Obediah Baker, Sr.
Director,
Multi-Family Housing Processing Division
Rural Housing Service, USDA
Washington, D.C.
Addressing CARH:
As I walked in the door, someone asked me what my topic is. I said loan
production, programs, and changes in funding activities. They said, well,
you
don’t have very much to say, do you? I just wanted to share a few highlights
with you.
As you know, the Section 515 Rural Rental Housing program basically
incurred a big change as a result of the 1997 Appropriations Act Reforms.
Prioritization of Places — I’m certain that most of you in the
Section 515 production business are in fact familiar with the new system
that
we have for Prioritization of Places, which was one of the requirements of
the Reforms. Another Reform was Subsidy Layering; as you see it in our
regulation, we are actually calling it Sources and Uses Comprehensive
Evaluation or SaUCE. Those are the two biggest Reforms that were mandated by
the 1997 Appropriations Act.
The factors involved in the Place selection are: 1. lack of credit; 2.
rural poverty; 3. substandard housing; 4. shelter costs and rent overburden.
[A CARH member said it is working.]
Basically, what we’re talking about when we talk about subsidy layering,
SaUCE, is we’re looking at all sources of funding involved in the
transaction. We have a computer program developed basically to enable us to
underwrite based on an acceptable fee schedule; in other words, we want to
be
sure that the transaction is not over subsidized. We’re encouraging the
State
Offices to enter into a Memorandum of Understanding (MOU) with the various
Housing Finance Agencies. I was in the state of Nevada recently and I had
the
opportunity to sit in on a session that the Nevada State Office held with
the
Nevada State Housing Authority; they had a draft MOU that not only involved
loan production, but servicing. They are combining the two documents; it was
a very healthy, wholesome discussion. I walked out of that very encouraged.
The reason I mention this is we talked with some of our State Offices and
they indicate they are having some difficulty in reaching a Memorandum of
Understanding; they have various reasons for not being able to reach that
point yet, but the great majority of States (30 to 35 out of 50) have in
fact
entered into either a written or verbal Memorandum of Understanding. So it
is
working in those States where that relationship is ongoing, is positive;
information is exchanged; those States are in fact producing the loans.
The Notification of Fund Availability (NOFA) has been issued; our State
Offices are now involved in the review process to develop the selection of
loans; most States have selected the loans. These are proposals that are
going to proceed to further processing and, ultimately, funding.
That is a very tedious process under our new system. You may be
wondering
why is it taking so long to obligate moneys. Not only are you asking me
that,
but Jan Shadburn is asking me. My answer to him is that it is complicated;
we’re involved in leveraging; it takes a long time to mesh the pieces
together; we will use our money. We will obligate the few dollars that we do
have in the 515 program this year.
Not the Old Days
I want to extend my appreciation to you, however, for your patience,
your
expertise, and sitting down with us. To those of you who are involved in the
515 funding proposals, for being patient with us in walking through the loan
participation situations. It is not an easy process. It’s not like it used
to
be where the Rural Housing Service was in fact the autonomous lender —
you’d
come in, get a 1% loan amortized at 50 years; it would either be 95% or 97%;
and, we’d go on to the next transaction. Now, because we’re not the sole
lending participant, it takes much longer and becomes more complicated. My
compliments to you for your ingenuity and finding the sources of funding
that
are in fact viable and will enable us to continue to serve the very-low,
low,
and moderate income rural population.
Where we are in terms of funding levels, under the 515 program for this
year, we had $150 million for new construction, and that’s the portion that
we’re leveraging fairly heavily; we’re also leveraging the $55 million that
we had set aside for repair and rehabilitation, which in fact, includes
equity loans. We’ve got $5 million included in that $55 million from the
equity loan pot, in addition to about $2 million that some States said they
had rehab transactions left over from a prior fiscal year. We afforded a
window of opportunity back in December to allow a transfer of funds from new
construction to do rehab. We had about $2 million in those transactions, the
rehab pot is $55 million, the new construction pot is $150 million.
For this year, the Section 521 Rental Assistance program is $545
million,
with most of it having to be used for renewals.
The Labor Housing program is on the rise in terms of the manner in which
we do business. There is a new system for processing an applicant; first of
all, for the selection of applicants for funding, we will be going to a NOFA
system during Fiscal Year 1999. That is the regulation involving Labor
Housing that we expect to have out in December; we expect to have the
Proposed Rule out in July to enable a lot of the non-profit organizations to
align themselves to participate in the NOFA that we expect to issue late
this
calendar year or early next calendar year for funding the Labor Housing
projects next year.
538 Program
On the 538 Guarantee program, this year we’re looking at loan authority
of $38 million. That is substantially more than what we were authorized last
year. It’s rapidly becoming the production program of the organization.
However, it is not intended to replace the 515 program. The intent is to
augment the 515 program.
As I indicated earlier, there is a feeling among your cohorts out there
on the West Coast that the 515 program is dying on the vine. I think we’ll
have a 515 program. It may not take the form as it has in the past, however,
there is a need in Rural America for the subsidies that the program does
come
forth with. However, in terms of production, we expect the 538 program over
the next year to gather a lot of momentum.
I think I’ve done a pretty good job in expanding on the few bumps that
we
have. Obviously, I’m hopeful. Obviously, I’m positive. I’m trying to convey
that positive feeling to you in terms of your continued efforts to provide
Affordable Housing to rural residents of our country.