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223(f) Refinancing prior to RAD for Mod Rehab Property
We are working with the owner of a Mod Rehab property and we have been advised by others that the property could undergo a refinance now with the Section 223(f) mortgage insurance program and afterwards apply for RAD. Is that accurate? Can the property refinance now and then apply for RAD? Would this exempt the owner from additional engineering studies, financing plans, etc? Would there be anything special with the pending RAD application that we could address with the current refinance (such as additional testing, energy studies, etc)?Yes, it is possible to refinance first and pursue RAD later. Your lender would have to be OK with the existing Mod Rehab contract, and you would want to be sure that your lender would also be OK with the future RAD conversion. Please also be aware that Mod Rehab eligibility is limited under RAD, and accordingly that there is a risk in waiting to apply for RAD. Refinancing prior to pursuing RAD would not change any of the otherwise applicable RAD requirements such as a PCA and a Financing Plan, so there probably will be savings available in transaction costs if the refinancing and RAD are pursued at the same time. If you do pursue refinancing now and RAD later, you might see if your lender would accept a RAD-compliant PCA. If so, your PCA provider might be able to update the PCA at a modest cost at the time you pursue RAD.
Units to Include in RPCA for Mod Rehab SRO
We are pursuing a RAD conversion under the second component. Our current Section 8 SRO Mod Rehab contract covers only a portion of the housing units in our building. Do we need to complete a PCA for the entire building, or just for the units included in our contract?The requirement for the assessment of the physical condition of the property proposed for RAD conversion is contacted in Notice, PIH-2012-32 (HA), REV-2, Section 2.4.A., on page 136. The RAD conversion is intended to place the SRO units on a sound financial, physical, and managerial footing for the long-term HAP contract that will replace the Mod Rehab contract. If the ownership of the SRO units also owns the remaining units in the building, then the CNA (HUD’s name for the PCA) must cover the entire building. If the ownership of the SRO units is different than the entity owning the remaining units in the building, then the CNA must only cover the SRO units.
RAD Accessibility & Relocation Checklist for Mod Rehab Conversions
Do Mod Rehab conversions under the First Component of RAD need to complete the RAD Relocation and Accessibility checklist as part of the Financing Plan?No.
Applicability of Davis Bacon to 2nd Component RAD Conversions
I am pursing a 2nd component conversion. Under the wording of the new PBV Final Rule, I am unclear if the transaction will be subject to Davis Bacon wage rates. Can you please confirm?In the June 25, 2014 final rule, HUD clarified the reference to statutory labor standards provisions that are applicable to assistance under the PBV program. The Final Rule states that when the nature of the work planned to be performed prior to execution of a Housing Assistance Payments (HAP) contract, or after HAP contract execution within such post-execution period as may be specified by HUD, constitutes development of the project, statutory Davis-Bacon requirements may apply to existing housing (which is not subject to an agreement to enter into a housing assistance payments contract, or AHAP). The Department is preparing additional guidance to clarify when Davis Bacon requirements apply to existing PBV housing, including 2nd Component RAD transactions. In the meantime, we offer the following general rule of thumb: if the project will undergo rehabilitation in connection with the RAD conversion (either pre or post HAP contract execution), the development team should budget assuming Davis Bacon wage rates will apply.
Mod Rehab (First Component of RAD): Limited Dividend
For Mod Rehab applications under the first component, if you choose PBRA the limited dividend is eliminated (2.2.6.a.5). Why is the LD not eliminated if choosing PBV?The Notice provision you mention simply clarifies that no new limited distribution requirement is imposed if your Mod Rehab (first component) project selects PBRA. Similarly, there would be no new limited distribution requirement if you selected PBVs (the PBV program does not limit distributions). However, neither PBV nor PBRA would eliminate an existing limited distribution requirement (if, for example, your project had an existing mortgage loan that imposed a limited distribution requirement).