Virginia Regulatory Town Hall

Final Text


Repeal the Multifamily Loan Program Regulation
Stage: Final



Part I

13VAC5-130-10. Definitions. (Repealed.)

The following words and terms, when used in this chapter shall have the following meanings, unless the context clearly indicates otherwise:

"Acquisition" means the purchase of real property.

"Applicant" means an individual, incorporated nonprofit, for-profit, or government entity, that makes application for funds under the Virginia Housing Partnership Fund.

"Application" is the written request, as published by the Department of Housing and Community Development, for a loan or grant funding under the Virginia Housing Partnership Fund.

"Application date" means the date on which a completed application is received by DHCD.

"Appraised value" means the monetary worth of property as determined by an appraiser.

"Area median income" means the median income established by HUD for various areas.

"Assessed value" is a monetary worth of the facility/property as determined by the real estate assessment office of the local government where the same is located for tax purposes. (The applicable assessed value shall be that value in effect as of the date of the application.)

"Borrower" means the individual, for-profit, nonprofit or government entity that has been approved for funding under the Virginia Housing Partnership Fund.

"DHCD" means the Department of Housing and Community Development.

"Energy grant" means a grant, available as a result of federal energy litigation, which may be awarded to pay for certain energy-related improvements.

"Energy-related improvements" means physical improvements to structures which are being rehabilitated which contribute to fuel cost savings and overall less energy consumption, and which have been so designated by this department.

"Fund" means the Housing Partnership Revolving Loan Fund.

"General improvements" means additions, alterations, renovations, or repairs made for the purpose of making housing more habitable and more desirable to live in. These improvements must be permanent. Improvements shall not include materials, fixtures, or landscapes of a type or quality which exceed that customarily used in the locality for properties of the same general type as the property to be improved.

"Grant" means funds provided to program recipients under the Virginia Housing Partnership Fund which, assuming satisfactory compliance with all terms and conditions, will not require repayment.

"Grant agreement" means the contract between DHCD and the project sponsor containing the terms and conditions provided for within the program.

"Gross income" is the total income from all sources and before taxes or withholdings of all residents residing in a housing unit, age 18 or older.

"HQS" means the Housing and Urban Development Section 8 Housing Quality Standards.

"Household" means all persons related or unrelated living together as one economic unit.

"HUD" means the Department of Housing and Urban Development.

"Individual" is a single person who submits an application pursuant to the program guidelines.

"Loan" means money lent with interest for a specified period of time.

"Loan note" means the agreement between DHCD and the project sponsor pertaining to the terms and conditions governing funding by the Virginia Housing Partnership Fund, including repayment provisions.

"Lower-income" means 80% of median income for the service area as established by the U.S. Department of Housing and Urban Development also referred to as LMI.

"Multifamily" means property with two or more complete dwelling units.

"Oil overcharge expenditure trust fund" is the United States Department of Energy moneys awarded to the Commonwealth for specific purposes to resolve alleged pricing violations in effect between 1973 and 1981 by crude oil providers; also referred to as Oil Overcharge Funds.

"Program" means the plan for funding under the Multifamily Loan Program.

"Project sponsor" means an individual, family, nonprofit, for-profit, or incorporated organization that enters into a contract/agreement with DHCD to undertake activities in accordance with the program guidelines.

"Rehabilitation" means significant physical improvements/repairs to a facility which will secure it structurally, correct building, health or fire safety codes related defects, increase energy efficiency and assure safe and sanitary operation.

"Set-aside" means funds reserved for a specified period, by the department, to finance a multifamily project.

"Site control" means the possession of or authorization to use real property by means of ownership, lease, or option.

"State" or "Commonwealth" means the Virginia Department of Housing and Community Development, also referred to as DHCD and the department.

"VHDA" means Virginia Housing Development Authority.

"VHPF" means the Virginia Housing Partnership Fund.


Part II

13VAC5-130-20. Eligible applicants. (Repealed.)

A. Nonprofit organizations;

B. Governmental entities, including local redevelopment and housing authorities;

C. Private, for-profit organizations; or

D. Individual investors.


13VAC5-130-30. Eligible activities. (Repealed.)

A. Loan funds may be used to rehabilitate existing multifamily housing, to acquire and rehabilitate existing multifamily housing, to construct new multifamily housing, or to acquire existing low-income housing which can be proven to be at risk of falling out of the LMI housing stock.

B. In rehabilitation projects, property must be brought up to HUD Section 8 Housing Quality Standards (HQS).

C. Energy improvements which exceed HUD Section 8 Housing Quality Standards are encouraged. Eligible energy improvements are authorized and published by the state.

D. Funds may also be used for other general improvements.

E. Luxury improvements are prohibited.

F. Upon completion of a new construction project, the property must meet the Uniform Statewide Building Code.

G. Reasonable fees and expenses incurred in the process of obtaining the loan may be financed in the loan, including credit report fee, appraisals, surveys, engineering and architectural fees, legal fees, recording costs, and commitment fees.

H. DHCD will accept requests for waivers to one or more of the program requirements on a case-by-case basis. In granting such a waiver, DHCD will look at the merits of each case relative to need, benefits, and intent of the program.

I. Construction financing will be available only when the sponsor can demonstrate that alternative financing is not available. Construction financing will only be disbursed in order of lien priority.

J. Refinancing of existing debt may be available if necessary for project feasibility.


13VAC5-130-40. Eligible projects. (Repealed.)

A. All projects must contain two or more units.

B. To qualify as a rehabilitation project the following must be met: (i) 75% of the exterior walls must be retained; (ii) on average at least $5,000 of construction costs must be expended per unit; and (iii) at least one major building system must be replaced or significantly repaired.

C. Conversion of commercial or institutional properties to residential use is permitted as long as the property is in conformance with zoning and other local requirements for multifamily use upon completion of the project.

D. No improvements to non-LMI units will be eligible for Multifamily Loan Program funds.

E. Existing properties must have existing HUD Section 8 Housing Quality Standards (HQS) violations or incipient violations prior to rehabilitation, unless otherwise approved by the state.


Part III
Occupancy and Rent Requirements

13VAC5-130-50. Occupancy requirements. (Repealed.)

The target population for occupancy of multifamily housing funded with multifamily loans is low and moderate income persons and families. The percentage of units which must be occupied by low and moderate income persons varies based upon the income level served by the project. A minimum threshold has been set as follows, and may be exceeded at the option of the project sponsor. All occupancy requirements must be met for the full term of the loan.

Project sponsors must select one of three occupancy options at the time of application and must comply with it for the term of the loan:


A minimum of 20% of the units must be reserved for households with incomes at 50% or less of the area median income as established by HUD.


A minimum of 40% of the units must be reserved for households with incomes at 60% or less of the area median income as established by HUD.


A minimum of 80% of the units must be reserved for households with incomes at 80% or less of the area median income as established by HUD.


13VAC5-130-60. Rent requirements. (Repealed.)

The owner must inform the Commonwealth of any changes in rents charged within the project. Annual rent increases may not exceed the percentage increase in the area median income as published annually by HUD. State approval is required in advance if proposed rents on low and moderate-income units exceed the percentage increase in area median income. Decreases in the area median income, as determined by HUD, will not require a reduction in project rents.


Part IV
Distribution of Funds

13VAC5-130-70. Distribution of funds; generally. (Repealed.)

Funds will be distributed annually through a competitive process. Any funds remaining after the competition will be made available on a competitive basis among those projects which have corrected application deficiencies and are judged ready for underwriting. The department may establish one or more application rounds per year and determine the distribution of available funds between the rounds. Pools and subpools may be established for each round which divide available funds and project applications according to geographic area, type of project, and/or other characteristics as the department believes meets the goals of the program.


13VAC5-130-80. Maximum funding for project sponsor. (Repealed.)

There will be a limitation of $1 million per project in any single funding cycle. Funds will only be available for lower-income housing units. Furthermore, the partnership will not fund more than 75% of the total development cost. Energy grant funds will only be available for rehabilitation projects and will be limited to $4,000 per low-income unit.

Any applicant may submit more than one project; however, no single project sponsor or closely related sponsoring entities may receive funding which totals more than 20% of the available funds for this program in any fiscal year.


13VAC5-130-90. Funds set-aside for project sponsor. (Repealed.)

A. Loan and energy grant funds will be made available initially on a competitive basis to eligible project sponsors in accordance with the selection/evaluation criteria established in 13VAC5-130-190.

B. Upon selection, a loan or energy grant set-aside will be made to a project sponsor for up to six months. This will allow time to complete project development activities including finalizing other financing and assistance from other local, state or federal housing programs. Extensions may be granted by DHCD, if appropriate.

C. A project sponsor's set-aside will be divided into two portions: The unrestricted portion will be provided from the state's General Fund Appropriation and may be used for any eligible improvements, as defined in 13VAC5-130-30. The eligible energy-related portion will be provided from the state's Oil Overcharge Expenditure Trust Fund and may be used only for eligible energy-related improvements, as defined by DHCD.


Part V
Loan Terms and Conditions

13VAC5-130-100. Interest rate. (Repealed.)

Loans may be made at rates averaging 5.0%, but as low as 2.0% and as high as 8.0%, depending upon the needs and characteristics of the project. Final determination of the interest rate will be made by the department upon receipt of the underwriting report from VHDA.

Eligible energy improvements which are funded from the Oil Overcharge Expenditure Funds will be provided as a grant.

The department reserves the right to charge a commitment fee, not to exceed 2.0% of the principal amount.


13VAC5-130-110. Term. (Repealed.)

The maximum term for loans will be 15 years, except for participation loans with VHDA which will be 30 years. Longer amortization schedules, not to exceed 30 years, may be considered. All repayments are due in 15 years. Grants are subject to repayment if the project sponsor violates program requirements. This repayment obligation is reduced at the rate of 25% per year. Notwithstanding the above, as of July 1, 1998, any remaining grant repayment obligations shall be forgiven.


13VAC5-130-120. Deferrals. (Repealed.)

Deferrals of principal payments or of both principal and interest payments may be allowed for up to five years. The Commonwealth shall determine the feasibility of any payment deferral or amortization deferral for each project. The use of such options may require higher interest rates to be paid during the loan repayment period.


13VAC5-130-130. Instruments for loan security; general requirements; lien requirements. (Repealed.)

A. The borrower or borrowers must be the sole owner or owners of the property. A title opinion and title insurance will be required for all loans unless otherwise approved by the state. Hazard insurance is required in such terms and amounts as specified by the Commonwealth.

B. A lien shall be recorded on every property for which a program loan is made. The lien shall be divided into the amount securing the General Fund portion of the loan and the amount securing Oil Overcharge funds. The General Fund portion shall remain in effect for the term of the loan. The Oil Overcharge portion of the lien will be forgiven at a rate of 25% per year, provided program requirements continue to be met. In no event shall the Oil Overcharge lien extend beyond July 1, 1998.

The Commonwealth will accept a subordinate position only to an existing mortgage or where the primary financing is being provided from another source.


13VAC5-130-140. Loan underwriting criteria; loan-to-value ratio. (Repealed.)

A. Specific underwriting criteria which are applicable to these loans have been established by the Commonwealth. These will include an evaluation of the site, project design and amenities, the market for the project, the experience and financial capacity of sponsors and contractors, architectural and engineering studies, the value of the project, financial risks, and other considerations. Each project will be evaluated to assess the potential cash flow available to pay debt service and operating expenses.

B. The loan-to-value ratio shall be based on the appraised value of the structure after completion. A loan-to-value ratio of up to 100% will be considered for loans/grants to nonprofit housing sponsors and up to 90% for other sponsors. The Commonwealth may permit the ratio to exceed 100% under special circumstances to be considered on a case-by-case basis. The loan/grant amount may not exceed 100% of cost, as determined by the fund.


13VAC5-130-150. Loan servicing. (Repealed.)

VHDA will close the loans, conduct construction inspections when applicable, disburse proceeds, service the loans and provide ongoing management oversight.


13VAC5-130-160. Sale or transfer restrictions. (Repealed.)

Loans made under this program will be assumable as long as the property use, income requirements, rent requirements, housing conditions and other program requirements are maintained for the term of the loan. An annual review will be made to assure project compliance. Approval by the Commonwealth will be required for loans to be assumed.


13VAC5-130-170. Prepayment of loan. (Repealed.)

Prepayment of loans under this program will be prohibited.


Part VI

13VAC5-130-180. Displacement. (Repealed.)

Projects which result in no or minimal displacement are encouraged. Where displacement is unavoidable, a sponsor's willingness and ability to assist current tenants in finding alternative housing both temporarily during rehabilitation and permanently will be considered in the selection of projects. A project which causes no displacement will be given higher ranking. Other projects will be required to include a description of the assistance (including counseling and financial reimbursement) to be given to displaced persons. Projects providing a greater level of assistance will be given a higher ranking score.


Part VII
Evaluation Criteria

13VAC5-130-190. Evaluation criteria. (Repealed.)

Project sponsors are selected to receive program funding through a competitive funding cycle. Criteria for evaluating and ranking projects are described below:

1. Public purpose. Projects which serve the lowest income groups (see 13VAC5-130-50) will receive higher ranking priorities. Projects which serve a higher proportion of lower income households than the minimum required shall be given a higher score. Projects which charge less than the maximum allowable rents will be given a higher score. Points will also be awarded for such categories as amenities and unit size, energy efficiency, historic certification, local need, local government financial support, displacement plan, and leasing preferences.

2. Project feasibility. Projects will be evaluated based upon the appropriateness of the project to the population to be served, achievable time frame for accomplishments, realistic project budget, and reasonable operating budget.

3. Project readiness. Projects will be evaluated on the strength of site control, zoning, completeness of plans and specifications, utilities, project time schedule, local support, and administrative capacity.

4. Leveraging /efficiency. Projects will be evaluated based on a comparison of the Multifamily Loan Program request to the total development cost for the project. Those projects requesting the lowest relative amount will receive the most points. Projects showing the lowest cost per unit will also qualify for more points. Scoring will also include loan request per unit and per bedroom.

The department may establish application parameters which specify limits on allowable costs and other assumptions with which projects must comply at the time of application. DHCD may also establish scoring thresholds in total and per individual scoring section, and projects must equal or exceed such thresholds in order to qualify for funding. The department, at its sole discretion, may reduce the scoring thresholds in order to fully reserve available resources.


Home Investment Partnerships Act

13VAC5-130-200. Distribution of funds; maximum funding for project sponsor. (Repealed.)

A. The Commonwealth is a participating jurisdiction for the allocation of HOME funds as defined by Title II of the National Affordable Housing Act of 1990. A portion of the funds available under this program may be allocated to multifamily projects which meet the eligibility requirements.

B. No single sponsor, or closely related entities, may qualify for a single reservation of funds or combined reservations from multiple projects in excess of 40% of the HOME funds available to multifamily projects. Those projects receiving HOME funds from a local participating jurisdiction are not eligible to apply for HOME funds administered by the state.


13VAC5-130-210. Occupancy requirements. (Repealed.)

A minimum of 20% of the HOME assisted rental units must be reserved for households with incomes at 50% or less of the area median income as established by HUD. The remaining units must be reserved for households with incomes at 60% or less of the area median income.


13VAC5-130-220. Rent requirements. (Repealed.)

At least 20% of the HOME assisted units must have rents not greater than 30% of the gross income (minus tenant paid utilities) of a family whose income equals 50% of the area median income. Remaining HOME assisted units must have rents at or below the lesser of: (i) the existing Section 8 Fair Market Rent, or (ii) 30% of the gross income of a family whose income equals 65% of the area median income.


13VAC5-130-230. Loan terms and conditions; interest rate; term. (Repealed.)

A. HOME loans will be available at a cost of 3.0% interest-only on the outstanding principal throughout the loan term and any extended compliance period elected by the sponsor.

B. HOME loans for new construction projects will be for a term of 20 years. Rehabilitation projects will have HOME loan terms of 15 years. Principal repayment will be deferred throughout the loan term. If the sponsor elects extended compliance, the loan principal will be forgiven on a pro rata basis over the extended term.


13VAC5-130-240. Other requirements. (Repealed.)

All HOME loan recipients must comply with all applicable federal requirements including, but not limited to, Davis-Bacon Act, equal employment and fair housing, affirmative marketing, environmental review, displacement and relocation, contractor debarment and suspension, minority business enterprises and women's business enterprises, ยง 3 of the Housing and Urban Development Act of 1968, lead-based paint, and conflict of interest.