RULE 109.00.09-001 - Neighborhood Stabilization Program (NSP)

RULE 109.00.09-001. Neighborhood Stabilization Program (NSP)

I. Introduction

The Neighborhood Stabilization Program (NSP) for Arkansas is authorized by the Housing and Economic Recovery Act ("HERA") (Public Law 110-289), which was signed into law on July 30, 2008. Originally introduced as HR 3221, HERA Division B, Title III establishes the NSP grant under the Emergency Assistance for Redevelopment of Abandoned and Foreclosed Homes heading. NSP was revised in February 2009 with the passage of the American Recovery and Reinvestment Act of 2009 (ARRA). The NSP is administered by the U.S. Department of Housing and Urban Development ("HUD") and is considered a special Community Development Block Grant ("CDBG") allocation. CDBG allocations for Arkansas arc administered by statute by the Arkansas Economic Development Commission ("AEDC"). Arkansas was allocated $19,600,000 in NSP funds by HUD.

Arkansas Development Finance Authority ("ADFA") has been designated by AEDC as administrator of NSP funds for the State of Arkansas. This designation is by virtue of a Memorandum of Understanding (MOU) executed by AEDC and ADFA dated October 7, 2008.

ADFA will administer NSP effectively and efficiently under the housing conditions that exist in the State of Arkansas (the "state") and with all practical safeguards against waste or fraud. ADFA will practice and advocate innovation, flexibility, and expansion in program design to address unmet housing needs and to address foreclosed and abandoned properties throughout the state. To that end, this policy and procedures manual is presented to provide an overview of ADFA policies and procedures as they pertain to NSP and step-by-step guidance on the implementation of NSP projects in the State of Arkansas. This manual is organized into the following sections:

IIPurpose of the Neighborhood Stabilization Program

III. General Requirements of NSP

IV. The NSP Rental Housing Program

V. The NSP Homcownership Housing Program

VI. Glossary

VII. Appendix I (Needs Score)

This manual is not meant to be a substitute for NSP regulations, but as a supplement to them. It is not exhaustive regarding all considerations affecting the use of NSP funds. While careful consideration and due care has been used in developing the manual, NSP participants are encouraged to consult with NSP staff to ensure correct interpretation of policies and regulations. ADFA reserves the right to implement additional policies as needed.

II. Purpose of the Neighborhood Stabilization Program

The Neighborhood Stabilization Program (NSP) is authorized by the Housing and Economic Recovery Act ("HERA") (Public Law 110-289) and requirements contained in the HUD Federal Register Notice published October 6, 2008 (Docket No. FR-5255-N-01) and as revised in a "Bridge Notice" published June 15, 2009 (Docket No. FR-5255-N-02). (The Bridge Notice includes changes from the American Recovery and Reinvestment Act of 2009 (ARRA).)

The primary purpose of NSP is to provide emergency assistance for the state to acquire and redevelop foreclosed properties that might otherwise become sources of abandonment and blight within their communities. Arkansas' NSP program provides loans to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop homes in order to stabilize neighborhoods and stem the decline of house values in neighboring homes.

As the administrator of the state of Arkansas' NSP funds, ADFA has designed its programs into two main categories-the NSP Rental Housing Program and the NSP Homeownership Housing Program.

III. General Requirements of NSP

A. Allocation of Funds

NSP funds committed to the state of Arkansas will be allocated as promulgated in the State of Arkansas' 2009 Amendment to the Consolidated Plan. In addition, the state may spend up to ten percent (10%) of its NSP allocation and 10% of any program income for administrative and planning expenses.

ADFA anticipates that the amount of funds that will be applied for and approved will vary with the needs and capacity of local organizations in different areas of the state. ADFA is required to ensure that funds are used to address the areas of greatest need in terms of foreclosure. Therefore, ADFA will review and rank applications based on the Proposal Scoring Criteria, outlined in the Consolidated Plan Amendment for NSP and attached as Appendix I to this document. See also Section C "Application Selection Criteria" below.

In addition, ADFA is required to ensure that all NSP funding is obligated within 18 months following the execution of the NSP grant agreement with HUD, which occurred in March 20, 2009. Therefore, ADFA reserves the right to award funds to projects that are "ready to go'1 and to further adjust contracted amounts based upon actual performance and progress to obligate the funds within the initial 18 months of the grant agreement date or by September 20, 2010.

B. Eligible Applicants

NSP funding is available statewide to entitlement cities, participating jurisdictions, ADFA-designated Community Housing Development Organizations ("CHDOs"), non-profit organizations, for-profit organizations, developers, units of local government provided the entity is in good standing with ADFA, the State of Arkansas, and the applicants' respective regulating agencies.

A letter of support from the chief elected official (CEO) of the applicable local jurisdiction must be provided with each application for NSP funds.

The eligible applicant is the entity responsible for the NSP application, project development, project implementation, and accountability for uses of all NSP funds. The eligible applicant must adhere to required compliance and monitoring of all NSP activities for the full applicable affordability period. ADFA will allocate NSP funds to the approved eligible applicant as outlined in the NSP Program Agreement.

C. Application Selection Criteria

NSP funds awarded in Arkansas will be allocated on the basis of established need, capacity of the applicant, and quality and content of complete applications received by ADFA by application deadline. As mandated by HERA NSP regulations, priority in Arkansas is given to the areas having the greatest instance of foreclosures. Since NSP funds are intended to stabilize neighborhoods, only applications for eligible activities in existing neighborhoods will be considered. The NSP is not intended and shall not be used for properties that are a part of new developments which were overbuilt as determined by ADFA. ADFA reserves the right in its sole and absolute discretion to determine the level of existing neighborhood destabilization when considering proposals.

The Proposal Scoring Criteria includes the following:

1. Need - The proposal must clearly demonstrate the specific areas to be assisted and the rationale for why this area and the specific properties have been or will be negatively impacted by foreclosure activity.

2. Capacity - The proposal must provide substantial information on the identity, location, and capacity of ALL partners who will be participating in NSP activities. The proposal must also fully demonstrate the ability of the applicants) to satisfactorily complete the proposed eligible CDBG activities within specified time lines. The applicant must provide specific examples of successful completion of the same or similar activities using CDBG, HOME, or other federal housing resources.

3. Financing - The proposal must clearly delineate the TOTAL resources expected to be used to complete the NSP activities proposed, including the exact amount of NSP funds requested in the proposal. All funding sources must be documented by firm financial commitments of the proposed amounts and uses of the funds. Leveraging of additional funds to NSP funds will be considered when reviewing and scoring the proposal.

4. Quality of plan - The proposal should clearly demonstrate the reasonableness of the proposed activities and funding in accomplishing the desired neighborhood stabilization results. Each proposal must require each NSP-assisted homebuyer to receive and complete at least eight (8) hours of homebuyer counseling provided by a HUD-approved housing counseling agency prior to obtaining a home mortgage loan.

5. Ultimate neighborhood stabilization goals - The proposal should specifically list units to be assisted and beneficiaries anticipated for assistance by the full scope of the submitted proposal. Include expected neighborhood stabilization benefits, number, type, and location of housing to be assisted, and number of expected eligible persons to benefit from NSP-funded activities.

6. Time of Performance ~ The proposal must include a reasonable and realistic time line for implementation of eligible activities, progress on those activities, and completion of ALL activities included in the proposal, including sale or rental of housing assisted using NSP funds.

D. Application Deadlines

ADFA will receive proposals through Tuesday, September 1, 2009. ADFA staff will review, evaluate, score, and make recommendations for approval to ADFA's Board of Directors for consideration at its regularly scheduled meeting on Thursday, November 19, 2009. If additional information is required by staff, the applicant must submit the documentation within thirty (30) calendar days of application deadline.

ADFA will develop and execute NSP agreements, committing NSP funds to the selected applicants by Thursday, December 31, 2009. Dependent upon the level of demand and award of NSP funds, ADFA reserves the right to extend the referenced time lines or establish additional funding rounds as necessary.

Note: Board Housing Review Committee approval, contingent upon aeceptable URA

appraisal.

E. Application Technical Assistance

Applicants may receive technical assistance by attending an informational training session prior to submitting an application. Sessions will address NSP and ADFA guidelines as well as application procedures. ADFA staff is also available to meet with applicants to provide technical assistance. Applicants must contact ADFA staff to establish a mutually convenient date, time, and venue.

F. Amendments to Applications

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

G. Eligible Activities

ADFA will distribute NSP funds for the following eligible activities:

1. Acquisition of abandoned and foreclosed properties

2. Rehabilitation of acquired abandoned and foreclosed properties

3. Demolition of blighted abandoned and foreclosed structures acquired using NSP funds for the purpose of rehabilitation or construction of housing

4. Reasonable developer's fees related to NSP-assisted housing rehabilitation or construction activities

5. New construction of affordable housing for sale or rental to eligible homebuyers/tenants

6. Sale of residential properties acquired or acquired/rehabilitated using NSP funds

7. Rental of residential properties acquired or acquired/rehabilitated using NSP funds

8. Payment of reasonable down payment and closing cost assistance

9. Interest rate buy-down for fixed-rate first mortgages for eligible purchasers

10. General administration and planning activities

11. Provision of homebuyer counseling to all purchasers of properties constructed, acquired, or acquired/rehabilitated with NSP funds

For puiposes of implementing the NSP, an abandoned property is defined as such when all the following apply:

1) Mortgage or tax foreclosure proceedings have been initiated for that property, and

2)No mortgage or tax payment have been made for the property owner for at least ninety (90) days, and

3)The properly has been vacant for at least ninety (90) days.

For purposes of implementing the NSP, a foreclosed property is defined as a property that, under state or local law, has a completed mortgage or tax foreclosure process and is currently owned by the lender or mortgagee. A foreclosure is not considered to be complete until after the property title has been transferred from the former owner under a foreclosure proceeding or transfer in lieu of foreclosure.

These and other definitions may be found in the Glossary at the end of this manual.

NSP Eligible Use*

CBBG Eligible Activities

Type(s) of Properties

A) Financing mechanisms for purchase & redevelopment of foreclosed homes & residential properties

1 Activity delivery cost for an eligible activity (designing & setting it

UP) Si The financing of an NSP eligible activity - such as soft second loans, loan loss reserve, equity sharing

M Other activities eligible in uses below ffl Housing counseling for those seeking to take part in the activity

Foreclosed residential properties only

38) Purchase and rehabilitate homes and residential properties that have been abandoned or foreclosed upon, in order to sell, rent, or redevelop such homes and properties

IE Acquisition

M Disposition

W Relocation

M Direct homeownership assistance

M Eligible rehabilitation and preservation activities for homes and other residential properties

B Housing counseling for those seeking to take part in the activity

Foreclosed or abandoned residential properties only

D) Demolish blighted structures ONLY in connection with one of the other eligible uses

M Clearance of blighted structures only in conjunction with one of the above activities

Any, but must be blighted

E) Redevelop demolished or vacant properties

M Acquisition

^ Disposition

M Public facilities and improvements

m Housing counseling public services (limited to purchasers or tenants of redeveloped properties)

M Relocation

M New housing construction

M Direct homeownership assistance

W Housing counseling for those seeking to take part in the activity

Any, but property must be vacant

* NSP Eligible Use C - Land Banking is not allowed under the Arkansas NSP.

H. Meeting the Low-Moderate-Middle Income (LMMI) National Objective

All NSP-funded activities must meet HERA's Low-Moderate-Middle Income (LMMI) National Objective, which means to primarily benefit LMMI households. LMMI households are defined as households whose incomes do not exceed 120% of area median income, adjusted for family size (measured as 2.4 times the current Section 8 income limit for households below 50% of area median income, adjusted for family size). All households assisted using NSP funds shall have incomes which do not exceed 120% of area median income, adjusted for family size.

NOTE that if funding is used in areas that are CDBG entitlement communities (e.g., Bcntonville, Conway, Fayetteville, Fort Smith, Hot Springs, Jacksonville, Jonesboro, Little Rock, North Little Rock, Pine Bluff, Rogers, Springdale, Texarkana, and West Memphis), area median income limits issued for that area apply (as opposed to the statewide limit).

Documentation that the national objective has been met must be completed when the project is funded. The income of each household will be determined and documented using the Part 5 (Section 8) definition of income identified in HUD's "Technical Guide for Determining Income and Allowances for the HOME Program" published in January 2005. This guide can be found at the following link: http://www.hud.aov/officcs/epd/affordablehousine/librarv/modclguides/1780.cfm.

For 2-unit structures, at least one of the units must be occupied by a LMMI household. For multi-family rental structures of three or more units, a proportional share of the units must be occupied by LMMI households. (NOTE that this is different than the regular CDBG program requirements.) For example, if the total development cost is $1 m and NSP is providing $750,000, seventy-five percent (75%) of the units must be occupied by LMMI households.

NSP further requires that not less than twenty-five percent (25%) of the total NSP funds allocated to the State shall be utilized to provide permanent housing for households with incomes at or below fifty percent (50%) of the AMI.

I. Administrative and Project Delivery Costs

Units of local government and nonprofit entities acting as subrecipients are allowed to incorporate eligible NSP administrative costs. Eligible administrative costs are costs associated with administering the grant that are NOT directly related to the project itself. For example, a portion of the salary of a staff person that will oversee the NSP-funded program (carry out budgeting, reporting, general oversight) is an administrative cost. Project specific costs such as appraisals, title searches, etc. are considered project costs.

The maximum amount that can be requested for administrative 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 NSP allocation in the proposed development budget. Any amounts requested for project delivery costs may be in addition to the requested NSP allocation amount. The NSP allocation may not include both a consultant fee and a project delivery cost reimbursement.

All for-profit entities are considered developers and nonprofit entities acting as developers (carrying out acquisition and rehabilitation activities only as defined by HUD) are NOT allowed to receive funding for administrative costs but may include eligible project delivery costs and a reasonable developers' fee in the requested NSP allocation amount (as supported by a budget).

J. Funding Disbursement

Following ADFA Board approval of the NSP application, the following processes will apply:

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

a. Required environmental review process must be satisfactorily completed.

b. Project closing documents shall reflect a project completion date acceptable to ADFA and the recipient of the NSP funds. The NSP Agreement will outline the payment of the NSP funds, (e.g., how the funds will be disbursed, i.e., prorate share, etc.) The NSP Agreement must contain provisions for the timing of NSP

fund disbursements.

c. ADFA staff must complete all Disaster Recovery Grant Repotting (DRGR)

system set up procedures.

d. A pre-construction conference is held. For rental activities the pre-construction conference must be conducted with the development team and an ADFA representative. For homebuyer activities the pre-construction conference must be conducted with the development team and an ADFA Inspector.

e. ADFA must issue a Notice to Proceed. To ensure that all NSP 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 IS UNDERWAY.

2. Retainage wilt 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 completion documentation will be required prior to ADFA's release of retainage:

© All DRGR set up procedures complete by ADFA staff

© Certification of release of liens

© Hazard insurance

® Certificate of Occupancy issued by local jurisdiction, if applicable

© Certification of final inspection, Plumbing Certification, and Electrical Certification

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

* ADFA staff must complete all DRGR set up procedures

© Certification in release of liens

© Hazard Insurance

© Certification of Occupancy issued by local jurisdiction, if applicable, and

© Certification of final inspection, Plumbing Certification and Electrical Certification

If any NSP-funded project has an available balance after development completion and release of reiainage, ADFA will deobligate those funds and reallocate such balance of NSP funds to other eligible activities according to ADFA's adopted NSP allocation process. ADFA must ensure that all NSP funds are obligated within 18 months after the execution of the grant agreement (March 20, 2009) with HUD or by September 20, 2010.

K. Reimbursement for Pre-Award Costs

Per OMB Circular A-87, Attachment B, paragraph 31 and HUD NSP regulations, ADFA may incur pre-award costs as if Arkansas was a new grantee preparing to receive its first allocation of CDBG funds. The date of pre-award costs is the date of submission of the Consolidated Plan Amendment, which is December 1, 2008.

Therefore, predicated on that authority, ADFA will allow NSP funds to be used to reimburse eligible pre-award costs to entities approved for an award of NSP funds, contingent upon the pre-award costs being included and documented in the applicant's proposal and adherence to all applicable requirements such as environmental review and the Uniform Relocation Act (URA). If the entity is NOT approved for an award of NSP funds, no reimbursement for pre-award costs will be allowed. Examples of allowable pre-award costs include, but are not limited to, appraisal fees, costs of a market study, costs of feasibility studies, and preparation of rehabilitation cost estimates.

Note: The most stringent requirements of any source of funds will apply to the project.

L.Combining NSP with Other Forms of Funding Assistance NSP funds should be used efficiently and encourage partnerships between public and private entities. In keeping with this mission, ADFA requires that recipients leverage their NSP allocation to the greatest extent possible with funds from other sources. For example, three such sources include: USDA Rural Development, Low Income Housing 1'ax Credits, and the HOME Program. ? To obtain information about the programs offered by Rural Development, please contact USDA Rural Development, Attention: Multi-Family Department, 700 West Capitol, Little Rock, AR 72201. © To obtain information about ADFA's Low Income Housing Tax Credit Program, please contact ADFA, Attention: Multi-Family Department, 423 Main Street, Suite 500, Little Rock, AR 72201. ? To obtain information about ADFA's HOME Program, please contact ADFA, Attention: HOME Program Manager, 423 Main Street, Suite 500, Little Rock, AR, 72201.

M. Performance Standards and Recapture of Funds

It is imperative that funds allocated to participants be used as quickly as possible and in the most efficient manner. Therefore, seventy-five percent (75%) of total NSP funds allocated must be disbursed on the development within one year from the date of the notice to proceed to a development. If these performance standards arc not met, any unspent NSP funds may be recaptured and reallocated to fund other affordable housing developments.

For developments applying for both NSP funds and LJHTC, any allocation of NSP funds is contingent upon the successful reservation of LIHTC.

Applicants approved for funding that do not complete the required number of units will be considered in default of their NSP Agreement. ADFA will recapture allocated funds that have not been used in accordance with these performance standards and NSP regulatory commitment and disbursement requirements. These funds will be placed back into the pool of funds that are available to fund other eligible NSP activities.

N. Requirements for Subrecipients

If a non-profit organization is awarded funds for the acquisition and rehabilitation of residential property, the non-profit is considered a developer. However, in all other cases, a non-profit is considered a subrecipient. Subrecipients may be government entities or non-profits. Subrecipients are subject to comprehensive administrative and financial management requirements similar to ADFA, and ADFA is required to monitor the organizations for compliance.

Subrecipients that arc government agencies are subject to the requirements set forth in OMB Circular A-87 "Cost Principles for State and Local Governments," certain provisions of 24 CFR Part 85 "Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments," and A-133 "Audits of State and Local Governments and Nonprofit Organizations." Subrecipients that are nonprofit organizations are subject to OMB Circular A-122 "Cost Principles for Nonprofit Organizations," certain provisions of 24 CFR Part 84 "Grants and Agreements with Institutions of Higher Learning, Hospitals and Other Nonprofit Organizations," and A-133 "Audits of State and Local Governments and Nonprofit Organizations."

Subrecipients are required to comply with the requirements set forth in the subrecipient agreement signed by the ADFA and the subrecipient. As required by 24 CFR 570.501(b), ADFA will monitor subrecipients to ensure that NSP funds are being used in accordance with all program requirements and that subrecipients arc adequately performing as required under subrecipient agreements and procurement contracts. If performance problems arise, ADFA will take appropriate actions as described in 24 CFR 570.910.

See also Section I. Administrative and Project Delivery Costs.Z

O. Acquisition of Properties Using NSP Funds Acquisition, Sales Contracts, and Obligations ADFA must have executed sales contracts for specific properties for funds to be considered obligated. Options or other non-binding instruments are not acceptable. Arrprjaisjy^anj^ Properties with an anticipated value exceeding $25,000 and acquired using NSP funds shall be appraised in conformity with the appraisal requirements of the Uniform Relocation Act (URA) at 49 CFR 24.103 by a licensed appraiser within sixty (60) days prior to an offer to purchase the property. Further guidance may be found at

http://www.hud.gov/offices/cpd/commiinitydevclopment/programs/nciahborhoodspg/docs/apprai sal guidance.doc. The market appraised value of properties with an anticipated value of $25,000 or less may be established based on a review of available data and shall be made by a person knowledgeable of and with experience in property valuation that ADFA determines is qualified to make the valuation.

NSP requires that properties acquired using program funding be purchased at a discount of at least 1% from the current market appraised value of the home or property. ADFA will require documentation to ensure the discount requirement is met including the address, appraised value, purchase offer amount and discount amount for each property. The discount value calculation may take into account the likely carrying costs of the mortgagee if it were to NOT sell the property to the applicant. Carrying costs may include: taxes, insurance, maintenance, marketing, overhead and interest.

No acquisition of single-family dwellings will be allowed for property in excess of Federal Housing Administration (FHA) limits, currently set at $271,050.

Voluntary Transactions and Tenants

ALL NSP-assisted property acquisitions must be voluntary acquisitions. Taking of property through eminent domain proceedings is NOT allowed. The Uniform Relocation Act requires that notices are provided to property owners even those considered to be voluntary transactions. The notices can be found at: http://www.hud.gov/offices/cpd/library/relocation/nsp/index.cfm.

URA and Section 104(d) and 5305(a)(l 1) of Title I of the Housing and Community Development Act of 1974, as amended, and the implementing regulations at 24 CFR Part 570.496(a) (the Barney Frank Amendment) govern the permanent displacement as well as temporary relocation of tenants in properties funded by NSP. For more information, refer to http://www.hud.gov/offices/cpd/library/relocation/nsp/indcx.cfm. In addition, ARRA includes additional provisions protecting the rights of property owners and "bona Fide" tenants. Refer to Section P below for more information.

Acquisition of a Property for Another Party

ADFA may not provide NSP funds to another party to finance an acquisition of tax foreclosed (or any other) properties from itself, other than to pay necessary and reasonable costs related to the appraisal and transfer of title. If NSP funds are used to pay such costs when the property owned by ADFA is conveyed to a sub-recipient, homebuyer, developer, or other jurisdiction, the property is NSP-assisted and subject to all program requirements, such as requirements for NSP-eligible use and benefit to income-qualified persons.

Resale of Property to Homebuyers

Bach awardee of NSP funds must maintain sufficient documentation on the acquisition and sale of each property to enable ADFA and HUD to determine compliance with the requirement to sell each property to homebuyers at an amount equal to or less than the cost to acquire and redevelop the property (not including holding costs).

Purchase of FHA-Foreciosed Properties

Per NSP regulations, HUD strongly urges every community to consider and include FHA-foreclosed properties in their NSP programs. The nature and location of many FHA-foreclosed properties make them compatible with the eligible uses of NSP funds, the geographic areas of greatest need, and the income eligibility thresholds and limits.

P. Tenant Rights and Protections

The following requirements apply to any foreclosed upon dwelling or residential real property that was acquired by the initial successor in interest pursuant to the foreclosure after February 17, 2009 and was occupied by a bona fide tenant at the time of foreclosure.

e The initial successor in interest in a foreclosed upon dwelling or residential real property shall provide a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice. The initial successor in interest shall assume such interest subject to the rights of any bona fide tenant, as of the date of such notice of foreclosure:

(i) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90-day notice under this paragraph; or

(ii)without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90-day notice under this paragraph, except that nothing in this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any Slate or local law that provides longer time periods or other additional protections for tenants.

? In the case of any qualified foreclosed housing in which a recipient of assistance under Section 8 of the United States Housing Act of 1937 (42 U.S.C 1437f) (the "Section 8 Program") resides at the time of foreclosure, the initial successor in interest shall be subject to the lease and to the housing assistance payments contract for the occupied unit.

e Vacating the property prior to sale shall not constitute good cause for termination of the tenancy unless the property is unmarketable while occupied or unless the owner or subsequent purchaser desires the unit for personal or family use.

e If a public housing agency is unable to make payments under the contract to the immediate successor in interest after foreclosure, due to (A) an action or inaction by the successor in interest, including the rejection of payments or the failure of the successor to maintain the unit in compliance with the Section 8 Program or (B) an inability to identify the successor, the agency may use funds that would have been used to pay the rental amount on behalf of the family-(1) to pay for utilities that are the responsibility of the owner under the lease or applicable law, after taking reasonable steps to notify the owner that it intends to make payments to a utility provider in lieu of payments to the owner, except prior notification shall not be required in any case in which the unit will be or has been rendered uninhabitable due to the termination or threat of termination of service, in which case the public housing agency shall notify the owner within a reasonable time after making such payment; or (2) for the family's reasonable moving costs, including security deposit costs.

A lease or tenancy shall be considered bona fide only if:

(i) the mortgagor under the contract is not the tenant;

(ii)the lease or tenancy was the result of an arms length transaction; and

(iii)the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property.

ADFA will maintain documentation of its efforts to ensure that the initial successor in interest in a foreclosed upon dwelling or residential real property has complied with the requirements under section K.2.a. and K.2.b. If ADFA determines that the initial successor in interest in such property failed to comply with such requirements, it may not use NSP funds to finance the acquisition of such property unless it assumes the obligations of the initial successor in interest specified in section K.2.a. and K..2.b. if ADFA elects to assume such obligations, it must provide the relocation assistance required pursuant to 24 CFR 570.606 to tenants displaced as a result of an activity assisted withNSP funds and maintain records in sufficient detail to demonstrate compliance with the provisions of that section.

The recipient of any grant or loan made from NSP funds may not refuse to lease a dwelling unit in housing with such loan or grant to a participant under the Section 8 Program because of the status of the prospective tenant as such a participant.

This section shall not preempt any Federal, State or local law that provides more protections for tenants.

Q. Energy Efficiency

To the extent feasible, ADFA will strongly encourage grantees to incorporate modern, green building, and energy-efficiency improvements in all NSP activities to provide for long-term affordability and increased sustainability and attractiveness of housing and neighborhoods.

R. Other Federal Requirements 2 Executive Orders 11625, 12432, and 12138 require that participating jurisdictions and local programs must prescribe procedures acceptable to IIUD 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.

NSP awardees and funded projects must adhere to all applicable other Federal requirements as outlined in 24 CFR part 570, HERA, ARRA, and NSP guidance from HUD. Key requirements are summarized below.

Equal Opportunity and Fair Housing

The state shall not exclude any organization or individual from participation under any program funded in whole or in part by NSP funds on the grounds of age, disability, race, creed, color, national origin, familial status, religion, or sex.

The following federal requirements as set forth in 24 CFR 5.105(a), Nondiscrimination and Equal Opportunity, are applicable to NSP projects:

Fair Housing Act

24CFR 100

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

24CFR 107

Title VI of the Civil Rights Act of 1964 (Nondiscrimination in Federal 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 1968'

24 CFR 135

Executive Order 11625, as amended (Minority Business Enterprises)

  

Executive Order 32432, as amended (Minority Business Enterprises)

  

Executive Order 12138, as amended (Women's Business Enterprise)2

  

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

Affirmative Marketing

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

© Methods for informing the public, owners, and potential tenants about fair housing laws and the policies of the local program e A description of what owners and/or the program administrator will do to affirmatively market housing assisted with NSP funds

® A description of what owners and/or the program administrator (e.g.., community development director) will do to inform persons not likely to apply for housing without special outreach 1 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.

® Maintenance of records to document actions taken to affirmatively market NSP-assisted units and to assess marketing effectiveness

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

Environ mental Review

In implementing NSP, the environmental effects of each activity must be assessed in accordance with the provisions of the National Environment Policy Act of 1969 and HUD's regulations at 24CFRPart58.

ADFA, as the NSP grantee, and the units of local government funded by ADFA will be responsible for carrying out environmental reviews for approved projects/programs. ADFA will approve the release of funds (ROF) for local governments and must request the release of funds (RROF) from HUD for any developments carried out by other types of entities. NSP 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 as part of the environmental review process.

Applicants/awardees of NSP funds may NOT execute contracts for purchase of properties that may be funded with NSP until receiving written authorization from ADFA to do so.

Flood Plains/Wetlands

NSP funds may generally not be invested in housing located in an area identified by the Federal Emergency Management Agency (FEMA) as having special flood hazards. ADFA discourages developments located in special flood hazard areas but, in some instances and with written permission from ADFA, 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. ADFA is willing to consider the proposed remedy and must approve the proposal in writing prior to approval of any NSP allocation. The community must be currently participating in the National Flood Insurance Program, and flood insurance must be obtained and maintained on the NSP-assisted property for the full period of affordability.

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 out for all developments constructed before 1978 and receiving NSP assistance. Applications for rehabilitation funds for existing buildings constructed prior to 1978 must include a lead hazard evaluation, by appropriate lead-certified personnel. The application must also include detailed lead hazard reduction plan, in accordance with the regulations, and separately identify within the rehabilitation budget, the costs associated with reduction of lead hazards in accordance with the regulation and guidelines. All NSP 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. In a development where NSP funds wil I be used on only a portion of the units, the lead-based paint requirements apply to ALL units and common areas in the development.

Labor Standards Davis-Bacon wage compliance and other federal laws and regulations pertaining to labor standards apply to all construction and rehabilitation contracts that are financed in whole or in part with NSP funds for residential property consisting of eight (8) or more NSP-assisted units. Davis-Bacon and related laws include the following:

* 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 203, et seq.)

The construction bids and contract for any NSP-assisted activity must 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.

Debarment and Suspension

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

Note: ADFA reserves the right to require criminal background checks for all program participants as part of the application process. Please refer to ADFA's agency policy and requirements for information regarding this item (See ADFA's QAP and/or HOME Policy Manual).

Relocation

NSP funds are intended ONLY for use in purchasing/improving properties that have been abandoned and foreclosed. As such, most properties are expected to be vacant at the time of appraisal and offer to acquire. Should there be residents in any foreclosed property considered for NSP assistance, potential awardees must follow the residential anti-displacement and relocation plans in effect and outlined in the State's approved Consolidated Plan and all applicable Uniform Relocation Assistance and Real Property Acquisition Act (URA) of 1970 provisions. Applicable regulations can be found at 49 CFR Part 24.

Audit

ADFA requires that local government and non-profit recipients expending more than $500,000 in Federal awards in a given fiscal year have an audit conducted in accordance with Generally Accepted Accounting Principals (GAAP) and the Single Audit Act Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations." An audit of NSP funds must be submitted to ADFA annually on or before June 30 each year.

S. Procurement

Local governments and subrecipient entities are required to adhere to all applicable procurement requirements in the selection and award of contracts for goods and services. Therefore, all solicitation of bids for goods and services to be paid with NSP funds must be conducted openly and competitively in accordance with Arkansas State Procurement guidelines, as applicable.

Developers are not subject to procurement requirements, but costs must be considered reasonable to be eligible under the program.

T. Contractor Requirements

All general contractors working on all NSP-funded developments must 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 may not "share" a license. That is, ADFA will not allow one contractor to work from another contractor's license.

All ADFA NSP-funded projects must have a general contractor that is properly licensed by the Arkansas State Contractor's Licensing Board. Any questions regarding licensing issues and a list of licensed contractors may be directed to the State Licensing Board at the following address:

Arkansas Contractor's Licensing Board 4100 Richards Road

North Little Rock, AR 72117 (501)372-4661

Any contractor or subcontractor 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 from participating in the NSP. All general contractors working on all NSP-funded developments must obtain one of the following:

(1) a payment and performance bond; or

(2)an Irrevocable Letter of Credit in the amount of the construction contract.

Note: Construction contracts for rehabilitation projects $25,000 or under will not be required to obtain a payment and performance bond or an irrevocable letter of credit.

U. Inspections

Inspections are required with all activities that are funded through the NSP. ADFA currently has inspectors that will be available as needed. Applicants must notify ADFA a minimum of 48 hours in advance to schedule inspections.

There are currently four (4) required inspections that are identified below:

Stage 1

Stage 2

Stage 3

Stage 4

Excavation

Plumbing top-out

Flooring systems

Final Inspection

Metals

Electrical rough-in

Painting

  

Termite treatment

Framing

Doors

  

Rough-in plumbing

Roof

Cabinets

  

Earth work

Interior wall systems

I-IVAC

  

Water proofing (vapor

Exterior wall systems

Electrical top-out

  

barrier)

Ventilation

Special construction

  

Footing

Insulation

(elevators, etc.)

  

Slab

  

Appliances

  

Rental housing development inspections may be scheduled more frequently, as warranted. The ADFA inspector must attend any pre-construction meetings for NSP-funded developments. For rehabilitation projects, when a project is ready for a draw on funds, the properly must be inspected and/or approved to verify that the work has been satisfactorily completed. ADFA will only make payments on work that has been satisfactorily completed, inspected and approved by an ADFA inspector.

Applicants may fax or mail their payment request, with all of the required documentation, to ADFA using the following contact information:

Arkansas Development Finance Authority

Attn: NSP Program Department

P.O. Box 8023

Little Rock, AR 72203-8023

FAX (501) 682-5859

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

V. Change Orders

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

W. Construction Contingency

ADFA allows up to ten percent (10%) of the NSP allocation for construction contingencies. A rehabilitation, reconstruction, or new construction activity, including contingencies, may not exceed the ADFA established per unit limits for the NSP.

X. Closing of Transactions

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

Y. Reporting Requirements

ADFA is required to submit quarterly performance reports to HUD no later than thirty (30) days following the end of each quarter, beginning 30 days after the completion of the first full calendar quarter after grant award (i.e., August 1, 2009) and continuing until all funds are expended and the program is closed out. Accordingly, all NSP awardees will be required to submit performance information to ADFA by established deadlines conducive for ADFA to meet its reporting requirements.

Performance information will include, but not be limited to, the following:

* Project name e Project activity

* Project location

* NSP Eligible use

© CDBG national objective

© Budgeted funds

? Expended funds

* Funding source e Total amount of any non-NSP funds

© Numbers of properties and housing units assisted

© Beginning and ending dates of activities

? Numbers of low, moderate, and middle-income persons or households benefiting

? Demographic data for households benefiting

In addition to this quarterly performance reporting, ADFA will report monthly on its NSP obligations and expenditures beginning 30 days after the end of the 15th month following receipt of funds, and continuing until reported total obligations are equal to or greater than the total NSP grant. After HUD has accepted a report from ADFA showing such obligation of funds, the monthly reporting requirement will end and quarterly reports will continue until all NSP funds (including program income) have been expended and those expenditures are included in a report to HUD.

To collect these data elements and to meet its reporting requirements, ADFA will use HUD's online DRGR system to report on its NSP funds to HUD. When it submits the report to HUD, ADFA will post a copy of the NSP DRGR report on a website for the public to review.

Reporting requirements are subject to change and additional specificity based on further guidance fromllUD.

Z. Program Income

All entities, government or private (as defined at 24 CFR 570.500(c)), that receive program income (as defined at 24 CFR 570.500(a)) directly generated by activities carried out with NSP funds must immediately remit any and all program income from NSP-assisted activities directly to ADFA, ADFA will disburse and use program income prior to requesting additional cash withdrawals from the U.S. Treasury,

AA. Monitoring

During the period of affordability, ADFA will perform on-site compliance and monitoring inspections of all single-family and multi-family developments utilizing NSP funds to determine compliance with the applicable regulations and requirements outlined in this manual and NSP

regulations.

IV. The NSP Rental Housing Program

Recipients utilizing funds in the NSP Rental Housing Program must closely adhere to all NSP regulations, as well as to ADFA's program-specific guidelines and adopted policies. Notwithstanding these requirements, program participants may structure their development and application for NSP Program funds to meet the specific rental needs of their community.

A. Eligible Applicants

ADFA will accept applications for projects up to the September 1, 2009 application deadline. Multiple NSP applications may be submitted for funding. ADFA will determine in its sole and absolute discretion if the applicant has the necessary capacity to complete any additional NSP applications submitted. Additional NSP applications submitted by eligible applicants will be approved only if the applicant exhibits the capacity to successfully complete all approved projects. ADFA will accept applications for rentals at a minimum of five (5) units, from entitlement communities, other units of local government, nonprofit organizations, or for-profit entities.

Eligible applicants may receive technical assistance by attending an information/training session prior to submitting an application. Sessions will address NSP Program and ADFA guidelines as well as application procedures. Applicant eligibility will be based on 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 affiliated entities.

B. Amount of NSP Funding Per Applicant

Each eligible applicant must request at least one hundred thousand dollars ($100,000). The maximum amount that can be requested for a developer's fee 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.

C. Eligible Activities and Projects

ADFA will accept applications in the NSP Rental Housing Program in the following eligible activity categories:

1. Acquisition - Acquisition of abandoned and foreclosed rental properties for the purposes of providing housing to NSP income eligible tenants.

2. Rehabilitation - Rehabilitation of abandoned and foreclosed rental properties for the purposes of providing housing to NSP income eligible tenants. This activity would be combined with acquisition of abandoned and foreclosed properties.

3. Demolition of Blighted Structures - Demolition of blighted structures to be replaced by units for rent by NSP income eligible tenants. This activity must be combined with acquisition of abandoned or foreclosed properties.

4. Reconstruction - Reconstruction of abandoned and foreclosed structures for the purposes of providing housing to NSP income eligible tenants. This activity would be combined with acquisition of abandoned and foreclosed properties.

5. New Construction - New construction of rental properties for the purposes of providing housing to NSP income-eligible homebuyers. The property upon which the structures are constructed must be either foreclosed or vacant, as defined by MSP.

Bach application must include a minimum of five (5) units.

All projects must aim to re-inhabit abandoned or foreclosed properties through their acquisition, rehabilitation, reconstruction, new construction, or some combination thereof. Eligible projects include multiple buildings on a single site as well as single or multiple units on scattered sites. Units may be on scattered sites but must be within the same jurisdiction.

ADPA will require all proposals to include no less than 25 percent of NSP funding requested to be designated for households at or below 50 percent of area median income. NSP funds may be UvSed for a mixed-income development provided that a pro rata of NSP-eligible units are occupied by households meeting the income limits of the NSP. Common area costs must be prorated based upon the number of NSP-assistcd units and non-NSP-assisted units.

A building that is designed, in part, for other than residential housing may qualify as affordable housing under the NSP as long as NSP funds are used for the residential portion and those units meet the rent and income limitations of the NSP (see F. Rent Limits and Project Affordability for more information.)

D. Eligible Costs

NSP Program funds may be used for certain development costs as dictated by 24 CFR Part 570 and outlined below:

1. Hard Costs - Eligible hard costs are the actual cost of constructing or rehabilitating housing. These costs include the following:

a. Construction, rehabilitation, or reconstruction of affordable housing units

b.Site improvements (including utility connection costs, but not the costs to provide utilities to the site)

c. Demolition (must be done in conjunction with a specific affordable housing project)

d. Acquisition

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

a. Finance related costs, i.e., credit reports, title reports and updates, appraisal fees, surveys, origination fees and discount points, and construction interest

b.Current market study (not more than six (6) months old)

c. Project audit costs

d.Professional services (architectural, engineering, and other services provided for a specific project; otherwise, the professional service costs may be considered to be administrative costs)

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

3. Relocation Costs - The cost of permanent or temporary relocation of tenants, as required by the URA.

4. Bridge Loans - Interim construction loans used to finance the NSP-assisted development with prior notification to ADFA.

Note: While ADFA 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 he denied if costs are deemed unreasonable.

5. Project Delivery Costs - Any nonprofit entity or local government receiving a NSP allocation may include project delivery costs (in an amount not to exceed 10% of the final NSP allocation) in the development budget. Project delivery costs are eligible only for costs directly associated with the NSP-funded development. A certification of costs must be submitted with all requests for project delivery costs. Participants must submit an itemized budget for project delivery costs as part of the initial application.

Proper documentation is essential for the payment of project delivery cost fund requests. Project delivery costs must be supported by source documentation maintained on tile by the recipient of NSP funds. Requests for payment of project delivery costs must be verified by the Certification of Costs (signed by the recipient) and not by the supporting documentation maintained by the recipient. Supporting documentation will be reviewed and verified by ADFA staff performing compliance and monitoring reviews.

Acceptable supportive documentation includes:

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

? No handwritten invoices will be accepted.

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

* ADFA will reimburse salaries which are "reasonable and customary" for support personnel (e.g., clerical, temporary employee, etc.) of the NSP participant directly providing project delivery costs to the affordable housing being assisted at a rate commensurate with their regular hourly wages.

® A copy of any contracts for professional services, (e.g., consultants, architects,

contractors, etc.), if applicable, must be provided in the initial application outlining the services to be rendered, the cost of the proposed services, and the proposed payment schedule or terms..

* Satisfactory documentation of fringe benefits being paid. Examples of fringe benefits include the following:

o Vacation/Sick/Holiday/Compensatory Time o Pensions o Veteran's Benefits o Group Insurance o Life Insurance/Long-term Disability o Accidental Death and Dismemberment Insurance o Profit Sharing Plan o Association/Union Dues

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.

E. Forms of Financial Assistance

ADFA caps the maximum subsidy for rental projects at $132,000 per unit or $158,400 per unit for properties listed on the National Register of Historic Places.

NSP allocations for rental housing activities will be in the form of a loan at 0% interest amortized over the period of affordability. The minimum affordability period may be extended at the owner's election.

F. Rent Limits and Project Affordability

All NSP Program funds must benefit households with incomes no greater than 120% of the area median income, adjusted for family size. Rents in all NSP-assistcd units must be set at "affordable rents," which are defined as follows:

o Low HOME Rent Limits: Tenant households with incomes < 50% of the AMI

o Tenant households with incomes between 50 and 60% of AMI: High HOME Rent Limits o Tenant households with incomes between 60 - 120% of AMI: HUD Fair Market Rent Limits

These rent limits and area median incomes are recalculated on an annual basis by HUD.

All NSP-assistcd projects must remain affordable to and occupied by LMMI households within the above listed rent limits for a period of time that varies in accordance with the level of NSP assistance. The table below provides the minimum period over which NSP-assistcd units must remain affordable.

  

NSP Assistance Per Unit

Minimum Affordability Period

  

Under $15,000

5 Years

  

$15,000-$40,000

10 Years

  

Over $40,000

15 Years

  

New Construction or Acquisition of Newly Constructed Rental Housing

20 Years

Rent, occupancy, and affordability requirements will be enforced with AFDA-approved covenants, mortgages, or deed restrictions running with the property. Specifically, rental property owners/managers will be required lo document that the required percentage of units arc occupied by LMMI households over the period of affordability. Income must be determined at a minimum, when a NSP-funded unit is occupied by a new tenant household (i.e., at unit turnover).

Where NSP Program funds are used in conjunction with HOME Investment Partnerships ("HOME"), Low Income Housing Tax Credits ("UHTC"), United Slates Department of Agriculture ("USDA") Rural Development funds or other financing programs, the more stringent project and occupancy regulations will apply.

G. Universal Design Standards

The following building design criteria must be included in all construction for all NSP-funded rental projects, in accordance with the Arkansas Department of Human Services' Arkansas Usability Standards in Housing: Guidance Manual for Constructing Inclusive Functional Dwellings (AUSH):

1. Seven percent (7%) of all residential rental units within the development must comply with the Level 5, "All-Inclusive" usability criteria as set forth in the AUSH. The AUSH is available on the internet at the following website address: www.studioaid.org. Under the "Design" link, click on "standards."

2. Each unit that is required to meet the Level 5, "All-Inclusive" usability criteria set forth in the AUSH must have at least one bathroom with an "accessible roll-in" shower facility with minimum dimensions of 60"x34," or 42" x 42" if a corner shower facility.

3. All ground level residential rental units in any building and all residential units with elevator access in any building in the development must comply with the Level I, "Visitable" usability criteria as set forth in the AUSH.

4. All exterior and interior doors intended for passage must provide for a minimum clear opening of 34".

5. All residential units in the development will have "closed-fist" operability throughout the unit (e.g., single handle door levers vs door knobs, push stick lighting and environmental controls, cabinet doors can be opened with a closed first, single handle faucets in bathrooms and kitchen).

6. All environmental controls must provide visual and tactile cues. For lighting, a "rocker" type switch is sufficient For thermostats, a programmable and digital with raised buttons is required.

7. All primary entries, not in a breezeway, must have a minimum roof covering of 5'x 5'.

8. All primary entries must have entry pad measuring at least 5'x 5'.

9. All sidewalks must be at least 5' wide.

H. Methods of Repayment

The standard loan terms and conditions for repayment of Rental Housing Program loans are to be evidenced by fully executed promissory notes. Promissory notes will be payable at a zero percent (0%) interest rate for a term coinciding with the NSP affordability period. Monthly or annual 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 NSP Agreement.

I.Leveraging Requirements for Rental Development

Applications will receive additional points for leveraging NSP funds with other sources (i.e., private financing, HOME, USD A, etc.).

VThe NSP Homebuyer Housing Program

The Homeownership Housing Program is designed to provide NSP funds for the acquisition and rehabilitation or acquisition and new construction of single-family properties for sale to eligible LMMI households to stabilize neighborhoods and promote homeownership.

A. Eligible Applicants

ADFA will accept applications for projects up to the September 1, 2009 application deadline. ADFA will loan NSP funds to the approved eligible applicant as outlined in the NSP Program Agreement. The homebuyer will be required to execute a Promissory Note, Mortgage, and Deed Restriction through an ADFA-approved closing entity.

B. Amount of NSP Funding Per Applicant

Each eligible applicant must request at least one hundred thousand dollars ($100,000). Additional applications may be submitted if currently funded project expenditures of NSP funds are being expended in a timely manner and the applicant demonstrates the capacity to successfully complete multiple projects. The approval of multiple and/or additional NSP applications will be contingent upon availability of funds, quality of submitted application, and in ADFA's sole and absolute discretion.

C. Eligible Activities

NSP Program funds can be used to fund the following homeownership activities:

1. Acquisition - Acquisition of abandoned and foreclosed residential properties for the purposes of providing housing to NSP income eligible homebuyers.

2. Rehabilitation - Rehabilitation of abandoned and foreclosed single-family structures for the purposes of providing housing to NSP income eligible homebuyers. This activity would be combined with acquisition of abandoned and foreclosed properties.

3. Demolition of Blighted Structures - Demolition of blighted structures to be replaced by units for purchase by NSP income eligible homebuyers. This activity must be combined with acquisition of abandoned or foreclosed properties.

4. Reconstruction - Reconstruction of abandoned and foreclosed structures for the purposes of providing housing to NSP income eligible homebuyers. Any single-family structure demolished per #3 above, not economically feasible to rehabilitate or has projected per unit rehabilitation costs equal to or greater than twenty-five thousand dollars ($25,000), will be considered for reconstruction. This activity would be combined with acquisition of abandoned and foreclosed properties.

5. New Construction -New construction of single family structures for the purposes of providing housing to NSP income eligible homebuyers. The property upon which the structures are constructed must be either foreclosed or vacant, as defined by NSP.

Each application must include a minimum of five (5) units.

The properties rehabilitated or constructed must be made available for sale to NSP income-eligible LMMI buyer households. Through ADFA's network of approved lending institutions, the funds can also be combined with permanent financing to assist eligible homebuyers.

Applications for single-family, reconstruction, new construction or acquisition/rehabilitation for sale must provide documentation demonstrating a demand (i.e., marketability of the proposed NSP-assisted housing) for the requested activity. Acceptable documentation must include at least one of the following:

(1) a market study completed by an ADFA-approved market analyst;

(2)copies of sales contracts for pre-sold units; or

(3)copies of mortgage pre-approval letters from a list of potential qualified homebuyers.

Each homebuyer household is required to receive at least eight (8) hours of counseling from a HUD-approved counseling agency. ADFA anticipates a small share of funds to be directed towards providing housing counseling in an amount not to exceed two hundred dollars ($200) per household. ADFA maintains a list of approved counseling agencies that is available at:

www-arkansas.gov/adfa.

If for any reason, an applicant/awardee is unable to meet the requirement to provide at least eight (8) hours of counseling from a HUD-approved counseling agency for a good cause (e.g., there are no HUD-approved housing counseling agencies within the jurisdiction, or there are no HUD-approved housing counseling agencies within the jurisdiction that engage in homebuyer counseling), a request for an exception to this requirement may be submitted to ADFA, which will submit the request to the HUD Field Office for its review.

NSP funding cannot be used to fund projects that include the following:

? Properties that are not foreclosed or abandoned;

* Properties that will not be owner-occupied;

* Properties that will not be sold to eligible LMMI households;

* Rental or commercial properties; and

* Projects where contractors do not have a state contractor's license or cannot obtain a builder's risk insurance policy and where contractors do not have a payment and performance bond for the full amount of the construction contract.

D. 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 foreclosed or abandoned as defined by ADFA in the Glossary of this manual and must result in single family residential units for sale to LMMI buyer households.

As described in Section III. General Requirements of NSP, ADFA requires that the purchase of all properties be at least one percent (1%) below the appraised value. All properties acquired using NSP funds shall be appraised in conformity with the appraisal requirements previously outlined, including the requirement that properties valued at $25,000 or more must be appraised in accordance with the Uniform Relocation Act (URA) at 49 CFR 24.103 by a licensed appraiser within sixty (60) days prior to a final offer to purchase the property.

Eligible properties must be modest in value. Therefore, no acquisition of single-family dwellings will be allowed for property in excess of Federal Housing Administration (FHA) limits, currently set at $271,050.

E. Eligible Homebuyers

An eligible owner must have a household income at or below the middle-income limits as defined by HUD. A middle-income owner is defined as an owner whose annual gross household income does not exceed one hundred twenty percent (120%) of the median income for the area, adjusted for family size. Without exception, NSP funds cannot be used on projects where the income of the prospective homebuyer household is greater than one hundred and twenty percent (120%) of the area median income,

HUD's "Technical Guide for Determining Income and Allowances for the HOME Program" published in January 2005 guide can be found at the following link: http://www.hud.goy/offices/cpd/aJOfordablehousing/libra17/model euides/1780,cfm. Income Verification forms will be provided by ADFA. Participants will use the Technical Guide and these forms for calculating and verifying incomes. Supporting documentation, such as W-2s, tax forms, and bank statements must be collected, reviewed, and kept in local records to demonstrate that the household's income was within the prescribed limit

As stated previously, each homebuyer household is required to receive at least eight (8) hours of counseling from a HUD-approved counseling agency. Documentation that the assisted buyers received such counseling must be maintained by the grantee.

The homebuyer must provide proof of hazard insurance in an amount sufficient to cover replacement of the structure. The insurance policy must list ADFA on the policy as the additional insured/mortgagee.

F. Forms of Financial Assistance

NSP allocations to units of local government or other entities for single-family development activities will he in the form of a loan at 0% interest.

Assistance to homebuyers will be provided as a forgivable loan at 0% interest, contingent upon NSP eligible homebuyer continuing to own, occupy as principal residence, and maintain the NSP-assisted home for the full applicable affordability period. ADFA will provide the legal documents that must be recorded for each property to enforce the loan/affordability period/recapture provisions.

The following requirements apply to NSP assistance to homebuyers:

o Buyers must obtain a first mortgage and not exceed front and back end ratios of 31% and

41%, respectively. o ADFA will cap the amount of direct NSP assistance to the purchaser to up to 20% of the purchase price not to exceed $25,000 excluding an interest rate buy down (up to .250

basis points).

G. Eligible Costs

NSP Program funds may be used only for eligible costs as defined at 24 CFR Part 570. NSP funds may be used to cover soft and hard costs associated with a project. These costs include the following:

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

a. Acquisition

b.Demolition

c.Site improvements

d.Construction, rehabilitation, or reconstruction

The cost of repairs must be reasonable compared to the value of the house (i.e., the level of rehabilitation is intended to allow continued owner occupation for at least the affordability period as regulated by NSP). The rehabilitation must be financially and structurally feasible.

NOTE: Rehabilitation/construction costs of single family homes is limited to $132,000.

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

a. Finance related costs, i.e., credit reports, title reports and updates, appraisal fees, surveys, origination fees and discount points, and construction interest

b. Mousing counseling (up to $200 per household) contingent upon buyer purchasing an NSP-assisted property.

c. Project audit costs

d. Affirmative marketing and fair housing costs

e. Professional services (architectural, engineering, and other services provided for a specific project; otherwise, the professional service costs may be considered to be administrative costs)

f. Hazard insurance

3. Relocation Costs - The cost of permanent or temporary relocation of tenants, as required by the URA.

4. Project Delivery Costs - 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 NSP fund allocation may include in its application an amount for project delivery costs (in an amount not to exceed 10% of the final NSP allocation) in the development budget. For instance, if a recipient receives a three hundred thousand dollar ($300,000) NSP allocation, it may request an additional thirty thousand dollars ($30,000) for project delivery costs. Project delivery costs are eligible only for costs directly associated with the NSP-funded development or activity. Applicants must submit an itemized budget for project delivery costs as part of the initial application. The approved applicant must submit a certification of the project delivery costs incurred that is signed by the appropriate approving official of the participating entity with each request for project delivery funds. Project delivery costs must be allocated on a pro rata basis among the NSP-assisted units. On single-family projects (i.e., new construction or rehabilitation), ADFA will withhold a ten percent (10%) administrative retainage throughout the project. Single-family projects exceeding eighteen months (18) for completion will be paid no more than 90% of administrative fees.

Proper documentation is essential for the payment of project delivery cost fund requests. Project delivery costs must be supported by source documentation maintained on tile by the recipient of NSP funds. Requests for payment of project delivery costs must be verified by the Certification of Costs (signed by the recipient) and not by the supporting documentation maintained by the recipient. Supporting documentation will be reviewed and verified by ADFA staff performing compliance and monitoring reviews.

Acceptable supportive documentation includes:

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

* No handwritten invoices will be accepted.

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

* ADFA will reimburse salaries which are "reasonable and customary" for support personnel (e.g., clerical, temporary employee, etc.) of the NSP participant directly providing project delivery costs to the affordable housing being assisted at a rate commensurate with their regular hourly wages.

© A copy of any contracts for professional services (e.g., consultants, architects,

contractors, etc.), if applicable, must be provided in the initial application outlining the services to be rendered, the cost of the proposed services, and the proposed payment schedule or terms.

1'he 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. Sale of Units to Homebuyers

NSP requires that properties acquired or acquired and rehabilitated/constructed with NSP funding be sold to eligible LMMI homebuyers at an amount equal to or less than the cost to acquire and redevelop the property by the funding recipient. This means that properties may not be sold at a profit. The cost may not include any holding costs incurred by the awardee. ADFA will enforce and monitor these requirements through its closing documentation procedures and additional monitoring.

The homebuyer must obtain a mortgage loan from a lender who agrees to comply with the bank regulators' guidance for non-traditional mortgages (see, Statement on Subprime Mortgage Lending issued by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Department of the Treasury, and National Credit Union Administration, available at

http://www.fdic.gov/regulations/laws/rules/5000-5160.htrril). Awardees must document compliance with this requirement for each homebuyer.

I. Affordabiiity Period and Recapture Provisions

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

Total Loan Amount

Number of Years

$1,000- $15,000

5

$15,000-340,000

10

Over $40,000

15

Homeownership assistance is provided as a forgivable loan at 0% interest, contingent upon eligible homebuyer continuing to own, occupy as principal residence, and maintain the NSP-assisted home for the full applicable affordabiiity period. If the buyer chooses lo sell the home, move, or fails to maintain the NSP-assisted home, the buyer shall repay to ADFA the pro rata amount of the NSP direct assistance that enabled the buyer to purchase the home for the unexpired term of affordabiiity. In the event the property is sold or otherwise transferred to any purchaser during the affordabiiity period, ADFA will recapture lhat amount of NSP funds unforgiven during the affordabiiity period from the net proceeds from the sale of the property. If net proceeds are not sufficient to recapture the full NSP investment or reduced amount per lien documents, ADFA will share the net proceeds. The three (3) eligible types of homeownership assistance are 1) downpayment and closing cost assistance, 2) mortgage reduction assistance, and 3) interest rate buy-down of the eligible homebuyer's first mortgage to a rate 250 basis points below current market (non-subprime) interest rates.

In all cases where NSP assistance is provided, a note will be executed and mortgage will be recorded in lavor of ADFA. ONLY ADFA-APPROVED LIEN DOCUMENTS WILL BE USED. NSP 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, regardless of the form of assistance.

All mortgage payments shall be paid by the homebuyer on a monthly basis to ADFA at the following address:

Arkansas Development Finance Authority c/o Accounting Department

P. O. Box 8052

Little Rock, AR 72201

ADFA will recapture that portion of NSP investment unforgiven by the elapsed affordabiiity 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 as follows:

(1) reimburse the NSP (approved activity) for the outstanding balance of NSP funds not forgiven during the applicable affordabiiity period at the time of recapture, and/or

(2)reimburse the NSP (administration) for "holding costs" or other costs associated with the recapture action (e.g., legal fees, insurance, taxes, realtor fees, appraisal/BPO costs, etc.)

If net proceeds recaptured are less than the outstanding balance of NSP funds invested in the property (for all approved activities and holding costs incurred), the loss will be absorbed by the NSP and all NSP requirements would be considered to have been satisfied. If net proceeds recaptured are greater than the outstanding balance of NSP funds invested in the property (for all approved activities and holding costs incurred), the balance of net proceeds would be distributed to the homebuyer (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.

J. Minimum Property Standards

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

At a minimum, the requirements that must be met for all rehabilitation and new construction projects are those set forth in the Section 8 Housing Quality Standards and the ADFA Construction Performance Manual Sections I and II,,those set by the International Code Council (ICC) (when applicable), and all applicable local, state, and federal requirements. Single-family units constructed (i.e., new construction and reconstruction) with NSP funds must adhere to Energy Star standards.

Rehabilitation projects funded with NSP funds must also meet all local codes, rehabilitation standards, zoning ordinances, the cost effective energy conservation and effectiveness standards (24 CFR Part 251), and the Arkansas Energy Code.

Single-family units constructed with NSP funds as part of the homebuyer program must be a minimum of 1,200 square feet heated and cooled with a minimum of three (3) bedrooms and two (2) bathrooms.

K. Universal Design Criteria

The following building design criteria must be included for all NSP-funded homebuyer projects, in accordance with the Arkansas Department of Human Services' Arkansas Usability Standards in Housing; Guidance Manual for Constructing Inclusive Functional Dwelling (AUSH):

1. All new construction and reconstruction homebuyer units constructed for persons with disabilities must comply with the Level 5, "All-Inclusive" usability criteria as set forth in the AUSH. The AUSH is available on the internet at the following website address: www.studioaid.org. Under the "Design" link, click on "standards."

2. All exterior and interior doors intended for passage must provide for a minimum clear opening of 34".

3. All rehabilitation, reconstruction, and new construction single-family units in the development will have "closed-fist" operability throughout the unit, (e.g., single handle door levers vs door knobs, push slick lighting and environmental controls, cabinet doors can be opened with a closed first, single handle faucets in bathrooms and kitchen).

4. All primary entries must have entry pad measuring at least 5'x 5'.

5. All walkways/sidewalks must be at least 5' wide.

6. Homebuyer units with NSP funds used as part of the construction must meet at a minimum the Level 1: "Visitable" usability criteria as set forth in the AUSH.

L. Construction Bids

Construction bids (rehabilitation and new construction projects) must be good for a minimum of 60 days from date received by ADFA.

VI. Glossary

Abandoned Property: For purposes of implementing the NSP, an abandoned property is defined as a property abandoned when 1) mortgage or tax foreclosure proceedings have been initiated for that property, 2) no mortgage or tax payment have been made for he property owner for at least ninety (90) days, AND, 3) the property has been vacant for at least ninety (90) days.

Affordability: As used in this guide, affordability refers to the requirements of the NSP that relate to the cost of housing both at initial occupancy and over established timeframes, as prescribed in the HERA and HUD requirements. Affordability requirements vary depending on the nature of the NSP-assisted activity (i.e., homcownership or rental housing).

Affordable Rents: Rents that are at or below the Fair Market Rent (FMR) levels as determined by the U.S. Department of Housing and Urban Development (HUD) per county. (Note: Fair Market Rents include utilities, therefore if a tenant is paying their own utilities, the Utility Allowance published by the local Public Mousing Authority (FHA), must be deducted from the maximum FMR). For purposes of the NSP, "affordable rents" shall be in accordance with the HOME Program Rents and FMRs as delineated in the HOME Investment Partnerships Program. The "affordable rents" are as follows:

® Beneficiaries whose total household income is < 50% of AMI - Low HOME Rent

? Beneficiaries whose total household income is 51 % - 60% of AMI - High HOME Rent

® Beneficiaries whose total household income is 61% - 120% of AMI - FMR

Annual (Gross) Income: NSP allows the use of one of the three definitions of income: Section 8 annual income (as defined under 24 CFR Part 5); annual income as reported on the U.S. Census Long Form; and adjusted gross income as defined for the purposes of reporting on IRS Form 1040. For the purposes of NSP, ADFA is using the Section 8 annual income definition (as defined under 24 CFR Part 5) to document income eligibility.

Blighted Structure: For the purposes of NSP, a structure is defined as blighted when it exhibits objectively determinable signs of deterioration sufficient to constitute a threat to human health, safety, and public welfare.

Commitment: The written, legally binding agreement between the ADFA and the project owner providing NSP funds to a project.

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

Developer: For profit entities assembling, financing, managing and possibly owning NSP deals. For nonprofits, only those carrying out acquisition and rehabilitation are considered developers.

Development: A site or an entire building or two (2) or more buildings, together with the site or sites on which the building are located, that are under common ownership, management and financing and are to "be assisted with NSP funds-under commitment by the owner-as a single undertaking.

Development Fees: Compensation to the developer for developing the property, includes overhead and profit, consult/processing agent fees, project administration, the value of personal guarantees and a portion of any reserves determined by the housing credit agency to be in excess of industry norms.

Equity: The value of a property less the amount of outstanding debt on it.

Financing Flan: The proposed financing for a project.

Foreclosed Property: For purposes of implementing the NSP, a foreclosed property is defined as a property that, under state or local law, has a completed mortgage or tax foreclosure process. A foreclosure is riot considered to be complete until after the property title has been transferred from the former owner under a foreclosure proceeding or transfer in lieu of foreclosure.

General Partner: A partner who is liable and responsible for completing a project as proposed, managing the partnership and guaranteeing funding required to complete the project. A general partner oversees construction, leasing and property management; maintains the books and records of the partnership; and submits periodic reports to the limited partners on the project's financial status.

General Partnership: A form of ownership in which all partners participate materially in the partnership's operations and share liability.

Interest Subsidy: The amount of subsidy required to reduce the interest rate on a loan to a below-market rate over the term of the loan.

Limited Partner: A passive investor in a limited partnership who, in exchange for contributing equity to the project, receives a pro rata share of cash flow and tax benefits and the right to approve the sale or refinancing of the property

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 income for the area (adjusted for family size). HUD may establish, on an exception basis, income ceilings higher or lower than eighty percent (80%) of the median income for an area.

Low-Moderate-Middle Income (LMMI) National Objective: For the purposes of ADFA's implementation of NSP, an activity meets HERA's Low-Modcrate-Middle income (LMMI) National Objective if the assisted activity provides or improves permanent residential structures that will be occupied by a household whose income is at or below 120 percent of area median income (abbreviated

Managing General Partner: The general partner responsible for the day-to-day management of a limited or general partnership.

Middle-Income Family/Person: Family or person whose annual (gross) income docs not exceed one hundred and twenty percent (120%)) of the median income for the area (adjusted for family size). HUD may establish, on an exception basis, income ceilings higher or lower than one hundred and twenty percent (120%) of the median income for an area.

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

New Construction: Construction of a new housing unit where one did not exist. In addition, any project that includes the creation of additional dwelling units outside the existing walls of a structure is also considered new construction.

NSP-Assisted Unit: Units within a NSP project where NSP funds are used and rent, occupancy and/or resale restrictions apply.

Partnership Agreement: A legal document that specifies the rights and responsibilities 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 on which the building are located, that are under common ownership management and financing and are to be assisted with NSP funds - under a commitment by the owner - as a single undertaking.

Reasonable Developer's Fee: For purposes of implementing NSP, a reasonable developer's fee is defined as a fee earned for development of single or multi-family affordable housing which does not exceed ten percent (10%) of total development costs. An NSP proposal may include a developer's fee OR an amount for administration, but not both. The amount of such developer's fee or administration should be clearly indicated in the proposal and included in the total amount of NSP funds requested.

Recapture: Repayment of losses of NSP funds due to lack of performance with applicable performance standards as defined under General Requirements in Section O of this manual.

Reconstruction: The rebuilding, on the same lot, of housing standing on a site at the time of project commitment. The number of housing units on the lot may not be decreased or increased as part of the reconstruction project, but the number of rooms per unit may be increased or decreased.

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

Soft Costs: Development costs exclusive of the cost of acquisition, site improvements, construction and contingencies.

Soft Second Mortgage: A loan provided by public and nonprofit lenders at below-market interest rates and with flexible repayment terms, using as collateral a second mortgage on the project property, 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 but shares common areas (such as dining and living rooms) with other residents.

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

Subrecipient: :Public agencies and nonprofit organizations that assist the recipient to undertake one or more activities on behalf of the grantee. Does not include for-profit entities or nonprofits carrying out acquisition and rehabilitation projects only.

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

Surplus Cash (Net Operating Income-NOI). The operating income derived by the project owner from development cash flow that exceeds 1st mortgage loan payments and the following operating expenses: property management fee, grounds maintenance, accounting services, amounts deposited into a replacement reserve account, legal services, taxes and insurance, and utility expenses, each specifically related to the development. Developer fees and depreciation of assets may not be included in calculating expenses.

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

Targeting: Requirements of the NSP relating to the income or other characteristics of households that may occupy NSP-assistcd units.

Total Development Cost ("TDC"): The sum of all costs for site acquisition, relocation, demolition, construction and equipment, interest and carrying charges.

Vacant Properties: Unoccupied structures or vacant land that was once developed.

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 on an exception basis.

VII. Appendix I

The Needs Score for areas in Arkansas range from 0 to 100, with a median score of 0.90. ADFA has determined a minimum Needs Score of 1.0 to indicate the areas of greatest need. Using LISC's Needs Score by U.S. Postal Service zip code area, ADFA has established the following as areas of greatest need ("Priority Areas"), translated into priority points:

Level 1 - U.S.P.S. zip code areas with Needs Score > 10.0

15 priority points

Level 2 - U.S.P.S. zip code areas with Needs Score > 3.0 but < 9.9

10 priority points

Level 3 - U.S.P.S. zip code areas with Needs Score > 1.0 but < 2.9

5 priority points

A table of the zip codes that are located in the areas of greatest need ("Priority Areas") along with their corresponding Need Score is included below.

In addition, ADFA has designated additional areas of need, translated into additional priority points as indicated next, to be those 15 counties in Arkansas, identified by HUD, with the highest number of foreclosures ("Priority Counties").

Category A - Arkansas counties with 1000 or more foreclosures: Benton County; Pulaski County; and Washington County

10 priority points

Category B - Arkansas counties with 500-999 foreclosures:

Craighead County; Garland County; Saline County and Sebastian County

7 priority points 5 priority points

Category C - Arkansas counties with 300-499 foreclosures:

Boone County; Crawford County; Crittenden County; Faulkner County; Jefferson County; Lonoke County; Mississippi County; and White County

ZIP CODES IN AREAS OF GREATEST NEED

Zip

Code

City

County

Need

Score

72026

Casscoe

Arkansas

1

72042

DcWitt

Arkansas

2.6

72160

Stuttgart

Arkansas

9

71635

Crosselt

Ashley

7.9

71642

Fountain Hill

Ashley

1.2 _____

71646

Hamburg

Ashley

72653

Mountain Home

Baxter

3.4

72714

Bella Vista

Benton

4.8

72715

Bella Vista

Benton

1.5

72712

Bentonville

Benton

7.7

72719

Centerton

Benton

5

72722

Decatur

Benton

1.7

72732

Garfield

Benton

1.5

72734

Gentry

Benton

4.6

72736

Gravette

Benton

2.6

72745

Lowell

Benton

4.3

72747

Maysville

Benton

1.4

72751

Pea Ridge

Benton

6.3

72756

Rogers

Benton

13.2

72758

Rogers

Benton

4.1

72761

Siloam Springs

Benton

5.5

72601

Harrison

Boone

4.2

72662

Omaha

Boone

1

71671

Warren

Bradley

5

71766

Thornton

Calhoun

1.6

72616

Berry ville

Carroll

1.5

72638

Green Forest

Carroll

1

71638

Dermott

Chicot

2.2

71640

Eudora

Chicot

2.3

71653

Lake Village

Chicot

1.1

71921

Amity

Clark

1.5

71923

Arkadelphia

Clark

3.1

71743

Gurdon

Clark

2.8

72422

Corning

Clay

1.4

72454

Piggott

Clay

5.2

72461

Rector

Clay

3.4

72543

Heber Springs

Cleburne

2.3

72131

Quitman

Cleburne

1.9

72179

Wilbum

Cleburne

1.4

71660

New Edinburg

Cleveland

1

71665

Rison

Cleveland

6

71753

Magnolia

Columbia

5.9

71752

McNeil

Columbia

1

71861

Taylor

Columbia

2.5

71770

Waldo

Columbia

5.7

72027

Center Ridge

Conway

1

72030

Cleveland

Conway

1.4

72110

Morrilton

Conway

4.3

72127

Plumerville

Conway

1.2

72156

Solgohachia

Conway

1.4

72411

Bay

Craighead

1.1

72416

Bono

Craighead

3.6

72417

Brookland

Craighead

4.6

72401

Jonesboro

Craighead

17.5

72404

Jonesboro

Craighead

5.3

72437

Take City

Craighead

2.6

72921

Alma

Crawford

6

72946

Mountainburg

Crawford

2.9

72947

Mulberry

Crawford

2.4

72956

Van Burcn

Crawford

10.7

72327

Crawford svil I e

Crittenden

2.4

72331

Earle

Crittenden

3.6

72364

Marion

Crittenden

21.4

72376

Proctor

Crittenden

1.2

72301

West Memphis

Crittenden

98,7

72324

Cherry Valley

Cross

1

72396

Wynne

Cross

4.3

71725

Carthage

Dallas

2.8

71742

Fordycc

Dallas

3.7

71639

Dumas

Desha

4

71654

McGehec

Desha

3.9

71655

Monticcllo

Drew

4.9

72032

Conway

Faulkner

16.1

72034

Conway

Faulkner

3.2

72047

Fnola

Faulkner

1.6

72058

Greenbrier

Faulkner

2.5

72106

72173

Mayflower

Faulkner

3.3

Vilonia

Faulkner

2.6

72933

Charleston

Franklin

2.9

72949

Ozark

Franklin

2.3

71913

Hot Springs National Park

Garland

10.9

71901

Hot Springs National Park

Garland

7.6

71964

Pearcy

Garland

~~T9~~~^

71968

Royal

Garland

1.3

72084

Leola

Grant

4.8

72128

Poyen

Grant

1.4

72150

Sheridan

Grant

9.1

72443

Marrnadukc

Greene

2.7

72450

Paragould

Greene

17.6

71838

Fulton

Hempstead

1.1

71801

Hope

Hempstead

8.8

71862

Washington

Hempstead

1.9

71929

Bismarck

Hot Spring

1.8

72104

Malvern

Hot Spring

19.7

71852

Nashville

Howard

2.8

71859

Saratoga

Howard

1.9

72501

Batesvillc

Independence

5.3

72527

Desha

Independence

1

72519

Calico Rock

Izard

1.3

72112

Newport

Jackson

3.6

72473

Tuckerman

Jackson

1.7

72004

Altheimer

Jefferson

1.5

72073

Humphrey

Jefferson

2.2

71603

Pine Bluff

Jefferson

62.4

71601

Pine Bluff

Jefferson

49.5

72132

Redfield

Jefferson

1.4

72152

Sherrill

Jefferson

1.2

71602

White Hall

Jefferson

10.1

72830

Clarksville

Johnson

2.9

72840

Hartman

Johnson

2.4

72846

Lamar

Johnson

2.3

71845

Lewisville

Lafayette

1

71860

Stamps

Lafayette

1.6

72433

Hoxie

Lawrence

1.1

72434

Imboden

Lawrence

1.1

72476

Walnut Ridge

Lawrence

2.5

72360

Marianna

Lee

5.3

71644

Grady

Lincoln

1.1

71667

Star City

Lincoln

4.6

71822

Ashdown

Little River

3.9

71836

Foreman

Little River

1.5

72927

Boone ville

Logan

2.8

72855

Paris

Logan

1.6

72865

Subiaco

Logan

1.2

72007

Austin

Lonoke

5

72023

Cabot

Lonoke

22.1

72024

Carlisle

Lonoke

1.7

72046

England

Lonoke

1.2

72086

Lonoke

Lonoke

9.4

72176

Ward

Lonoke

12.9

72738

Hindsville

Madison

2.8

72740

Hunts ville

Madison

4.2

72776

Witter

Madison

1

72687

Yellville

Marion

1

71837

Fouke

Miller

3.4

71854

Tcxarkana

Miller

18.5

72315

Blytheville

Mississippi

40.1

72428

Etowah

Mississippi

2.9

72438

Leachville

Mississippi

1.3

72358

Luxora

Mississippi

1.6

72442

Manila

Mississippi

2.4

72370

Osceola

Mississippi

9.9

72395

Wilson

Mississippi

5.3

72021

Brinkley

Monroe

1.2

71857

Fresco It

Nevada

7.7

71858

Rosston

Nevada

1.5

71720

Beardcn

Ouachita

1

71701

Camden

Ouachita

18.1

71764

Stephens

Ouachita

1

72016

Bigelow

Perry

1.8

72342

Helena

Phillips

9.2

72355

Lcxa

Phillips

2.4

72366

Marvel 1

Phillips

1.2

72374

Poplar Grove

Phillips

1.2

72390

West Helena

Phillips

21.6

71943

Glenwood

Pike

1.3

72432

Harrisburg

Poinsett

2.4

72354

Lepanto

Poinsett

2.8

72472

Trumarm

Poinsett

8.8

71953

Mena

Polk

2.5

72823

Atkins

Pope

3

72837

Dover

Pope

2.9

72847

London

Pope

1.2

72858

Pottsville

Pope

1

72801

Russcllvillc

Pope

5.1

72802

Russell ville

Pope

3.9

72040

Des Are

Prairie

1.2

72064

Hazen

Prairie

3.5

72076

Jacksonville

Pulaski

27.3

72209

little Rock

Pulaski

100

72204

Little Rock

Pulaski

73.1

72206

Little Rock

Pulaski

25.5

72202

Little Rock

Pulaski

8.2

72205

Little Rock

Pulaski

4.8

72210

Little Rock

Pulaski

4.3

72211

Little Rock

Pulaski

2.9

72212

Little Rock

Pulaski

1.5

72113

Maumelle

Pulaski

4.2

72117

North Little Rock

Pulaski

29.8

72118

North Little Rock

Pulaski

23.9

72114

North Little Rock

Pulaski

13.1

72116

North Little Rock

Pulaski

5.5

72142

Scott

Pulaski

1.2

72120 "~7245?~~

Sherwood

Pulaski

11

Pocahontas

Randolph

3.2

~~~T.2...............

72460

Ravenden Springs

Randolph

72478

Warm Springs

Randolph

2.1

72326

Colt

Saint Francis

1.1

72335

Forrest City

Saint Francis

18.4

72348

Hughes

Saint Francis

1.9

72002

Alexander

Saline

4.6

72011

Bauxite

Saline

1.9

72015

Benton

Saline

21.4

72022

Bryant

Saline

5.2

72065

Henslcy

Saline

1.8

72103

Mabelvale

Saline

14.1

72167

Traskwood

Saline

1.1

72944

Mansfield

Scott

2.7

72958

Waldron

Scott

1.5

72650

Marshall

Searcy

1.1

72923

Barling

Sebastian

1.2

72904

Fort Smith

Sebastian

11

72901

Fort Smith

Sebastian

7.4

72903

Fort Smith

Sebastian

6.2

72908

Fort Smith

Sebastian

3

72936

Greenwood

Sebastian

4.6

72937

Hackett

Sebastian

1.2

72941

Lavaca

Sebastian

3

71832

De Queen

Sevier

I

71842

Horatio

Sevier

1

71846

I,o ekes burg

Sevier

2.2

71730

El Dorado

Union

12.8

71762

Smackovcr

Union

1.2

72013

Bcc Branch

Van Buren

1.3

72031

Clinton

Van Buren

3.2

72727

Elkins

Washington

2.7

72730

Fannin gton

Washington

3.6

72701

Fayetleville

Washington

3.3

72704

Fayette villc

Washington

3.2

72703

Fayetteville

Washington

1.4

72744

Lincoln

Washington

1.8

72753

Prairie Grove

Washington

3.8

72764

Springdale

Washington

20.8

72762

Springdale

Washington

10.4

72774

West Fork

Washington

1.7

72959

Winslow

Washington

1

72010

Bald Knob

White

1.4

72012

Beebe

White

5.6

72020

Bradford

White

2.6

72102

McRae

White

1.1

72136

Romance

White

1.1

72137

Rose Bud

White

1

72143

Searcy

White

4.5

72081

Judsonia

White

1.7

72006

Augusta

Woodruff

2.1

72101

McCrory

Woodruff

1.8

72834

Dardanelle

Yell

1.9

72860

Rover

Yell

1.8

Arkansas Neighborhood Stabilization Program Income Limits

(FY 2009 Income Limits for 50% of HUD Area Median)

Areaname

Countv/Town Name

1 person household

2 person household

3 person i household i

4 person nousehoid

5 person l household ;

6 person "lousehold !

7 person household

8 person household

Arkansas County, AR

Arkansas County

16,200

18,500

20,850 i

23,150

25,000;

26,850;

28,700

30,550

Ashley County, AR

Ashley County

16,050

18,350

20,650!

22,950

24,800;

26,6001

28,450

30,300

Baxter County, AR

Baxter County

15.250

17,450

19,600!

21,800

23,550;

25,300!

27,050

28,800

Fayetteville-Springdale-Rogers, AR HUD Metro FMRArea

Benton County

19,600

22,400

25,200;

28,000

30,250;

32,500!

34,700

36,950

Boone County, AR

Boone County

16,550

18,900

21,300;

23,650

25,550;

27,450!

29,350

31,200

Bradley County, AR

Bradley County

15,250

17,400

19,600;

21,750

23,500!

25,250 j

26,950

28,700

Calhoun County, AR

Calhoun County

15,400

17,600

19,800;

22,000

23,750!

25,500!

27,300

29,050

Carroll County, AR

Carroll County

15,250

17,400

19,600:

21,750

23,500;

25,250'

26,950

28,700

Chicot County, AR

Chicot County

15,250

17,400

19,600;

21,750

23,500;

25,2501

26,950

28,700

Clark County, AR

Clark County

16,500

18,850

21,200:

23,550

25,450i

27,300!

29,200

31,100

Clay County, AR

Clay County

15,250

17,400

19,600!

21,750

23,500!

25,250!

26,950

28,700

Cleburne County, AR

Cieburne County

16,650

19,000

21,400;

23,750

25,650!

27,550!

29,450

31,350

Pine Bluff, AR MSA

Cleveland County

16,650

19,000

21,400;

23,750

25,650!

27,550!

29,450

31,350

Columbia County, AR

Columbia County

16,100

18,400

20,700;

23,000

24,850 *

26,700!

28,500

30,350

Conway County, AR

Conway County

17,000

19,400

21,8501

24,250

26,200;

28,150!

30,050

32,000

Jonesboro, AR HUD Metro FMR Area

Craighead County

18,350

20,950

23,600;

26,200

28,300:

30,400^

32,500

34,600

Fort Smith, AR-OK HUD Metro FMR Area

Crawford County

16,300

18,600

20,950;

23,250

25,100;

26,950!

28,850

30,700

Memphis, TN-MS-AR HUD Metro FMRArea

Crittenden County

20,250

23,100

26,0001

28,900

31,200!

33,500!

35,850

38,150

Cross County, AR

Cross County

15,250

17,400

19,600;

21,750

23,500

25,250 '<

26,950

28,700

Dallas County, AR

Dallas County

15,250

17,400

19,600;

21,750

23,500 !

25,250!

26,950

28,700

Desha County, AR

Desha County

15,250

17,400

19,60Q;

21,750

23,500:

25,250:

26,950

28,700

Drew County, AR

Drew County

16,600

18,950

21,350i

23,700

25,600!

27,500 !

29,400

31,300

Little Rock-North Little Rock-Conway, AR HUD Metro FMR Area

Faulkner County

21,250

24,300

27,300!

30,350

32,800!

35,200;

37,650

40,050

Franklin County, AR HUD Metro FMR Area

Franklin County

16,100

18,400

20,700;

23,000

24,850!

26,700;

28,500

30,350

Fulton County, AR

Fulton County

15,250

17,400

19,600!

21,750

23,500!

25,250!

26,950

28,700

Hot Springs, AR MSA

Garland County

16,750

19,100

21,500;

23,900

25,800;

27,700!

29,650

31,550

Grant County, AR HUD Metro FMR Area

Grant County

19,100

21,800

24,550;

27,250

29,450 j

31,600;

33,800

35.950

Greene County, AR

Greene County

16,500

18,850

21,200;

23,550

25,450!

27,300!

29,200

31,100

Hempstead County, AR

Hempstead County

15,250

17,400

19,600:

21,750

23,500!

25,250;

26,950

28,700

Hot Spring County, AR

Hot Spring County

16,850

19,250

21,650!

24,050

25,950;

27,900!

29,800

31,750

Howard County, AR

Howard County

15,350

17,500

19,700:

21,900

23,650!

25,400 i

27,150

28,900

Independence County, AR

independence County

16,300

18,650

20,950;

23,300

25,150!

27,050!

28,900

30,750

Izard County, AR

Izard County

15,250

17,400

19,600;

21,750

23,500;

25,250!

26,950

28,700

Jackson County, AR

Jackson County

15,250

17,400

19,600!

21,750

23,500)

25,250!

26,950

28,700

Pine Bluff, AR MSA

Jefferson County

16,650

19,000

21,400;

23,750

25,650!

27,550'

29,450

31,350

Johnson County, AR

Johnson County

15,250

17,400

19,600;

21,750

23,500;

25,250!

26,950

28,700

Lafayette County, AR

Lafayette County

15,250

17,400

19,600;

21,750

23,500!

25,250!

26,950

28,700

Lawrence County, AR

Lawrence County

15,250

17,400

19,600!

21,750

23,500;

25,250 '

26,950

28,700

Lee County, AR

Lee County

15,250

17,400

19,600i

21,750

23,500!

25,250:

26,950

28,700

Pine Bluff, AR MSA

Lincoln County

16,650

19,000

21,400;

23,750

25,650!

27,550 i

29,450

31,350

Little River County, AR

Little River County

16,100!

18,400

20,700

23,000!

24,850

26,700|

28,500

30,350

Logan County, AR

Logan County

15,250!

17,400

19,600

21,750:

23,500

25,250!

26,950

28,700

Little Rock-North Little Rock-Conway, AR HUD Metro FMR Area

Lonoke County

21,250!

24,300

27,300

30,350!

32,800

35,200!

37,650

40.050

Fayetteviile-Springdale-Rogers, AR HUD Metro FMR Area

Madison County

19,600:

22,400

25,200

28,000|

30,250

32,500!

34,700

36,950

Marion County, AR

Marion County

15,250;

17,400

19,600

21,750!

23,500

25,250!

26,950

28,700

Texarkana, TX-Texarkana, AR MSA

Miller County

18,100!

20,700

23,250

25,850!

27,900

30,000!

32,050

34,100

Mississippi County, AR

Mississippi County

15,250;

17,400

19,600

21,750!

23,500

25,250!

26,950

28,700

Monroe County, AR

Monroe County

15,250;

17,400

19,600

21,750!

23,500

25,250 i

26,950

28,700

Montgomery County, AR

Montgomery County

15,250;

17,400

19,600

21,750!

23,500

25,250!

26,950

28,700

Nevada County, AR

Nevada County

15,250:

17,400

[_ 19,600

21,750!

23,500

25,250!

26,950

28,700

Newton County, AR

Newton County

15,2501

17,400

19,600

21,750;

23,500

25,250!

26,950

28,700

Ouachita County, AR

Ouachita County

15,650!

17,900

20,100

22,350!

24,150

25,950!

27,700

29,500

Little Rock-North Little Rock-Conway, AR HUD Metro FMR Area

Perry County

i 21,2501

24,300

27,300

30,350;

32,800

35,200^

37,650

40,050

Phillips County, AR

Phillips County

15,250!

17,400

19,600

21,750:

23,500

25,250;

26,950

28,700

Pike County, AR

Pike County

15,250!

17,400

19,600

21,750!

23,500

25,250!

26,950

28,700

Poinsett County, AR HUD Metro FMR Area

Poinsett County

15,250;

17,400

19,600

21,750:

23,500

25,250:

26,950

28,700

Poik County, AR

Poik County

15,250!

17,400

19,600

21,750,

23,500

25,250!

26,950

28,700

Pope County, AR

Pope County

17,100:

19,550

22,000

24,450!

26,400

28,350;

30,300

32,250

Prairie County, AR

Prairie County

16,050;

18,350

20,650

22,950!

24,800

26,600 >

28,450

30,300

Little Rock-North Little Rock-Conway, AR HUD. Metro FMR Area

Pulaski County

21,250!

24,300

27,300

30,350 j

32,800

35,200!

37,650

40,050

Randolph County, AR

Randolph County

15,250!

17,400

19,600

21,750!

23,500

25,250!

26,950

28,700

St. Francis County, AR

St. Francis County

15,250!

17,400

19,600

21,750!

23,500

25,250!

26,950

28,700

Little Rock-North Little Rock-Conway, AR HUD Metro FMR Area

Saline County

21,2501

24,300

27,300

30,350::

32,800

35,200!

37,650

40,050

Scott County, AR

Scott County

15,250:

17,400

19,600

21,750:

23,500

25,250!

26,950

28,700

Searcy County, AR

Searcy County

15,250;

17,400

19,600

21,750!

23,500

25,250!

26,950

28,700

Fort Smith, AR-OK HUD Metro FMR Area

Sebastian County

16,300!

18,600

20,950

23,250 'i

25,100

26,950!

28,850

30,700

Sevier County, AR

Sevier County

15,350;

17,550

19,750

21,950!

23,700

25,450!

27,200

28,950

Sharp County, AR

Sharp County

15,250:

17,400

19,600

21,750!

23,500

25,250'

26,950

28,700

Stone County, AR

Stone County

15,250!

17,400

19,600

21,750|

23,500

25,250!

26,950

28,700

Union County, AR

Union County

16,400!

18,750

21,100

23,450!

25,350

27,200!

29,100

30,950

Van Buren County, AR

Van Buren County

15,250!

17,400

L 19'600

21,750!

23,500

25,250

26,950

28,700

Fayetteviile-Springdale-Rogers, AR HUD Metro FMR Area

Washington County

19,600!

22,400

25,200

28,000:

30,250

32,500

34,700

36,950

White County, AR

White County

16,650^

19,000

21,400

23,750!

25,650

27,550

29,450

31,350

Woodruff County, AR

Woodruff County

15,250:

17,400

19,600

21,750;

23,500

25,250

26,950

28,700

Yell County, AR

Yell County

15,250:

17,400

19,600

21,750

23,500

25,250

26,950

28,700

Arkansas

Neighborhood Stabilization Program Income Limits (FY 2009 income Limits for 120% of HUD Area Median)

Areaname

Countv/Town Name

1 person, household <

2 person household

3 person ! household i

4 person nousehold

5 person household

6 person ' household I

7 person Household

8 person household

Arkansas County, AR

Arkansas County

38,900!

44,450

50,000!

55,550

60,000

64,450!

68,900

73,350

Ashley County, AR

Ashley County

38,550j

44,050

49,550;

55,100

59,500

63,900;

68,300

72,700

Baxter County, AR

Baxter County

36,600|

41,850

47,100i

52,300

56,500

60,700^

64,900

69,050

Fayetteville-Springdaie-Rogers, AR HUD Metro FMR Area

Benton County

47,0501

53,750

60,500!

67,200

72,600

77,950;

83,350

88,700

Boone County, AR

Boone County

39,750 i

45,400

51,100!

56,750

61,300

65,850 j

70,400

74,900

Bradley County, AR

Bradley County

36,550 i

41,750

47,000!

52,200

56,400

60,550!

64,750

68,900

Calhoun County, AR

Calhoun County

36,950 '*

42t250

47,500!

52,800

57,000

61,250;

65,450

69,700

Carroil County, AR

Carroll County

36,550.

41,750

47,000;

52,200

56,400

60,550 i

64,750

68,900

Chicot County, AR

Chicot County

36,550:

41,750

47,000!

52,200

56,400

60,550:

64,750

68,900

Clark County, AR

Clark County

39,550;

45,200

50,850 i

56,500

61,050

65,5501

70,100

74,600

Clay County, AR

Clay County

36,550<

41,750

47,000!

52,200

56,400

60,550!

64,750

68,900

Cleburne County, AR

Cleburne County

39,900!

45,600

51,300!

57,000

61,550

66,100i

70,700

75,250

Pine Bluff, AR MSA

Cleveland County

39,900;

45,600

51,300:

57,000

61,550

66,100;

70,700

75,250

Columbia County, AR

Columbia County

38,650;

44,150

49,700;

55,200

59,600

64,050!

68,450

72,850

Conway County, AR

Conway County

40,750!

46,550

52,400:

58,200

62,850

67,500;

72,150

76,800

Jonesboro, AR HUD Metro FMR Area

Craighead County

44,000!

50,300

56,600!

62,900

67,900

72,950 =

77,950

83,000

Fort Smith, AR-OK HUD Metro FMR Area

Crawford County

39,0501

44,650

50,200;

55,800

60,250

64,750;

69,200

73,650

Memphis, TN-MS-AR HUD Metro FMR Area

Crittenden County

48,550;

55,500

62,400i

69,350

74,900

80,450'

86,000

91,550

Cross County, AR

Cross County

36,550 j

41,750

47,000;

52,200

56,400

60,550:

64,750

68,900

Dallas County, AR

Dallas County

36,550 i

41,750

47,000;

52,200

56,400

60,550!

64,750

68,900

Desha County, AR

Desha County

36,550;

41,750

47,000 '<

52,200

56,400

60,550i

64,750

68,900

Drew County, AR

Drew County

39,800*

45,500

51,200;

56,900

61,450

66,000:

70,550

75,100

Little Rock-North Little Rock-Conway, AR HUD Metro FMR Area

Faulkner County

51,000 =

" 58,250

65,550!

72,850

78,650

84,500!

90,300

96,150

Franklin County, AR HUD Metro FMR Area

Franklin County

38,650;

44,150

49,700;

55,200

59,600

64,050 i

63,450

72,850

Fulton County, AR

Fuiton County

36,550!

41,750

47,000!

52,200

56,400

60,550;

64,750

68,900

Hot Springs, AR MSA

Garland County

40,150!

45,900

51,6001

57,350

61,950

66,550;

71,150

75,700

Grant County, AR HUD Metro FMR Area

Grant County

45,800!

52,300

58,850!

65,400

70,650

75,850!

81,100

86,350

Greene County, AR

Greene County

39,550;

45,200

50,850!

56,500

61,050

65,550!

70,100

74,600

Hempstead County, AR

Hempstead County

36,550i

41,750

47,000!

52,200

56,400

60,550!

64,750

68,900

Hot Spring County, AR

Hot Spring County

40,400'

46,200

51,9501

57 J 00

62,350

66,950!

71,550

76,200

Howard County, AR

Howard County

36,800;

42,050

47,300 j

52,550

56,750

60,950!

65,150

69,400

Independence County, AR

Independence County

39,1501

44,750

50,350!

55,900

60,400

64,850;

69,350

73,800

Izard County, AR

Izard County

36,550^

41,750

47,000;

52,200

56,400

60,550!

64,750

68,900

Jackson County, AR

Jackson County

36,550;

41,750

47,000!

52,200

56,400

60,550;

64,750

68,900

Pine Bluff, AR MSA

Jefferson County

39,900!

45,600

51,300;

57,000

61,550

66,100;

70,700

75,250

Johnson County, AR

Johnson County

36,5501

41,750

47,000 \

52,200

56,400

60,550?

64,750

68,900

Lafayette County, AR

Lafayette County

36,5501

41,750

47,000

52,200

58,400

60,550!

64,750

68,900

Lawrence County, AR

Lawrence County

36,550!

41,750

47,000

52,200

56,400

60,550;

64,750

68,900

Lee County, AR

Lee County

36,550!

41,750

47,000!

52,200

56,400

60,550i

64,750

68,900

Pine Bluff, AR MSA

Lincoln County

39,9001

45,600

51,300:

57,000

61,550

66,100;

70,700

75,250

Little River County, AR

Little River County

33,6501

44,150

49,700

55,200!

59,600

64,050!

68,450

72,850

Logan County, AR

Logan County

36,550|

41,750

47,000

52,200;

56,400

60,550 i

64,750

68,900

Little Rock-North Little Rock-Conway, AR HUD Metro FMR Area

Lonoke County

51,000;

58,250

65,550

72,850!

78,650

84,500!

90,300

96,150

Fayettevitle-Springdaie-Rogers, AR HUD Metro FMR Area

Madison County

47,050;

53,750

60,500

67,200'

72,600

77,950;

83,350

88,700

Marion County, AR

Marion County

36,550;

41,750

47,000

52,200;

56,400

60,550:

64,750

68,900

Texarkana, TX-Texarkana, AR MSA

Miller County

43,450]

49,650

55,850

62,050!

67,000

71,950;

76,950

81,900

Mississippi County, AR

Mississippi County

36,550!

41,750

47,000

52,200!

56,400

60,550i

64,750

68,900

Monroe County, AR

Monroe County

36,550 j

41,750

47,000

52,200;

56,400

60,5501

64,750

68,900

Montgomery County, AR

Montgomery County

36,550!

41,750

47,000

52,200!

56,400

60,550;

64,750

68,900

Nevada County, AR

Nevada County

36,550;

41,750

47,000

52,200!

56,400

60,550!

64,750

68,900

Newton County, AR

Newton County

36,550!

41,750

47,000

52,200;

56,400

60,550!

64,750

68,900

Ouachita County, AR

Ouachita County

37,550!

42,900

48,300

53,650!

57,950

62,200!

66,500

70,800

Little Rock-North Little Rock-Conway, AR HUD Metro FMR Area

* Perry County

51,000;

58,250

65,550

72,8501

78,650

84,500!

90,300

96,150

Phillips County, AR

Phillips County

36,550!

41,750

47,000

52,200!

56,400

60,550!

64,750

68,900

Pike County, AR

Pike County

36,550;

41,750

47,000

52,200!

56,400

60,550;

64,750

68,900

Poinsett County, AR HUD Metro FMR Area

Poinsett County

36,550;

41,750

47,000

52,200!

56,400

60,550!

64,750

68,900

Polk County, AR

Polk County

36,550,

41,750

47,000

52,200;

56,400

60,550!

64,750

68,900

Pope County, AR

Pope County

41,100!

46,950

52,800

58,700;

63,350

68,050!

72,750

77,450

Prairie County, AR

Prairie County

38,550i

44,050

49,550

55,100!

59,500

63,900:

68,300

72,700

Little Rock-North Little Rock-Conway, AR HUD Metro FMR Area

Pulaski County

51,000 j

58,250

65,550

72,850:

78,650

84,500!

90,300

96,150

Randolph County, AR

Randolph County

36,550 j

41,750

47,000

52,200 i

56,400

60,550:

64,750

68,900

St. Francis County, AR

St. Francis County

36,550!

41,750

47,000

52,200;

56,400

60,550!

64,750

68,900

Little Rock-North Little Rock-Conway, AR HUD Metro FMR Area

Saline County

i 51,0001

58,250

65,550

72,850;

78,650

84,500;

90,300

96,150

Scott County, AR

Scott County

36,550!

41,750

47,000

52,200?

56,400

60,550;

64,750

68,900

Searcy County, AR

Searcy County

36,550|

41,750

47,000

52,200:

56,400

60,550!

64,750

68,900

Fort Smith, AR-OK HUD Metro FMR Area

Sebastian County

39,050 i

44,650

50,200

55,800!

60,250

64,750!

69,200

73,650

Sevier County, AR

Sevier County

36,900!

42,150

47,400

52,700!

56,900

61,100:

65,300

69,550

Sharp County, AR

Sharp County

36,550;

41,750

47,000

52,200;

56,400

60,550!

64,750

68,900

Stone County, AR

Stone County

36,550!

41,750

47,000

52,200;

56,400

60,550;

64,750

68,900

Union County, AR

Union County

39,400!

45,000

50,650

56,300;

60,800

65,300!

69,800

74,300

Van Buren County, AR

Van Buren County

36,550;

41,750

47,000

52,200;

56,400

60,550.

64,750

68,900

Fayetteville-Springdale-Rogers, AR HUD Metro FMR Area

Washington County

47,050!

53,750

60,500

67,200!

72,600

77,950;

83,350

38,700

White County, AR

White County

39,900;

45,600

51,300

57,000 j

61,550

66,100!

70,700

75,250

Woodruff County, AR

Woodruff County

36,550;

41,750

47,000

52,200;

56,400

60,550;

64,750

68,900

Yell County, AR

Yell County

36,550

41,750

47,000

52,200!

56,400

60,550;

64,750

68,900

Guidance on NSP Appraisals ~ Voluntary Acquisitions

Acquisitions financed with NSP grant funds are subject to the URA, and its implementing regulations at 49 CFR Pari 24, and the requirements set forth in the NSP Notice that was published in the Federal Register on October 6, 2008. HUD anticipates that most of these transactions will qualify as voluntary acquisitions under the applicable regulations of 49 CFR 24.101(b). The URA regulations do not specifically require appraisals in connection with voluntary acquisitions under 49 CFR 24.101(b). However, the NSP Notice requires appraisals to be performed with respect to the NSP funded acquisition of foreclosed upon homes and residential properties, even though they may be considered voluntary under the URA. In those cases, the URA appraisal requirements of 49 CFR 24.103 must be met. The following guidance on appraisals pertains to acquisitions of foreclosed upon homes and residential properties which meet the applicable voluntary acquisition requirements of 49 CFR 24.101(b) and reflects applicable URA requirements and the NSP requirements, including the URA appraisal requirements of 49 CFR 24.103.

1. The NSP grantee must ensure that the owner is informed in writing of what the grantee believes to be the market value of the property; and that the NSP grantee will not acquire the property if negotiations fail to result in a an amicable agreement (see 49 CFR 24.101(b)(1) & (b)(2)).

2. If NSP funds are to be used to acquire a foreclosed upon home or residential property (other than through donation), the grantee must ensure that the purchase price includes a discount from the value established by an appraisal that meets the following requirements:

a. The appraisal must have been completed within 60 days of the offer made for the property (we have advised that an initial offer can be made, subject to the completion of the appraisal within 60 days of a final offer).

b. The appraisal must meet the URA definition of an appraisal (see 49 CFR 24.2(a)(3) and the five following requirements (sec 49 CFR 24.103(a)(2)):

i. An adequate description of the physical characteristics of the property being appraised (and, in the case of a partial acquisition, an adequate description of the remaining property), including items identified as personal property, a statement of the known and observed encumbrances, if any, title information, location, zoning, present use, an analysis of highest and best use, and at least a 5-year sales history of the property.

ii. All relevant and reliable approaches to value. If the appraiser uses more than one approach, there shall be an analysis and reconciliation of approaches to value used that is sufficient to support the appraiser's opinion of value.

iii. A description of comparable sales, including a description of all relevant physical, legal, and economic factors such as parties to the transaction, source and method of financing, and verification by a party involved in the transaction.

iv. A statement of the value of the real property to be acquired and, for a partial acquisition, a statement of the value of the damages and benefits, if any, to the remaining real property, where appropriate.

v. The effective date of valuation, date of appraisal, signature, and certification of the appraiser.

c. The appraiser shall disregard any decrease or increase in the fair market value of the real property caused by the project for which the property is to be acquired or by the likelihood that the property would be acquired for the project, other than that due to physical deterioration within the reasonable control of the owner.

d. If the owner of a real property improvement is permitted to retain it for removal from the project site, the amount to be offered for the interest in the real property to be acquired shall be not less than the difference between the amount determined to be just compensation for the owner's entire interest in the real property and the salvage value (defined at § 24.2(a)(24)) of the retained improvement.

3. The NSP grantee has a legitimate role in contributing to the appraisal process, especially in developing the scope of work and defining the appraisal problem. The scope of work and development of an appraisal under these requirements depends on the complexity of the appraisal problem. HUD's guide to preparing an appraisal scope of work under the URA is available in HUD Handbook 1378-Appendix 19 or through the following link:

http://wwwJiud.gOv/officcs/adm/hudc1ips/handbooks/cpdlT/l378.0/1378xl9CPDH.pdf

4. The NSP grantee shall establish criteria for determining the minimum qualifications and competency of appraisers. Qualifications shall be consistent with the scope of work for the assignment. The NSP grantee shall review the experience, education, training, certification/licensing, designation(s) and other qualifications of appraisers, and use only those determined by the NSP grantee to be qualified.

5. If the NSP grantee uses a contract (fee) appraiser to perform the appraisal, such appraiser shall be State licensed or certified in accordance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) (12U.S.C. 3331etseq.).

Questions:

1. Can the lender's appraisal be used if it is reviewed for compliance with the URA requirements?

Yes, if it meets the requirements in 2-5 above.

2. Must appraisals for the voluntary acquisition of NSP funded foreclosed upon homes and residential properties have a review appraisal performed?

No. Although the URA criteria for appraisals refer to qualifications for review appraisers, the NSP grantee is not required to have a review appraisal performed in connection with voluntary acquisitions under 49 CFR 24.101(b).

3. Must a scope of work be developed?

Yes, if the NSP grantee is procuring the services of an appraiser (or requires someone else to procure those services) or is relying on a lender's (the owner of the foreclosed upon property) appraisal that is determined by the NSP grantee to meet above requirements. No, if the appraisal is performed by otherwise qualified in-house appraisal staff, although it is still advisable in such cases.

Guidance on NSP-Eligible Acquisition & Rehabilitation Activities

This NSP Policy Guidance describes how to determine whether or not a property is eligible for acquisition and or rehabilitation with NSP funds. The following criteria will help determine eligibility: the NSP Notice published in the Federal Register on October 6, 2008 (statutory program requirements, waivers granted, and alternative requirements applied), timing parameters, acquisition protocols, a written agreement with any Third Party Entities (see page 3 for definition) prior to obligation of funds, and options for NSP acquisition assistance.

NSP Notice

The NSP Notice provides the criteria for acquiring and rehabilitating property under NSP. The Notice states that properties must have been abandoned, foreclosed upon, or vacant to qualify for NSP acquisition assistance (see Attachment). I n purchasing homes and residential properties that have been foreclosed upon with NSP assistance, such properties must be acquired out of foreclosure, meaning directly from the entities that obtained title to the properties through foreclosure (e.g., the lender or trustee for holders of obligations secured by mortgage liens). The acquisition of properties that have been abandoned with NSP assistance must occur while they are in abandonment status.

Timing Parameters

NSP acquisitions are not authorized to begin until the grantee has submitted an action plan amendment to HUD. For most NSP grantees, the earliest acquisition start date would be December 1, 2008, but for those grantees that submitted an action plan amendment prior to December 1, 2008, an earlier date could be acceptable. For subgrantees, subrecipients, and other "Third Party Entities" (see definition on page 3), other requirements must first be met, as described in the Matrix on page 4.

Acquisition Procedures

I n addition to submitting an action plan amendment, NSP grantees and Third Party Entities alike must comply with the environmental review, purchase discount and appraisal (if foreclosed) and other eligible-use criteria discussed in the Guidance on Eligible Uses prior to acquiring properties under NSP.

Agreements to Use NSP Funds

If the acquisition is performed by an "outside entity," the grantee must give permission or enter into an agreement with the outside entity prior to the acquisition in order to qualify for NSP assistance under Eligible Use B. Properties acquired out of foreclosure before these requirements have been met are no longer foreclosed or abandoned and therefore are only eligible for NSP assistance activities identified under Eligible Use E (if vacant). This agreement may take the form of a contract, written commitment, preliminary commitment or other form that clearly describes the responsibilities and the requirements of each party. Sec the Attachment for a more extensive discussion of agreements with Third Party Entities.

Options for NSP Acquisition Assistance

There are a variety of options that can be used to acquire property under NSP. HUD regulations distinguish eligible entities based on those identified in § 570.201(a), § 570.202(b), § 570.202(n) and § 570.204. Depending on which category your entity falls into there are different requirements that must be followed to ensure compliance with NSP regulations. Listed below is a chart that explains the revenue implications, selection criteria and OMB Circular requirements that apply for acquisitions under NSP. Detailed explanations follow on page 3.

C0BG

Regulations

Entity

Selection Criteria

Revenue Implications

OMB Requirements

     

C

NC

Treated as

Program

Income

Part 85/ A-87

Part 84/ A-122

A-133

§ 570.201(a)

NSP Grantee

NA

NA

Yes

Yes

No

Yes

Sub recipient NSP Grantee

GO

" NA~

GD

Yes

No .....Yes

Yes

Yes

§ S70.202(b)

NA

Yes

No

Yes

Developer:

For Profit Private Nonprofit

GD

GD

No

No

No

No

Subrecipient:

Public Entity

GD

GD

Yes

Yes

No

Yes

Private Nonprofit

No

Yes

Individual Jftejvejidaj^y________

GD

GD

No

NA

NA

NA

§ 570.201(n)

Individual Beneficiary

GD

GD

No

NA

NA

NA

§ 570.204

CBDO

GD

GD

No

No

Yes

No

C - Competitive

NC - Non-competitive

NA - Not applicable

GD - Grantee determination

CBDO - Community-Based Development Organization

Individual Beneficiary - a homeowner who will occupy an NSP home as a primary residence

See following page for more detailed discussion of terms and regulatory bases.

Definition of Third Party Entities

Third Party Entities include subrecipicnts, individuals, and other private entities such as for-profit developers, non-profit developers or other entities. How they are selected, generate revenue, and keep records, summarized in the Table above, is described more fully below.

Public Entity or Private Nonprofit as subrecipient - Non-profit organizations and public entities under § 570.201(a) can be designated by the NSP grantee as subrecipicnts, without a procurement process (See § 570.500(c) for guidance). However, subrecipient agreements must conform to all the regulations under § 570.503. Any revenues exceeding costs captured from properties sold or leased are classified as program income and must be used for NSP-eligible activities. At their option, grantees may allow subrecipicnts to retain Program Income, subject to § 570.503 and 504.

Private Nonprofit, a For-profit organization, or an Individual as developer (not a subrecipient) -Non-profit organizations, For-profit organizations or individuals under § 570.202(b)(l) can be given assistance to acquire residential property for the purposes of rehabilitation, resale, or use. The sales price of properties sold to NSP income-eligible individuals cannot exceed total costs (acquisition, rehabilitation, and development costs). Therefore, entities treated as developers must work within these parameters to generate a profit.

If engaged in rehabilitation, or for acquisition prior to rehabilitation, entities treated as developers may be selected through a competitive procurement process or may be designated as grant recipients without a procurement process. See § 85.36 for procurement guidance. For rental projects or others not sold to individuals for use as a primary residence, revenues are not considered Program Income.

In addition, such entities are not subject to recordkeeping or audit requirements that do apply to subrecipients. This flexibility creates a burden on the grantee to underwrite all such transactions to avoid undue enrichment.

Community-Based Development Organizations (CBDO) - CBDOs arc governed by the regulations in § 570.204 and can be either nonprofit or for-profit entities. CBDOs can be treated as developers or subrecipicnts and would be subject to the same rules applied above depending on the grantee's determination of the relationship (whether the NSP grantee chooses to treat the CBDO as a developer or as a subrecipient).

Timeline Matrix

The following Matrix describes the recommended sequence of events for grantees carrying out NSP activities directly and for those grantees that carry out NSP activities in collaboration with Third Party Entities. These examples assume a simple transaction under Eligible Use B, in which property is acquired, rehabilitated, and sold, but the principles of these examples apply to all NSP assisted acquisitions and rehabilitation activities. The requirements under B can be undertaken in any order, but MUST be performed prior to a commitment of funds or a "choice-limiting action" as described in the Environmental regulations at 24 CFR Part 58. HUD encourages grantees to undertake tiered reviews, which can generally be completed for a group of properties in advance of the other steps in the process. Starting early also reduces the potential for delays at State Historic Preservation Offices.

RECOMMENBEB SEQUENCE OF EVENTS FOR NSP ACQUISITION AND REHABILITATION

  

Direct Grantee

Subrecipient (on behalf of grantee)

Private Developer (for-profit, non-profit)

Individual: Homeowner-Occupant

     

^^i^ag^Ta^^Trry^gffiaa

     

PRE-AWARD

May initiate activities before grant award by meeting all requirements and 570.200(h)

May initiate action oaly with explicit approval of grantee and in compliance with ail requirements in Section B.

No action advisable prior to grantee's receipt of funds.

B. AFTER grant award (No required sequence but MUST precede funds obligation)

AGREEMENTS

Internal agreements not required for any department under the grantee's jurisdiction.

Receive approval from grantee with agreement on who does what, when, how.

Apply to grantee or subrecipient to qualifv based on income and other requirements. Receive preliminary approval to participate in NSP Program-

If permitted in agreement, subrecipient may incur administrative costs.

Developers MAY NOT incur administrative costs, but may charge fees and earn profits.

PROPERTIES

Locate one or more foreclosed, abandoned, or vacant properties in the areas of greatest need to acquire for the NSP. Ensure property qualifies, by location, type, condition, etc.

Find eligible property, in collaboration with NSP grantee or other party.

FRE-ACQUISITION REQUIREMENTS

I. Environmental

Environmental review MUST be completed before committing funds. Only grantee can certify review & request release of funds

Work with grantee to understand what must be done and ensure no commitment of funds (choice-limiting action) before release of funds. Grantee alone can certify and request release of funds.

Not Applicable

No role for Individual

2. Appraisal

Order URA-compliant Appraisal if foreclosed property7 or if sale not voluntary. Sale is not voluntary when potential exists for eminent domain if agreement cannot be reached.

Grantee will inform if Individual is required to obtain appraisal.

3. Uniform Relocation Act

Determine other URA applicability (e.g. relocation). American Recovery and Reinvestment Act places added restrictions on acquiring properties with tenants.

Not Applicable

4. Purchase Discount

Negotiate purchase discount with Consult with grantee on process for purchase price discount with seller-s seller-servicer if foreclosed. j foreclosed upon.

ervicer; only applies if property is

  

ELIGIBILITY ATTAINED

After this point, the property has eligibly been acquired. It retains this status through any subsequent sales or transfers, such as directly to an eligible end user, or to another entity for rehabilitation and later sale to an eligible end user (LMMI family).

REHABILITATION AND FINANCING OPTIONS

Ifthehomeis in need of repair and/or financial subsidy to make it affordable to LMMI, there are different options based on the type of property (foreclosed, vacant, etc.) and which NSP Eligible Use the grantee has employed. See the NSP Policy Guidance page for more detailed discussion of Eligible Uses (and property types) and Homeownership Assistance.

INELIGIBLE PURCHASES

If a participant has acquired a property BEFORE meeting all the requirements above, the home is generally considered ineligible because it is no longer "foreclosed or abandoned". However, some NSP assistance may still be possible; see Attachment for discussion.

ATTACHMENT

DEFINITIONS AND EXPLANATIONS

NSP"Eligible Acquisition Property Types

From Housing and Economic Recovery Act, Sec. 2301 (c)(3) and (i)(3)):

(A) purchase and redevelopment of foreclosed upon homes and residential properties,

(B) purchase and rehabilitate homes and residential properties that have been abandoned or foreclosed upon,

(C) land banks for homes that have been foreclosed upon, (E) redevelop demolished and vacant properties, and

(From the 25% set-aside for low-income families), purchase and redevelopment of abandoned or foreclosed upon homes and residential properties.

Potential Considerations for Agreements with Third Party Entities

The Agreement may include, but is not limited to, these considerations:

a Effective start and completion dates,

e Appropriate locations in which to purchase (areas of greatest need),

© Property types (abandoned, foreclosed, vacant, homes and/or residential properties),

© If foreclosed, need tbr appraisal and purchase discount,

? Selection criteria (quality, price, level of repairs needed, tenns),

© Need for complete environmental review and release of tUnds prior to closing,

© Estimated/maximum amounts of NSP funds per unit and number of units,

® Financial considerations (loan, grant, reimbursement process, etc.), ® Responsibility for rehabilitation, if required,

© Eligible purchasers/tenants, affordable rents, continued affordability,

® Deadlines for completion, disposition procedures,

® Financial records,

® Recordkeeping and documentation requirements; see especially 570.506(h) for developers.

Ineligible Acquisitions and Subsequent Participation

If a participant has acquired a property before meeting all the requirements above, the building is generally considered ineligible for NSP acquisition assistance under l^ligible Use B because it is no longer "foreclosed or abandoned". However, acquisition is an option for activities identified under Eligible Use E and if the grantee planned to rehabilitate the home, the grantee (or Third Party Entity, with grantee approval) may eligibly use NSP funding for tinaneing and rehabilitation (if granted an Exception by HUD)

(8/17/2009)

The following state regulations pages link to this page.