Carl Grate
Acting Director
Multi-Family Housing Portfolio Management Division
Rural Housing Service, USDA
Washington, D.C.
Addressing CARH:
I am here to share with you a little bit about what is going on in the
multi-family housing program, particularly from the servicing side. Usually
I’m not a very popular person at these gatherings because I am a loan
servicer. So you kind of know where that puts me — some of us like to refer
to us as the junkyard dogs, so to speak: We come looking.
I do want to say that I believe very strongly that our portfolio is
alive
and well. We are in good standing and could probably stand up to any other
Affordable Housing portfolio.
We do have about 18,088 projects as of May 30, which translates to a
little over 455,000 units. There is an outstanding principal balance of
$11.8
Billion. So, to augment the fact that we believe we are alive and well,
there
is only a 2.0% delinquency — that’s only 300 to 400 projects — which we’re
very proud of.
Inventory Properties
Our servicing efforts have translated into some Inventory Properties, in
other words, properties that we have had to take into our possession via
some
sort of liquidation action. But actually, it’s only 8 projects with 124
units
with a portfolio value of $2.5 million. I think that’s a number we can all
be
proud of. We don’t like being a landlord, and of course these 8 projects
include some Labor Housing units that are the on-farm type where the farm is
no longer in business and we’ve had to take over ownership of those
projects.
We have most of those committed to be sold, so within our next couple of
reporting periods we think we should be looking a lot better than that.
One of the things that we are doing, and a lot of you are familiar with,
is the Multi-Family Integrated System — MFIS. MFIS has become a real good
management tool for us and for you as well. Now, some of you may not think
so
because MFIS categorizes projects and you end up being, maybe, in a Category
D, which is not the place you’d like to be.
19.1% Category D
As of the end of May, we had 19.1% of our portfolio in a Category D.
That’s a little high, but we haven’t panicked because, as a lot of you know,
it includes getting in some of the audits and getting budgets approved and
what have you. So when you go kind of back and forth on getting budgets
approved, that number stays a little bit high, although it includes some of
the other things such as delinquencies, Health and Safety and deferred
maintenance types of issues. We’re not that concerned, again, because it
contains things like unapproved budgets.
One of the things it has also done in terms of managing the portfolio is
it made our managers really look at the portfolio from the standpoint of
what’s really happening and being able to have a better dialogue with you as
owners and managers. We’re very excited about the fact that this is a tool
they have and can use; when used properly, it can benefit them in managing
the portfolio. There’s been a recent upgrade to that system and of course
there’s an ongoing upgrade in process that we hope to have out by Fall this
year.
MTFS is up and going. We’ve got all States with the hardware uploaded,
with the exception of five, and we expect those States to have their
software
loaded fairly shortly. We’ve got 3,147 of the Partnership Agreements, which
is little less than 20% of our portfolio. Larry Anderson tells me that is
coming along fairly well although we would like to see that number begin to
escalate.
One of the things you hear a lot about is consistency; Jan talks about
consistency in the program. One of the ways we’re doing that, of course, is
through the Reg Reinvention, training, and other initiatives.
OIG Initiative
It was mentioned about the OIG and the Rural Housing Service initiative;
I won’t say a lot about that other than to say the preliminary reports
really
are not showing us in that bad of a light. That’s not something we didn’t
expect. It is showing that we probably do need some rule changes and this
issue of consistency and understanding the regs, consistency across State
lines, and people in the field really understanding what we intend the regs
to be about.
Tenant Initiative
We also beginning to open up an avenue on Tenant Initiatives, something
that this Agency probably has not been too involved in like HUD, where you
have quite a few Tenant Initiatives going. We don’t have a lot finalized at
this point, but I will tell you we’re looking at several proposals on a
case-by-case basis. Hopefully, the new regs will have more guidance on
Tenant
Initiatives. A couple that I will just share with you — we’ve received some
proposals (incidentally, this would be an approved project expense): a
computer learning center where management will provide the space, we may
allow some moneys for the purchase of software. In the case of the proposals
we’ve had, the computers are being donated and a local community college
will
provide the training, etc. Depending on the cost, and some of this can be a
project expense, we are working on a case-by-case basis, looking at what
kinds of costs and what we would allow as a budget expense. Drug awareness
programs are others. And you will be hearing a lot more about these in the
very near future.
On program consistency, we talked about training. We are now, as we
speak, preparing to put on three new employee training courses this summer
in
St. Louis. Interestingly enough, we call them “new employee” training
courses, but it is really basically for people that are new to the program.
We did a survey of the last two courses we had, and the numbers show that
the
average time with the government or with the Agency was about 17 years —
for
people in the program, less than two years due to reorganization. They don’t
have the history or the skill or the experience in the multi-family program.
We’re also offering an IREM course; one of the interesting things about this
is it will be given from the satellite centers so our people will not have a
big cost impact — they can go into HUD centers if they are available or
even
do link-ups from State Offices or other offices where we have that
capability, even in some of the community colleges. One course that we’ve
had
a lot of mileage out of is the Community Development course given by the
University of Maryland — it has been a very intense, couple week course,
but
it has been well received. And, we think it increased the knowledge of our
people and carries our people to another level in understanding community
development.
So these are some of the things we are trying to do to get at this issue
of consistency. Getting people to understand community development as a
whole; the technical side of the program as well.
Prepayment and Office of Preservation
We staffed the Office of Preservation with a couple of detailees for a
short period of time. Larry Anderson and Cynthia Reese-Foxworth are the
individuals who have initial responsibility for the Office of Preservation.
I
will say they are not doing regulation changes at this point; that is a part
of the overall rewrite package. We are going to be doing some policy changes
in terms of where and how incentive packages will be reviewed. Jan has been
committed that we will look at all of those at least here at the national
level and provide some form of input and approval and/or concurrence with
those packages. So we’re trying to get again at this issue of consistency.
Mr. Meyers, I’m sure you’ll be glad to hear about that and we welcome your
input as well.
Funding for Preservation
In the area of funding for Preservation, we have funded everything
through the fourth quarter. We have only about a little over $1 million for
the third quarter put out. Fourth quarter coming — we have only a little
over $1 million. We still have about $23 million in incentive loans that
need
to be funded. As you all know, the money is not there.
We have a lot going on. Our people are busy, and I’m not making any
excuses. I just want to say that to say if our response time to you is
suffering in any way, be it through a direct response that you need from us
or through the States, please let me or any other staff members know. One of
the things we do try to pride ourselves on is quick turnaround time on
responses to the public. My phone is always there, and I like to know about
issues that you have about servicing the portfolio and response time.