FOR YOUR INFORMATION
I have the following comments on the state of the program.
RECENT APPEAL HEARING: I prepared and presented the owner’s defense against an OIG Audit accusing him of ripping off projects for well over $1,000,000 through his Identity of Interest maintenance company. Although we have not yet received the decision, I feel confident we showed that the Audit was grossly in error. In a previous appeal hearing on a different OIG Audit, the decision reduced the demand from about $500,000 to under $12,000.
OIG: OIG continues to look for fraud, waste and abuse through the Identity of Interest between ownership and management. In one recent Audit of an Identity of Interest maintenance company, OIG said the work could not have been done because the maintenance staff did not have time to travel to the projects and perform any work; OIG used a computer program to reach the conclusion that there was no time to perform the work.
OIG AUDIT OF RESERVES: OIG is apparently auditing Reserves in a number of states, apparently to find misuse of Reserves (including Agency error in approving withdrawals). OIG will probably try to conclude that the “abuse” of the Reserves has resulted in unnecessary rehab loans. In addition, they will inspect a number of projects to further document the project conditions resulting from the abuse.ž
LOAN CLASSIFICATION SYSTEM: The Agency has implemented the System. The Agency plans to service projects on the basis of the Classification and will concentrate on low rated projects — this will include projects with unapproved budgets, missing annual reports, delinquent reserves, high vacancies, and reduced revenues of 10%+. When the Agency requires a Workout Plan, the project’s Classification is probably the reason for it.
PREPAYMENT/EQUITY LOANS: The Agency is still trying to work out a way to reduce the backlog of equity loans. I am involved in several innovative approaches to overcome the lack of funding. Prepayment requests can still be submitted and processed for pre-1979 projects.
WORKOUT PLANS: I have prepared a number of Workout Plans, including over 30 projects that the Agency had micro-managed to the point that they were not working.
SECTION 8: In Section 8/515 projects with excess Reserves, I expect the Agency will require that money to be used fund operations. You might explore your options.
APPEALS: The Agency is asserting that some adverse decisions are not appealable. That is not an Agency decision. The National Appeals Division Director has the final decision on what may be appealed. So far, the Director has been very liberal in granting appeal rights.
APPRAISALS: Whether you’re applying for a rehab loan, equity loan or new project (or a transfer in some cases), the Agency’s appraisal is crucial to making the deal work. If the appraisal is off, I may be able to work with you and the Agency to revise the appraised value.
RETURN TO OWNER: If you are not getting a Return, it’s time to look at the options, especially with the Agency turning up the heat on servicing.
I have worked with and advised owners, developers and managers on 515 program issues and problems since 1988. If you have an issue with the Agency or on your projects, or don’t have the expertise on your staff, please contact me.