BROADCAST EMAIL – Regulatory Update

July 31, 2015

1)  Management Fees Published for Fiscal Year 2016

In a June 25^th Broadcast Email, CARH notified our members that Rural Development (RD) had informed CARH and other industry groups that they have approved an increase in the management fee limits for Fiscal Year (FY) 2016. Today, RD published the Procedural Notice (PN) 478 with the final management fees for FY 2016. Management fees will vary from state to state because RD has based on the increase on HUD’s Operating Cost Adjustment Factor (OCAF) which varies based on location in the country and is applied to each state’s current maximum fee.  (Click here for the direct link to the charts that provides states’ management fee adjustment for FY 2016.)

CARH proposed that OCAF should be the base and that additional add-on fees should also be part of the management fee calculation. CARH, together with the National Affordable Housing Management Association (NAHMA), sent the attached letter to RD. This letter was a follow-up to RD’s proposal back to the industry regarding additional incentives that should be included for management fees in the future. As CARH members will recall, due to the work of Kevin Flynn and Bill Shumaker, a comprehensive proposal for determining management fees, starting with the OCAF, was developed and agreed to by CARH other affordable housing advocates. This proposal was then sent to RD. On May 4, 2015, RD countered with a proposal which incorporated many of the industry’s recommendations.  However, as you can see from the letter additional items need to be addressed by RD.  We will continue to work with RD on a proposal that will provide some certainty and consistency on fees going forward. Further we suggested that a survey be conducted every five years to determine if the OCAF needed some further adjustment. Although the increase in fees for FY 2016 is based on OCAF, CARH will continue to work with RD to advocate for CARH’s entire proposal – including add-on fees.

2)  Unnumbered Letters – Section 538 Guaranteed Rural Rental Housing Guidance

Today, RD published two Unnumbered Letters (ULs) concerning the Section 538 Guaranteed Rural Rental Housing Program. According to RD, the UL dated July 14, 2015, Guidance on the Use of Section 538 Guaranteed Rural Rental Housing Program with Section 515 Properties is intended to clarify issues concerning the use of Section 538 loan guarantees in transactions involving the revitalization and preservation efforts of existing affordable housing properties financed with Section 515 direct loans.

The second UL, dated July 30, 2015, Guidance on Loan Modifications in the Section 538 Guaranteed Rural Rental Housing Program (GRRHP), is intended to provide guidance on loan modifications to reduce the interest rate of existing Section 538 GRRHP loan guarantees.

Please contact the CARH national office at carh@carh.org or 703-837-9001 should you have questions or concerns.