HUD. January 10, :00 pm ET

Transcription

1 Page 1 HUD January 10, :00 pm ET Operator: Good day and welcome to the HUD NSP Open Forum Q&A conference call. Today's conference is being recorded. To ask a question during today's call, please press star 1. If your question has been answered, please press star 2 to remove yourself from the queue. At this time, I'd like to turn the conference over to Marsha Tonkovich. Please go ahead. Marsha Tonkovich: Good afternoon everybody. This is Marsha Tonkovich, glad to be here with you today. This is an open forum meaning we re here to answer your questions and to hear more about things that are working and not working on your NSP program. So for the welcome, I'm going to turn it over to Jesse Handforth Kome. Jesse Handforth Kome: Hey. I'm Jesse Handforth Kome at HUD, Deputy Director of the Office of Block Grants. And the NSP Team does a lot of work with me for me on their own without telling me what's going on, you know, and eventually they get back and tell me.

2 Page 2 I'd like to welcome you to this Q&A session. We d like to sort of be informal and get a chance to find out what your questions are, what s going wrong, what's going right, how can we help you particularly for NSP 2 grantees as you're approaching your expenditure deadline and NSP 3 grantees who are trying to get going. We re interested in, you know, whatever s going on out there. And you've got - I've got a couple other HUD people here with me today to help answer questions. David would you like to introduce yourself? David Noguera: Hello everyone, good afternoon and thanks for joining us today. I'm David Noguera, the co-team Leader for NSP and hope we have an interesting discussion. Jesse Handforth Kome: Okay Sarah? Sarah Stewart: Hi. I'm Sarah Stewart on the NSP team here at headquarters. Jesse Handforth Kome: And so there's three of us here and you can drag in other people if you need them to answer your questions. Marsha Tonkovich: Perfect. Jesse Handforth Kome: So you're going to give us the full spiel. Marsha Tonkovich: I will. So again, many of you have probably been on these calls before but in case you haven't there's a couple different things we ask you to do in order to get into the queue to ask a question.

3 Page 3 So first we ask that you go ahead and go on the Feedback box at the top right-hand corner of your screen. You'll see that it's green now. If you can go ahead and change that to purple if you do want to have a question answered. That'll let us know how many questions are pending so we can have a sense of how much time we need and make sure we get to everybody's question. And then in order to really be heard what we need you to do is press star 1 on your phone. And star 1 will get you into the queue. And then we re going to take the questions in the order they are received. And Jeremy our operator will announce your first name, so if you could just go ahead and ask your question. If someone asks a similar question and therefore you're already taken care of and you don't need to ask your question anymore feel free to press star 2 and that will take you out of the queue and then make sure you turn your box back to green. Now if you don't have audio or for whatever reason you want to type in your question you're also welcome to do that. You can go into the Q&A box at the top left-hand corner of your screen and you can go ahead and send in a question that way as well. I will say that if you - we would prefer the questions to come in verbally because then we can ask follow-up questions and have a dialogue about them. It's hard to do that with a type in question but please feel free to use either mechanism.

4 Page 4 So we re going to cover any topics that you may have and then we ll come back and we'll talk about some options for other kinds of resources that may be helpful to you. So with I m going to go ahead and open up the phone lines unless Jesse or David is there any policy updates or anything you want to discuss before we go ahead and take some questions? Jesse Handforth Kome: No. I mentioned the NSP 2 deadlines that are coming up. And we are very, very close to starting to roll out the policy for what s going to happen for at the deadline. And, you know, if people have questions around that kind of thing I'd urge them to take a look at the October 2010 unified NSP notice. There is an actually an NSP 2 portion hidden in there in paragraph M in the requirements section, sub paragraph 3 which talks about at the NSP 2 deadline HUD can recapture but can also take alternate corrective actions. And we are going to be outlining in the process by which we make that decision which way we re going to go very soon. Marsha Tonkovich: And then you guys will issue a notice Jesse is that right? Jesse Handforth Kome: No. We don't need to issue a notice for this because we already got it out in October of We re going to be issuing operating instructions to our field offices and the field offices will be contacting the grantees.

5 Page 5 Any grantee at risk of meeting missing a deadline will get a warning letter about 15 days out that they re, you know, basically everybody's under 50% if they re - or 49.9 we ll have to send you that letter. And then after the deadline when the dust settles you'll be getting additional letters saying, you know, telling you what your status was basically, you know, congratulations or we re going to have to have a longer relationship with you working this out letters. Marsha Tonkovich: Okay. I'm sure some folks some folks on the phone who are NSP 2 grantees might have additional questions on that. Jesse Handforth Kome: Right. We are also working on and it's a little further out in time guidance - and it will be a notice on closeouts and what happens to the disposition of program income and real property on - such as land banks and resell recapture of implications at closeout. Not all the decisions been made yet around both policies but we re very, very close. And that would be a notice that would show up in the Federal Register. Marsha Tonkovich: And Jesse that will also include with happens with the program income that's received after the end of the closeout as well, correct? Jesse Handforth Kome: Yes. Right now if we do nothing it will be bound by the regular CDBG rules. Marsha Tonkovich: Okay because I know we've been getting on these Webinars we've been getting a lot of questions about that, about money that's either left in the DRGR accounts because you have sent program income and therefore you have grant money left or income received later on down the road.

6 Page 6 Jesse Handforth Kome: Well grantees that are currently CDBG entitlement grantees are aware that CDBG program income is program income in perpetuity. And NSP is a CDBG product. It's been ironing out the details on that that's been tricky. And the other piece is the CDBG rules are silent on what happens to nonprofits. So that's part of the, you know, we have nonprofit direct grantees. So we've been having to figure out exactly, you know, crawling through circulars and what rights we do have in the laws and figure out what authority we have to sort of move things around to make that work for them. Marsha Tonkovich: Got it. Okay well so it sounds like for many of the folks on the call I recognize some of the names of folks who are chimed in. I know you're CDBG recipients or you have been in the past so you understand how program income and the other closeouts or not - and the lack of closeout in the case of CDBG, how that works. So yes, I think you ll... Jesse Handforth Kome: Especially CDBG regs... Marsha Tonkovich: Yes. Jesse Handforth Kome:...for closeout of Not that any entitlements ever really had any reason to read it in many years. Marsha Tonkovich: But it's probably a good place to start if you're thinking about that at the local level. And Josh I think you ed in a question about the status of the notice on the closeout. So it sounds like Jesse has just given you that answer.

7 Page 7 Any other policy updates guys before we take a few more questions? David I know that you guys are working on a notice on demolition and that's coming fairly soon? Jesse Handforth Kome: It's not a notice. It's a memo. Marsha Tonkovich: Okay. Jesse Handforth Kome: It's a demo memo. And the lawyers are rewriting it again. So I'm giving up promising dates on it. We sent it to the three times in differing guises. We all agree on the base policy on it. And that this sort of basic policy underlying it is that if you are familiar with CDBG you know that you can't do new construction in CDBG but there are some things you can do to assist in new construction projects and such as assemble the land. So basically you're disposing of the property that you've assembled for an ineligible activity but it has to meet a national objective. We re moving through that analogy for our properties that have been acquired or approved with NSP funds and you want to pass them off for redevelopment for an ineligible purpose. Marsha Tonkovich: Okay. Jesse Handforth Kome: You can use eligibility E for it but we re picking our way through the - or for - you can t use eligible E if you re doing non housing. Marsha Tonkovich: Right.

8 Page 8 Jesse Handforth Kome: But we re picking our way through where it works and where it doesn't and I think we re down to the fine points now. Marsha Tonkovich: Okay. Jesse Handforth Kome: But we re moving through by analogy on that. Marsha Tonkovich: Terrific. All right well Jeremy let's go ahead and start taking some questions. Do we have folks on the queue on the phone? Operator: There are no questions in the queue at this time. Again that is star 1 to ask a question. Marsha Tonkovich: Okay great. And we do not currently have any written in questions as far as I can see either. And so again guys if you're on the phone you have a question I encourage you to call in and hit star 1 on your phone. And also, you know, even if you didn t have a question, if you just have found something that you think is working that you want to share with your colleagues, you have about 100 of your colleagues on the phone with you or if you're seeing something that you ve tried that, you know, you're struggling with and you want to put it out there we can put out there for comments from your colleagues or from HUD feel free to also call in or write in with that. Jesse Handforth Kome: Okay while they're working on that Marsha why don't we talk about the concept we've been kicking around about adding a peer exchange to the Web site. Marsha Tonkovich: Yes, yes...

9 Page 9 Jesse Handforth Kome: And would people think is, you know, doing that? What - ICF made a proposal that - about what would be on it. What usefulness would that be for grantees? Marsha Tonkovich: Yes. So let me just share with you the general idea. And David I think you've been in those meetings with Ken more than I have so I'll let you jump in as well. But the idea is that there will be a portion of the Web site where grantees could upload questions or comments for each other or also tools or program descriptions or, you know, whatever kinds of things you might want to share with one another to create kind of a peer exchange of those tools. So if you had a really terrific checklist for inspections let's say you could share that or somebody could put out, you know, does anybody have a great checklist and have a peer to peer kind of exchange of some of those tools which wouldn't sort of go through a HUD review process if you will. So, you know, it would be anything official but the idea is that you guys would be able to have a dialogue. And David anything you d add to that? Jesse Handforth Kome: He wandered off. But I think that's right. And it would also though incorporate what's on your grantee page already which some grantees are using really well in the resource exchange and uploading pictures of their projects and, you know, adding details about how to contact them and stuff. It would incorporate that stuff as well to create a, like a grantee presence almost inside the Resource Exchange. It's making some of the old guards here a little nervous but I think we re going to get to go ahead and try it out if people are interested.

10 Page 10 Marsha Tonkovich: So yes please, you know, push star 1 and let us know your thoughts about whether you think you would use an exchange like that. I know that there are other organizations like NCHSA and COSCA and some of the other associations who do something similar, a peer to peer kind of exchange and I get copied on some of those as member. And I see a lot of really interesting questions and suggestions from peers or, you know, call so and so might be able to give you an idea about that. And there's a lot of power in that that, you know, I think we as key providers or HUD on our own can't do because we don't know what s happening in every community across the country. So but we'd love to hear from you whether you think that's a good investment of TA resources to develop something like that and if you think you could use it? Jesse Handforth Kome: Many, many years ago Marsha you may not know this but, you know, we have a very active IDIS listserv community that's run outside of HUD these days. But it started actually on a bulletin board that I was running for the entitlement division back in the day when we actually had electronic bulletin boards. Marsha Tonkovich: I do remember that, yes. And the IDIS people that were really hurt by the IDIS because it was just starting to roll out then populated, took over my bulletin board. They came over and asked if it was okay and they just started running discussions about IDIS and threads, you know, discussion threads in there. And when HUD when I transferred to the Greensboro office for a while they followed me.

11 Page 11 They left the entitlement bulletin board and they moved to the Greensboro bulletin board. And then eventually HUD took down the bulletin boards and they went off and got themselves a listserv. So I've been a fan of this kind of exchange, you know. And it can be dormant sometimes for a few days and then suddenly somebody will ask a question and get things going again. It's very interesting to watch. Marsha Tonkovich: Yes and I like actually watching the recommendation because, you know, it's just that we don't know what's all happening all out there everywhere. So it's really cool to see the interesting things that are happening or just, you know, the bits of your program that are really innovative. So, you know, again please jump in if you're a grantee who s out there listening in and let us know what you think of it. So Jeremy do we have anybody in the queue yet? Operator: Yes we do. And we can take our first question from Mike. Marsha Tonkovich: Okay hi Mike. Mike: Hi. How are you doing? Marsha Tonkovich: Great. Mike: I'm from Hillsboro County, Florida and...

12 Page 12 Marsha Tonkovich: Great. Mike:...this is an NSP 1 question that probably has to do of all NSP. It's about operating subsidy for a multi-family development. Marsha Tonkovich: Okay. Mike: We purchased a 40 unit or helped do a nonprofit purchased it and a 40 unit development. And it's about 80% vacant. Marsha Tonkovich: Okay. Mike: And we didn't want to move everybody out because that would be a forced relocation and we want - didn't want to get into that. But we've had trouble bidding this project. It s taken about a year and a half with this 80% vacancy rate. Have - can we pay for those operating costs during this time before we get to the rehab? Jesse Handforth Kome: So you own the property? Mike: Well a nonprofit. We funded the acquisition. Jesse Handforth Kome: So you're sub recipient or a developer? Mike: They are a sub recipient.

13 Page 13 Jesse Handforth Kome: The answer is yes it's a disposition cost. It's an expensive one and you're going to have to be careful of how you deal with it but I believe the answer would be yes. Mike: Okay. Jesse Handforth Kome: Given that... Mike: So prior to... (Crosstalk) Mike: What was that I'm sorry? Jesse Handforth Kome: Given that set of facts. David Noguera: Right. Mike: Okay. David Noguera: They're not an owner operator. Mike: We... Jesse Handforth Kome: Right. David Noguera: You re in the process of selling it, of disposing of it? Mike: Yes.

14 Page 14 David Noguera: And... (Crosstalk) David Noguera:...now behind you. Jesse Handforth Kome: Right. Mike: Okay. Jesse Handforth Kome: If you're going to read develop it and then dispose of it. Mike: That's correct. Okay well thank you. That helps. Marsha Tonkovich: Hi. One thing I would say is make sure that when you get to the end of construction and you re going to turn the property over and it's going to be operated by the final owner of the property at that point the ongoing operating subsidy needs to end. Mike: Oh yes definitely. Yes we re just trying to help them because they're having such a hard time getting the construction started. Marsha Tonkovich: Great. And Mike what would you think of a listserv or not a listserv but a bulletin board or equivalent, you know, a peer to peer kind of thing? Would you find that helpful? Mike: Oh yes it would definitely great. I'd only go on it whenever I had to but it would definitely be a good thing.

15 Page 15 Marsha Tonkovich: Great okay terrific. Thank you. Mike: All right, okay thank you. Marsha Tonkovich: Great. All right Jeremy let's take our next caller. Operator: Our next question comes from Rich. Marsha Tonkovich: Hi Rich. Rich: Hello. This is Rich Malloy from Salem, Oregon. I m the NSP coordinator for the state and I have two questions, a current problem and a future problem. The first one is on our NSP 3 target areas. The dynamic here in Oregon is when you run the map and you get the score and the minimum number of units let's say that comes out to ten, when you get on the ground there s only one unit out there available. And that seems to be sort of almost a ubiquitous problem across our target areas where the available units - and keep in mind in Oregon we don't have a lot of vacant or abandoned. It's mostly REO. It's, you know, newer stock. It's not like where I came from back East. But regardless what I'm asking or proposing is that we can redraw an area where we first of all take a look at where there are actual foreclosures, maybe using RealtyTrac or something, redraw the area, provided that the minimum score which is 11 in Oregon that we reached that we get some available number of units at some - we re close to the minimum number of units the model produces.

16 Page 16 Is that okay? Can we give permission to do that? Because I played with us a lot and I don't see us getting to the - my example of where it's ten I don't see us getting more than one or two. You know, anybody having trouble with that? What's your feeling on that? Marsha Tonkovich: And your concern is being able to hit the impact score right, that you can... Rich: Yes. Marsha Tonkovich:...((inaudible)) in that neighborhood? Rich: Yes. And, you know, it's just I don't know if the data in the model is old and it doesn't work here well or whatever. And I have our, you know, we only have four, five sub recipients in NSP 3. The ones up in the Portland metro area have been running these numbers and they can't, you know, it's pretty difficult to come up with a targeted area that has enough REOs. When you have enough REOs that are significant that a minimum number of units is so high it's not achievable because, you know, some inconsistency in the model or something. So I'm trying to come up with target areas that will work because if we could we can get this thing done in six months. Marsha Tonkovich: So Jesse or David what do you guys think? Jesse Handforth Kome: To change a target area would probably take a notice change or having the assistant secretary grant a waiver for the notices. Rich: Oh.

17 Page 17 Jesse Handforth Kome: So notices are set up using statutory waiver authority which is... Rich: Okay. Jesse Handforth Kome:...kind of tricky. Rich: All right. Jesse Handforth Kome: But are you using MCST, the first look service? Rich: No we re not. (Crosstalk) Rich: But the problem is we re not doing much in activity B. It's almost all activity A so, you know, it's all homebuyer driven for the most part at this point. Jesse Handforth Kome: But one of the interesting things about it, I mean one is that they're working on a direct homebuyer product that s sort of brokered by the grantee rather than that you actually make the purchase. So they might be interested in hearing from you. But even just participating enough to be able to see REO match... (Crosstalk)

18 Page 18 Jesse Handforth Kome:...(would) be useful to you because one of the things you can do in there is reverse lookups. Rich: Okay. Jesse Handforth Kome: You can go in, click on a building, like look in your neighborhood if you re driving around you see a building it looks like it might be, you know, abandon, might have some issues you can find out who owns it and what its status is and that might... Rich: Okay. Jesse Handforth Kome:...enable you to piece out more buildings, but it... Rich: Okay. Jesse Handforth Kome:...sounds to me like I mean you're not looking at neighborhoods that need... David Noguera: You're having trouble finding the inventory is what you're describing here? Rich: Yes. The nature of the inventory yes, I mean there are some concentrated areas but concentration here is much less dense I think than probably other jurisdictions for some reason. But, you know... David Noguera: Right. Rich:...I m making that... Jesse Handforth Kome: I think you were expecting Oregon to try to go after vacant properties. But...

19 Page 19 Rich: There aren't many. Jesse Handforth Kome: Yes I mean... Rich: And - yes. Jesse Handforth Kome:...because we re seeing some in the rural. And that's kind of to be honest what we thought your response to the way it was set up would be to go. So it's interesting hearing from you. Rich: Yes so, you know, I'm ready to - I wanted to ask you this before I go back to the drawing board and, you know, redraw a target areas and see if anything has changed to see if we can come up with something new. But I mean I catch your drift here. I'll see what I can come work with even if we use the full range of scores but it might be a challenge. Jesse Handforth Kome: Well you can... Rich: It has been... Jesse Handforth Kome:...and request remote technical assistance too on program design. Go to the Web site and request TA and then you just specifically want some program design TA and we can get you some of the for lack of a better word, data geek to come... Rich: Okay.

20 Page 20 Jesse Handforth Kome:...you know, help massage that. I mean just a few hours of remote TA might - may help you, give you better data, fresher data, take a look at it. But we have to be fair to the whole country and use the same data. But we can also look and see if we can get, you know, a refreshed set. We haven't refreshed our data set in a little while. Rich: Okay. Marsha Tonkovich: But Rich it might be that making the target area smaller rather than bigger. I know that there have been some places in Florida where this is also an issue. They were smaller towns that it might be looking at a smaller area would enable you to have a greater impact, so I don't know... Rich: Oh yes these areas - yes some of these areas are pretty small compared... Marsha Tonkovich: Okay. Rich:...to, you know, what we dealt with before. But well I'll take those suggestions. I ll write request the remote TA. I'm happy to meet every data geek you have and see what we can do and we'll take it from there. Jesse Handforth Kome: Yes well we process the TA requests once a week mostly on Thursdays just so...

21 Page 21 Rich: Okay. Jesse Handforth Kome:...log it in and you re wondering. They will send you back an saying, you know, we re dealing with it. Just, you know, general we process them in a Thursday morning meeting. Rich: Okay. And then the second problem that we have and maybe everybody else has it's a lot of jurisdictions have done agreements with Habitat to buy foreclosed lots and do the new construction thing. I don't see them making their target for getting those units occupied by the deadline here next February or March. Are you getting any feedback on that particular problem because it takes them... David Noguera: Yes. Rich:...a lot longer? I mean is there a potential solution out there? Should I sit tight and wait or should I be worried? Jesse Handforth Kome: Hey Marsha are we working directly with Habitat on any issues? Marsha Tonkovich: We are. So we have an ongoing TA with them and we are doing a Webinar actually with them on the 17th, so there will be... Rich: Okay.

22 Marsha Tonkovich:...and that issue of construction timeliness and process will be part of that conversation. HUD Page 22 I do think - and this is a closeout question I get Jesse and David is it s my understanding from last I talked to John about this question you guys were not going to require that the units had to be occupied at the time we got to February of next year for NSP 1 but rather that that the cause - you have to admit - the full amount of your grant has to been expended of course or program income. But it might take - if you guys had recognized it it might take a couple of months after that point to meet the national objective and have the unit occupied. So... Jesse Handforth Kome: We re actually anticipating for the tax credit projects that have had their expenditures because their money was used for acquisition that they may go as long as 18 months before they reach a point where we can closeout. We cannot closeout until the national objective is met. It's - closeout isn't related to expenditure. It's related to meeting a national objective and the amount... David Noguera: Right. Jesse Handforth Kome:...that... David Noguera: Getting... Jesse Handforth Kome:...the deadline... David Noguera: Getting a family into the unit, right?

23 Page 23 Jesse Handforth Kome: Right. David Noguera: Getting a family to occupy the unit. Jesse Handforth Kome: And for grantees that are earning program income hand over fist we are probably going to end up with the point, the close out has to happen being a negotiation. Because they are going to - we have some grantees who are going to cross the deadline, we can already see it in 2013 in February for NSP 2 and March for NSP 3 with almost double their grants in program income. And because they're earning program income so fast they're still going to have money in their line of credit. And we have to get them to a point where they can expend their entire line of credit before we close them out. So we anticipate being here a while on some of these NSP grants. But you do have to expend the amount of grant plus program income equal to your initial grant amount... David Noguera: By next year. Jesse Handforth Kome:...by yes, February 2013 for NSP 2 or March for most NSP 1 grantees. Marsha Tonkovich: So Rich what that would mean... (Crosstalk)

24 Page 24 Marsha Tonkovich:...is if you got that Habitat assuming you guys are going to meet that full amount of your grant having been expended by next March, if it takes the Habitat a while or if you're using program income that happens after that you get the unit occupied, you'd still be okay. Rich: Yes because that's what will happen. And we'll exceed the 100% with program income sometime this year. And we've spent the money on buying the land. It s just going to take them probably next year to build all these units. Marsha Tonkovich: Yes so it sounds... Rich: Yes. Marsha Tonkovich:...to me from what Jesse and David just said that you would be okay because you will have met... Rich: Okay. Marsha Tonkovich:...your expenditure. You just won't be able to closeout... Rich: Okay. Marsha Tonkovich:...until, you know, those folks are in the unit and occupied. And again watch for that closeout notice to give you better guidance on timelines and everything but...

25 Page 25 Rich: Okay. Jesse Handforth Kome: ((inaudible)) piece of guidance Marsha on this. The risk we see is that your admin money, you have to really husband it if you're going to be in this situation. Rich: Okay. And then will we be able to carry admin money into the future so we can keep running these programs? I mean we won't closeout our admin money for a while right? Jesse Handforth Kome: Program income you get 10% of your program income too. Rich: Yes. Jesse Handforth Kome: So you just need keep really good receipts on your program income and yes it carries forward until we close the grant. Rich: Okay. Jesse Handforth Kome: After we close the grant if you're a CDBG grantee and we have a special - one of the special issues we re dealing with right now is what happens to the question of states whether we should keep acting directly going to future if you switch back to the CDBG model. But the funds are going to be NSP like CDBG or CDBG like NSP, one of those sort of variations in perpetuity. Rich: Okay so good. Marsha Tonkovich: You might want to, you know, you if you do want to sort of nudge your Habitat along in terms of their...

26 Page 26 Rich: Oh yes. Marsha Tonkovich:...feel free to join our Webinar on the 17th. And actually your notice is coming out soon. And it s going to try to deal with - because you're right this is not just an issue you guys are facing. Rich: Okay. All right well you made my day. The sun is out. Thanks. Marsha Tonkovich: Good. Rich: All right. Marsha Tonkovich: Bye. Rich: Bye-bye. Marsha Tonkovich: All right Jeremy who's next? Operator: Our next question comes from Jeff. Marsha Tonkovich: Hi Jeff. Jeff: Hey how are you guys? Can you hear me? Marsha Tonkovich: Yes we can here you. Jeff: Yes I've been researching this and I had a question on homeowner...

27 Page 27 Marsha Tonkovich: Oh I'm sorry Jeff can you speak a little bit louder? Jeff: Yes. I've been researching this and have a question on homeownership. Marsha Tonkovich: Okay. Jeff: Are there any - I can t find any but are there guidelines preventing a grantee from restricting homeownership assistance to a max LTV of that particular program that the lender s trying to get the borrower approved for? Marsha Tonkovich: Okay so let me just make sure I'm understanding it. So is there any restriction on you guys having a max LTV is an underwriting criteria for your NSP assisted unit? Jeff: Correct. Marsha Tonkovich: Okay. No. In fact, you know, think you want to have some selection criteria for your program that ensures that, you know, you ve got a reasonable level of LTV and that this is likely to be a house the person will be able to afford to live in and stay in and not, you know, get upside down in shortly. So yes, in fact I think it would be encouraged for you to come up with you think is a reasonable LTV structure. Jeff: Perfect thank you. Marsha Tonkovich: Jesse or David is there anything you would add to that?

28 Page 28 David Noguera: Yes I mean we typically use 30% as a rule of thumb in terms of the percentage of income that should be going towards housing. But, you know, grantees are free to use anything less than that that they think s reasonable. Marsha Tonkovich: Well and for the LTV, you know, it varies a lot. You know, the loan to value ratio is - it varies a lot by grantee. There are some will go up closer to hundred. Many, you know, very conservative around 80. What are you looking at in terms of the kind of LTV you're thinking of? Jeff: Really depends upon the program... Marsha Tonkovich: I'm sorry; speak up a little bit. Jeff: It's really depends upon the program itself. Marsha Tonkovich: Okay. Jeff: And, you know, the minimum number required on FHA is going to be 3-1/2%. Marsha Tonkovich: Right. So Jeff: ((inaudible)) is zero. Maybe we'll do closing costs. Marsha Tonkovich: Yes. And so you might, you know, you might decide to go the FHA model as a reasonable proxy. It's - I think you guys just have to decide as a local underwriting procedure. Jeff: Yes we just don't have, the need out here most people can get approved without having that extra home ownership business, plain and simple.

29 Page 29 Marsha Tonkovich: Yes so and, you know, I think one of the things that IG has been looking at, not in NSP but in other programs -- and it may soon look at NSP I don't know -- is whether the level of assistance that s being provided to buyers is reasonable. And so having those kinds of criteria to say well what do people need and what does, for example if they ve got a FHA mortgage what is FHA requiring would be a reasonable sort of policy for you to have in place. Jeff: Okay. So that helps. Thank you. Marsha Tonkovich: Sure. And Jesse and David, anything to add to that? David Noguera: No. Sorry for the confusion. I misinterpreted the question. Marsha Tonkovich: No problem. David Noguera: Yes. Marsha Tonkovich: Okay who do we have next Jeremy? Operator: We'll take our next question from Reginald. Marsha Tonkovich: Hi Reginald. Reginald: Hi. Good afternoon. How are you today? Marsha Tonkovich: Great.

30 Page 30 Reginald: Good. I am work - I am with Seminole County in Florida. We re working on amending our action plan for NSP 3 and the question I have, you know, looking on the HUD user for my data set and comparing our mapping tool to the Excel spreadsheet that you can download that contains all the state data as far as foreclosure risk, area benefit... Marsha Tonkovich: Yes? Reginald:...my numbers are differing between the Excel sheet and the mapping tool. And I was wondering has one been updated more than the other, which number should I be looking at? My... Marsha Tonkovich: Jesse I'm going to have to turn that one over to you. I don't know the answer to that. Jesse Handforth Kome: Do we have an update? David Noguera: No. Jesse Handforth Kome: So far as I know we haven't updated. That's an interesting question. Can you go ahead - and we need to figure that out because we haven't updated any of the NSP 3 data that I know of. David Noguera: No. Reginald: Yes because... David Noguera: Unless you're talking about the 2012 income numbers that came out? Reginald: What - no I've got those and...

31 Page 31 Jesse Handforth Kome: Yes. Reginald: And I... David Noguera: Yes you mean the data used to calculate the target areas? Reginald: Right, the NSP 3 need score is actually different between the Excel sheet and the mapping tool? Jesse Handforth Kome: It should be. It s supposed to be. And in fact the Excel sheets are what s supposed to be used to generate the mapping tool which is I mean the Excel sheet is supposed to be the master. Reginald: Okay. Well then I'll make sure that I'm not doing anything wrong. I'm trying to put together a pivot table to... Jesse Handforth Kome: Okay. Reginald:...choose our area but I'll make - I ll recheck it just to make sure. I'm looking at it now and if it comes up again I ll just buzz back in and ask the question again. Marsha Tonkovich: Well and if you find that the data is in fact different, that it s not an error on your, you know, the way you've entered it or anything I would recommend, you know, giving HUD a buzz because maybe there s some data error that we don't know about. Reginald: Yes. Okay will do. Thank you.

32 Page 32 David Noguera: Yes. Marsha Tonkovich: Thanks. Okay our next question Jeremy. Operator: Our next question comes from Lavora. Marsha Tonkovich: Hi Lavora. Lavora: Good afternoon. Marsha Tonkovich: Great. Lavora: My name is Lavora. Hi. And I'm from the National Association for Latino Community Asset Builders. Marsha Tonkovich: Okay. Lavora: And I have a question relating actually to peer to peer exchange that you referenced earlier. Marsha Tonkovich: Okay. Lavora: Do you all have any contact info for NSP 2 grantee or an organization that is doing well with job reporting or section 3 attainment so we could, you know, exchange information and learn about the reporting systems and compare our strategies with theirs? Marsha Tonkovich: I would turn that over to folks at HUD. Have you heard of anybody doing a particularly good job on Section 3?

33 Page 33 David Noguera: We haven't directly no. No I mean some of those things is anecdotal information just from conversations we've had with folks and I think that's probably one of the reasons why we want to create this peer to peer component on the Resource Exchange so that we have a better means of compiling some of these best practices. But a lot of what we have now is just anecdotal information. And specific to Section 3 I can't offer any suggestions. Marsha Tonkovich: You might try - I don't know what field office you're in but you might try calling your local field office because they, you know, they will be do monitoring of the grantees around your area and they probably would have a decent handle on when they've monitored who's doing a good job on a Section 3, so you might try that. Lavora: Okay. Marsha Tonkovich: And the other thing... Lavora: Thank you. Marsha Tonkovich:...I don't know if you're a member of any of the national associations like NCA or any of those guys at all but they do have listservs right now that are currently up and functioning or information exchanges that are up and functioning and they may be able to put a message out for you. So you could try contacting them as well. Lavora: Okay. Thank you very much. Marsha Tonkovich: Sure. All right Jeremy. Who's next?

34 Page 34 Operator: Okay we have one question left in the queue at this time. Once again if you'd like to ask a question or have a follow up question, please press star 1. And we'll take our next question from Shanta. Marsha Tonkovich: Hi Shanta. Shanta: Hi. This is Shanta Nunn-Baro from Argenta CDC in Arkansas. Marsha Tonkovich: Hey. How are you? Shanta: Good Marsha. How are you? Marsha Tonkovich: Good to talk to you. Shanta: Okay. I have two questions. I want to go back, I kind of did not get when we were talking about disposition. I just want to clarify something. Based on what Jesse said what I'm getting is if we've expended our funds and met the - by February, 12, 2013 but have not had the units occupied that would be okay? Am I understanding that correctly? David Noguera: Yes. If you go back and look at the notice when it references March 2013 the past four years it is talking about expending the funds. Shanta: Okay so that's means I can sleep at night now as well. And my other question, this one was ed to me from someone in the office and please bear with me as I go through it.

35 Page 35 When we went back to do - after we got the - rolled out how much our actual budgets for the project would be our and we did our revision our local HUD officer required that we breakdown each of the categories to include acquisitions, rehabilitation, acquisition new construction, and acquisition set aside for each of the categories in addition to rehabilitation, new construction and set aside construction. And we also had a separate line item for demolition. And the question that they asked as a consortium, I mean is a consortium member can we acquire an eligible abandoned property using NSP 2 funds to demo a house using NSP 2 funds, get a lien on the property with the end use being a vacant lot? Marsha Tonkovich: So and why are you demolishing this house? Is it dilapidated or what's the... Shanta: Yes that they meet the definition of it s blighted, it's bad, public health and plus we've got a definite state definition of what an abandoned property - well it meets the definition. So what we re trying to do is some of the units that we put in the new construction budget and our rehab budget we re wondering if we could move some of those units to a demo budget? We re not here to get our 10%. We re a long way from it. So because we wanted to move those units to demo because what we re finding out is how much money it's costing us to build. Our building budgets are being quickly depleted. David Noguera: Right, right, right. Marsha Tonkovich: Rather than building you would actually demolish and then leave the land vacant?

36 Page 36 Shanta: And we have a strategy. We do have a building strategy for those. David Noguera: Right. So the issue isn't a matter of the homes being blighted. The issue is a matter of the demo caps on the NSP 2 funds? Shanta: It's a combination of two David, both of them. Both what you're saying is true. David Noguera: Oh got you, got you, got you. So okay so from the cap perspective you just need to amend your plan? Shanta: Right. We - we re only at4.4% of our demolition of our total consortium demolition budget. Marsha Tonkovich: ((inaudible)) you guys are going to move activities from construction to demolition... David Noguera: Right. Marsha Tonkovich:...that s a change in your plans so you probably would have to make that amendment. Shanta: Just make an amendment. But that is eligible? We can do it? David Noguera: Yes. Shanta: Amending the plans? David Noguera: What you're describing sounds eligible yes. Shanta: Okay.

37 Page 37 Marsha Tonkovich: The only question guys at HUD is, is she's going to demolish them and leave this land vacant so that's where the blight question comes in because it has to meet a national objective obviously. Shanta: And we - it would. (Crosstalk) Shanta: Based on what you all issued, that s what we wanted to make sure. David Noguera: Right. So you're only - the only structures you re demolishing are those that are blighted... Shanta: Right. David Noguera:...based on like a local definition. So that's fine. Shanta: And your definition and our state definition that we got past. David Noguera: Right, right. The fact that at the end of the day the properties are going to remain vacant is there any issue with it meeting the area benefit test? Shanta: It would meet the definition. David Noguera: Okay.

38 Page 38 Shanta: And we did all this research yesterday just looking at some of the notices that you issued. It would meet all your definitions. David Noguera: All right. Marsha Tonkovich: Well so the only caution I would give you - and this is one I know you guys are looking at a the demolition guidance piece that hasn t yet come out, so David jump in here because I'm, no, not privy to that - those conversations... David Noguera: Yes. Marsha Tonkovich:...is what would happen if, you know, a year or two down the road Shanta s organization were to go in and now take those vacant lots where they had previously demolished the house and it s now vacant and now they're going to turn it in - they re going to build something on that, would that reuse of the site have any constraints on it? David Noguera: So on one hand if it's going to be used as housing then you would have to meet national objective. Shanta: Right. David Noguera: However if there s a change in use of funds that aren t going to meet a national objective... Jesse Handforth Kome: No, no, no that's - this is... David Noguera: Okay.

39 Page 39 Jesse Handforth Kome:...not related. David Noguera: Okay. Jesse Handforth Kome: The lawyers are rewriting this. So we re going to try this another way. You cannot acquire property for demolition only under NSP. Demolition does not have acquisition as one of the CDBG eligible activities associated with it. So the eligible use for demolition does not have acquisition. You must acquire under one of the other eligible uses. Shanta: Got you. That okay. So when you start from there then it all starts the dominoes start falling better. So if you have a property that belongs to somebody else you demolished the notice says you must put a lien on that property to get your demo cost back... Shanta: Okay. Jesse Handforth Kome:...or you're going to have to do something else that meets one of the other eligible uses in order to really make things fit in the program properly. And we can walk through that and that's possible. If you spend more than $25,000 on the demolition one of the discussions we re having is whether the property would improve when you demolished it. Shanta: Okay.

40 Page 40 Jesse Handforth Kome: Because there's a $25,000 threshold there. So that piece has been solved. But if you acquired a property for redevelopment with NSP 1 funds, okay, we'll start with NSP 1 because two and three are little different. Marsha Tonkovich: And Shanta has NSP 2 funds. Jesse Handforth Kome: I know, I know but I've got to step you through this because it's complicated. Okay so NSP 1 can do things that are eligible beyond housing NSP 2 and 3 for eligible use E. Shanta: Right. Jesse Handforth Kome: Bought the property, it s for redevelopment project and where you're putting NSP money is a requiring, demolish it and then passing it on. If you acquire it and demolish it and pass it on under NSP 1 it can be beyond housing. You can pass it across for things that you couldn't spend your NSP 1 funds on or that you could. Either way you must need a national objective. Shanta: Okay. Jesse Handforth Kome: For NSP 2 and 3 if you do under eligible use E for example acquire and demolish and pass it on the property has to be used for housing and it must meet a national objective whether not you ever put another nickel of NSP in. Shanta: Okay.

41 Page 41 Jesse Handforth Kome: Okay. So you could dispose of property for a public purpose is what we re telling you that acquiring for a public purpose has a mirror activity disposition for a public purpose. So demolition just happened to happen in-between. Shanta: Okay. Jesse Handforth Kome: And no matter what unless you are selling it for fair market value you have to meet a national objective. Now here's the kicker for NSP 2 and 3. You can t acquire and demolish and pass it on for anything but housing even if you sold it for fair market value because that's money laundering. Shanta: Okay. Jesse Handforth Kome: Because you're supposed to... (Crosstalk) Jesse Handforth Kome:...produce. You're supposed to do housing on the redevelopment activity. Shanta: Right. Jesse Handforth Kome: The reimbursable you made a mistake but doing it on purpose can get you in trouble. Marsha Tonkovich: But Jesse let me bottom line this. So the bottom line is if you do acquisition demolition and right now it's vacant as that would be what Shanta s doing...

42 Page 42 Jesse Handforth Kome: Right. Marsha Tonkovich:...when it comes time to go ahead and reuse that property that reuse has to meet a national objective... Jesse Handforth Kome: Yes... Marsha Tonkovich:...or else you have to pay back the program? Jesse Handforth Kome: Right. Marsha Tonkovich: Okay. Jesse Handforth Kome: Now... Marsha Tonkovich: And Shanta and I know you guys are looking at doing affordable housing so that probably works for you but I just wanted to make sure you guys knew that... Jesse Handforth Kome: Right. Marsha Tonkovich:...there is this sort of long term strong that happens on this program. Jesse Handforth Kome: Right. And there isn't a - I mean we do see some deals where people acquire and demolish and then their housing deal falls through and they sell the property out of the program. I'm not talking about those. That's going to happen. Shanta: Okay.

43 Page 43 Jesse Handforth Kome: You can t set up a program to take advantage of this. Shanta: Okay. So we cannot use the eligibility of D to demo and make a long term use strategy? You can't... Jesse Handforth Kome: Well you can't use it to acquire. You can use it for demolition. In fact you're supposed to use it for demolition. Shanta: Okay. So but we would acquire and demo under our other under B? Jesse Handforth Kome: Acquire yes. Shanta: Under B, so it's just okay so technically we can okay, so we can do we wanted to do. That's what I just wanted to make sure but we just can't... Jesse Handforth Kome: Okay. Shanta:...do it under D? Marsha Tonkovich: And you can do it under B but you just need to make sure you know that later on down the road when you go to touch that lot... Shanta: Yes. Marsha Tonkovich:...there are... Shanta: Yes.

44 Page 44 Marsha Tonkovich:...going to be some constraints about what you can do to it if you decide to redevelop it. Shanta: Okay and that's okay and that s also going to be by the guidelines that are coming out soon, right? Jesse Handforth Kome: We re working on it. It's... Shanta: Okay. I just want to make - as long as I know that our - bottom line was that our construction dollars are being spent and we were concerned if we don't sell enough to get more construction dollars can we up our demos? We can t up our demos. I got it. Mentally I got it. Jesse Handforth Kome: Right. We don't to give grantees the wrong advice on this. And people keep bringing up what ifs as we clear this and it's on the boundary line between eligible and ineligible. And we re trying to make the boundary line clearer. The other problem and the reason it's held up this policy is because it's actually a CDBG regular program policy. This does not actually vary from the regular CDBG guidance but the CDBG guidance we re working off hasn't been reissued since early 90s... Shanta: Okay. Jesse Handforth Kome:...maybe the late 80s.

45 Page 45 Shanta: Okay. Jesse Handforth Kome: You know, so we re just carving our way through this. And I'm sorry is slow but we want to get it... Shanta: We just want to make sure that we do definitely - all of us do the right thing. Jesse Handforth Kome: Right. Shanta: And... Marsha Tonkovich: And Shanta I would write this up, you know, because are going to have to amend your action plan in order to be able to do this anyway. So write up what you want to do is send it into the field office. And just make sure that as you guys think through the properties and then the reuse of the properties and where you re going to categorize it and how you re going to move the money from new construction to this that you ve clearly explain that to HUD so that they can take a look at it before you move forward. Shanta: Okay. And there's a possibility if we need be we can reduce our demo budget and move it to our - use B to meet the demos that we re wanting to do? Marsha Tonkovich: I think it would depend on whether you're acquiring the properties are not. If you're just doing straight demo... Shanta: Oh yes we would acquire and demo. Marsha Tonkovich: Yes. So I you can't do acquire and demo under D right Jesse?