is any project with commitment of HCME Program funds made within one (1) year of the date of initial certification of occupancy. Any project that includes the creaticn of additional dwelling units outside the existing walls of a structure is also considered new construction.

Parti cipating Jurisdiction ("PJ")

The term given to any state, local government or consortium that HUD has designated to administer a HCME Program. HUD designation as a PJ occurs if a state or local government meets the funding thresholds, notifies HLD that it intends to participate in the program and obtains approval by HUD of its Consolidated Plan.

Partnership Agreement

A legal document that specifies the rights and respcnsibilities of the general and limited partners and governs the ongoing relationship between these parties.

Project

A site or an entire building or two (2) or more buildings, together with the site or sites en which the building are located, that are under carmen ownership management and financing and are to be assisted with HCME Program funds - under a commitment by the owner - as a single undertaking.

Recapture

Losses of HCME Program funds due to lack of performance with applicable performance standards as defined under General Requirements in Section 0 of this manual.

Reconstruction

The rebuilding, en the sate lot, of housing standing on a site at the time of project ccmritment. The number of housing units on the lot may not be decreased or increased as part of the reccn-structicn project, but the number of rooms per unit may be increased or decreased. Ftecenstrue-ticn is considered to be rehabilitation for the purposes of ADFA' s Homeownership Housing Program.

Restrictive Covenant

A limitation placed on a property, which is recorded and attached to the deed, thereby passing to subsequent owners.

Section 8 Tenant-Based Rental Assistance Program

A federal program that provides rental assistance to low-incore families who are unable to afford market rents. Assistance is provided in the form of vouchers.

Soft Costs

Development costs exclusive of the cost of acquisition, site iitprcvements, construction and ccntingencies.

Soft Second Mortgage

A loan provided by public and nonprofit lenders at below-rrarket interest rates and with flexible repayment terms, using as collateral a second ncrtgagecnthepoojectpaxperty, to fill a financial gap for a project serving a public purpose (for instance, affordable housing).

SRO Housing

A type of congregate housing in which each resident has a private room by shares common areas (such as dining and living roars) with other residents.

State Recipient

Any unit of local government designated by a state to receive HCME Program funds. The state is responsible for ensuring that HCME Program funds allocated to state recipients are used in accordance with the HCME Program regulations and other applicable laws.

Subrecipient

A public agency or nonprofit organization selected by a participating jurisdiction to admnis-terallcraport±ncf trepart±ipat±Tgju^ HCME Program. A public agency or nonprofit organization that receives HCME Program funds solely as a developer or owner of housing is not a subrecipient.

Substantial Rehabilitation

The cost of a rehabilitation project that costs more than $25,000.

Surplus Cash (Net Cperating Income-NOI)

The operating income derived by the project owner from development cash flew (excluding interest income earned en tenant security deposits and reserve accounts) which exceeds cperating expenses. Cperating expenses include: salaries of on-site property managers, management fees, accounting services, lean repayments, amounts deposited into a replacement reserve account, travel expenses, legal services, insurance expenses, utility expenses, of f ice supplies, rental and maintenance (but not purchase) of office space and developers' fees, each specifically related to the development.

Syndicates

Individuals or firms who arrange for the sale of ownership shares in a project to raise equity from investors.

Targeting

Requirements of the HCME Program relating to the income or other characteristics of households that may occupy HCME Program-assisted units.

Tenant-Based Rental Assistance ("TBRA")

A form of direct rental assistance in which the recipient tenant may move from a dwelling unit with a right to continued assistance. Includes security and utility deposits associated with the rental of dwelling units.

Total Development Cost ("TDC")

The sun of all costs for site acquisition, relocation, demolition, construction and equipment, interest and carrying charges.

Very Low-Income Family

Family whose annual (gross) income does not exceed fifty percent (50%) of the median income for the area (adjusted for family size). HUD may establish income ceilings higher or lower than fifty percent (50%) of median income for an area en an exception basis.

(8/26/2004)

The following state regulations pages link to this page.