Obediah Baker, Sr.
Deputy Administrator,
Multi-Family Housing
Rural Housing Service, USDA
Washington, D.C.
Addressing CARH:
One of the first steps I have taken as the Deputy Administrator is that
within the past six weeks we have appointed three Deputy Directors — Carl
Wagner for the 538 Guaranteed Program, Sue Harris-Green for Processing (515,
HPG), and Larry Anderson for the Office of Rural Housing Preservation.
Working with Larry is Cynthia Reese-Foxworth. On January 10, we issued two
additional position announcements — one for Director of Processing and one
for Director of Portfolio Management. These are the actions I’m taking to
more or less stabilize the leadership in the multifamily housing program in
the National Office. In doing this, when we get these individuals in place,
we hope to move forward, and as Jan indicated, to address the needs of our
aging portfolio as well as the needs for additional units.
In this new position, I want to strengthen my alliance with CARH. I’m
going to be calling on you in the future. We have been working with you in
our Reinvention process. As Jan indicated, we want to set up a team to
address preservation issues. You’re out here on the ground, this is your
living, you can tell us much better than we can ever dream sitting in
Washington what it takes, what’s needed, to address the preservation issues
out there. It is a very serious issue, as Jan indicated. Our bottom line
right now is: we know what the problems are and for the most part, we don’t
have the financial resources to address them.
We want to work closely with the housing agencies. Most of you in many
states have been conduits between RHS and the state housing agencies. They
have been our primary lifeline with Tax Credits, mortgage dollars,
tax-exempt
bond financing. For the most part, the state housing agencies across the
country have fallen in line, they have partnered with us, leveraged our
resources with theirs, and theirs with us.
Staffing at RHS/DC
I have a staff person leaving RHS and going to work for HUD. The reason
I mention that is that when we have individuals leaving us to go to bigger
and better things, especially with an organization such as HUD, it
strengthens our alliance with HUD. Chuck Wehrwein went to HUD — that was a
tremendous help, that was an alliance, that was a line of communication we
haven’t had in the past. So it is a plus.
Joyce Allen has been assigned the collateral duty of working to
coordinate the final writing as well as the issuance of the Reinvention
regulation 3560 for publication. Jan indicated that I am to give you some
details on Reinvention. We’re at the final stages of signing off (we’re
about
to sign off) on the regulation to be released for clearance through the
Agency as well as the Department.
3560 is Coming
You might ask what all that means. Is it going to take eight months to
get 3560 out of the Agency and the Department? It could — I wouldn’t kid
you, it could. But, I don’t think so. We expect to have that regulation
cleared and out for Proposed Rule by late March or early April. Now, this is
only for Proposed Rule; if you have concerns when you see it, please
comment.
You’ll have a second shot at it. 3560 includes all of the management (the
old
1930-C).
FY 99 515 NOFA
We issued a 515 NOFA on November 16th, which expired January 15th,
1999.
This was a 60-day window for submission of proposals. As we speak, the
States
are in fact evaluating your responses to that NOFA. Your responses have been
in the form of proposals for funding properties to be constructed with 515
funds. By February 8th, the States are to have completed their reviews and
evaluations, their ranking and scoring on a State level. Those applications
will then come into the National Office for a further evaluation and ranking
and scoring. By the end of February, if not sooner, we expect to have our
final decisions made and answers back to the State offices.
We did a preliminary check on the number of applications that we
received in response to the NOFA — that was 161. The requests total $123
million. This is against a $114 million allocation. Of course, out of that
allocation, we had $79 million for new construction; so, in effect, you have
$123 million in requests against a $79 million set-aside. The remainder of
the allocation actually amounts to the $30 million we have set-aside for
repair/ rehab, and then we have a small portion set-aside for the
Administrator’s Reserve — that’s about $5.4 million. It’s all spelled out
in
1940-L.
Repair/Rehab
We expect to have final decisions made on repair/rehab within the next
few weeks. We will be in touch with the States for one last bit of
information, and it’s very minor. As soon as we get that, we will in fact be
releasing to the States the final decisions on the repair/rehab loans. We
received 52 applications for $31.5 million in repair/rehab.
We have within our portfolio about 455,000 units; that equates to about
18,000 properties. Our delinquency level has actually maintained at 1.9% for
the past three months. This is our lowest delinquency in fifteen years. In terms
of properties that we have in our inventory (what we call REO’s), we’re down
to sixteen. I know all are essentially asked for; we have procedural steps we
have
to go through, and we have some legal entanglements; pretty soon that figure
will reduce.
We’re planning to review our portfolio condition, develop reliable
predictions on repair/rehab as well as financial needs, as well as focus on
troubled properties first. We are in fact studying ways to keep funds
available in future budget years — it’s going to be tough. As Jan
indicated,
we have a high percentage of properties that are in excess of fifteen years old
—
these are properties we financed pre-1979. We have each, since 1994 put
small
amounts of dollars out there for repair/rehab to address Health and Safety
needs. That’s only a drop in the bucket. Within the next two to three years,
those properties are going to be coming back at us — it’s only the tip of
the iceberg.
Repair/Rehab Funds Needed
We project that by 2000 we will need some $423 million in repair/rehab
dollars in order to touch every property out there within that 18,000
project
portfolio that needs repair. We don’t have that kind of money. That’s why
I’ll be calling on you.
On preservation, Larry Anderson and Cynthia Reese-Foxworth head this
up.
We will be calling on you to work with us as far as setting up the Task
Force. We want to call it a Preservation Task Force; we have to sit down,
first of all, to identify the needs (I’m talking conceptually). After we’ve
identified the needs, we want to determine our strategy for getting out and
determining exactly what’s there and what it’s going to cost to make the
needed repairs.
The Industry Interface is proceeding well. We want to thank you for
your
cooperation in this area. TPA’s (Transfer Protocol Agreements) are up to
5,940 as of January 4, which is about 34% of all projects. We’re up to 39%
of
all properties that are over 24 units; Jan set a goal of 60% this year for
properties that are larger than 24 units to engage TPA’s; so we’re getting
there. Looks like we will make that 60% goal.
Automation in Field
On Automation, the bottom line on that (Industry Interface is one
aspect
of this), MFIS (Multi-Family Integrated System) Two will come out by,
hopefully, March. We will provide the field with more Automation tools —
budget reviews, financial statement reviews, status tracking, along with
providing management information system tools that they do not currently
have. What we have now in our offices is we have stand-alone 3B2 systems
that
the local office feeds data into. If I, for example, need information from a
particular Servicing Office, as our system is set up now, we have to do a
survey. In the future, we hope that a lot of that data within the
stand-alone
3B2’s will be put on a server; it will give us the capacity to do ad-hoc
reporting. We could actually pull that information to the National and State
levels.
MFIS, however, is going to be a monitoring system, primarily that will
enable our field offices when they make reviews to actually, through
automation, make notes, loan the information into a data base, and that data
base will be accessible from the National Office down.
Prepayment List
You want to know basically how we’re handling the prepayment list. We
are in fact accepting prepayment requests, we’re funding those that we’re
capable of funding. This year we have $5 million set-aside, with $2.5
million
of that designated to facilitate transfers to non-profits.
Thank you very much.
QUESTIONS & ANSWERS
3560 Handbook?
Question: Will the handbook on 3560 be given out for comment?
Answer: Baker: When we do a Proposed Rule, we don’t issue the handbook until
the rule is issued as a Final Rule. The Proposed Rule at that stage is still
a moving target, the policies are still a moving target. If in fact you see
areas there in the Proposed Rule that still need to be further addressed, we
review those comments. If they’re significant, we make changes; then we go
out for Final Rule. At that point, we issue the handbook because the
handbook
has to be consistent with the actual regulation. So your handbook will not
be
issued with the Proposed Rule.
Comments on Handbook?
Question: Will we have the opportunity to comment on the handbook?
Answer: Shadburn: I know we had the same concerns when we were doing the 538. In
June, Bob Yoder said he wanted to see the 538 handbook. Well, we made
through
that, and everyone has been happy with the 538 handbook. In answer to your
question on those concerns, we’ll work diligently to try to make sure that
as
this process goes through, that people are comfortable with the 3560
handbook.
Relief in Automation?
Question: RD staff are still spending a vast amount of time on nickel and
dime paperwork in the field; as the portfolio and the tenants in elderly
projects grow older, can we figure out how to spend less time on paperwork
and more time on the big issues such as the physical conditions? Can we cut
down, for example, on the rent increase and tenant certification paperwork?
Answer: Baker: We anticipate that MFIS Two will do just what you said. I’ve
seen demonstrations on it — it is very time sensitive, very compliance
sensitive. It will have, in fact, alarms in there to tell us that, for
example, during the last project visit, there was some concern about the
roof. We’re talking capital expenditure needs — it will, in fact, track
that. What we’re hoping to have is systems in place where a staff person can
visit a property and press certain menu items, and go back to the field
office itself and have that information recorded on a data base. Once it is
in the MFIS data base, that system will alert the field offices to various
reviews. Even the budget needs, we expect MFIS to address that. The idea
behind our new automation system is to reduce the paperwork involved. And,
this does have the potential for reducing Management’s paperwork.
Reserve Planning?
Question: We need to build large Reserve accounts to care for aging
projects.
Many RD staff are new and not very knowledgeable about the costs of repairs.
They ask us, for example, to put together Capital Improvement Plans; my
experience in the public sector is that you put together both the
expenditure
side and the revenue side. The difficulty with RD in putting together the
revenue side is that it is not a reliable, predictable side; we constantly
argue over minor rent increases, not to mention substantial increases, to
build these Reserve accounts when we really need a five year plan for rent
increases. I think the Agency needs to tell the States to build the Reserves
substantially, and one of the ways to do this is allow us to build in and
rely on five year rent increases.
Answer: Baker: The policy we’ve been employing in terms of capital
expenditures, cash inflows, cash outflows — we try to stick with comparable
rents for comparable units, try to use those as a measure. The reason we do
that is it all boils down to the cost of Rental Assistance. When you’re
talking capital expenditures, we’re looking for ways to make the capital
expenditure. If we have to put additional money in there, we do; or, if we
have to subordinate in order to enable you to get funding elsewhere, but we
have to, in fact, make certain our rents stay within what the market
dictates. Otherwise, we are going to have a horrendous drain on our Rental
Assistance. It all boils down to the availability of Rental Assistance.
Summary by Jan Shadburn
These kinds of things help us. As we move forward, certainly don’t
hesitate to give us a call. We need to hear from you to make these programs
better. If we’re hearing from you, that’s what’s most important. Thank you
for inviting us.