FOR YOUR INFORMATION
I consult with owners and managers on a wide range of 515 issues:
— appeals related to OIG audits;
— Workout Plans;
— appeals of RHS decisions;
— processing and servicing issues;
— prepayment, etc.
I have the following comments on the state of the program:
LOAN CLASSIFICATION SYSTEM: RHS is implementing the system. They plan 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 RHS tells you to submit a Workout Plan, the project’s classification is probably the reason for it.
PREPAYMENT/EQUITY LOANS: RHS is still trying to work out a way to reduce the backlog of equity loans. I’m involved in several innovative approaches to overcome the lack of funding. Prepayment requests can still be submitted and processed.
OIG AUDITS: OIG is still looking for fraud, waste and abuse, especially with Identity of Interest between ownership and management. And, in one audit of an Identity of Interest maintenance company, OIG claimed the work couldn’t have been done because the maintenance staff didn’t have time to have traveled to the projects they said they visited; in that audit, OIG used a computer program that estimated the driving speed at 42 MPH, although even the AAA estimates travel time at 50 MPH.
WORKOUT PLANS: I recently prepared (and RHS approved) Workout Plans for over 30 projects that RHS had micro-managed to the point that they weren’t working.
SECTION 8: If you have a Section 8/515 project with excess Reserves, I expect that RHS will require you to fund operations with that money. You might explore your options.
APPEALS: RECD is more assertive that some adverse decisions are not appealable. That isn’t an RECD 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), RECD’s appraisal is crucial to making the deal work. If the appraisal is off, I may be able to work with you and RHS 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 RHS 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 RHS or on your projects, or don’t have the expertise on your staff, please contact me.