Remarks by:
Carl Wagner
Acting Deputy Administrator,
Multi-Family Housing
Rural Housing Service
RD Nitty GrittyMy name is Carl Wagner. I’m with the Rural Housing Service. Most of you might remember that I’ve been around for a few years — thirty-six of them, in fact. So I think I do know a little bit about the Rural Housing Service.
I like little, short statements. So this is going to be little and short and, I hope, to the point.
I’m very pleased to be here and to talk about what’s going on in the Rural Housing Service Multifamily Housing. Part of the reason for that is that right now I’m serving as the Acting Deputy Administrator, so if I don’t like something, I get to make some effort to make it change.
The second thing I would have to say to you is that this is a time of great change for Multifamily Housing. We’re making a lot of things happen. I think two words would describe what’s going on in Multifamily Housing and Rural Housing Service: refocus and revitalization.
When I talk about refocus, I’m really trying to get our folks to think about what the objective of the Multifamily Housing program is, and that is to provide capital and other resources to builders, owners, borrowers, and management, to build and operate affordable, safe, decent and sanitary housing in rural areas that meet the housing needs of very low- and moderate-income families.
I’m very confident in saying that most of our projects are well located, well maintained, and meet those needs. No matter what anybody else says, most of them do that. And we’re very pleased with that, and a lot of that is the result of your hard work and hopefully the efforts between the Agency and you working together.
We do have new management and a new management team to talk about. We have a new Acting Administrator, and that’s Chris Alsop. Most of you will remember that he did it for about a year, about a year ago. Stephanie White is the Director of Servicing. Stephanie has been with us a little over a year and is doing a great job.
Improve Customer ServiceWe will soon have a new Deputy Administrator. The decision has been recommended to OPM and that process is going through — we have no control over that process — so as soon as it is completed, they will make the announcement of the new Deputy Administrator for Multifamily Housing.
The other good part is we have been able to fill some vacancies. As a matter of fact, for the first time since I’ve been up here we have added seven new people this spring. Some of these people are with us today—three of them are brand new today. I am also proud that some of these folks come from the field offices, so we’re not consistently getting folks who are not from the field offices. We welcome them on board and hopefully you’ll have a good relationship with them. If you have time, come up and introduce yourselves and ask your questions.
I also want to talk about the fact that one of our major objectives is to improve customer service. And we mean by that being both more accessible and more responsive to our field staff and the public.
Before Involving D.C.And I want to talk about the chain of command. I’ve been around this outfit for 36 years and I came from the Farmers Home Administration (it will always be Farmers Home to me, so you might as well just adjust). So basically I want you to remember that there is a chain of command in how we do things, and a way that we like to have things done. And that is to work with the local field office first, then the state office, and then the national office. It doesn’t do any good to call the national office and say you have a problem with the field office unless you have talked to the field office and to the state office. We would like that chain of command to be followed and adhered to as much as possible, because if we have to figure out what’s going on, it can take a lot of time away from other things.
Another thing that we want to try to do is to build partnerships with other capital providers and help meet the affordable housing needs of rural residents and the demand for rehabilitation.
GSEs and RHSWe have done some things that we want to make you aware of at this point. We have worked with Freddie Mac on a pilot program where Freddie Mac is making first mortgage loans and we’re subordinating our existing loan to rehab some projects. We’re doing that pilot program in Indiana and Ohio this summer to see how it works, and if it goes well we will expand. We want to take little baby steps first, see if it works, and then we’ll go further with that. There’s a little bit of a process of them getting comfortable with us and getting the bugs worked out. We’re also working diligently on a similar process with Fannie Mae.
I’m pleased to tell you is that, with your help, we were able to get the amendment to the Housing Act so that Ginnie Mae can buy 538 mortgages. Big deal for us. That’s going to be a place to place those mortgages. That should be coming up relatively soon. The Reg has been written, it’s in the clearance process, and as soon as that’s done, it’ll be out.
In addition to these new partnerships, the traditional ones continue — the Low Income Housing Tax Credits that we use heavily, the HOME funds, CDBG, Federal Home Loan Bank, and other sources of subordination. So if somebody says the Agency will not subordinate their existing loan to let them get a first mortgage loan, that’s wrong, OK? We will do that.
AppraisalsI also want to talk about clear and concise program directions. You’ve seen some of the Administrative Notices that we’ve issued recently. The one we issued on appraisal terminology is the biggest AN we’ve ever done. It’s Brett Morgan’s work, something like 37 or 38 pages with Exhibits, but basically the effort is to try to make a program operate like the industry does and use the same terminology. We were using some things that really didn’t make any sense to appraisers. They kept coming back to us to ask, “What are you trying to do?” So this cuts some of that stuff out, and also gives some direction.
I suggest that if you haven’t already read that AN and you are in the development business, read it. It’s worthwhile. It will help you understand what we’re trying to do as far as valuing the properties, and how we’re going to address those things, and what an appraiser should do for you and what an appraiser can and cannot do for you.
We also have an AN out on the release of appraisals, which means that appraisals can be released to the owner. If any state is not doing that, they are violating that AN now. It is out, it is published.
And we are working on a tenant income verification AN. We’re also working on an AN about Rental Assistance management.
And so far as loan processing goes, the big thing is the change in the loan approval authority of the state directors, which basically went from $1 million to $3 million. So there’s not a whole lot of reason for dockets for approval requests and stuff like that coming in to the national office.
We are going to be more open in decision-making, including owners, managers, interest groups, and field staff. We also want to continue open dialogue with Congressional Members and their staffs. So we’ve made some real progress there. Mr. Alsop and the Acting Under Secretary, Mr. Gonzalez, have been up to talk to various groups on the Hill, Congressional Members and their staffs, and it’s been very helpful for us to have that line of communication reestablished.
RHS AutomationWe want to embrace some new technologies, some new ways to deliver the program. Some of you have been involved in the MINC (Management Interactive Network Connection — see AN 3953) program. That’s a methodology for transmitting the information about the tenants and payment collection and all that kind of stuff back and forth.
I understand it’s working relatively well, and we are going to push people in that direction, just as HUD is doing. The more of these things we can do electronically, the fewer things we’ve got to have people doing out there; pushing calculators and counting numbers when they could be doing other things that are more productive.
We’ve made MIFIS 4 available. It has some things in it that will be helpful to us. One of the great things that we like about it is that we can find out what’s going on in a state electronically without having to call up and ask a whole bunch of questions. So we can know some things.
The PRETRAC system, which most of you are aware of as far as prepayment, is available and working.
We’re going to try to put some more stuff on the Website. One of my big complaints about our Websites is simply that most of them have so much garbage on them that you can’t figure out what the heck they’re trying to say. We want to add information about NOFA selections, maybe the Obligations, maybe some frequently asked questions, and obviously, something I think we need, is contact information for national office staff — phone numbers, email addresses, who’s responsible for what. Since we have all these seven new people, we can put them to work right now.
3560, Hope SpringsAnd one other thing is the new 3560 handbooks and Regulations. They are pretty much out of the Division and in the clearance process — we’re just doing some final little touches to them, some work on the preambles and so on, before they start in through the Clearance of the Department and then through OMB; then it’s out of our hands. So I can almost say, I’m done all I can do with it and so now it’s going to have to take whatever time it takes. But it is a great effort. I want to acknowledge our staff, you guys have no idea the amount of time these folks have spent working on this, probably the last six months we’ve made it our major priority. We individually addressed all 3,000 comments we got and provided changes to the handbook. And we have done major things as far as making the Regs more user friendly.
Issues to Work OnThere remain a couple things we need to work on, issues we need to work on together to resolve. I mean that sincerely, because we can’t do it by ourselves, and some of them we can’t do at all. So we need your help.
We need, first, to figure out something to do about escalating insurance costs. I know you folks agree with that 100%. I don’t have a solution, but we need to figure out something that works to get that resolved.
That’s becoming a mounting problem for us, something that we can’t even imagine. I actually got an email this morning—one of 137 emails—which said that an owner of a project is being sued by a tenant because, unfortunately, a child in this family project was killed on the swing set. The child’s mother is suing the owner on this issue. His first solution, that his insurance man suggested, was to take out all the swing sets. Well, does that make a lot of sense in a project filled with kids? I don’t know. There has to be some solution to that whole problem, and we’ve got to find it.
Second thing, exit tax relief for aging owners. I know you guys are actively pursuing Congressional staffs and working on that effort. We will do whatever we can to help in that area, whether it’s information or whatever we can possibly provide. It’s a big issue.
Get the Story OutThird, as I have told this group before, we need to tell the story of the positive economic, political and social impact that affordable housing has on a community. And I include all those elements deliberately, because affordable housing has economic and political and social impacts. It does create some jobs, it does create some tax base, and it does have a positive social impact on the community. If you don’t have rental housing and the community is out in the middle of nowhere, one of these days it’s not even going to be there, it’s just going to be a crossroads. Nothing is going to be there.
On a side note, I just spent a week in Germany. It was enlightening for me, my first time ever abroad, and one thing I do have a better understanding about is life cycle costs — I saw buildings that were a thousand years old and in great shape. So they can be maintained. I don’t want to hear any excuses. It may cost you, but it can be done.
So, as I say, in the next few months Chris Alsop and I will do our best to keep the ship on course. But if there’s something you need out of either of us, please contact us, and we’ll be glad to try to get you the information you need and try to answer any questions you have. We will try to work together with you, as we have over the years, to try to rekindle that spark within Multifamily Housing. Because I think it is a time to refocus and revitalize.
Question and Answer SessionQ. What’s happened with the capital needs assessment report?
A. There’s not a whole lot I can say about it. The stance that we’ve taken so far is that they have done the inspections, they’ve done the market piece of it, they’re still working on the analysis and have not yet given us a report. They have made some efforts to brief some of the upper level management within Rural Housing Service, but the report has not been presented to the Agency yet. It is still in process, it’s still the objective to release it to the Agency some time this summer.
Q. A question about preservation and outside capital. Would you subordinate to a third party for a rehab loan?
A. Yes.
Q. Would that trigger a twenty-year use agreement?
A. No.
Q. Is it true that last year rehab loans that did not have Rental Assistance with them, because there was a shortfall of Rental Assistance, were approved or in the process of being approved. Is that correct?
A. For ’04, that is correct.
Q. Is there anything that can be done about that? Can you see a solution for that? In other words, if a project couldn’t support itself prior to the rehab loan, so it got in such bad shape that it needs the rehab loan, how can it afford to carry additional debt service for the rehab loan?
A. Well, the interesting thing was that out of some $146 million’s worth of requests, about $44 million, maybe $46 million (these figures are off the top of my head), that had 100% of RA in them. Those are the ones that we’re trying to work with this year. There are a lot of needs where there’s not 100% of RA. The key to that part of the solution is still not available to us at this point. We asked the folks who are doing the assessment for us to make some recommendations as to other tools that maybe would work. We have approached the Hill, and Mr. Alsop and Mr. Gonzalez sat up there talking to them about this issue, but I don’t see anybody coming along to give us a big check for much more RA. So we don’t have a solution for that yet.
Q. The Agency is working on some transfer Regs. Can you tell us when those new Regs will come out, and can you give us any insight into what they’ll say?
A. We’re working on two things. We’re working on 3560, which is the new Reg. Period. It includes the transfer portion of the Reg. And we’re actually doing an Administrative Notice. I’d say it’s maybe 99% done; it’s in the final review process, and I’ve read it about four times, and fallen asleep a couple of times. It’s pretty intensive, but it takes into consideration some of these things, as far as third-party equity loans, third-party loans — those kinds of things. And it does have provisions for enhancing or enabling transfers to occur more smoothly. Our objective right now is to get the AN out first. It should be in place within the next 30 days. And then the Regs will come along later and will encompass most of those abilities.
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