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Questions on Mod Rehab

Increasing Subsidized Units in SRO Mod Rehab

Through SRO Mod rad conversion is an increase to the total units subsidized approvable?

No, an increase to the total units subsidized is not allowed. Only units on the contract are eligible for conversion.

Mod Rehab and Multiple Buildings and HAP Contracts

There are four buldings with four HAP contracts. I assume they could be consolidated into one RAD contract.

Indeed, there are some Mod Rehab projects where there is one legal entity but multiple HAP contracts. It would be acceptable (and advisable) for the owner to consolidate these into one HAP following conversion.

Different Rents for the Same Sized Unit

There are two different rents for the same size unit. Would these rents be kept different in the RAD HAP or averaged?

If there is a sound business reason to maintain a different rent for the different 2-bedroom units, we would consider it (i.e., one with 1 1/2 baths and the other with just 1 bath). Otherwise, we would consolidate into one contract rent for all two bedrooms. [Updated 7.29.13]

Mod Rehab Contract Expiring Before RAD Conversion

What should we do if the Mod Rehab contract is expected to expire before the RAD conversion is completed?

If the Mod Rehab contract is expected to expire before the RAD conversion is completed, the Owner may request a short term renewal contract for the period necessary to complete the conversion.

2nd Component of RAD; Combining Mod Rehab Contracts

I am preparing a Conversion application for a project that involves consolidating two mod rehab contracts (and properties) under one new ownership and LIHTC financing structure. Is there a way that we can submit a single RAD application rather than having to submit individual applications for each Mod Rehab contract? All of the financing is interwoven.

Yes, you can. When completing the Mod Rehab RAD Application, which is only used for the first component, fill out a single application, including the total units at the project and make sure you attach both Mod Rehab contracts. For data for which the two contracts may have different numbers (e.g. rents and utility allowances) use the weighted average.[Updated 7.29.13]

Mod Unit Conversions Under First Component

Is there still a 1,250 unit cap for Mod Rehab conversions under the 1st component?

No. That cap was removed with the publication of PIH Notice 2012-32 REV-1. [Updated 7.29.13]

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).

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?


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.

Conversion Processing Times

I'm working with an MOD/SRO owner converting to RAD PBV. Once the application is received, are the current processing times still 180 days per the notice, pending all owner/PHA required information is received?

The RAD Program Notice PIH-2012-32-(HA), addresses this in paragraphs 2.8.4.A and B on page 153. HUD will review and either approve/reject/request more information in 60 days. HUD’s approval letter requires closing within 90 days. In the case of a PBV conversion, the HAP contract is issued by the Public Housing Authority, and the Owner would need to coordinate timing with the PHA also.

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.

Transfer of Assistance for Mod Rehab Component 2 Conversion

We have a 47 unit mod rehab project that may be interested in redeveloping under RAD at another site. Is this permissible under RAD?

Yes, transfers of assistance are permitted for Mod Rehab RAD conversions. See Section 2.4(I) in the RAD Notice for scenarios under which assistance may be transferred to another site.