FOR YOUR INFORMATION
I consult with owners and managers on the full range of 515 issues:
— appeals related to OIG audits;
— Workout Plans;
— appeals of adverse RHS decisions;
— processing and servicing issues; and
— prepayment as part of an acquisition strategy.
I have the following comments on the state of the program.
APPEAL COSTS AND THE EQUAL ACCESS TO JUSTICE ACT: As I see it, when you prevail in an appeal (such as the denial of a rent increase), you now can ask the Agency to pay for the costs of the appeal where you paid a professional to conduct the appeal. The last word is not in yet on how to do this, but stay tuned. The most recent Rural Housing Council newsletter has an excellent presentation on this.
CUSTOMER? If you’re a fast food customer, you have a choice of McDonald’s, Hardee’s, Burger Chef, etc. When you’re the customer of the Agency, you don’t.
PROJECT SERVICING: The Agency Project Classification System is focusing servicing actions on D rated projects. A Workout Plan is the fastest way to upgrade the rating.
UNTHINKABLE: Agency staff are wondering what would happen if RA were to end. Can you say underwater? To date, neither Congress nor HUD has proposed anything so drastic on §8/202 projects, which are direct loans - the same as §515 loans. It may be better to watch §8/202 rather than either §8 or the "Mark to Market" for FHA insured loans.
PRESERVATION: The Agency almost guarantees that the housing will be preserved at your expense because of the restrictions on prepayment. If it won’t cash flow with the restrictions, you can’t refinance it. Most projects won’t cash flow if they have too many RA tenants. And then there is the story making the rounds that an owner prepaid before realizing there were any restrictions; it may be apocryphal.
PREPAYMENT INCENTIVES: Because of a lack of effective incentives, I am seeing more owners chafing more at the overall Agency requirements. See CUSTOMER above.
MILLENNIUM APPROACHES: Under current rules, when 20 year restrictive use clauses start expiring in 2000, there are more restrictions imposed upon prepayment than if you prepay before the clause expires. Now is the time to start planning.
COMPUTER REPORTS TO AGENCY: The Agency is moving to accept tenant certifications over a computer. Costs might be allowable in project budgets; check with your Servicing Office to get their interpretation, and consider including any such costs in 1998 budgets.
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.