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Question ID: WEB07112014_10_02040

Title: Lender and Investor Concerns Regarding Foreclosure

Question: How is RAD responding to concerns of commercial lenders and Low-Income Housing Tax Credit (LIHTC) investors with regard to foreclosure matters and continued rental assistance?

Answer: HUD has posted a standard rider to the public housing conversion RAD HAP contracts to address the concerns LIHTC investors have raised while also protecting the long term affordability of properties converting under RAD, and adhering to the statutory provisions for ownership and control. These riders document and set forth conditions for: providing notice to LIHTC investors; accepting the investor’s offer to cure on behalf of a defaulted owner; providing HUD consent to the transfer of the investor’s interest in the ownership; and pre-approving replacement of the general partner or managing member with the special limited partner or similar entity for a limited period of time in order to facilitate an acceptable permanent replacement. To access these riders, go to www.radresource.net > Contracts & Closing Documents. HUD is also in the process of drafting standard riders to the Use Agreement and the public housing conversion RAD HAP contracts to clarify that HUD will not assert an interest to prohibit a lender from foreclosing when there is cause, but that the Use Agreement -- which establishes affordability requirements -- survives foreclosure by its terms and that continuation of HAP assistance requires HUD consent. It is also HUD’s goal through these riders to provide for a limited continuation of HAP assistance if the lender or its designee comes into ownership of the project in accordance with its rights under the loan documents. When final, these riders will be published on the RAD website. Until these riders are finalized, HUD has developed several provisions that can be provided by the RAD Closing Coordinator to assist with transactions currently moving into the closing phase. These provisions address lender concerns while also protecting the long term affordability of properties converting under RAD, and adhering to the statutory provisions for ownership and control. Importantly, neither rider changes RAD statutory and RAD notice requirements around ownership and control. The RAD Use agreement and RAD HAP contract – two means through which long-term affordability for residents are secured – survive foreclosure, leaving current and future residents protected.

Keywords:

Categories: Tax Credits | Underwriting and Funding Sources

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Question ID:	WEB07112014_10_02040
Title:	Lender and Investor Concerns Regarding Foreclosure
Question:	How is RAD responding to concerns of commercial lenders and Low-Income Housing Tax Credit (LIHTC) investors with regard to foreclosure matters and continued rental assistance?
Answer:	HUD has posted a standard rider to the public housing conversion RAD HAP contracts to address the concerns LIHTC investors have raised while also protecting the long term affordability of properties converting under RAD, and adhering to the statutory provisions for ownership and control. These riders document and set forth conditions for: providing notice to LIHTC investors; accepting the investor’s offer to cure on behalf of a defaulted owner; providing HUD consent to the transfer of the investor’s interest in the ownership; and pre-approving replacement of the general partner or managing member with the special limited partner or similar entity for a limited period of time in order to facilitate an acceptable permanent replacement. To access these riders, go to www.radresource.net > Contracts & Closing Documents. HUD is also in the process of drafting standard riders to the Use Agreement and the public housing conversion RAD HAP contracts to clarify that HUD will not assert an interest to prohibit a lender from foreclosing when there is cause, but that the Use Agreement -- which establishes affordability requirements -- survives foreclosure by its terms and that continuation of HAP assistance requires HUD consent. It is also HUD’s goal through these riders to provide for a limited continuation of HAP assistance if the lender or its designee comes into ownership of the project in accordance with its rights under the loan documents. When final, these riders will be published on the RAD website. Until these riders are finalized, HUD has developed several provisions that can be provided by the RAD Closing Coordinator to assist with transactions currently moving into the closing phase. These provisions address lender concerns while also protecting the long term affordability of properties converting under RAD, and adhering to the statutory provisions for ownership and control. Importantly, neither rider changes RAD statutory and RAD notice requirements around ownership and control. The RAD Use agreement and RAD HAP contract – two means through which long-term affordability for residents are secured – survive foreclosure, leaving current and future residents protected.
Keywords:
Categories:	Tax Credits \| Underwriting and Funding Sources
See Also:	There are currently no See Also References for this Question.