Remarks by:
Patrick N. Sheridan.
Assistant Deputy Administrator
Multifamily Housing
Rural Housing Service, USDA
Washington, D.C.
Addressing CARH:
A Global Roundup
I want to go over some global things we and others have been working on
related to our programs.
As many of you know, several months ago with the
support of the Under Secretary we put together our Task Force, and we’re working in production in rural
areas to take a look at the 515 program, and we’re working in production
and in preservation of the portfolio, and these tie in with other
things that are going on. The Task Force involves five State Directors and their Multi-Family Housing Chiefs, and
National Office staff. We’ve had a number of guest speakers come and talk
about what’s going on in the industry, including Conrad Egan of the Millennial Housing
Commission, Compass Associates, and others.
Task Force Report
What we’re working on right now is to come up with a list of
recommendations for the Under Secretary as to the needs of the program from
the production standpoint, ideas for preservation, and how the program should
be best delivered as far as staffing and office set-up goes. We have one more meeting of
the Task Force in mid-July. After that, a paper will be drafted and
delivered to the Under Secretary. I expect that after that happens there will
be a roll out for the industry, with Stakeholder sessions looking for feedback.
Obviously, one of the things that we wanted to make sure we did was build
in what was going on in the industry right now. The Millennial Commission
Report was issued; we worked with the Commissioners and the Task Forces to
try to make sure that rural issues, particularly the apartment industry, were
identified. Those of you who have looked at the Report will notice we have
the first recommendation that is fairly specific to our program, and which in
general did support the need for adequately funded multi-family and single-family
programs. Another thing that came out of
the Report is they felt Vouchers were not necessarily the answer.
The Report sort of validated a lot of what you in the industry and those
of us in the Agency thought all along. It’s good to have that extra support
when you’re trying to make the case to our own Budget people, and also on the
Hill.
GAO Report
The GAO issued a Report quite some time ago that addressed
multi-family housing issues, and there’s the new one to be issued. We saw the
draft report. It is focussing on preservation of the RHS portfolio, taking
the broader definition of Preservation to mean not just the at-risk-of-prepaying projects, but also those that are potentially at-risk because of
rehab needs and the potential for becoming substandard housing. It does track
fairly closely to what we felt the needs for the program were and will
give us some boost in some of the things we will be recommending.
As far as Preservation goes, we’re seeing a trend, in particular, in
a pickup in interest by large national
nonprofits (in some cases, faith-based) in acquiring properties. I think that as an Agency we are not
encouraging that any more than for-profit owners acquiring properties through
transfers and substitutions. It is a favorable sign from the standpoint that
a lot of these faith-based organizations do offer any number of services with
them for tenants that we can’t afford either under the Basic Rent structure or the
Rental Assistance program. From that perspective, this can be a favorable
outcome.
A number of them have very sophisticated back-room operations that can do
the underwriting on these, although so far they are going through a fair
amount of brain damage trying to figure how. I think at some point in time
you may see more of these pick up. There may be opportunities for owners to
sell to them. I think it could be an opportunity for some of the larger
portfolio transfers to take place when you have multiple properties.
Unique Funding Possible
We’re seeing some very creative ideas in how to make these big transfers
happen. In two states in particular we’re working with sort of
unique funding sources and cooperation. I say working with states, I mean
State Agencies more so than even with our own staff. In New Mexico and
Michigan, we’ve had meetings with the State Agencies. We’ve discussed
opportunities for the Agencies to participate in transfers of properties that
need to be preserved. New Mexico has had some very favorable responses to working with some of their internal programs. They should be able to
use FHA insurance to insure loans they would make to facilitate transfers. In
Michigan, we have the State Agency working with us and several large
nonprofits to become owners of large portfolios they’re interested in
selling. Quite a few parties are at the table looking for ways to make this
happen.
The Enterprise Foundation has been working with us both in New Mexico and
Michigan to use some of their expertise in those two states to help
nonprofits acquire properties. We’re seeing some very good outcomes in those
situations.
3560 To OMB
On 3560, I want to point out how long this process has been. I dug it out
and looked to see when Obie signed off on it as far as when it left
Multi-Family for initial clearance: That was April 1999. So it’s a little more
than three years from the time writers stopped writing, It’s been a long
process through the Office of General Counsel to the Department for their
review. We are very pleased to see it is about ready to go to OMB. As Obie
said, I think we have a pretty good chance of seeing it published either
before the end of the Fiscal Year or the end of the calendar year.
What we will have to do is focus on the Handbook. We have two drafts of
the Handbook done, and what we want to be able to do is have enough of the
details done at the time the regulation is published is to let you look at
some of the excerpts from the Handbook so you will know how things will actually
be administered. We don’t want to do a final Handbook because what will
happen is that comments we get back in the Proposed Rule process will
oftentimes ask us to go in a different direction that might make a
whole lot of sense. Rather than spend a lot of time fleshing out
the Handbook to final form, we’d rather have it in good shape as a draft and
then be able to react to the comments as they come out.
Need For Comments
When the Proposed Rule comes out, be sure to look at it. We recognize
this regulation has been in process for so long that a number of things are
out of date already. We’ll throw up our hands at this point and say: Don’t
blame us, things have changed. We do want to know if you think there are
things we ought to change because of changes in the industry. Insurance is a
good example. Make sure you let us know where you see changes that need to be
made so we can make those changes before we go to Final Rule.
We will be talking with our field staff about making sure that they keep
an open mind about the types of deals we’re seeing now because it takes flexibility to work with so many different partners, particularly when
we’re not necessarily the major funding source in the deals. We’re trying to
make sure everyone keeps an open mind about creative ways to work with
our partners. If documents need to be adjusted from the standpoint of the
Reserves, for example, we’re going to be open to suggestions — within the
regulations, because we can’t waive something we already have in the
regulations. Where there is some discretion that makes sense, I think we’re
going to try to make sure the States are looking at that. If there are other
funding sources you can bring in that will make the deal work, we’re
certainly open to that and will try to see that happens.
I did mention insurance briefly. I had an interesting conversation
recently. Apparently Fannie Mae is going to be issuing some guidance on what
they will accept on insurance standards. I encourage you to take a look at
those standards when they come out and see if it might make sense for us to look at and
maybe incorporate them in the Proposed Rule when it comes out or make that change
between Proposed and Final. Certainly, it is a huge issue and we’ve heard
about it from every group we’ve met with. We’re doing what we can within existing regulations. We do recognize we need to make some changes.
Thank you.
Next: Sections 515 and 538, Training — and PR