Notice of Funding Availability: Section 515 Multi-Family Housing Preservation and Revitalization Restructuring Program (MPR) for Fiscal Year 2007, 21211-21216 [E7-8148]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Housing Service

[Federal Register Volume 72, Number 82 (Monday, April 30, 2007)]
[Notices]
[Pages 21211-21216]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-8148]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service


Notice of Funding Availability: Section 515 Multi-Family Housing 
Preservation and Revitalization Restructuring Program (MPR) for Fiscal 
Year 2007

AGENCY: Rural Housing Service, USDA.

ACTION: Notice.

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    Announcement Type: Inviting applications from eligible applicants 
for Fiscal Year 2007 funding.
    Catalog of Federal Domestic Assistance Number (CFDA): 10.447.
SUMMARY: USDA Rural Development administers the programs of Rural 
Housing Service (RHS) announces the availability of funds and the 
timeframe to submit applications to participate in a demonstration 
program to preserve and revitalize existing rural rental housing 
projects financed by Rural Development under Section 515 of the Housing 
Act of 1949. The intended effect is to restructure selected existing 
Section 515 loans expressly for the purpose of ensuring that sufficient 
resources are available to preserve the rental project for the purpose 
of providing safe and affordable housing for very low-, low-, or 
moderate-income residents. Expectations are that properties 
participating in this program will be revitalized and affordable use 
extended without displacing tenants because of increased rents. No 
additional Rural Development rental assistance units will be made 
available under this program.

DATES: The deadline for receipt of all pre-applications in response to 
this Notice of Funding Availability (NOFA) is 5 p.m., Eastern Time, May 
30, 2007. The pre-application closing deadline is firm as to date and 
hour. The Agency will not consider any pre-application that is received 
after the closing deadline. Applicants intending to mail pre-
applications must allow sufficient time to permit delivery on or before 
the closing deadline. Acceptance by a post office or private mailer 
does not constitute delivery. Facsimile (FAX) and postage-due pre-
applications will not be accepted.

FOR FURTHER INFORMATION CONTACT: Carlton Jarratt, 
carlton.jarratt@wdc.usda.gov, (804) 561-0665; Sherry Engel, 
sherry.engel@wi.usda.gov (715) 345-7677; or Sandra Mercier, 
sandra.mercier@wdc.usda.gov (202) 720-1617, Senior Loan Specialists, 
Multi-Family Housing Office of Rental Housing Preservation, STOP 0782, 
(Room 1263-S), U.S. Department of Agriculture, Rural Housing Service, 
1400 Independence Avenue, SW., Washington, DC 20250-0782. (Please note 
these phone numbers are not toll free numbers.)

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The information collection requirements contained in this Notice 
have received approval from the Office of Management and Budget (OMB) 
under Control Number 0570-0190.

Overview

    The Agriculture, Rural Development, Food and Drug Administration, 
and Related Agencies Appropriations Act, 2007 (Pub. L. 110-5), February 
15, 2007, provides funding for and authorizes Rural Development to 
conduct a demonstration program for the preservation and revitalization 
of the Section 515 multi-family housing portfolio. The Section 515 
multi-family housing program is authorized by Section 515 of the 
Housing Act of 1949 (42 U.S.C. 1485) and provides Rural Development the 
authority to make loans for low-income multi-family housing and related 
facilities.

Program Administration

I. Funding Opportunities Description

    This NOFA solicits pre-applications from eligible borrowers/
applicants to restructure existing multi-family housing within the 
Agency's Section 515 multi-family housing portfolio for the purpose of 
revitalization and preservation. The demonstration program shall be 
referred to in this notice as the Multi-Family Housing Preservation and 
Revitalization Restructuring Demonstration (MPR) program. Agency 
regulations for the Section 515 multi-family housing program are 
published at 7 CFR part 3560. The MPR is intended to assure that 
existing rental projects will continue to deliver decent, safe, and 
sanitary affordable rental housing for the lesser of the remaining term 
of the loan or 20 years from the date of the MPR transaction closing. 
Once an applicant has been confirmed eligible and the project has been 
selected by the Agency in the process described in this notice, and the 
applicant agrees to participate in the MPR demonstration by written 
notification to the Agency, an

[[Page 21212]]

independent third party capital needs assessment (CNA) will be 
conducted to provide a fair and objective review of projected capital 
needs. The Agency shall implement this NOFA through an MPR Conditional 
Commitment (MPRCC) with the eligible borrower, which will include all 
the terms and conditions under this NOFA, including the MPR Debt 
Deferral Agreement.
    The primary restructuring tool to be used in this program is debt 
deferral up to 20 years of the existing 1% Section 515 loans obligated 
prior to October 1, 1991. The cash flow from the deferred payment will 
be deposited to the reserve account to help meet the future physical 
needs of the property. If the resulting cash flow is not adequate to 
address the long-term needs of the project, the Agency may use the 
following sources of funds:
    (1) Other Agency restructuring tools as discussed below;
    (2) Section 515 Rehabilitation loan funds; and
    (3) Third party funds in the form of grants, tax credits, tax 
exempt financing, owner-provided rehabilitation funds, Rural 
Development Section 538 Guaranteed Rural Rental Housing Program 
financing, and financing from loan funds established through the Rural 
Development Section 515 Multi-Family Housing Preservation Revolving 
Loan Fund Demonstration Program.
    For the purposes of the MPR, the restructuring transactions will be 
identified in three categories:
    (1) Simple transactions involve no change in ownership.
    (2) Complex transactions will consist of a property transfer to new 
ownership processed in accordance with 7 CFR 3560.406, or transactions 
requiring a subordination agreement as a result of third party funds.
    (3) Portfolio Sale transactions that are defined as multiple 
project sale transactions with a common purchaser all within one state 
closed no earlier than September 30, 2006.
    Each category may utilize any or all restructuring tools. 
Restructuring tools that may be available to address capital needs 
during the MPR demonstration based on the capital needs assessment 
process and the underwriting feasibility determination. Restructuring 
tools include:
    (1) Debt Deferral: A deferral of the existing Agency debt for the 
lesser of the remaining term of the loan or 20 years. All terms and 
conditions of the deferral will be described in the MPR Debt Deferral 
Agreement. A balloon payment of accrued principal and interest will be 
due at the end of the deferral period. Interest will accrue at the 
promissory note rate and subsidy will be applied as set out in the 
Agency's Interest Credit Agreement. Interest will not be charged on the 
deferred interest.
    (2) Revitalization Grant: A revitalization grant (for non-profit 
applicants/borrowers only), is limited to the cost of correcting health 
and safety violations as identified by the CNA. The grant 
administration will be in accordance with 7 CFR part 3015.
    (3) Rehabilitation Loan: A rehabilitation loan at zero percent 
interest that will be amortized over 30 years.
    (4) Bullet Loan: A loan with a one percent interest rate that will 
have its interest and principal deferred, to a balloon payment, due at 
the time the latest maturing Section 515 loan becomes due.
    (5) Additional Section 515 Loan: A Section 515 rehabilitation loan 
at traditional rates and terms.
    (6) Regulatory Approvals: Transfers, subordinations, and 
consolidations may be approved as part of a MPR transaction in 
accordance with existing servicing authorities of the Agency as 
available in 7 CFR part 3560.
    While all non-deferred Agency debt, either in first lien position 
or a subordinated lien position, must be secured within market value, 
deferred debt may exceed market value of the security. Payment of the 
deferred debt will not be required from normal project operation 
income, but from excess cash from project operations and the value of 
the property after all other secured debts are satisfied.
    (1) Pre-application: Applicants must submit a pre-application 
described in Section VI. This pre-application process is designed to 
lessen the cost burden on applicants who may not be eligible or whose 
proposals may not be feasible.
    (2) Eligible Properties: Using criteria described below in Section 
III, USDA will conduct an initial screening for eligibility. As 
described in Section VIII, USDA will conduct additional eligibility 
screening later in the process.
    (3) Scoring and Ranking: All eligible, complete and timely-filed 
pre-applications will be scored, ranked and put in funding queues as 
discussed in Sections VI and VII.
    (4) Formal Application: Top ranked pre-applicants will be invited 
to submit a formal application. As discussed in Section VIII paragraph 
(2) of this notice, USDA will require the owner to provide a Capital 
Needs Assessment (CNA) in order to determine the mix of tools to be 
offered to the applicant, perform additional eligibility review, and 
underwrite the proposal to determine financial feasibility. Where 
proposals are found to be ineligible or financially infeasible, owners 
will be informed and proposals lower in the queue will be considered.
    (5) Financial Feasibility: Using the results of the CNA to help 
identify the need for resources and applicant provided information 
regarding anticipated or available third party financing, the Agency 
will determine the financial feasibility of each potential transaction, 
using restructuring tools available either through existing regulatory 
authorities or specifically authorized through this demonstration 
program.
    Project financial feasibility is determined when a property can 
provide affordable, safe, decent, and sanitary housing for 20 years or 
the remaining term of the loan whichever is less, by using the 
authorities of this program while minimizing the cost to the Agency and 
without increasing rents for tenants, except when necessary to meet 
normal and necessary operating expenses. If the transaction is 
determined financially feasible by the Agency, the borrower will be 
offered a restructuring proposal, which will include the requirement 
that the borrower will execute, for recordation, a restrictive use 
covenant consistent with 7 CFR 3560.662. The restructuring proposal 
will be established in the form of the MPR Conditional Commitment 
(MPRCC).
    MPR Agreements: If accepted by the borrower, the Agency and 
applicant will enter into a MPRCC. The applicant must also agree to 
restrict the property use pursuant to 7 CFR 3560.662 when the MPR 
transaction is closed. Any third party lender will be required to 
subordinate to the Agency's restrictive use covenant unless the Agency 
determines on a case-by-case basis that the lender refuses to 
subordinate and such refusal will not compromise the purpose of the 
MPR. The Agency may also request that the applicant sign an agreement 
that would require the owner to escrow reserve, tax, and insurance 
payments in accordance with all pertinent current and future Agency 
regulations.
    General Requirements: The MPR transactions may be conducted with a 
stay-in owner (simple) or may involve a change in ownership (complex or 
portfolio sale). Any housing or related facilities that are constructed 
or repaired must meet the Agency design and construction standards and 
the development standards contained in 7 CFR part 1924, subparts A and 
C, respectively. Once constructed, Section 515 multi-family housing 
must be managed in accordance with 7 CFR part

[[Page 21213]]

3560. Tenant eligibility will be limited to persons who qualify as a 
very low- or low-income household under Agency regulations or who are 
eligible under the requirements established to qualify for housing 
benefits provided by sources other than the Agency, such as U.S. 
Department of Housing and Urban Development Section 8 assistance or Low 
Income Housing Tax Credit Assistance, when a tenant receives such 
housing benefits. Additional tenant eligibility requirements are 
contained in 7 CFR 3560.152.
    Voluntary Community Market Rent Demonstration: In conjunction with 
this demonstration, Rural Development also announces the opportunity 
for all successful applicants to participate on a voluntary basis in a 
viability test of a 30 percent limitation on tenant rents, as proposed 
in Section 544(b)(7) of Saving America's Rural Housing Act of 2006, 
H.R. 5039, for post-restructured properties. Owners of properties in 
the Section 515 restructuring program may elect to participate in the 
``community market rent'' demonstration which will allow an owner to 
set a rent above the approved basic rent for any unit not currently 
occupied by a tenant receiving Rural Development rental assistance. 
Eligible tenants for these units must have adjusted annual incomes 
sufficient to allow them to pay the community market rent using less 
than 30 percent of their adjusted income. Tenants would be allowed to 
occupy without paying overage, additional sums that would otherwise be 
required to bring their rent payment up to 30 percent of income. With 
Rural Development's consent, up to 50 percent of the difference between 
the basic rent and the new ``community market rent'' could be retained 
by the owner as an increased return.
    For example, if the basic rent is $350, the owner could create a 
community market rent at, say, $410, and market the unit to tenants who 
could pay that rent at less than 30 percent of adjusted income. A 
percentage of the difference, $60.00 could be retained by the owner, as 
negotiated with Rural Development, up to $30.00.
    Prior to implementation of the community market rent demonstration, 
Rural Development will issue guidance to successful applicants who have 
indicated an interest in participating in the demonstration providing 
further details with respect to the program.

II. Award Information

    Public Law 110-5 makes funding available to the Secretary of 
Agriculture for Rural Development to provide the restructuring tools of 
the MPR demonstration. Approximately $8,900,000 in budget authority 
will be available during FY 2007. Additionally, up to $70,000,000 in 
Section 515 funding may be made available for properties selected to 
participate in the MPR. Based on an identical level of budget authority 
made available for the MPR last fiscal year, the Agency 2006 funded 
approximately $47,795,000 in deferred debt, $210,000 in grants, 
$280,000 in zero percent loans, $4,473,000 in bullet loans. The Agency 
anticipates the ability to revitalize approximately 200 properties 
(5,500 units) with the funds available during FY 2007. Once the funding 
levels for this program are determined, a subsequent notice will be 
published in the Federal Register announcing them. Funding levels may 
differ from above when necessary to assure that the Agency maximizes 
the value of the funds available and that all funds are used.
    All funding must be approved no later than September 24, 2007 and 
obligated by the Agency not later than September 28, 2007. If funds 
available for the MPR are fully used before all properties approved 
under this NOFA are funded, the unfunded approved properties may 
receive priority for funding from future resources available for MFH 
revitalization if additional funds become available and the selected 
properties/owners meet any future eligibility criteria.

III. Eligibility Information

    Applicants (and the principals associated with each applicant) must 
meet the following requirements:
    (1) Eligibility under 7 CFR 3560.55; however, the requirements 
described in 7 CFR 3560.55(a)(5) pertaining to required borrower 
contributions and CFR 3560.55(a)(6) pertaining to required 
contributions of initial operating capital are waived for MPR 
proposals.
    (2) That the project is needed in the market as evidenced by an 
average physical vacancy rate over the twelve months preceding the 
filing of the pre-application of no more than 10 percent for projects 
of 16 units or more and 15 percent for projects under 16 units. The 
Agency may consider and accept documentation submitted by the applicant 
that demonstrates the occupancy standard will be met once a 
restructuring is performed. The documentation must include a copy of a 
market study performed according to 7 CFR 3560.56(d)(2) and the 
guidance provided in HB-1-3560, Attachment 4-F. The cost of the market 
study will NOT be considered a part of the project expense.
    (3) Ownership of and ability to operate the facility after the 
transaction is completed. (In the event of a transfer, the proposed 
transferee with an executed purchase agreement or other evidence of 
site control will be the applicant.)
    (4) Compliance with any commitment to contribute funds to pay 
transaction costs as represented at the time of application for the MPR 
program.
    (5) A CNA and Agency financial evaluation must demonstrate that 
utilization of the restructuring tools of the MPR program is 
financially feasible and necessary for the revitalization and 
preservation of the property for affordable housing. Eligibility for 
processing will be determined as of the date of the pre-application 
filing deadline. The Agency reserves the right to discontinue 
processing in the event that material changes in the applicant's status 
occurs any time after the initial determination.

IV. Equal Opportunity and Nondiscrimination Requirements

    (1) Borrowers and applicants will comply with the provisions of 7 
CFR 3560.2.
    (2) All housing must meet the accessibility requirements found at 7 
CFR 3560.60(d).
    (3) All MPR participants must have on file a valid Form RD 400-1, 
``Equal Opportunity Agreement'' and Form RD 400-4, ``Assurance 
Agreement.''

V. Authorities Available for MPR

    MPR tools will be used in accordance with 7 CFR part 3560 and its 
associated handbooks (available in any Rural Development office). The 
program will be administered within the resources made available to the 
Agency through Pub. L. 110-5 for the preservation and revitalization of 
Section 515 financed properties. In the event that provisions of 7 CFR 
part 3560 conflict with this demonstration program, the provisions of 
the MPR will take precedence.

VI. Application and Submission Information

    (1) The application submission and scoring process will be 
completed in two phases in order to avoid unnecessary effort and 
expense on the part of interested borrowers/applicants and to allow 
additional points to be added to applications that propose a transfer 
of a troubled project to an eligible owner.
    The first phase is the pre-application process. The applicant must 
submit a complete pre-application by the deadline date under the 
``DATES'' section of this Notice. The applicant's

[[Page 21214]]

submission will be classified complete when a ``pre-application'' is 
received by MFH for each MPR proposal the applicant wishes to be 
considered in the demonstration. In the event the MPR proposal involves 
either a project consolidation completed in accordance with 7 CFR 
3560.410 or a portfolio sale only one pre-application for the proposal 
will be required so long as the proposal lists all the properties to be 
consolidated or purchased as a portfolio. The form to be used for the 
pre-application is ``MPR Pre-application'' and is attached at the end 
of this Notice. An electronic version of this form may be found on the 
internet at https://www.rurdev.usda.gov/rd/nofas/.
    Information must be provided, as indicated on the MPR pre-
application, showing the breakdown of funding sources, type and 
probability of third party money, borrower names and identification 
numbers, project names and numbers, and property locations of all 
properties being consolidated and included in the transaction.
    Additional information that must be provided with the pre-
application, when applicable, includes:
    (i) A copy of a Purchase agreement or other evidence of site 
control if a transfer is being considered.
    (ii) Evidence of need for property if occupancy standards are not 
met, which could include a copy of a market study.
    The second phase of the application process will be completed by 
the Agency based on Agency records and the pre-application information. 
Points as set forth below will only be assigned to eligible pre-
applications. Additional points will be assigned when the proposal 
involves a transfer to a new eligible owner and the property is 
currently classified by the Agency as a troubled property; or to an 
eligible ``stay-in owner'' when the property is classified by the 
Agency as a troubled property AND there is an approved workout plan in 
place that was approved prior to January 1, 2007.
    All eligible, complete, and timely-filed pre-applications will then 
be scored and ranked based on points received during this two-phase 
application process.
    Further, the Agency will categorize each MPR proposal as being 
potentially Simple, Complex, or Portfolio Sale based on the information 
submitted on the pre-application and in accordance with the category 
description provided in Section I of this Notice.
    (2) Pre-applications can be submitted either electronically or in 
hard copy. The Agency will record pre-applications received 
electronically by the actual date and time received in the website mail 
box. Hard copy pre-applications received on the deadline date will 
receive the close of business time of the day received as the receipt 
time. Assistance for filing electronic and hard copy pre-applications 
can be obtained from any Rural Development State Office.
    The pre-application is stored in the form of a .pdf format and may 
be completed as a fillable form. The form contains a button labeled 
``Submit by Email''. Clicking on the button will result in an e-mail 
containing a completed pre-application being sent to the Office of 
Rental Housing Preservation in Washington, DC for consideration.
    Pre-application forms may be downloaded from the site given in 
Section VI, paragraph (1) above or obtained by contacting the State 
Office in the state the project is located. Hard copy pre-applications 
and electronic submittals should be submitted to the attention of 
Sandra L. Mercier, Senior Loan Specialist, Multi-Family Housing Office 
of Rental Housing Preservation-STOP 0782 (Room 1263-S), or Ed Duval, 
Chief, Operations Research and Systems Development Branch-STOP 0782 
(Room 1263-S), U.S. Department of Agriculture, Rural Housing Service, 
1400 Independence Avenue, SW., Washington, DC 20250-0781

    Note: All documents must be received on or before the pre-
application closing deadline to be considered complete and timely 
filed. Pre-applications that are incomplete as of the closing 
deadline will not be considered and will be returned to the 
applicant with no appeal rights.

VII. Selection Process

    Pre-application ranking points will be based on information 
provided during the submission process and in Agency records. Points 
will be awarded as follows:
    (1) Contribution of third party funds. Third party funds are those 
discussed in the second paragraph of Section I ``Funding Opportunities 
Description''. Points awarded are to be based on documented written 
evidence that the third party funds are available or they will be 
available by October 1, 2008 or closing, whichever is first. The 
maximum points awarded for this criterion is 25 points. These points 
will be awarded in the following manner:
    (i) Owner contribution (these funds cannot be from project reserve 
or operating funds) sufficient to pay transaction costs. Transaction 
costs are defined as those soft costs required to complete the 
transaction and include, but are not limited to, the CNA, legal and 
closing costs, appraisal costs and filing/recording fees. The minimum 
contribution required to receive these points is $5,000 and will be 
required to be deposited in the property reserve account prior to 
closing--5 points, and
    (ii) Evidence of intent that meets the approval of the Agency to 
obtain a commitment greater than $5,000 per unit from other sources--10 
points . (An example of evidence to obtain a commitment might be an 
application for the Low Income Housing Tax Credit Program), or
    (iii) A commitment of at least $3,000 to $5,000 per unit from other 
sources--15 points, or
    (iv) A commitment greater than $5,000 per unit from other sources--
20 points.
    (2) Age of project. Since the age of the project and the date that 
the loan was made are directly related to physical needs, a maximum of 
25 points will be awarded on the following criteria:
    (i) Initial loans closed prior to December 21, 1979--25 points.
    (ii) Initial loans closed on or after December 21, 1979, but before
    December 15, 1989--20 points.
    (iii) Initial loans closed on or after December 15, 1989, but 
before October 1, 1991--15 points.

    Note: For multiple property transactions, the closing date of 
the earliest loan will be used.

    (3) Troubled project points. The Agency may award up to 25 
additional points to facilitate the transfer and revitalization of 
troubled projects with an Agency classification of ``C'' or ``D'' 
according to HB 2-3560, Paragraph 9.7 (available at https://
www.rurdev.usda.gov/regs/hblist.html). Troubled properties that are 
classified ``B'' and do not involve a transfer will also receive 
consideration. These projects may be troubled due to an act of nature 
or physical or financial deterioration or to correct management issues. 
Points will be awarded in the following manner:
    (i) If the Agency servicing classification is C or D for less than 
24 months--15 points.
    (ii) If the Agency servicing classification is C or D for more than 
24 months--20 points.
    (iii) For Stay-in Owners only: If the Agency servicing 
classification is B as a result of a workout plan approved by the 
agency prior to January 1, 2007--25 points.
    (4) Prior Agency approvals. The Agency will award up to 20 points 
for properties with CNAs already approved by the Agency. Points will be 
awarded for:

[[Page 21215]]

    (i) CNAs approved after October 1, 2005 and prior to October 1, 
2006--20 points.
    (ii) CNAs approved after October 1, 2006 but before April 1, 2007--
10 points.
    (5) Energy generation. Applicants will be awarded 5 points if the 
proposal includes the installation of energy generation systems to be 
funded by a third party.
    The proposal must include an overview of the energy generation 
system being proposed. Evidence that an energy generation system has 
been funded by a third party and that it has a quantifiable positive 
impact on energy consumption will be required.
    (6) Tenant service provision. The Agency will award 10 points for 
applications that include new services provided by a non-profit 
organization, which may include a faith-based organization, or by a 
Government agency. Such services shall be provided at no cost to the 
project and shall be made available to all tenants. Examples of such 
services are transportation for the elderly, after-school day care 
services or after-school tutoring, etc.
    The Agency will total the points awarded to each pre-application 
received within the timeframes of this Notice and rank each pre-
application according to total score. If point totals are equal, the 
earliest time and date the pre-application was received by the Agency 
will determine the ranking. In the event pre-applications are still 
tied, they will be further ranked by giving priority to those pre-
applications with the earliest Rural Development loan closing date.
    Eligibility will then be confirmed on the 10 highest-scoring pre-
applications in each State. If one or more of the 10 highest-scoring 
pre-applications is determined ineligible, (i.e. the applicant is a 
borrower that is not in good standing with the Agency or has been 
debarred or suspended by the Agency, etc.) the next highest-scoring 
pre-application will be confirmed for eligibility.
    If one or more of the highest ranking pre-applications is a 
portfolio sale, then eligibility determinations will be conducted on 
all of the pre-applications associated with the portfolio sale. Should 
any of the pre-applications associated with the portfolio sale be 
determined ineligible, the overall eligibility of the portfolio sale 
will not be affected as long as the definition in Section I ``Funding 
Opportunities Description'', of ``portfolio sale'' is still met.
    Once ranking has been established, the Agency will conduct a five-
step process to select pre-applications for submission of formal 
applications. This process is needed to assure that the Agency can 
process the proposed transactions within available staffing resources, 
develop a representative sampling of revitalization transaction types, 
assure geographic distribution, and assure an adequate pipeline of 
transactions to use all available funding.
    Step One: The Agency will review the eligible pre-applications, 
identify pre-applications as either Simple, Complex or Portfolio Sale 
and separate them by state.
    Step Two: For portfolio sale transactions, the Agency will re-
calculate an average score for each portfolio sale transaction and then 
score and separately rank the simple, complex and portfolio sale 
transactions.
    Step Three: The Agency will select, for further processing, the 
top-ranked portfolio sale transactions until a total of $100,000,000 in 
potential debt deferral is reached. Portfolio sale transactions will be 
limited to one per State.
    Step Four: The highest ranked complex transaction in each State 
will be selected for further processing, not to exceed 3 per State.
    Step Five: For those states not having a portfolio transaction and 
at least two eligible complex transactions, additional projects will be 
selected from the highest ranking eligible pre-applications involving 
simple transactions in that state, seeking a minimum of 4 pre-
applications for MPR transactions per state.

VIII. Processing for Selected Pre-applications

    Those proposals that are ranked and then selected for further 
processing will be invited to submit a formal application on SF 424 
``Application for Federal Assistance.'' Those proposals that are 
rejected by the Agency will be returned to the applicant and the 
applicant will be given appeal rights pursuant to 7 CFR Part 11. In the 
event that a proposal is selected for further processing and the pre-
applicant declines, the next highest ranked pre-application in that 
state will be selected. Applications can be obtained and completed on 
line. An electronic version of this form may be found on the internet 
at https://forms.sc.egov.usda.gov/eforms/mainservlet and can be 
submitted either electronically or in hard copy.
    If a pre-application is accepted for further processing, the 
applicant will be expected to submit additional information needed to 
demonstrate eligibility and feasibility (such as a CNA), consistent 
with this NOFA and the appropriate sections of 7 CFR part 3560, prior 
to the issuance of a restructuring offer.
    Rural Development will work with pre-applicants selected for 
further processing in accordance with the following steps:
    (1) Based on the feasibility of the type of transaction that will 
best suit the project and the availability of funds, further 
eligibility confirmation determinations will be conducted by the 
designated Multi-Family Housing Revitalization Coordinators assigned by 
each Rural Development State Director with the assistance of the Office 
of Rental Housing Preservation.
    (2) If one is not already available to the Agency, a CNA will be 
required and conducted in accordance with the requirements of 7 CFR 
3560.103(c), HB 3-3560, Chapter 7, ``Guidance on the Capital Needs 
Assessment Process,'' and the CNA Statement of Work (available in any 
Rural Development State Office.) A CNA is prepared by a qualified 
independent contractor and is obtained to determine needed repairs and 
any necessary adjustments to the reserve account for long-term project 
viability. While the requirements of the CNA are described in the 
materials referenced above, at a minimum, to be considered acceptable, 
a CNA must include:
    (i) A physical inspection of the site, architectural features, 
common areas and all electrical and mechanical systems,
    (ii) An inspection of a sample of dwelling units;
    (iii) Identify repair or replacement needs,
    (iv) Provide a cost estimate of the repair and replacement 
expenses, and
    (v) Provide at least a 20-year analysis of the timing and funding 
for identified needs which includes reasonable assumptions regarding 
inflation. The cost of the CNA will be considered a part of the project 
expense and may be paid from the ``project reserve'' with prior 
approval of the Agency. The Agency approval for participation in this 
program will be contingent upon the Agency's final approval of the CNA 
and concurrence in the scope of work by the owner. The Agency, in its 
sole discretion, may choose to obtain a CNA, at its expense, if it 
determines that doing so is in the best interest of the Government.
    (3) Underwriting will be conducted by the designated Multi-Family 
Housing Revitalization Coordinator assigned by each Rural Development 
State Director with the assistance of the Office of Rental Housing 
Preservation. The feasibility and structure of each revitalization 
proposal will be

[[Page 21216]]

determined using this underwriting process and will include a 
determination of the restructuring tools that will minimize the cost to 
the Government consistent with the purposes of this NOFA. To help 
assure a balanced utilization of revitalization tools and the long-term 
economic viability of revitalized projects, the MPR underwriting 
guidelines include, but are not limited to the following:
    (i) The maximum bullet loan is limited to no more than $5,000 per 
unit,
    (ii) The total assistance provided from a revitalization grant, 
rehabilitation loan, and/or a bullet loan is limited to $10,000 per 
unit,
    (iii) The maximum Section 515 one percent loan is limited to no 
more than $20,000 per unit,
    (iv) Properties receiving tax credits are expected to have 
sufficient funding sources and generally will receive debt deferral 
only.
    (4) Properties with more than 75 percent of the units receiving 
deep tenant subsidy such as Rural Development rental assistance or HUD-
funded tenant subsidy will be supplemented with rehabilitation loans 
and Section 515 loans before grant and bullet loans are considered,
    (5) Grants will be limited to $5,000 per unit,
    (6) Any rent increases that may be necessary will not exceed 10 
percent in any one year,
    (7) The approved MPR transaction will include projected revenue 
sufficient to cover a 10 percent Operations and Maintenance increase in 
the second year after the transaction,
    (8) Full return to owner will be budgeted pursuant to the Loan 
Agreement,
    (9) Budgeted increases to reserve deposit will not exceed 3 percent 
per annum,
    (10) The remaining reserve balance at the end of the 20-year 
analysis period should be at least 2.0 times the average annual needs, 
including inflation, over the 20-year analysis period.
    These guidelines have been developed based on experience in the FY 
2005 and FY 2006 Demonstrations. The Agency believes that these 
guidelines will be appropriate for typical transactions. However, the 
Agency reserves the right to waive any of the guidelines if, in the 
Agency's judgment, doing so would further the objectives of the 
Demonstration and is in the best interest of the Government.
    The Agency expects that some of the transactions proposed by 
selected pre-applicants will prove to be infeasible. The applicant 
entity may be determined to be ineligible under Section III of this 
Notice. If a proposed transaction is determined infeasible or the 
applicant determined ineligible, the Agency will then select the next 
highest ranked project for processing.
    Each MPR offer will be approved by the Revitalization Review 
Committee chaired by the Deputy Administrator for Multi-Family Housing 
or an agency-authorized delegate. Approved MPR offers will be presented 
to applicants who will then have up to 15 calendar days to accept or 
reject the offer in writing. Offers will expire after 15 days. The 
Agency will replace expired applications by selecting the next highest 
ranked project. Closing of MPR offers will occur within 90 days of 
acceptance by the applicant unless extended by the Agency.

IX. Funding Restrictions

    Applicants will be selected in accordance with selection criteria 
and the five-step process identified in Section VII of this Notice. 
Once selected to proceed, the Agency will provide additional guidance 
to the applicant and request information and documents necessary to 
complete the underwriting and review process. Since the character of 
each application may vary substantially depending on the type of 
transactions proposed, information requirements will be provided as 
appropriate. Complete project information must be submitted as soon as 
possible but in no case later than 45 days from the date of Agency 
notification of the applicant's selection for further processing or 
September 1, 2007, whichever occurs first. Failure to submit the 
required information in a timely manner may result in the Agency 
discontinuing the processing of the request.
    Funding under this NOFA will be obligated to selectees that finish 
the processing steps outlined above first within each of the 3 funding 
queues described in Section VII of this Notice and to result in a ratio 
as close as possible to 30 percent portfolio sale transactions, 50 
percent complex transactions, and 20 percent simple transactions.

X. Application Review

    A review committee will make recommendations for final decision 
regarding funding to the appropriate Rural Development State Director 
based on the selection criteria contained in this NOFA.

XI. Appeal Process

    All adverse determinations regarding applicant eligibility and the 
awarding of points as a part of the selection process are appealable. 
Instructions on the appeal process will be provided at the time an 
applicant is notified of the adverse action.

    Dated: April 20, 2007
Russell T. Davis,
Administrator, Rural Housing Service.
[FR Doc. E7-8148 Filed 4-27-07; 8:45 am]
BILLING CODE 3410-XV-P