Free Response to Motion - District Court of Federal Claims - federal

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

Page 1 of 11

S.I,I,'~ I : Bear

Re: Osaers Plan of grtlon -- Infor~atloe For Preparatlon And Submission Pursuant to your lIoLlce ol Intent Lo Prepay, this provide fuethor guidance and Information that EUD requires to evaluate your proposed Plan of Action. Preparation and Submission. An original and 3 copies of ~uur Plan ~( ACLI0n 15 ~equ~d ~0 be submitted to your local HUD Field Office as ~ollows: U.S, OepartmenL of Housing ~nd Urban Development Attention: Loan ~enagement Branch Chief 415 Here Ed~or~h S~eeL G=oons_b~ro~, ~ C You may also submit the Plan of Action simultaneously ~o the appropriate State or local government, if you do, please be advised that It is Incumbent upon such State or 1oc~ government to consul~ with representatives of the tenants of the housing in its review of the Plan of Action. Contents. Your Plan of Action must include certain descr~ data, and information to meet statutory and regulatory mandates and to help facilitate HUg's review and approval of an acceptable Plan. Based on the contents of your Plan, XUO will make a finding(s) that certal~ conditions are met, agreements m~de~ and situations are considered, evaluated and sufficient in ~eetlng the standards and crltarla for prepayment.

GOV-AG 14134

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

Page 2 of 11

The s~andards and ~rlterla HUD will use to evaluate particular findings for the approval or a prepayment Involving enclosed. In addition, Included is a list of various Federal Incentives that HUD IS authorized to negotiate for those projects where l) the Owner's Plan of Ectlon Involving termination of the low-income affordablllLy restrictions would not be approvable~ or ~) the Owner wishes ~o reconsider prepayment, Involving Lamination, for Incentives Lo maintain the low Income nature of the project. Such incentives will be offered only If a) the property has a higher and better use, as deLer,nlned and shown in the Plan of AcLton, and b) low-Income affordablllly resLflctlons are locLed-ln for the remaining term of the mortgage. HUD will approve any and all Plans of ~ctlon where ~n Owner ~eeLs the criteria and, where all standards and criteria canno~ be met. ~o negotiate tn good fatLh e~forLs Lo accommodate o~r mutual needs end considerations. I look forward to worktn9 wlth you tn a positive and creative partnership to meet the challenges addresslrl9 today's Sincerely,

~homas T. Oemer~ Assistant Secretary Enclosures

GOV-AG 14135

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

Page 3 of 11

PLA~ OF ACTIO~ Standards and Criteria A. Contents: 7~e Plan of Action mus~ Include: OescrlpL|ons'of proposed changes In the status or terms of the mortgage or the regulator~ agreement wh|ch me2 tnclude a request for Incentives to extend the low income use of the housing;

2) 3)

gescrlptlon of any assistance that could be provided by State or local government agencies~ as determined by prior consultation between the owner and the agaric|us| Oescrlptton of any proposed changes in the |ow-|ncome affordabllity restrtctlons~ to the Plan of Action or prepayment;

4) Description of any proposed change in ownership related
5) An assessmen~ of the effect of the proposed changes on existing tenants, t.e, rent Increases, relocaLfon, etc. if an Owner plans to prepay, the Owner must protect the existing very low, ]ow, and moderate ~ncome tenants place] by e|ther~ a) relocating el! such tenants to comparable and affordable replacement housfng with stmilar rent structures within the hOUSing market area; or protecting the low-income affordab|lt~y of all such tenants by maintaining their current rent structures, as determined by the program economic criteria, for as long as such tenant(s) qualifies under such economic or|taring The Plan or Action must, therefore~ describe the type of protection the OHner p|an~ to provide the tenants, how he/she plans to go about It, where the repl~cemen~ housing would be, contracts, agreements, etc,

6) A statement of the effect of the proposed changes on the

supply of housing affordable LO |ow and very low-income families In the community within which the housing ls located and in the housing market area that the housing could reasnnabl~ be expected to serve, toe., pecentage of assisted housing the project represents t~ the tntal assisted housing in the market area and/or percentage of huusin9 s~ock of similar rental structure this housing ~epresenLs In the market area.

GOV-AG 14136

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

Page 4 of 11

7) An Independent market analysis or appraisal, provldlng unsubsidized market Information sufficient In scope to allow HOP to determine market rents and value and m~rkeL needs tn the area for both market and below mapket tenants and equity Of proper~y. Such appraisal shall Project |dent|f|cat|on and |nfor~atIon [Complete attached Form HUD-92013, page 1.]; A map shoW|rig ~he ]ocatton of the project and accompanying demograph| data~ Including: o o o o racial composition of the census tract In which project is located; income composition of the census tract in w~lch project is 1oca~ed; employment and employment opportunities in the neighborhood, community and mar~e~ area, neighborhood condltIon and characLer|sLfcs, Incluetng type (residential, commercial, tndustrtai~ etc.)i

c)

Description of the corrupt condition in the overall market for unassisted rent~l housln~ In the co~untty and the marke"~a.--T'~T~dlng: o o o o t~pes of other renta| housing ava|lab]e; description and number of untLs and current vacancy races; size and description of wal~l,|9 ltsts; and description of comparab]e pants;

d}

Description of the current condition of assisted rer~tal houslo~ ~n the community and the marLe~ area, description and numbe~ of units and cUrr~nt vacancy raLe~ (Sectten 8, Public Iloustng,
0 0

size a~d description of watttn9 tlst; and description o~ comparable renLso

GOV-AG 14137

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

Page 5 of 11

e)

Bescrlptfon and data of project tenancy, composition of the proJect~ as of the da~e o[ the prepayment request~
o o

d~te ef t~e prepa~e~ request, broken do~o as YePy |ew (50~ or below o~ median) Low (50180~ of med4aa) HoderaLe [8D/955 of medtan) HapkeL (95~ or above, median)

D

~enants~ occupancy ra~e of ~he project as oF January 1. 19~, broken do~n as-~lo~s: Very low (50= or below of median) Low (50180~ of median) Xoderate (Bo/gs~ of median) Xar~et [~5~ o~ aboYe median) Rent roll, anJt-by-un|~ (CompleL~ For~at

Oescrfp~[on and physical condition o~ ~he Proportyl Descrlp=lon and ~lnancto! condition of the P~ogert~:
o Exist)n9 First Hortgage InformaL)on

-Hot,gage 6alance -|nteresL Rate -Hontbl~ Hortgage Payments to Principal and Interest -Honthly Payment Lo ~IP .HatortL~ JeLe of the Heritage o ~xlstlng Second mer~gages, subsidy. Flexible ~ebsfdy, Gran~s~ or financial loans/contracts or other rlnanc~a| ||ens/l~ncumbran~es-Outstanding Balance(s) Payments tp Pr]nc]pa] a~d InLeres~ -Haturlty or Expiration dale or loan/grantlcen~racL term

GOV-AG 14138

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

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h)

the est|maL~d fair ~ar~et value, based on ~he project being mafnL6|ned as residential rental housing, as of the date of the prepayment request, the estimated fair market value, based on the propertyls highest and best use.

i)

Important -The independent market analysts or uppraisal. ~ncorporatlng the Information requested under 7) above, ~s to be conducted ~nd provtded by an Independen~, qualified prnfesstol|a|, recognized by the real estate appraisal fn~usLryo It is to be lncluded ]n the Ownerls Plan of Action, but packaged separately and discretely from the other requested contents~ and s|gned~ certified and dated by the ~ppralser. The Owner should also make the Appraiser aware LhaL~ In the case o~ lt~l~atlon Involving the information ontained in the ~arket anal~s~s ~r appraisal, the Xppra|ser may be called upon zs an expert witness on behalf of the Department In any suck lttlgat|on or court ~c~ion emanating fro~ an~ of the information supplied In the marLet ana]ys]slappralsal. The cost of the appraisal ~111 be approved by HOD as a ero~eot e~pense |f the u1[~mate result of the F1an of Action extends the low-income character o~ the project for the re~aln]ng tare of the mortgage.

8) g)

Cop|as of ProJect Operating Statements (Forms HUn-92410) for last three [3~ ~ears; Description of an~ outstanding [lndtngs of noncompliance with Title Vii! of the Civil ~tghLs Act of 1968; Title V! of the CJvtl Rights ~ct of 1964; Executive Order ~|063; or with respect to ~he pro~ec~ Re9ul~tor3 Agree~enL.
other Information which would enable the Owner sho~ and demonstrate ~hat the 1egJslatJve1~ m~ndaLed criteria can be

Be

Apprnval uf a Plan of Action that Involves termination of lowIncome effordab|l|Ly restrictions. Eased on the content ~r The Plan of AcLton, HUP must ma~e findings ~ha~ certain conditions and Situations are considered and evaluated. ~ P]an of Action Involving termination of Income af[ordablliLy r~strlc~lons m~sL mee~ the [ollowlng

GOV-AG 14139

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

Page 7 of 11

before prepayment can be approved:
that-

(a) implementation of the Plan of Action ~111 not materially increase economic hardship rot current ver~ ion-Income, |ow-tncome and moderate |ncome tenants or tnvo|unter|ly dtsplace current very Io~-tncome, income and moderate Income tenants (e~cepL for 9ood cause~ ~here comparah]e an6 affordable hous~n9 is not readily ava||able, 3he owner vii| a9ree to execube and allow the retardation or USe a9reomenLs to safegaard current tenants against such adverse effects. The Plan nf Action generally will not be considered materially to increase e~onomic hardship for current tenants if: (~} In the case of a pro~ecL that ts to be converted to cooperative or condomin|u~ ownership, Y~ry low-Income, low-Income and moderate income tenants ~tho are unable or unwilling to purchase cooperat|ve shares or condomin|um untts~ ~ are provided relocation assistance suf~fcien~ to secure adequate, comparable replacement houstng a~ ren~a]s not exceeding the l~ve%s set ror~h in paragraph(a){2) of this section, or are allowed to remain as tenants, paying rents not exceeding such levels; and

o

In the case of a project which will continue as rental hoostn9, the CommiSsioner de~ermlnes that co,parable and affordable replacement houst~g ts available in the com~unity and that tenants wlll'be provided reasnnable relocation assistance, If the Commlssioner de~erm|nes that comparable and effordable replacement hous|ng is not available, a material |ncrease in econom]c hardshtp will not occur when rent contributions for current tenants do not e~ceed the following percentages: o 30 percent of 50 percent of median area tncome~ adjusted by family size, for tenants who ape very low income tenants at the time of the Increase=

o .30 percent of BO percent of median are~ income, adjusted by famtl~ s~ze~ by tenants who are low Income tenants at the time of the Increase, and

o

30 percent of 95 percent or median area Income, adjusted by family stze~ for tenants who are moderate ln~ome tenants at the time of the

GOV-AG_14140

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

Page 8 of 11

The Co~missioner may requ|re that |~cPeases In rent= for some or all of the such current tenants (except for Increases made necessary by Increased operating c0sLs) aile~ed under zhfs paragraph be phased in gradually; and (b)(l) The supply or vacant, comparable housing is s~ffictent to ensure that the prepaymen~ w|]l not materially affect: (I) The availability of decent, sara and san|Lary hous|n9 affordable ¢o low-income and very low-income families ~n the area thaL the housing coul~ reasonab1~ be expected to serve; (i~] ]he ability of lower income and very |oW-income~ families to find decent, sa~e and sanitary housing near emplo3ment opportunities; or [tli) The housing opportunities of minorities in the ~ommun~Ly w~thin which the housing |s located~ or (2) The Plan of Action has been approved by ~he appropriate State agenc~ and an# appropriate lace| government aqency for the ~ur]sd|cL]on fn wh|ch the housing is located as being In accordance with ~ State s~rategy approved by the Comm]ss|oner, ]~ ts Incumbent upon ~he Owner to prepare the Plan of in such manner as Lo zhow ~nd demonstrate ~hat these flndtngs C. Plan of Action lovely|n9 prepayment with Restrictions. Fleas of Action not mee~n~ the s~andards and findings under B,~ Involving termination o~ low-Income e~fordabflfty restrictions, Eoch such Plan wl~| be evaluated on its oHn merits and on a case-by-case basis, through negotiations between Lhe Owner and ~UOo An example of such ~ situation ~lght be where, through restrictive= b~ndin9 agreements, such housing ~ould be maintained as housing for the very low-Income, low-|ncome~ and moderate ]n¢omo tenants for a designated time Into the ~uture, notw|LhsLandlng a prepaymen~ of the cur~eoL~ e~|stt~9 mortgage. In t|lls ~ase, ~11 ]ow-lncome affordabilit3 restrictions would not be terminated, tenants (current and future} ~euld be protected, end such a prepa2ment would not housl,~9 aeallable to such tenanL~,

GOV-AG_14141

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

Page 9 of 11

Plans of ~ctlons Involvlng prepayment with restrictions shall clearly and definitively describe and demonstrate the manner and wherewlthall Lo accommodate the legislative ~andat~s, l,e., ouvenLioon| financing, State or local agency financial tnterventlenp the Low-~ocome Tax Credit Pregram~ etc. Use Restrictions would be set forth In a document that ~ou~d IX) be recordeK In the appropr|ate land records, (2) have pr|ort~y over all mortgage lJens, and (3) be enforceable HUn [and existing and, tf app]l~abie~ potentla~ tenantS]. D. incentives to Extend Low-Income Use. ~here Plans of A¢~fon pr~vidlng for prepayment of ~e mor~oage cannot be approved, or where an Owner m~ght be |nnuced to e~tend the lo~-Income use of toe proJecL~ (within cerLatn market areas) HUO may agree to provide o~e or mope ~edePal |ncenttves~ IF such ~ncentive{s) are determined to be warranted in orde~ to achteve the purposes of the legislation, such Incentives will be offered only |f a) the property has a higher and better use, as delete|ned ~nd sho~n in the Plan of Action, and b) low~intone affordab|li~y restr|cLtons are locked-in for the remaintno ~erm of the Qor~gnge. Incentives to Extend Lqw-lncome U~e~ the specific Incentives available, and Individual pro~e~'u~s end step-by-step |nstructlons for processing, are covered and detat}ed In Exhibit 6, pub]|shed undel" Separate cover. The Incentlves and the probable arden tn whtch HUO will consider such Incentives are brlef|y ~Jt forth here, as fol~ows: Increased ~ccess to restdual receipts funds; For those pro~ects tn good physical condition, HOD will consider releasln9 ~ll or a port|on of the pro~ect=s residual receipts funds, Access to the Reserve for Replacement funds w|11 not be entertained a~ a possible Inducement given that the General Account]no Office, the Office of Inspector General and IIUO ~udlL~ and revte~s ~11 have consistently found Lha¢ the Reserve for Replacement funds do no~ have excessive balances Lo cover pro~ect needs. 2) Revisions to the method of c~]culatlng equity; RUO me? consider revising the method of calculating equity based on ~he ne~ appraised wlue as residential rental houstn9, ~lnos the Lo~al outstanding financial debt and encumbrances, Lo arrive at a ne~ equity base on which ~he six percent rate of return on equtLj Is applted,

GOV-AG 14142

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

Page 10 of 11

~)

Provision of tnsuranc~ for an equtt~ loan; HUO may approve and Insure an Equlty Loan under Section 2ql{r). The Owner would be requlred Lo seek out a mortgagee to submit an appllcatlon for pro¢e~slng, and such proce;stng and loan approval ~ould be carrled nut tn a pro forma mao~ero Provision or F]e~tble Subsidy assistance; To provide financial assistance under the Flexible Subsidy Program in order to cure financial dtfflculttes and/or to fund deferred ~alnten~nce needs or the provision of c~ptta] ~mprovements for the pro~ect. Though the legislative and regulation provisions covering prepayment include capital improvement loans as a pas~tble incentive, the Department does nat plan to implement the Capital Improvements Loan Program at this time. However, the need for capital improvements can be met through the ?lexib~e Sobsld3 Program as staled above, An increase In the allosable dlstrlbut|ons~ or other measures to tncrease the rate of return; Increasing the allowable distribution by Increasing tke current six percent rate to some higher ~greed upon An Increase In the Penis permitted under an existing Section O Contract. Section 8. tn and of Itself, is not a real inducement not to prepay, but a funding mechanism to make It possible far the Owner Lo collect rents from those tenants whose 30 percent of tnco~e would not meet the approved rent. Therefore, on a case-by-case basis, subject ~o Appropriations Act funding, the Oepartment would consider providing some form of Section 8 assistance for those parLicolar tenants.

E.

5ubl~Isslon of the Plan of The Plan of Action should be submitted to HUD only upon completion of all required information, It should meet the requirements In such a manner as Lo show ~nd demonstrate, as thoroughly and accurately as posslblo, ho~ the legislative and regulatory mandates are met. Any a~d all portions of the Plan involving participation or Involvement by ~hlrd par~les shall be endorsed, certified or otherwise verif|ed or signed, us appropriate, Specifically. the market analysis or appraisal must be signed and dated by a recognized Appraiser=

GOV-AG 14143

Case 1:93-cv-00655-MMS

Document 183-7

Filed 12/28/2007

Page 11 of 11

Final|y, the comp~eted p~ck~ge ~ust be d~ted ~nd s~gned b~ the Project O~n~r of Recotd (Genera| Partner) ~nd submitted in trfpltcate to the HOD Office In the J~tsd~ct|on of subject housing project,

Attachments

GOV-AG 14144