Multifamily Direct Loan Frequently Asked Questions (FAQs)
Where can I find the Multifamily Direct Loan guidelines?
Guidance affecting the Multifamily Direct Loan program can be found in the Uniform Multifamily Rules in Sections 10.307 and 10.403.
What is the Department's position on structuring multifamily loans as soft debt?
As specified in 10.307, if the first lien mortgage is a federally insured HUD or FHA mortgage, the Department may approve a loan structure with annual payments payable from surplus cash provided that the debt coverage ratio, inclusive of the loan, continues to meet Department requirements as outlined in Chapter 10 Subchapter D. Any other transaction requesting this type of structure must request the cash flow loan structure before the Board, which will determine whether the financial risk is outweighed by the need for the proposed multifamily housing.
How does the Department determine lien position?
As specified in 10.307, TDHCA multifamily loans will have a deed of trust with a permanent lien position consistent with the principal amount of the loan in relation to the principal amounts of other sources of financing. The TDHCA loan will be superior to any other sources for financing that have soft repayment structures, non-amortizing balloon notes, are deferred forgivable loans, or in which the lender has an identity of interest with any member of the Development Team.
Can the loan be structured as a grant?
No. Unless specifically noted in the published Notice of Funding Availability (NOFA), TDHCA does not award multifamily loan funds as a grant source or deferred, forgivable debt.
What is the lowest interest rate that can be requested?
For multifamily loans, the interest rate requested can be as low as zero percent provided all applicable program requirements and underwriting requirements are met. Note for the HOME program that loans requesting less than a 2% interest rate must also demonstrate the ability to provide up to 5% of Match.
How soon can I close on my multifamily loan?
All due diligence must be complete within 30 days of the planned closing date. Once the due diligence file is complete, the file will be forwarded to Legal for document processing. Depending on current workload, files may have a shorter processing time; check with the Loan Closing Specialist if you have requirements that will necessitate a quick turnaround time.
Can I draw my entire loan amount at closing (i.e., table fund my HOME amount)?
In general, each loan program will have its own restrictions. For HOME, which is currently the only loan source available, if eligible acquisition and soft costs can be provided, up to the entire HOME loan amount less $1,000 can be drawn at closing. If there are plans to draw this amount at the closing table, development staff should contact HOME program staff well in advance of closing to receive instructions regarding budget and draw cost review. Table funding draws cannot be submitted any later than 10 business days prior to loan closing.
Do I have to close on all of my financing at the same time?
As specified in Section 10.403, TDHCA multifamily loans must be closed concurrently with any superior lien holder debt determined to be necessary for the long-term financial feasibility of the Development. If the Department is in a first lien position and you can provide documentation showing that closing on other sources is reasonably expected to occur within 3 months, the Executive Director may approve the TDHCA closing ahead of closing on other sources; however, a personal guarantee from the Principal of the Development Owner for the interim period may be requested.
If my costs change, will my deal have to be re-underwritten?
If the final budget submitted (as requested in Section 10.403) shows significant increases or decreases in cost, or changes in lenders, terms, or other items affecting the financial feasibility of the development have occurred, the final budget will require a re-review by underwriting. Closing may not occur until a revised underwriting report or memo to file is posted (or an alternate communication evidencing that no such communication is necessary is provided to the Loan Closing Specialist).
The Limited Partnership Agreement (LPA) will not be fully executed until the day of closing; can this document be provided concurrently with closing?
Yes. If a fully executed LPA will not be available until the day of closing, the Department will accept a final draft for the due diligence file. A final draft must be submitted for the file to be transferred to Legal for review.
Our closing date has changed. How do I amend the closing date in my Loan Commitment?
If your anticipated closing date has changed, you must contact program staff as soon as possible but no later than 2 weeks prior to your Loan Commitment expiration date. A request for amendment to the closing date may be emailed to program staff and should specify: 1) the reason for the extension requested and 2) the new, expected closing date. The request should either be sent directly from the Contract Executor or by a designated representative (with a cc: to the Contract Executor). Amendments are processed the same day they are received and routed for approval. Final Department signatures will not be collected until the Contract Executor signs and returns the executed amendment page.
If I requested an amendment and returned the signature page electronically, do I also have to submit a hard copy?
No. A hard copy version of the document is not necessary; as specified in the text of the Amendment, under Agreements, signed copies returned by fax or electronic submission will be treated as the signing party's original signature.
When will my permanent loan repayment period begin?
For the HOME program, the construction loan agreement (CLA) provides for a construction/development period of eighteen (18) months from the date of loan closing and loan repayment begins at the end of that 18 month period. Extensions to the CLA can only be approved by the Executive Director or designee. Extensions needed for more than 6 months will require Board approval.
Are there benchmarks or timing restrictions related to drawing HOME funds?
Once the loan closes, HOME funds may be drawn at any time provided that adequate cost support is submitted with the draw request. There is no time that must pass between each draw request. However, in accordance with the Multifamily Rules, funds may be retained until the close of the contract to keep a contract active in HUD's IDIS system. In general, HUD requires a draw within one year of the commitment date and the Department requires that up to $1,000 be retained in the contract to release funds at the one year mark and at contract end. Otherwise, developer fee is the only fee that is tied to a certain percentage of completed construction for the HOME loan.
Our HOME development also received tax credits. Can I still draw developer fee?
Developer fee can only be drawn from HOME funds on developments that also receive tax credits if letters from every lender and the syndicator are submitted demonstrating that there are no alternate plans for the disbursement of developer fee. If letters are provided, developer fee must still be drawn in accordance with rules in Section 10.403 – 75% will be disbursed in accordance with the percent of construction completed.
Is it possible to obtain draft loan documents prior to moving to closing?
Drafts of some loan documents are available on the Asset Management page; however, drafts particular to each individual transaction will not be submitted until the full due diligence file has been transferred to Legal.
Can my file be transferred for legal review prior to receipt of HUD Environmental Clearance?
The Department generally prefers to wait on receipt of Environmental Clearance prior to transferring a file to Legal; however, if the Owner has already published and Clearance is likely to occur within a set timeframe, the Closing Specialist can request special approval to transfer the file to Legal ahead of Clearance receipt.
What are the minimum and maximum terms allowable for the HOME loan?
The Department requires that the loan term be no less than 15 years and no greater than 40 years; the amortization schedule shall be no less than 30 years and no greater than 40 years.
Why is the Department questioning my signature block?
The Department uses the Secretary of State (SOS) website to view formation documents and review signature authority. If the SOS site does not match the signature block presented, additional documents may be requested before the Department can consent to use the signature block submitted.
When will Notices of Funding Availability for loan funds (NOFAs) become available?
HOME Multifamily Development NOFAs are typically published once a year depending on the release of HUD's grant agreement to TDHCA. Any other NOFAs will be published based on the availability of funds.
When will I receive my Notice to Proceed (NTP)?
All developments, even those that will be exempt from Davis Bacon, will need to contact the Senior Labor Standards Specialist prior to loan closing and provide any requested documentation. Owners and developers building developments that will be subject to Davis Bacon must attend a Pre-Construction Conference prior to loan closing in order to ensure that a NTP can be prepared and issued after loan closing. Developments that are not subject to Davis Bacon regulations must still receive a NTP-Davis Bacon Exempt notice at the time of closing.
Does the Department offer recurring training for Direct Loan programs?
The HOME program currently offers annual trainings at the time awards are made. Copies of the training power point are also divided by section and posted on the Multifamily HOME program page.
Where can I find the documents needed for my draw submission?
Draw submissions happen in two parts for the direct loan programs. A final budget must be approved and set up in the Housing Contract System (using the last approved development cost schedule submitted at the time of underwriting) and the Multifamily draw workbook must be used to submit the funding request (the draw workbook also includes a checklist of additional materials that must be submitted for review and approval). All items must be submitted and available for review at the time the draw request is submitted. Table funding will require additional components as referenced in the draw checklist and require 10 business days to process. All draw documents can be found on the Multifamily Finance HOME page.
How do I know how many HOME units I need to have in my project?
TDHCA defaults to the federal rule (24 CFR Part 92) regarding HOME unit requirements. To determine the the total number of HOME units required, please use the HOME Unit Calculation Tool (XLS). Once you've entered the total number of units, the applicable 221(d)3 limits (PDF), the total number of HOME units, and the Total Development Cost less ineligible costs, you will be able to see if the amount of HOME units meets 221(d)3 subsidy layering requirements as well as proportionality of HOME funds to Total Eligible Cost requirements.
Once I determine the amount of HOME units needed, are there any income restrictions on the HOME units?
Yes, income restrictions regarding HOME units can be found in two sections of 24 CFR Part 92. 92.216 states that at least 90 percent of the HOME units must be occupied by families whose income does not exceed 60 percent of the Area Median Income, with the remaining 10 percent capped at 80 percent Area Median Income. Furthermore, 92.252 states that at least 20 percent of the HOME units must be occupied by families whose income does not exceed 50 percent of the Area Median Income.
Can I use HOME funds in a Participating Jurisdiction?
Yes, but only if the HOME funds are requested and awarded under the Persons with Disabilities (PWD) Set-Aside.