December 16, 1996 PRESERVATION LETTER NO. 97-1 MEMORANDUM FOR: Directors of Housing Multifamily Housing Directors Multifamily Production Chiefs Multifamily Asset Management Chiefs Preservation Coordinators FROM: Nicolas P. Retsinas, Assistant Secretary for Housing- Federal Housing Commissioner, H SUBJECT: Fiscal Year 1997 Implementation of Low-Income Housing Preservation and Resident Homeownership Act of 1990 (LIHPRHA) and Emergency Low-Income Housing Preservation Act of 1987 (ELIHPA) Programs The purpose of this letter is to provide HUD State/Area Offices with instructions and policy for implementing the Preservation Program in Fiscal Year (FY) 1997. On September 26, 1996, the President signed the Department of Veterans Affairs, Housing and Urban Development, and Independent Agencies Appropriations Act of 1997. It made available $350,000,000 for Preservation project activities for FY 1997. The Act mandates that designated amounts be used to fund specific categories of LIHPRHA and ELIHPA eligible projects. Now that we have received full funding, we must expeditiously proceed to implement the program and provide as much time as possible to residents, owners, purchasers and HUD to accomplish the processing necessary to complete program activities prior to the end of the Fiscal Year. A round table meeting was convened on October 8, 1996, in HUD Headquarters with residents, owners, housing industry representatives and HUD staff to discuss provisions contained in the Act. The meeting also included State/Area Office staff and other participants that could be accommodated via teleconferencing. Many interesting and differing opinions, statements and comments were made and recorded, and received by facsimile. All were compiled, reviewed and considered by HUD program staff and the Office of General Counsel (OGC) when determining how to implement the Preservation Program. 2 For each specific category of eligible projects designated to receive funding, we have attached separate guidance for program implementation. Each attachment includes: 1) a description of the provision, 2) implementation guidance, and 3) questions and answers related to policy issues that also provide an explanation for certain determinations made by the Department. Below is a funding summary including a list of attachments contained in this letter. Please note that all Preservation provisions included in the Act have not been addressed in this letter or complete guidance for program implementation provided. Subsequent guidance is being prepared and will be included in a future letter. Please continue to fax your questions to the Existing Products and Preservation Division at (202) 708-1300. If this line is busy, you may use (202) 708-3104. Responses will be included in future Preservation letters. Please share this information with program participants. Attachments TABLE OF CONTENTS FOR PRESERVATION LETTER No. 97-1 Attachment Page 1. Preservation Acronym Lexicon.............................. 2 2. The Funding Queue......................................... 5 3. Tenant Protections........................................ 6 4. Sales to Priority Purchasers..............................10 5. Owner Reimbursement.......................................13 5. Section 236 IRP Recaptures................................13 6. Pipeline Processing.......................................14 7. ITAG......................................................15 8. Section 236 Excess Rental Income..........................19 9. Sales to Priority Purchasers List.........................21 PRESERVATION LETTER NO. 97-1 ATTACHMENT 1 Page 1 of 3 Preservation Acronym Lexicon AMB - ASSET MANAGEMENT BRANCH. Area within the HUD State/Area Office responsible for maintaining information on the physical, financial and other relevant information on the Preservation project. ELIHPA - EMERGENCY LOW INCOME HOUSING PRESERVATION ACT. Title II of the Housing and Community Development Act of 1987. Designed to prevent the loss of affordable housing units. EPE - EXTENSION PRESERVATION EQUITY. Owner's equity from Form HUD 9607, adjusted for principal repayment and reasonable value fluctuations for condition since the issuance of the form. Calculated as Extension Pres. Value (Highest and Best Use) EXTENSION ACT - Housing Opportunity Program Extension Act of 1996. FH&EO - Fair Housing and Equal Opportunity. The area in HUD responsible for determining whether there are any findings of noncompliance with the Fair Housing Act, Title VI of the Civil Rights Act of 1964, Exec. Order 11063, Sec. 504 of the Rehabilitation Act of 1974. FMR - FAIR MARKET RENT. Calculated rental rate determined by the Secretary for use in facilitating Section 8 rental payments and ceilings. LIHTC - LOW INCOME HOUSING TAX CREDITS. Form of assistance used by some deals to attract investors into an affordable housing deal. Generally discouraged in Preservation deals. LOCCS - LINE OF CREDIT CONTROL SYSTEM (See VRS). Automated accounting system used by HUD to distribute on-going grant fund disbursements, i.e., rehabilitation funds, oversight costs, and approved consultant fees. MCE - MORTGAGE CREDIT EXAMINER. This HUD Staff person is responsible for reporting on the project's financial requirements as well as the credit capacity of the mortgagor, its principals and the general contractor if any. Additionally, the MCE sets the bonding requirement and the mortgage amount. PRESERVATION LETTER NO. 97-1 ATTACHMENT 1 Page 2 of 3 NOI - NOTICE OF INTENT, FORM HUD-9608. Sent by owner to HUD and other required entities to let them know the owner(s) are interested in participating in the Preservation process under either Title II or Title VI. OCAF - OPERATING COST ADJUSTMENT FACTOR. Factor applied only to operating expense items to insure adequate coverage for inflationary conditions adjusted for vacancy, management fees, and, in case of priority purchaser, oversight costs. OPH - Office of Public Housing located in the State or Area HUD Office. PC - PRESERVATION COORDINATOR. Staff person(s) in each processing Office designated as the point of contact for all preservation related processing and information for a given office. PCNA - PRESERVATION CAPITAL NEEDS ASSESSMENT. Report which was made during the pre-appraisal processing stage to identify the condition of the property, and estimate the cost associated with the needed repairs. PIH - Office of Public and Indian Housing located in Headquarters. PHA - The local Public Housing Authority or the State Housing Authority POA - PLAN OF ACTION. Documentation submitted by Purchaser and Owner that details how the affordable restrictions will be maintained in the project, as well as how grant funds will be allocated. PPR - PRESERVATION PROJECT RENT. The Preservation Project Rent has two components, the GRP (Gross Rent Potential) which is all expected rental income from units and other operations, plus all approved tenant utility allowances. RIS - RESIDENT INITIATIVES SPECIALIST. Staff person in select Offices who has the responsibility of maintaining relationships with nonprofit entities throughout the field office's jurisdiction. PRESERVATION LETTER NO. 97-1 ATTACHMENT 1 Page 3 of 3 TPA - TRANSFER OF PHYSICAL ASSETS (PACKAGE). The documentation needed to be submitted to HUD to allow for a change in ownership under the Low Income Housing Preservation and Resident Homeownership Act. TPE - TRANSFER PRESERVATION EQUITY. Owner equity from Form HUD 9607 adjusted for principal repayment since issuance and changes in value due to condition since issuance of the 9607. Calculated by taking Transfer Preservation Equity value less outstanding balance of federally assisted mortgage(s) for the project. TPV - TRANSFER PRESERVATION VALUE. Value established and reported on FORM HUD-9607, which represents the Fair Market Value based on the project's highest and best use. VRS - VOICE RESPONSE SYSTEM (See LOCCS). The voice activated automated system used by HUD for requesting and disbursing approved and allocated grant funds. NOTE: Termination of mortgage insurance is requested by the mortgagee to HUD, at the request of the owner. For the purposes of Preservation, prepayment and termination of mortgage insurance is used interchangeably in the statute. Whenever either of these terms is used, it shall mean both. PRESERVATION LETTER NO. 97-1 ATTACHMENT 2 Page 1 of 1 The Funding Queue Q1. How is the rank order established for projects on the funding queue? A1. All projects placed on the Funding Queue have been assigned a funding control rank order number, regardless of the type of category the project has placed in within the queue. The rank order number was assigned to a project as of the time and date the funding request worksheet was received by the Headquarters Preservation branch. There are three categories within the queue: (CODE 1) sales to priority purchasers, (CODE 2) carve outs, and (CODE 3) extensions. It is the rank order numbers (relative to other projects) that determines when a property can access funds. Along with a project's rank order number, a project's category (CODE) does make a difference as to when it will receive funding. For example: A project is assigned a funding control rank order number of 100, and is designated as a CODE 1, sale to a priority purchaser project. This means that 99 projects preceded it into the Funding Queue. Of the 99 preceding projects, 50 of these were also CODE 1 (sales) projects, 25 were CODE 2 (carve out), and the remaining 24 projects were CODE 3 (extension). The result is that this 100th ranked project on the overall Queue, is 51st in relation to all CODE 1 sales to priority purchasers. If later it was determined that this project is eligible as a carve out, it would take a physical location as 26th as a carve out because 25 projects preceded it on list. If later the same 100th ranked project is determined to be an extension or sale to a non qualifying purchaser, then it would be 25th on the extension (CODE 3) listing. PRESERVATION LETTER NO. 97-1 ATTACHMENT 3 Page 1 of 4 Tenant Protections Provision 1b Description: Up to $112 million ($100 million plus $12 million carry over from FY 1996 to be used under FY 96 rules) for tenant-based rental assistance use (vouchers and certificates) for families displaced as a result of mortgage prepayment or termination of the mortgage insurance contract. Implementation: 1. Rental assistance funds will be used to prevent displacement of eligible families residing in projects whose owners prepay the mortgage or voluntarily have their mortgage insurance contract terminated. 2. Funds transferred to the Office of Public and Indian Housing (PIH) to fund the rental assistance will be monitored quarterly by the Preservation Division to determine if there are excess funds that should be redirected. Any excess funds will be used as capital grants for the sale of properties to priority purchasers. HUD'S RESPONSE TO POLICY QUESTIONS: Q1. Isn't $100 million for tenant protection excessive as believed by many industry representatives and should the excess be redirected for other Preservation activity(s)? A1. Based on our best estimate of potential prepayments in FY 1997 the amount appropriated is not excessive and funds will not be redirected at this time. Program staff will reevaluate the spend-down rate of the $100 million on a quarterly basis to determine whether excess funds should be redirected. Q2. If an owner prepays in FY 1996, but does not raise rents until FY 1997, do FY 1996 or FY 1997 rules apply? A2. The applicable tenant protections are based on when the owner prepays. FY 1996 rules apply to FY 1996 prepayments and FY 1997 rules apply to FY 1997 prepayments. PRESERVATION LETTER NO. 97-1 ATTACHMENT 3 Page 2 of 4 Preservation tenant-based rental assistance will be given in lieu of protections previously offered under Section 223(b) and (c). The class of families that can receive this protection under FY 1997 rules, have been expanded to include moderate income Special Need tenants and tenants in low vacancy areas. Q3. After prepayment of the mortgage, how high can the owner raise project rents? A3. An owner cannot raise the project's rent prior to 60 days following prepayment. After the 60 days, there is no limit to how high the owner can raise the rent. However, to receive subsidy payments to cover the rent, the owner and the Public Housing Agency (PHA) administering the Section 8 rental assistance program must agree that the new rent is reasonable. Once the new "reasonable" rent is agreed upon, the Tenant Based Housing Assistance Payment contract is signed. The voucher or certificate will only cover the rent level determined by the PHA. Q4. Do Sections 223(b) and (c) of LIHPRHA apply to projects that prepaid before September 26, 1996, but did not get vouchers until after September 26, 1996, when the Act was implemented? A4. Projects that prepaid their notes prior to September 26, 1996, are under the rules of law in effect at that time. Therefore, moderate income tenants with special needs are allowed the protections of Section 223(b) and (c). Q5. When prepayment occurs during FY 1997, are Section 223(b) and (c) effective? What protections do the special needs, (except large families) moderate income tenants have? A5. No. During FY 1997, as long as sufficient appropriations are available to provide tenant-based assistance, Section 223(b) and (c) are not applicable. Special needs, low-, very low- and moderate income tenants will be given a Preservation voucher or certificate, if: 1) the owner indicates that rent will be raised within one year after prepayment, 2) the tenant will be required to pay greater than 30 percent of adjusted income, and 3) will pay more for rent than was being paid on the date of prepayment (result of rent increase). This is in lieu of Section 223(b) and (c), as long as funds are available. A tenant with a Preservation voucher or certificate may elect to remain in PRESERVATION LETTER NO. 97-1 ATTACHMENT 3 Page 3 of 4 the project (even with the new, higher rent) as long as the owner retains the housing as rental housing or the tenant may elect to move to another project and take their voucher or certificate. Moderate income tenants are those with income greater than 80 percent of the area median income and less than 95 percent of the area median income. Q6. How will Preservation vouchers or certificates be provided to the moderate income tenants? A6. Moderate income tenants may use Preservation tenant-based assistance to remain in their existing housing. Vouchers or certificates for moderate income tenants will be provided under the same income guidelines used generally by the PHA and the Preservation Law. The tenant will be reviewed annually to determine if their rental assistance can be renewed. Q7. What happens if a State law prohibits an owner of a subsidized project from raising rents for 1 year following prepayment? A7. HUD has no recourse. State statutory relief is required. The State legislature would have to modify their law to provide statutory relief. Q8. If a project has a LMSA contract and the owner prepays, how are the tenants protected? A8. The tenants' rent remains the same until the expiration of the LMSA contract. Q9. After prepayment, and the 60 day period expires, is the owner required to continue to rent to tenants with tenant-based Section 8 rental assistance and tenants unassisted on the date of prepayment? A9. Yes, a tenant may elect to stay in a unit of housing for one year if all of the following conditions are met: a. The owner continues to maintain the property as rental housing, and b. the tenant meets the eligibility requirements to receive a Preservation voucher or certificate. Upon renewal of the Section 8 certificate or voucher, the Section 8 rules govern the future terms of the tenant-based assistance. PRESERVATION LETTER NO. 97-1 ATTACHMENT 3 Page 4 of 4 Q10. How will Headquarters know when to send to the tenants in projects that prepay the Tenant Notification Letter that explains to them their protections and responsibilities? A10. The State/Area Office will notify the Preservation branch in Headquarters as soon as they are made aware that an owner intends to prepay the project's mortgage. Headquarters will assure that the HUD Clearing House will distribute tenant brochures. PRESERVATION LETTER NO. 97-1 ATTACHMENT 4 Page 1 of 3 Sales To Priority Purchasers Provision 1c Description: Remaining balance of approximately $175 million (includes $10 million from the provision that gave the Secretary the discretion to reimburse owners for costs incurred in the submission of the POA) is available for capital grants for sales to preferred priority purchasers with approved POAs. Implementation: 1. The Department intends to fund as many sales to priority purchasers that can be funded using the appropriation of $165 million. Projects on the attached list must conform to the conditions stated below in order to gain access to the funding. 2. Projects listed in Attachment 9 shall be funded in their current rank order within the funding queue provided that the Transfer Preservation Equity agreed to under the existing approved POA, is at least equal to the lesser of: a) $5,000 per unit; b) $500,000 per project; or c) Eight times the most recently published monthly Fair Market Rent (FMR) for the project area for each unit. Projects that do not meet the minimum eligibility requirement shall not be funded in FY 1997. These projects will remain on the funding queue in their existing rank order pending future funding appropriation actions. 3. The capital grant amount needed for POAs that are more than 12 months old as of February 28, 1997, may be updated as required. Updates (per Headquarters instructions) may include increases in the seller's equity due to normal principal repayment (that has been realized since the initial funding request), and funding changes due to updating the scope of repairs or rehabilitation, costs estimates and deposit to replacement reserves. Such increases will be permitted, however the total amount of the PRESERVATION LETTER NO. 97-1 ATTACHMENT 4 Page 2 of 3 capital grant shall not exceed seven times the annual fair market rent for the project. State/Area Office staff instructions for updating POAs is forthcoming. 4. Capital grant amounts for projects with POAs less than 12 months old as of February 28, 1997, will not be updated under any circumstance. If a project is no longer viable with its existing approved funding configuration, it will remain in the funding queue with its current funding control rank order number. 5. Headquarters will review requests made by a priority purchaser relative to program cost limits and will establish the conditions under which a request will be accepted. Requests must be made through the appropriate State/Area Office. 6. Headquarters will review the availability of fiscal year 1997 funds quarterly, relative to Sales to Priority Purchasers. If it is determined that there are sufficient funds available to fund additional projects or additional funds from other sources become available, e.g., excess tenant protections, the appropriate State/Area office will be notified that funds are being made available and that they should proceed to prepare projects specified by Headquarters to close prior to September 30, 1997. HUD Responses to Policy Issues: Q1. Legislation restricts funding of sales to "preferred priority purchasers." Accordingly, should HUD award funds only to resident councils and community based nonprofit organizations? A1. The term "preferred priority purchaser" used in the Act is not defined in the law or in the conference report. Therefore, the Department considers a preferred priority purchaser to be the same as a priority purchaser. Q2. Should the sales queue be prioritized in order as sales to, 1) residents, 2) tenant supported resident group and nonprofit organization (joint venture), 3) other nonprofits, and 4) for-profit purchasers. A2. The Department will fund Capital Grants for sales to priority purchasers in rank order in the queue. PRESERVATION LETTER NO. 97-1 ATTACHMENT 4 Page 3 of 3 Q3. Should the Department make adjustments in the amount of equity and repair costs listed for projects that have been in the funding queue for many months? A3. For those projects (whose POA is more than 12 months old as of February 28, 1997) that will be funded, State/Area Offices may update the scope of repair or rehabilitation and estimated costs, and extension or transfer Preservation equity as required to reflect principal payments made on the insured first mortgage through the date of closing. State/Area Offices will be receiving instructions for performing the update as well as a list of projects within their jurisdiction. Q4. Will projects that are not funded this FY, be permitted to restructure their Plan of Action (POA) under different rules in FY 1998? A4. It depends on FY 1998 legislation and appropriation actions for FY 1998 that may modify current provisions. Otherwise, FY 1997 authorizations/appropriations expire on September 30, 1997. PRESERVATION LETTER NO. 97-1 ATTACHMENT 5 Page 1 of 1 Owner Reimbursement Provision 15 Description: Up to $10,000,000 is made available to be used at the discretion of the Secretary to reimburse owners for POAs submitted prior to the effective date of the FY 1997 Act, but were not executed for lack of available funds. Reimbursement is available only for documented costs directly applicable to the preparation of the POA as determined by the Secretary and under his terms and conditions. Implementation: The authority to reimburse owners is discretionary and HUD has decided that the $10 million will be used exclusively to fund capital grants for the sale of projects to priority purchasers. Section 236 IRP Recaptures Provision #3 Description: First $150 million recaptured from Section 236 Interest Reduction Payment (IRP) contracts shall be rescinded. Implementation: Funds recaptured in excess of $150 million cannot be used to fund Preservation program activities. HUD Responses to Policy Issues: Q1. Can recaptures in excess of rescinded amount be used for Preservation activity? A1. Since the FY 1997 Act does not state that recaptured IRP can be used, HUD has determined that funds recaptured in excess of 150 million cannot be used. PRESERVATION LETTER NO. 97-1 ATTACHMENT 6 Page 1 of 1 Pipeline Processing Provision 2 Description: The FY 1997 Act suspended processing of all Preservation eligible projects that had not received an approved POA prior to September 30, 1996. The only exception is carve out projects. Implementation: Effective October 1, 1996, further processing of all eligible Preservation projects that did not have an approved POA on or before September 30, 1996, is suspended, with the exception of carve out projects. PRESERVATION LETTER NO. 97-1 ATTACHMENT 7 Page 1 of 4 ITAG Purpose: Under LIHPRHA and the NOFA, the purpose of ITAG funds is to promote the ability of residents of Preservation eligible low-income housing to meaningfully participate in the Preservation process established under LIHPRHA and ELIHPA. Since the FY 1997 Act limits the class of Preservation eligible projects to those with approved POAs and carve out projects which may continue to be processed, HUD has determined that the only projects that may continue to be eligible for ITAG funds are those projects that can meaningfully participate in the Preservation process. While LIHPRHA and the NOFA provide that projects which have filed a NOI are eligible for ITAG funding, the Act, by limiting the class of eligible projects has limited the projects that can meaningfully participate in the Preservation process. Accordingly, ITAG grantees must be associated with carve out projects or projects with approved POAs to be eligible to receive ITAG funds. Implementation: 1. ITAG grantees that are not associated with a carve out project, or projects which do not have an approved POA are no longer eligible to receive funds. Therefore, the organizations responsible for distributing ITAG funds can no longer accept voucher requests from grantees without an approved POA. 2. New applications must be associated with a carve out project or have an approved POA and meet the criteria outlined in the ITAG NOFA. 3. As provided in the FY 1997 Act, during FY 1997, ITAG funds may be used by priority purchasers to seek assistance under the HOME Investment Partnerships Act (HOME) or the Low Income Housing Tax Credit (LIHTC) to be used in conjunction with the Preservation Program. Grantees will be required to execute a certification that the ITAG funds are being used to seek assistance under HOME and LIHTC to be used in conjunction with the Preservation Program. If the grantee uses the ITAG funds to seek assistance under HOME or LIHTC not to be used in conjunction with the Preservation Program, the grantee must repay the funds to HUD. While grantees may PRESERVATION LETTER NO. 97-1 ATTACHMENT 7 Page 2 of 4 use ITAG funds to pursue assistance under HOME and LIHTC, if the grantee receives assistance under HOME or LIHTC but has not executed a Use Agreement with HUD pursuant to ELIHPA or LIHPRHA, grantees will be deemed to have improperly used ITAG funds. 4. The repayment requirement, for grantees who obtain financing not in conjunction with a Capital Grant, goes into effect two weeks after the publication of this Preservation Letter (No. 97-1). HUD's Response to Policy Questions: Q1. What prompted the decision to no longer fund ITAG Grantees not associated with a carve out or projects without an approved POA? A1. The Act of 1997 provides that the Secretary shall suspend further processing of applications which do not have POA approval as of September 30, 1996, except for carve out projects. Q2. Can any project without an approved POA still receive ITAG funds? A2. Yes. Only carve out projects can continue to use currently approved ITAG funds or apply for new ITAG funds without an approved POA. Intermediaries must consult with the appropriate local HUD Office to determine whether a project is considered a carve out. Q3. Does the FY 1997 Act change the way that ITAG funds can be used? A3. Under the FY 1997 Act, the use of ITAG funds for an eligible grantee remains the same. ITAG funds can still be used for those activities eligible under the ITAG NOFA. These activities must be for purposes acceptable under ELIHPA and LIHPRHA. What has changed are the classes of projects that are eligible to receive an ITAG grant. PRESERVATION LETTER NO. 97-1 ATTACHMENT 7 Page 3 of 4 Q4. Can ITAG funds be used for activities to pursue other forms of financing the sale of the property, other than the Preservation Capital Grant? A4. ITAG funds can be used for activities related to a sale to the nonprofit being financed by means other than a Capital Grant as long as such financing is used in conjunction with the Preservation Program. Funding activities in the pursuit of financing mechanisms under HOME and LIHTCs can be paid for using ITAG funds as long as such finance is used in conjunction with the Preservation Program. Q5. When other forms of financing are being pursued, can ITAG funds continue to be used? A5. A grantee with an approved POA may continue using ITAG funds for ITAG eligible activities as described in the April 6, 1994, NOFA. Funding of activities in pursuit of financing other than for a Capital Grant are also acceptable. The funding account(s) of those activities must be kept separate from normal eligible ITAG activity accounts. Example: A grantee can hire a consultant to seek financing mechanisms other than a Capital Grant and at the same time continue using ITAG funds for activities in the pursuit of a Capital Grant but these funding accounts must be kept separate. a. If the grantee decides not to sign a LIHPRHA use agreement and uses only the financing (i.e., Home or LIHTC), other than the capital grant, they must repay whatever ITAG funds were used to seek such other financing. The level of funds to be repaid must be clearly indicated in the separate funding account. b. If the other financing is used in conjunction with the Preservation Program (A Capital Grant) and a use agreement is signed, the pursuit of the other forms of financing is considered an eligible ITAG activity and the ITAG funds do not have to be repaid. Q6. Must those ITAG grantees who are currently pursuing other forms of financing not in conjunction with LIHPRHA, repay the ITAG funds they are expending? A6. The requirement that ITAG funds be repaid does not apply to those grantees currently using it in the pursuit of other financing even if it is not in conjunction with LIHPRHA. The repayment requirement goes into effect two weeks after the publication of this Preservation Letter (No. 97-1). PRESERVATION LETTER NO. 97-1 ATTACHMENT 7 Page 4 of 4 Q7. Can ITAG funds continue to be used after another financing mechanism(s) is received? A7. ITAG funds can be used even when the other financing mechanism(s) which will be used in conjunction with the preservation process is received. But, when an ITAG grantee actually closes the sale of the property, the approval of ITAG funding vouchers must stop immediately. Q8. Will the Department reallocate ITAG funds? A8. A decision regarding whether the Department is going to reallocate ITAG funds from low priority ITAG needs to higher priority ITAG needs has not been made. ITAGs will be notified of the decision. Q9. What will the Department do if it can retrieve FY 1996 ITAG funds that were misdirected during FY 1996? A9. The Department will allocate additional ITAG funds to those Intermediaries who have immediate Preservation grant needs. Once these immediate needs are addressed the Department will consider those Intermediaries who might have a need for more funding in the near future. PRESERVATION LETTER NO. 97-1 ATTACHMENT 8 Page 1 of 2 Section 236 Excess Rental Income Provision 6 Description: The Secretary may modify regulatory agreements to permit owners and priority purchasers to retain rental income in excess of basic rental charge in Section 236 projects for the purpose of preserving low and moderate income housing. Implementation: Regulatory agreements may be modified to allow limited dividend owners or priority purchasers to retain rental income in excess of the basic rental charge in a project assisted under Section 236 of the National Housing Act. The excess income that now can be retained by the project can be used for any activity determined by the Secretary that promotes the preservation of low and moderate income housing. This procedure pertains only to Preservation Properties. Instructions: The following instructions must be followed by State/Area Offices to provide the necessary information to the Headquarters to permit excess rental charges to be retained in the project: 1. Obtain a signed Use Agreement and Amendment of Existing Regulatory Agreement for Nonprofit Mortgagors or Limited Dividend Sponsor for Multifamily Projects Insured or Assisted Under Section 236 of the National Housing Act. 2. Confirm that there is no outstanding debt or that no Monthly Report of Excess Rental Income has been received by contacting DARTS staff for verification or by reviewing the DARTS system prior to amending the Regulatory Agreement. 3. Make sure there are specifications detailing how the Retention of Excess Rental Income will be controlled (e.g. what account the money will be deposited to, and when the deposits are to be made), and the time period of retention (e.g., months and/or years covered). PRESERVATION LETTER NO. 97-1 ATTACHMENT 8 Page 2 of 2 4. Mail the Agreement to: Department of Housing and Urban Development CFO/Program Accounting Division Excess Rental Income Room 3242 C/O Gloria B. Daffin 451 7th Street, SW Washington, DC 20410 PRESERVATION LETTER NO. 97-1 ATTACHMENT 9 Page 1 of 1 Sales to Priority Purchasers List FC Funding Number Project No. Project Name Code of Units Number 2 GLENVIEW GARDENS APTS 1 204 052-44007 312 HOLLY PARK EAST APTS 1 72 101-44063 422 EDEN HOUSE APTS 1 116 121-44151 423 BARRETT TERRACE 1 115 121-44365 424 TANGLEWOOD II APTS 1 192 064-55040 427 FREDERICK HEIGHTS 1 71 052-44006 428 PIEDMONT PLAZA 1 68 126-44116 429 MULTNOMAH MANOR 1 54 126-55004 430 OAKHURST II 1 80 067-44142 431 OAKHURST I 1 431 067-44066 432 LANCE APARTMENTS 1 76 136-44264 433 FOLSOM GARDENS I 1 48 136-44020 434 CHERRYDALE 1 186 052-55002 435 FOLSOM GARDENS II 1 48 136-44172 436 808 MEMORIAL DRIVE 1 301 023-121 437 ALEWIFE PARKWAY 1 274 023-44039 438 JEROME ESTATES 1 176 017-44046 439 TARFFVILLE APTS 1 81 017-44165 440 BAYVIEW TOWERS 1 200 017-44005 441 ABBOTT HOUSE APTS 1 100 052-44137 442 KING TOWERS 1 129 000-55077 443 GLENARDEN WOODS APTS 1 151 000-55017 444 GLENREED APTS 1 104 000-55023 445 BRIARWOOD APTS 1 64 061-44184 446 EASTVIEW APTS 1 80 061-44076 447 SPENCER HOUSE 1 40 126-44045 448 COLLEGE MANOR 1 20 126-55003 449 SUNNYSLOPE MANOR 1 50 126-44017 450 DOLLY ANN APTS 1 108 051-35118 451 LOCUST PARK 1 160 052-44124 452 COPPERSTONE CIRCLE 1 108 052-44073 455 BARRETT PLAZA 1 58 121-44366 456 KENMORE PLAZA 1 324 071-44135 457 WAUKEGAN TERRACE 1 140 071-44027