AHFA Bond Policy Proposed Revisions #2 8-19-2011 from N. Acker (02212608;7)

ALABAMAHOUSINGFINANCE AUTHORITYMULTIFAMILYHOUSING REVENUE BONDPOLICY

INTRODUCTION

AlabamaHousingFinanceAuthority(“AHFA”)receivestax-exemptbondallocationeachyearfromtheStateofAlabama.AHFAalsoadministerstheStateofAlabama’sannualallocationofLowIncomeHousingTaxCredits(“TaxCredits”)andoffundsmadeavailableunderthe HOMEPartnershipInvestmentsProgram(“HOMEFunds”).

AHFAdedicatesitsTaxCreditsandHOMEFundstothedevelopmentofsafe,decentandaffordablemultifamilyhousing. Becauseoftheavailabilityofthesesubstantialresourcesformultifamilyhousing,AHFA’sfirstpriorityintheuseofitstax-exemptbondallocationisforsinglefamilymortgageprogramsforpersonswithlowtomoderateincome.TotheextentthatAHFA’sannualbondallocationexceedstheneedsofitssinglefamilymortgageprogram,AHFA’spolicyistomaketheexcessbondallocationavailablefordevelopmentofsafe,decentandaffordablemultifamilyhousing.

InordertoenhancethefeasibilityandstabilityofmultifamilyprojectsconstructedthroughtheuseofTaxCreditsand/orHOMEFunds,AHFA’spriorityintheissuanceofmultifamilyrevenuebonds,whetherornottheyaretax-exempt,willbefor(a)acquisitionandrenovationofexistingaffordablehousingor(b)newconstructionofprojects in citiesorcountiesin whichallexistingprojectsfunded by AHFAare notlessthanninetypercent(90%)occupiedattimeAHFAreceivesanapplication,oralternatively,projectsthatmeettheradiustestwithrespecttoprojectspreviouslyfundedbyAHFAunderthethenapplicableHousingCreditQualifiedAllocationPlan,allasdescribedmoreparticularlybelowin“PROJECTREQUIREMENTS–LocationandTypesofProjects”.

ThisdocumentsetsforthAHFA’spolicyconcerninguseoftax-exemptbondallocationfortheacquisition,renovationandnewconstructionofaffordableresidentialrentalhousing.ThispolicyalsoappliestorequestsforAHFAtoserveasaconduitissuerofbondstobeusedformultifamilyhousingdevelopments,whetherornottheprojecttobefinancedexpectstoutilizetax-exemptbondallocationoranyothersourceoffundingfromAHFA,includingwithoutlimitationTaxCreditsorHOME Funds.

PROGRAMOVERVIEW

AHFAissuesmultifamilyhousingrevenuebondsfortheacquisition,renovation,andnewconstructionofaffordableresidentialrentalhousing.Thedevelopmentteamshouldhaveconsiderableexperienceinmultifamilyrentalhousingdesignedforusebylow-to-moderate-incometenantstoassurethesuccessfulcompletionandoperationofthedevelopment.

AllapplicantsmustmeetallthresholdrequirementsinAHFA’sthenapplicableHousingCreditStateQualified AllocationPlan.

ApplicantsseekingTaxCreditsforabond-financedprojectmustmeettherequirementsimposedbySection 42 oftheInternalRevenueCode of1986, asamended(the“InternalRevenueCode”).

InadditiontoqualifiedresidentialrentalbondsunderSection142oftheInternalRevenueCode,AHFAmayconsiderissuingtax-exemptbondstoqualified501(c)(3)organizationsfordevelopmentsthatmeettherequirementsofSection145 oftheInternalRevenueCode.

Allcostsincurredintheapplication or developmentprocessarethesoleresponsibilityoftheapplicant.

AHFAreservestherighttomodify,suspendoramendtheMultifamilyHousingRevenueBondPolicyatanytime,withorwithoutfurthernotice,andAHFAinitssolediscretionmayimposeadditionalconditions,restrictions, andrequirements.

AMOUNTOFALLOCATION

TheamountofbondallocationcommittedtoanyapplicantmustbeapprovedbyBoardofDirectorsoftheAHFA(the“BoardofDirectors”)priortotheissuanceofbonds.Allcommitmentsofbondallocationwillbeforaspecificapplicantwithrespectto aspecificprojectona specificsite.

APPLICATIONPROCESS

Declaration ofOfficialIntent

ApplicationforDeclarationofOfficialIntent.Theinitialstepforanyapplicantseekingtax-exemptbondvolumecapallocationfromAHFAistosubmitawrittenapplicationforadeclarationofofficialintent.TheformofapplicationisavailableatanddirectlyfromAHFAuponrequest.Theapplicationwillnotbedeemedsubmitteduntilitiscomplete. Anon-refundableapplicationinanamountequalto the amount outlinedin the current AHFA Approved Housing Credit Qualified Allocation Planmustaccompany the filing of the application submitted for consideration for a Declaration of Official Intent.

TimingforConsiderationofApplication.IfAHFAdeterminesthattheapplicationiscompleteandotherwisesatisfactory,AHFAwillexecuteanddeliverawrittendeclarationofofficialintentwithrespecttotheproposedprojectandbondissuenosoonerthan30daysafterthedateonwhichtheapplicationisdeemedcomplete.ThedeclarationofofficialintentshallbeinformandsubstancesatisfactorytoAHFAanditscounsel.TheExecutiveDirectorofAHFAshallhavetheauthoritytoexecuteanddeliverdeclarationsofofficialintentonbehalfoftheAHFAwithrespecttoproposedprojects.AHFA’sexecutionanddeliveryofadeclarationofofficialintentforaprojectoffersnoassurancethattax-exemptbondvolumecap allocationisor willbeavailable fortheproject.Actualavailabilityoftax-exemptbondvolumecapforeachprojectcouldbeaffectedbyanumberofvariablesandwillnotbefinallyapprovedunlessanduntiltheBoardofDirectorsadoptsa bondresolution withrespecttotheproject.See“ApplicationProcess–BondResolution”below.Inallevents,theactualissuanceofbondsremainssubjecttofinalapprovalbythe BoardofDirectorsintheformofa bond resolution.

DeclarationofOfficialIntentas“OfficialAction”underInternalRevenueCode.AHFA’sexecutionanddelivery ofadeclarationofofficialintentisintendedto serveasAHFA’s“officialaction” forpurposesofSection1.150-2 ofthe UnitedStatesTreasuryRegulations, oritssuccessor.

ExpirationofDeclarationofOfficialIntent.Eachdeclaration ofofficialintentwillexpireonDecember1inthesamecalendaryearinwhichthedeclarationisexecuted.UponpaymenttoAHFAofa$500.00renewalfee,anextensionmayberequested.AHFA’spolicyis to permitone extension ofeachdeclarationofofficialintent forgoodcausefora periodofuptotwelvemonths.AnysuchextensionmustbeinwritingandmaybegrantedbytheExecutiveDirector.

VolumeCapCommitmentAgreement;Expiration

CommitmentAgreement.Following theexecutionanddelivery ofadeclaration ofofficialintent,AHFA,owner,lender,andcreditprovider(ifany)mustexecuteacommitmentagreementinformandsubstancesatisfactorytoAHFA(the“CommitmentAgreement”).AHFAwillnotexecuteaCommitmentAgreementwithrespecttoaprojectunlessAHFAhasreceivedfromtheapplicantallitemsandinformationthatthesubmittedapplicationrequiresbedeliveredpriortoexecutionoftheCommitmentAgreement.TheCommitmentAgreementpermitsbondcounselandAHFA’scounseltocommencelegalworkattheapplicant’sexpense,regardless ofwhetherthe proposedbondsareeveractuallyissued.

CommitmentFee.AtthetimetheCommitmentAgreementisexecuted,acommitmentfeeisduefromtheapplicantinanamountequaltothegreaterof(a)onepercent(1%)oftheamountofbondallocationrequested,or(b)$75,000.Ifbondsareissued,AHFAwillrefundthefullamountofthecommitmentfeeuponreceiptofwrittenconfirmationthatallcostsofissuancehavebeenpaidfromproceedsofthebonds,includingwithoutlimitationtrusteefees,ratingagencyfeesandthefeesandexpensesofbondcounsel,AHFAcounselandtrustee’scounsel.Ifbondsarenotissuedforanyreason(includingwithoutlimitationtheexpiration,aftergivingeffecttoanyapplicableextensions,ofadeclarationofofficialintent,CommitmentAgreement,orbondresolution),AHFAwillapplythecommitmentfeetopay(a)allfeesandexpensesofbondcounselandAHFAcounselincurreduptothatpoint,and(b)anyunpaidfeesorexpensesduetoAHFA,andafterconfirmingthattheforegoingitemshavebeenpaidinfull,AHFAwillrefundtheremainder(ifany)ofthecommitmentfeeto theapplicant.

ExpirationofCommitmentAgreement.Unlessbonds areissued,allcommitmentagreementsshallexpireontheearlierof(a)December1oftheyeartheCommitmentAgreementissignedor(b)theterminationdatesetforthinthe CommitmentAgreement.

BondResolution

SubmissionsRequiredforBondResolution.Notlessthanthirty(30)dayspriortothedateoftheAHFAboardmeetingatwhichanapplicantwishesfortheBoardofDirectorstoconsiderabondresolutionforapproval,AHFA musthavereceivedthefollowing:

1.atrueandcompletecopyofthefullyexecuteddeclarationofofficialintentwithrespectto theproject(see“ApplicationProcess– DeclarationofOfficialIntent”above),

2.afullyexecutedCommitmentAgreementfortheprojectinformsatisfactorytoAHFA(see“VolumeCapCommitment;Expiration–CommitmentAgreement”above),and

3.paymentinfullofthecommitmentfee(see“VolumeCapCommitment;Expiration–CommitmentFee”above).

Inaddition,AHFAwillnotplaceaproposedbondissueontheagendaforaBoardofDirectorsmeetingunlesstheproposedbonddocumentshavebeensubmittedinsubstantiallyfinalformandhavebeenapprovedbyAHFA,itscounselandbondcounselpriortothedateonwhichAHFAcirculatesboardpackagestotheBoardofDirectorsforthemeeting,whichtypicallyoccursapproximately10daysinadvanceofthemeetingdate.The30-daydeadlinereferencedaboveisaminimumrequirement,anditishighlyrecommendedthatapplicantsdeliveralloftheaboveitemstoAHFAassoonastheyareavailableinordertoensurethatAHFA,itscounselandbondcounselhavesufficienttimetocompletethedrafting,negotiation andrevisionof thefinancingdocuments beforeboardpackages are circulated.

ConditionsforApproval.FinalapprovalbytheBoardofDirectorstoissuebondsforanyprojectissubjecttothefollowingapprovalsandrequirements:

1.finaldeterminationofproject’seligibilityforTaxCredits(ifapplicable),

2.formandsubstanceofeither(a)thecreditenhancementtobeprovidedforthebonds(seeBondResolution–CreditEnhancement”below),or(b)theinvestmentlettertobeprovidedwithrespectto thebonds(see“BondResolution – InvestmentLetter”below),

3.formandsubstanceofallfinancingdocumentstobeapprovedintheproposedbondresolutioninsubstantiallyfinalformandsatisfactorytoAHFA,itscounselandbondcounsel(see“BondResolution– SubmissionsRequired for BondResolution”above), and

4.theapplicant’sfullpaymentofallapplicablefees.

CreditEnhancement.ThecreditenhancementforanyproposedbondissuebyAHFAmustbesufficientto enablethebonds toobtain a ratingofAorhigherfromMoody’s,S&P, orFitch.

InvestmentLetter.IfproposedbondsdonothavecreditenhancementsufficienttoenablethebondstoreceivearatingofAorhigherfromMoody’s,S&P,orFitch,thebondsmaybesoldonlytoasingle“accreditedinvestor”(assuchtermisdefinedinReg.DoftheSEC),whichsignsaninvestmentletterinAHFA’srequiredformandotherwiseacceptabletoAHFAinitssolediscretion.Theinvestmentletterwillbeaso-called“traveling”investmentletter,andtheformoftheproposedbondsshallprovidethatsuchbondsshallbe transferredonly inaccordancewiththeinvestmentletter.Prospectiveapplicantsmayobtain acopyofAHFA’s requiredformofinvestmentletteruponrequest.

AllTermsofBondsMustbeSatisfactorytoAHFA.Withoutlimitinganyoftheforegoingrequirements,andinadditionthereto,AHFAreserves the rightto approvein itssolediscretionany proposedtransactionstructurefortheissuance ofmultifamilyhousingrevenue bonds and theforms ofallfinancingdocuments,includingwithoutlimitationfinancingdocumentsto whichAHFA isnota party.

ISSUANCEOFBONDS

AftertheBoardofDirectorshasadoptedabondresolutionandallrequirementssetforthinthatresolutionhavebeensatisfied,thepre-closingforthebondissueshalltakeplaceatAHFA’sofficesinMontgomery,Alabama.Allpartiesrequired to executedocuments in connectionwithanAHFAbond issueareexpectedtodo so in personatthepre-closing.Actualdeliveryofbondsmaytakeplaceviathebook-entryonlyproceduresestablishedbyThe DepositoryTrustCorporationor, in thecase ofa privateplacementpursuantto an approvedinvestmentletter,byphysicaldeliveryto thebondholderinaccordancewithitsinstructions.

ADMINISTRATIVEFEE

AHFA’sagreementtoissuebondsforanyprojectiscontingentupontheowner’spaymentofanAdministrativeFeeequalto(a)oneeighthofonepercent(0.125%)oftheoutstandingbalanceoftheBonds,dueandpayableinadvanceontheclosingdateandthefirstdayofOctoberofeachyearforsolongasanyamountofthebondsisoutstanding,and(b)aprepaymentpenaltytobecalculatedinamannersatisfactorytoAHFAifthebondsaredefeasedorretiredearly.SatisfactoryarrangementforongoingpaymentoftheAdministrativeFeeisaconditionoftheAHFA’s financing.

SPECIALREQUIREMENTSFORTAXCREDITS

ForprojectsreceivingTaxCredits,applicantsmustcomplywiththerequirementsofthethenapplicableHousingCreditQualifiedAllocationPlanandtheTaxCreditreservationissuedbyAHFA,includingwithoutlimitationthepaymentofanon-refundablereservationfeebyremittingachecktoAHFAwithin30daysoftheissuanceoftheTaxCreditreservationinanamountequalto the amount outlinedin the AHFA Approved and Funded Transaction Fee Requirements found at

PROJECTREQUIREMENTS

Location andTypesofProjects

AHFAwillacceptapplicationsfortax-exemptbondvolumecap formultifamilyresidentialrentalprojectsthroughouttheStateofAlabamathatare(a)newconstructionprojects,whicharedefinedtoincludebothnewconstructionandrehabilitationofprojectsthatarelessthan50%occupiedatthetimeofapplication(“NewConstructionProjects”),or(b)rehabilitationprojects,whicharedefinedtoincludeprojectsthatareatleast50%ormoreoccupied atthetime ofapplication(“RehabilitationProjects”).

AHFAwillacceptapplicationsforNewConstructionProjectsinacityorcountyinwhichAHFAhaspreviouslyprovidedfundingforanytypeofproject(whetherinformofamultifamilybond,TaxCredits,HOMEFunds,awardsundertheTaxCreditExchangeProgramorTaxCreditAssistanceProgram,oranycombinationoftheforegoing)onlyiftheprojectfundedpreviouslyinthatcityorcountyhasbeenplacedinserviceandisnotlessthanninetypercent(90%)occupiedatthetimeofapplication;provided,however,thatAHFAmayconsideranexceptiontothislimitationforaproposedNewConstructionProjectthatmeetstheradiustestwithrespecttoprojectspreviouslyfundedbyAHFAthatisdescribedinthethresholdrequirementsofthethenapplicableHousing CreditQualifiedAllocationPlan.

Theapplicantmustprovideamarketstudy,informacceptabletoAHFA,demonstratinganadequatemarketfortheproposedunitstobefinancedwithanyproposedbondissue.IfAHFAdoesnotagreewithapplicant’smarketstudyorfeelsthattheproposedprojectwouldadverselyimpactexistingprojectsorcreateexcessiveconcentration,AHFAreservestherighttoobtain,attheapplicant’sexpenseafterpriornotice,amarketstudyorotherinformationfroman independentconsultantfor AHFA’sconsiderationinresolvingthe matter.

OccupancyRequirementsfor AllProjects

A“qualifiedresidentialrentalproject”asdefinedbySection142oftheInternalRevenueCodemustremainincompliancewiththeapplicablesetasidetestthroughoutthe“qualifiedprojectperiod”asdefinedbySection142oftheInternalRevenueCode.Afailuretodosocanresultintheretroactivetaxabilityoftheprojectbondsbackto theirissuedate,aswellasrecaptureofanyTaxCredits.

Atalltimesduringthe qualifiedprojectperiod,theprojectmustmeetone ofthefollowingset-asidetests:

(a)20/50percenttest–Twenty(20)percentormoreoftheresidentialunitsintheprojectmustbeoccupiedbyandrentrestrictedtoindividualswhoseincomeis50percentorlessoftheareamedianincomeadjustedforsize ofhousehold;or

(b)40/60percenttest–Forty(40)percentormoreoftheresidentialunitsintheprojectmustbeoccupiedbyandrentrestrictedtoindividualswhoseincomeis60percentorlessoftheareamediangrossincome,adjustedforsize ofhousehold.

PhysicalRequirementsforAllProjects

Aresidentialrentalprojectmustconsistofunitscontainingcompletelivingfacilitiesandwhichareavailabletothe generalpublic.Completefacilitiesprovideseparatespaceforliving,sleeping,eating,cooking, and sanitation.

Residentialrentalprojectsmustbeonasinglesiteorcontiguoussites.Sitesmaybeconsideredcontiguousifseparatedonlybyoneneighborhoodstreet.Intermediatecarefacilities,grouphomes,andcongregatecarefacilitiesare notallowed.

SpecialMinimumRequirementsforRehabilitation Projects

AllhardconstructioncostsforRehabilitationProjectsmustbecertifiedbyacapitalneedsassessmentsatisfactorytoAHFA,whichmustbesubmittedwiththeinitialapplicationforadeclarationofofficialintent(a“CapitalNeedsAssessment”).AHFAreservestherighttoengageathird-partyconstructionconsultantattheapplicant’sexpensetoverifythescopeofworkandcostsand/ortoinspectthedevelopmentperiodicallytoverifytherehabilitationis as proposed and is proceedingin a timelymanner.Allworkin aRehabilitationProjectmustmeetapplicablebuildingcode requirements and AHFA DesignQualityStandards.

ForrehabilitationofprojectsnotpreviouslyfundedbyAHFA,theapplicationmustmeetallthresholdrequirementssetforthintheLow-IncomeHousingTaxCreditQualifiedAllocationPlan,exceptfortheminimumrehabilitationexpenditureof$20,000ofhardconstructioncostsperqualifiedlow-incomeunit.Forthistypeofproject,AHFAmay allowalowerminimumrehabilitationexpenditureperunit, butonly ifsupportedby aCapitalNeedsAssessmentsatisfactoryto AHFA

ForrehabilitationofprojectspreviouslyfundedbyAHFA,theapplicationmustmeetallthresholdrequirementssetforthintheHousingCreditQualifiedAllocationPlan,exceptthatforthistypeofproject,AHFAwillrequireaminimumrehabilitationexpenditureof$12,500ofhardconstructioncostsperqualifiedlow-incomeunit.

Innoeventmaytheminimumrehabilitationexpenditurebelessthanthegreaterof(a)theamountrequiredbySection 42ofthe InternalRevenueCodeorotherapplicablelaw, and(b)$12,500perqualifiedlow-income unit.

FEASIBILITYANDCOSTREQUIREMENTS

AHFAreservestherighttoreviewandapproveinitsdiscretiontheeconomicfeasibility,marketfeasibilityandcostsforeachprojectproposedtobefinancedwithbonds.AHFAmayreviewthisinformation,includinganychangesthereto,atanytime fromreceiptofinitialapplicationthroughissuanceofbonds.

FinancialandMarketRequirements

AlldevelopmentswillbesubjecttoanunderwritingreviewforfinancialandmarketfeasibilitybyAHFAinaccordancewithitsthenapplicableHousingCreditQualifiedAllocationPlan.

DevelopmentCostReview

Eachdevelopmentwillbeevaluatedforcomparabilityandreasonablenessofdevelopmentcosts.Costswillbereviewedastotheirvalidityand necessityagainstpreviousyears'developments,regionaldata,thirdpartydocumentation,and otherfactorsand data.

Theapplicantmustbeasaccurateaspossibleinprovidingdevelopmentcostinformation.Underestimatingcouldresultin insufficientfundsbeing availabletosuccessfullycompletethedevelopment. Overestimatingcouldresult

inadevelopmentbeingconsiderednotfeasiblebasedonthedebtlevelneededtocompletethedevelopment.Additionaldocumentationfromthe applicantmaybe requested.

TheInternalRevenueCodelimitstheamountofbondissuancecostthatmaybefinancedwithtax-exemptbondproceedsto 2%oftheprincipalamountofthe tax-exemptissue.

LEGALREQUIREMENTSANDPLANUPDATES

ItisAHFA’sintenttoissuebondstofinancemultifamilyresidentialrentalprojectsonlyincompliancewithapplicablelawandwithAHFA’stheneffectivepoliciesandprocedures,includingwithoutlimitationitsannualHousingCreditQualifiedAllocationPlan.FuturechangestoAHFA’sHousingCreditQualifiedAllocationPlanshallbedeemedtoamendaccordinglyanyprovisionofthispolicythatisinconsistentinoperationorintentwithsuchchanges,andtotheextentthatanytermorconditionofthispolicyconflictswithapplicablelaw,applicablelaw shallgovern.

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