FOR YOUR INFORMATION
So, what now? The Agency is going to be reviewing how to better administer the Preservation and Prepayment program, including how to improve the regulations and the legislation. You may or may not have a dog in this fight, but there may come a day when you do. There doesn’t seem to be a key organization such as CARH or the NAHB Rural Housing Council taking the lead, so you can be on your own or urge them to make it a priority issue.
Reappraisals? I favor a policy to reappraise projects on the List of projects waiting for equity loans; the reappraisal is to update the equity and, where there were faulty appraisals, move projects off the List.
Equity Loans Soon? I’m not sure the Agency will be funding equity loans very soon, but there is the remote possibility that it will try, or try to offer increased Returns.
Whose equity? Some Agency staff think the equity belongs to the project; they want you to put the equity back into the project if you get an equity loan. And, even more interesting, when you have an older project, they think the Owner should, at his own cost, cure the depreciation rather than use the Reserve (which may be on schedule, but inadequate).
Why not equity loans now? The Agency made the decision to severely limit the use of 515 loan funds for equity loans, preferring to build new projects instead. This is a divisive issue between active developers and owners that aren't developing 515's any more.
Securitized Return? Assuming the Agency considers offering a “guaranteed” Return to Owner, I invite discussions on my securitized RTO.
Let the Agency know. If you think prepayment is an issue, let the Agency know, and let your Congressional delegation know.
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.