Presented by Sammy Ehtisham Midwest Housing Equity...

Presented by Sammy Ehtisham

Midwest Housing Equity Group, Inc.

About Me:

Sammy Ehtisham

Acqusitions Manager for MHEG’s Oklahoma

Operations

Work only with Low Income Housing Tax

Credit financed developments

6 years

Current territory includes Oklahoma,

Arkansas, and North Texas

Today’s Discussion

We are going to talk about something

much more exciting than a way to

combine a financing source with tax

credits.

So….let’s talk about:

S_X! I

Our Discussion Will Include

General Overview of LIHTC

LIHTC with HOME

LIHTC with RD 515

LIHTC with RD 538

LIHTC with AHP

LIHTC with Tax Exempt Bonds

What is the LIHTC Program?

The Federal Low Income Housing Tax Credit program was created under the Tax Reform Act of 1986, as amended.

This program creates affordable rental housing through a partnership of public and private partners.

The program is responsible for the creation of more than 2.5 million units of affordable housing since inception.

How many credits are available?

Each year population figures for each

state are estimated and each state

receives their allocation of credits based

on a predetermined formula.

In 2012, the Oklahoma allocation of

credits was $8.3 million, as determined

by population.

So what’s the benefit of LIHTCs?

Owner Structure

0.01% to the General Partner (or Managing

Member in an LLC)

99.99% to the Limited Partner (or Investor

Member in an LLC)

The resulting ownership structure is how

the benefits flow to the partners.

What we’ll look at for each

financing combination

General Program Information

Advantages

Disadvantages

Layering complexities

HOME – General Information

Funds are administered by HUD,

through Participating Jurisdictions

There are 6 PJs in Oklahoma

What is the HOME Program?

LIHTC w/ HOME Advantages

Awards in the form of grants to Non

Profits

Now available to for profits

38% of HOME funds set aside for LIHTC

Minimum 1% Debt Service

LIHTC w/ HOME Disadvantages

Can only apply in 2nd Round of LIHTC

Separate lengthy application

Subject to federal appropriation

Cross cutting federal regulations

HOME Layering Issues

Must have Low HOME and High HOME

rents

New construction period of affordability

not equivalent to LIHTC compliance

period.

RD 515 – General Information

Loans available direct from USDA-RD.

Administered through each state office.

What is the 515 program?

LIHTC w/ RD 515 Advantages

30 year term and 50 year amortization

1% effective interest rate

Units generally have some type of rental assistance through RD

Rents can be in excess of the LIHTC limits

LIHTC w/ RD 515 Disadvantages

Limited cash flow allowed – Return to

Owner

Rural Areas

Must request rental increases through

RD.

LIHTC w/ RD 515 Layering Issues

Restrictions on the terms of additional

debt, if needed.

Generally require much higher per unit

per year replacement reserve deposits

RD 538 – General Information

What is it?

Lender based loans

LIHTC w/ RD 538 Advantages

No Return to Owner limitations like the

RD 515 program.

Lender gets a 90% guaranteed loan

Terms – Minimum 25 years and a

maximum of 40 years. Amort. up to 40

years.

LIHTC w/ RD 538 Disadvantages

Limited eligibility

Loan fees are expensive

Is the benefit of the loan really worth the

extra expenses?

RD 538 Layering Issues

Additional Reserve Requirements

Annual fee adds to operation expenses.

Otherwise meshes very well with

LIHTCs.

AHP – General Information

FHLB

Topeka

What is the AHP program?

LIHTC w/ AHP Advantages

Grants

Works very well with LIHTC

LIHTC w/ AHP Disadvantages

Limited funds

Very competitive

Max per project

AHP Layering Issues

Grant funds into LIHTC deal

Keep to promises in Tax Application

The Greatest Advantage of All of

These Financing Combinations?

Leverage Points in the LIHTC

Application!

Tax Exempt Bonds – General

Information

How much is available?

OHFA

LIHTC w/ Tax Exempt Bonds

Advantages

Plenty of bond cap available.

Allows access to non-competitive 4%

LIHTCs

Deep skewing of rents not required

Great for larger deals

LIHTC w/ Tax Exempt Bonds

Disadvantages

Significant additional fees

More debt risk

More parties involved, slower to get

through process

No 9% credits

Tax Exempt Bonds Layering

Issues

50% of the basis for the project must be

financed with Tax Exempt Bond

financing

Use 4% rate….not fixed.

Works very well with LIHTC’s

Questions about LIHTC:

Sammy Ehtisham Darcy Green

Midwest Housing Equity Group Oklahoma Housing Finance Agency

405-278-7909 405-419-8145

sehtisham@mheginc.com darcy.green@ohfa.org

Questions about HOME:

Darcy Green

Oklahoma Housing Finance Agency

405-419-8145

darcy.green@ohfa.org

Questions about RD 515:

Debora Phillips

USDA RD

580-726-3347

Debora.phillips@ok.usda.gov

Questions about RD 538:

Tammi Miller

USDA RD

580-889-2554 ext 114

Tammi.miller@ok.usda.gov

Questions about AHP:

Jeff Ragsdale

FHLB Topeka

785-438-6034

Jeff.ragsdale@FHLBTopeka.com

Questions about Tax Exempt Bonds:

Darrell Beavers

Oklahoma Housing Finance Agency

405-419-8261

darrell.beavers@ohfa.org