Previous Participation Training

Previous Participation Training


>>GOOD AFTERNOON. I’M DEPUTY ASSISTANT SECRETARY
OF MULTIFAMILY HOUSING HERE AT H.U.D. I AM PLEASED TO WELCOME YOU TO
THE PREVIOUS PARTICIPATION REVIEW WEBCAST TODAY. THIS HAS BEEN A JOINT EFFORT OF
OUR OFFICE TO OFFICE OF MULTIFAMILY HOUSING, THE OFFICE
OF HEALTH CARE PROGRAMS AS WELL AS THE OFFICE OF GENERAL COUNSEL
AND IT HAS BEEN ALMOST FOUR YEARS IN THE MAKING. AS A FORMER STAKEHOLDER I KNOW
AS WELL AS ANYONE THAT THE PREVIOUS PARTICIPATION PROCESS
HAS BEEN A SOURCE OF CONFUSION FOR THE INDUSTRY AND H.U.D. STAFF. THAT’S WHY I’M REALLY EXCITED TO
BE HERE TODAY AND TO HELP LAUNCH THE NEW PREVIOUS PARTICIPATION
RULE AND SUPPLEMENTAL PROCESSING GOOD THAT ADDRESSES THOSE
CONCERNS BY STREAMLINING THE APPROACH, ADDING CONSISTENCY AND
FOCUSING THE REVIEW ON THE PEOPLE AND ENTITY TABS ARE IN
CONTROL OF THE PROJECTS AND MATTER MOST. I’M GOING TO TURN IT OVER TO MY
COLLEAGUE, THE ACTING DEPUTY AND ASSISTANT SECRETARY OF THE
OFFICE OF HEALTH CARE PROGRAMS. THANK YOU FOR JOINING US.>>THANK YOU, EVERYONE, FOR
JOINING US. AS MENTIONED, I’M THE ACTING
OFFICER FOR HEALTH CARE AND WE’RE PROUD AFTER A LONG EFFORT,
ALMOST FOUR YEARS NOW, WE’RE PLEASED TO WELCOME YOU TO THIS
WEBCAST THAT WILL GO THROUGH THE DETAILS OF HOW WE’VE MADE THE
REVIEW PROCESS MORE REPEATABLE, PREDICTABLE AND CONSISTENT FOR
THOSE OF YOU WITH THE LEARNING PROCESS, YOU KNOW WHAT THAT
MEANS AND WE’RE VERY PROUD OF THIS PARTICULAR EFFORT. WHILE THE REGULATION AND THE
PROCESSING GUIDE WENT THROUGH PUBLIC COMMENT AND WE’VE DONE
OUR BEST TO ADDRESS BOTH INDUSTRY AND STAFF CONCERNS AND
MANY SUGGESTIONS, I’D LIKE TO REMIND YOU, WE’LL BE RESPONSIVE
TO FURTHER INPUT FOR THE PURPOSE OF CONTINUOUS IMPROVEMENT AS
THIS PROGRESSES. RIGHT NOW, WE HAVE MORE
FLEXIBILITY TO ADAPT TO CHANGES, ANNUAL FEEDBACK THROUGH THE 30
DAY COMMENT PERIOD AND IN THE PROCESSING GUIDE. THANK YOU FOR PARTICIPATING.>>GREAT! SO I’M IN THE OFFICE OF GENERAL
COUNSEL. AND THE FIRST THING THAT WE’D
LIKE TO DO DURING THIS TRAINING IS PROVIDE YOU WITH AN OVERVIEW
OF THE REGULATION TEXT. THE REGULATIONS ARE FOUND IN 24
C.F.R. PART 200 SUBPART H.
THAT’S 24C.F.R. PART 200-210
THROUGH 222 AND AT ONE POINT OR ANOTHER, THIS LINK MIGHT BE
HYPERLINKED TO THE FEDERAL REGISTER NOTICE, THE REGULATIONS
WERE ANNOUNCED IN THE FEDERAL REGISTER ON OCTOBER 14TH. SO THERE, YOU CAN SEE NOT ONLY
THE REGULATORY TEXT AND SEE THE PROCESSING GUIDE TEXT BUT YOU
CAN ALSO FIND THE COMMENTS THAT WE RECEIVED DURING THE
REGULATION PROMULGATION PERIOD AND OUR RESPONSES SO IF YOU HAD
SOME QUESTIONS AS TO WHY WE MADE SOME DECISIONS OR HOW WE
RESPONDED TO SOME COMMENTS, YOU CAN SEE THAT IN THE FEDERAL
REGISTER NOTICE. THE MAIN PURPOSE OF THE
REGULATION IS TO PUT EVERYBODY ON NOTICE THAT H.U.D. WANTS TO
CHECK THE PREVIOUS PARTICIPATION OF THE INDIVIDUALS AND ENTITIES
IN CONTROL OF OUR PROJECTS. SO DESPITE WHAT MIGHT BE IN THE
FOUR CORNERS OF AN APPLICATION, WE’RE GOING TO LOOK TO THE
PREVIOUS PARTICIPATION OF THE INDIVIDUALS AND ENTITIES IN
CONTROL OF THE PROJECT. THE APPLICATION MIGHT LOOK GREAT
BUT IF THAT CONTROLLING PARTICIPANT HAS DEFAULTED ON
FIVE OTHER LOANS, WE WANT TO THINK TWICE BEFORE PROVIDING
THEM ANOTHER F.H.A. INSURED
LOAN. THE NEW RULE SUPERSEDES THE
PREVIOUS REGULATION SO THAT WAS SOME QUESTIONS EARLY ON, DO THE
TERMS AND THE EXISTING REGULATION AND THE PREVIOUS
REGULATION, DO THEY STILL COME INTO PLAY? SOME OF THE NUMBERS ARE
DIFFERENT. HOW DOES THAT WORK? IT’S A CLEAN SLATE. THE OLD REGULATION IS GONE AND
THE NEW REGULATION SUPERSEDES IT. WHAT YOU’LL FIND IN THE
REGULATIONS ARE SOME DEFINED TERMS, SOME DEFINITIONS. A LIST OF WHAT KINDS OF PROJECTS
AND WHAT PROGRAMS THIS APPLIES TO.
AND IT’S IMPORTANT TO NOTE THAT THIS PROJECT — THAT THIS RULE
APPLIES ONLY TO THE OFFICE OF HOUSING. PROGRAMS THAT ARE ADMINISTERED
BY THE OFFICE OF HOUSING. NOT P.I.H., NOT C.P.D. THE HEART OF THE REGULATION IS
REALLY SECTION 200.220. UPON THE OCCURRENCE OF A
TRIGGERING EVENT, THE COMMISSIONER SHALL REVIEW THE
PREVIOUS PARTICIPATION OF THE RELEVANT CONTROLLING
PARTICIPANTS IN CONSIDERING WHETHER TO APPROVE THEIR
PARTICIPATION. THAT’S THE HEART OF IT.
AND AGAIN, NO MATTER WHAT IT SAYS IN THE FOUR CORNERS OF THE
APPLICATION, WE’RE GOING TO LOOK TO THE PREVIOUS PARTICIPATION IN
ORDER TO DECIDE WHETHER OR NOT TO ALLOW THAT CONTROLLING
PARTICIPANT TO CONTINUE. THE REGULATIONS ALSO SPECIFY A
RECONSIDERATION PROCESS AND THE PROCESSING GUIDE IS ALSO
REFERENCED IN THE REGULATION. SO THAT IT SAYS THE MORE
SPECIFIC DETAILS ARE IN THE PROCESSING GUIDE AND IF WE WANT
TO CHANGE THE PROCESSING GUIDE, WE’LL PROVIDE 30 DAYS OF PUBLIC
COMMENT. SO SARAH, MAYBE YOU COULD GIVE
US AN OVERVIEW OF THE PROCESSING GUIDE.>>GEE, THANKS, KATHY. MY NAME IS SARAH BERGEN AND I’M
AN UNDERWRITER IN THE HOUSING DIVISION IN THE MINNEAPOLIS
FIELD OFFICE AND I’M HAPPY TO BE WITH YOU HERE TODAY TO TALK
ABOUT THE PROCESSING GUIDE. THE PROCESSING GUIDE IS A ONE
STOP SHOP FOR THE PREVIOUS PARTICIPATION REVIEW GUIDANCE. IT WAS DEVELOPED IN RESPONSE TO
THE VERY INITIAL PUBLISHING OF THE RULE WHICH WAS BACK IN
AUGUST OF 2015. THE FEEDBACK THAT H.U.D. RECEIVED WAS THAT THE RULE WAS
TOO BROAD. AND IN RESPONSE TO THAT, THE
PROCESS — PROCESSING GUIDE WAS DEVELOPED TO PROVIDE SOME MORE
SPECIFICITY. IT WAS PUBLISHED AS AN APPENDIX
TO THE RULE AND THEN IT WAS ALSO PUBLISHED AS A STAND ALONE
DOCUMENT AS HOUSING NOTICE 2016-15. AS HAS BEEN MENTIONED BEFORE,
THERE’S A 30-DAY COMMENT PERIOD BEFORE H.U.D. CAN MAKE
SUBSTANTIVE CHANGES TO THE GUIDE. THIS WAS DONE TO PROVIDE SOME
FLEXIBILITY SO THAT H.U.D. IS BETTER ABLE TO RESPOND TO A
CHANGING INDUSTRY LANDSCAPE WHICH WE THINK IS AN IMPROVEMENT
UPON THE PREVIOUS GUIDANCE WHICH KIND OF LOCKED ON TO THE
CORPORATE STRUCTURES THAT WERE IN EFFECT WHEN THE GUIDANCE WAS
DEVELOPED. AS KATHY SAID, THIS IS A BRAND
NEW PROCESS. IT SUPERSEDES AND CLARIFIES THE
PAST PRACTICE AND GUIDANCE THAT HAS BEEN PUT OUT BEFORE. SO IF YOU’RE LIKE ME, PERHAPS
YOU HAVE SOME OF THE HANDBOOKS BOOKMARKED THAT YOU REFERRED TO
WHEN YOU’RE REVIEWING OR FILLING OUT PREVIOUS PARTICIPATION
INFORMATION. SO JUST SO YOU’RE ON NOTICE, THE
PREVIOUS PARTICIPATION HANDBOOK 4065.1 IS NO LONGER GOING TO BE
IN EFFECT. ANYWHERE, WHERE THE PROCESSING
GUIDE AND THE NEW RULE CONFLICT WITH THE MAP GUIDE, THE
PROCESSING GUIDE AND THE NEW RULE WILL TAKE PRECEDENCE. THE MULTIFAMILY ASSET MANAGEMENT
AND PROJECT SERVICING HANDBOOK 4350.1, I’M SURE MANY ACCOUNTING
EXECUTIVES HAVE THAT BOOKMARKED. THAT’S NO LONGER GOING TO BE IN
EFFECT. THE TWO PROGRAM BOOKS ALSO ARE
BOTH SUPERSEDED BY THIS NEW RULE. WE ENCOURAGE YOU, OBVIOUSLY, TO
READ THE PROCESSING GUIDE CAREFULLY. THE GOAL OF THE PROCESSING GUIDE
REALLY REINFORCES THE GOAL OF THE NEW RULE WHICH IS TO FOCUS
ON THE PEOPLE AND ENTITIES WITH ORGANIZATIONAL OR OPERATIONAL
AND/OR FINANCIAL CONTROL. I KNOW QUITE A LARGE PORTION WAS
INVOLVED INVOLVING FLAGS. THIS PROVIDES A LEVEL OF TRANDZ
PARN SI THAT WAS NOT THERE PREVIOUSLY. AND AN OVERVIEW OF THE FLOW OF
THE PROCESSING GUIDE, IT STARTS OUT THE FIRST PAGES CLARIFIES
WHICH PROGRAMS ARE SUBJECT TO THE PREVIOUS PARTICIPATION
REVIEW. THE NEXT PORTION ON PAGES THREE
THROUGH NINE OF THE NOTICE DISCUSSES WHO MUST FILE AND HAS
A PRETTY DECENT LIST OF WHO IS EXCLUDED FROM FILING AND THERE’S
AN ADDITIONAL ADDED PORTION REGARDING ORGANIZATIONAL CHARTS
WHICH RACHEL IS REALLY THRILLED TO DISCUSS IN A FEW MINUTES. THE PROCESSING GUIDE ALSO
DISCUSSES HOW TO FILE. AS ALWAYS, OUR PREFERRED METHOD
IS TO FILE ELECTRONICALLY VIA APPS. I KNOW THERE IS SOME ISSUE WITH
APPS BUT WE ARE WORKING WITHIN THE CONSTRAINTS OF OUR —
WORKING WITHIN OUR LIMITS TO MAKE THAT A BETTER PROGRAM
THAT’S EASIER FOR EVERYONE TO USE. IF YOU DO USE A 2530 FORM, THE
FORM ITSELF HAS NOT BEEN UPDATED. BUT THE PROCESSING GUIDE DOES
INCLUDE NEW INSTRUCTIONS FOR THE FORM THAT WE’RE HOPING IS GOING
TO MAKE IT SIMPLER PROCESS TO FILL OUT. SO IF YOU FEEL OUT THE 2530 FORM
IN THE FUTURE, PLEASE REFER TO THE GUIDANCE AND THE PROCESSING
GUIDE RATHER THAN THE INSTRUCTIONS ON THE FORM ITSELF.>>JUST A QUICK NOTE ON THAT, WE
ARE, OBVIOUSLY, WE ARE WORKING WITH THE PROPER AUTHORITIES TO
HAVE THE PAPER FORM INSTRUCTIONS BE UPDATED SINCE THEY JUST MIMIC
THE REGULATION. SO SHORTLY, THE FORM WILL HAVE
THE PROPER INSTRUCTIONS ON THERE. BUT AGAIN, AS YOU MENTIONED, THE
INFORMATION COLLECTED AND CERTIFICATIONS WILL NOT CHANGE
UNLESS IT GOES THROUGH ANOTHER P.R.A. PROCESS FOR THE FORM
SPECIFICALLY.>>YES. RIGHT. THANK YOU, KATHY, FOR THAT
CLARIFICATION. AND THE PROCESSING GUIDE HAS A
SIGNIFICANT PORTION DEVOTED TO FLAGS. I THINK IT’S FIVE PAGES. PAGES 16 THROUGH 21. THIS DIVIDES FLAGS INTO THREE
TIERS IN ORDER OF DESCENDING RISK TO THE DEPARTMENT WITH A
TIER 3 FLAG BEING THE LEAST AMOUNT OF RISK AND TIER ONE
BEING CONSIDERED THE HIGHEST AMOUNT OF RISK. THE PROCESSING GUIDE ALSO
DESCRIBES HOW TRIVIAL THOSE RISKS AND UNDER WHAT
CIRCUMSTANCES FLAGS CAN BE PLACED AND UNDER WHAT
CIRCUMSTANCES THOSE CAN BE REMOVED. FINALLY, THE LAST TWO PAGES OF
THE PROCESSING GUIDE INCLUDE A NEW CERTIFICATION FOR LIMITED
LIABILITY INVESTOR ENTITIES. THIS CERTIFICATION WILL SIMPLY
NEED TO BE SUBMITTED TO THE H.U.D. OFFICE AND DOES NOT NEED
TO UNDERGO AN APPROVAL PROCESS UNLIKE THE PREVIOUS
CERTIFICATION. AND NOW, WE ARE GOING TO GET
INTO SOME OF THE MEAT OF THE PROCESSING GUIDE. AND START OFF WITH OVERVIEW OF
IDENTIFYING THE CONTROLLING PARTICIPANTS.>>WE’RE GOING TO DIVE IN! BECAUSE I KNOW THERE’S A LOT OF
— THERE’S A LOT OF CONFUSION ON THIS PART. SO WE’RE GOING TO JUMP IN AND
WE’RE GOING TO BE — WE’RE GOING TO CLEAR UP ALL THAT CONFUSION.>>WE HOPE TO.>>SO THE KEY QUESTION IN THE
PROCESSING GUIDE THAT FOLLOWS THE RULE ITSELF IS AGAIN WHO HAS
OPERATIONAL AND/OR FINANCIAL CONTROL. WE’RE TRYING TO TARGET THE FOLKS
AND THE ENTITY WHO’S HAVE DECISION-MAKING AUTHORITY OVER
THE COVERED PROJECT. AND WE DON’T WANT TO REVIEW
INDIVIDUALS OR ENTITIES THAT DON’T HAVE ANY DECISION MAKING
AUTHORITY OVER THE COVERED PROJECTS. SO THIS PROCESSING GUIDE
INCLUDES A LIST OF EXCLUSION — OF ENTITIES AND INDIVIDUALS WHO
ARE EXCLUDED FROM FILING FOR PREVIOUS PARTICIPATION REVIEW. SOME HIGHLIGHTS OF THE
EXCLUSIONS ARE WHOLLY OWNED ENTITIES, SHELL ENTITIES AND ONE
OF MY FAVORITES IS NONPROFIT BOARD MEMBERS WHO DO NOT ALSO
HAVE A ROLE IN THE EXECUTIVE MANAGEMENT OF THE NONPROFIT
ITSELF AS LONG AS YOU ARE JUST SIMPLY A BOARD MEMBER OF A
NONPROFIT, IN MOST CASES, YOU’RE NOT GOING TO BE REQUIRED TO FILE
PREVIOUS PARTICIPATION REVIEW. I KNOW THIS IS GOING TO PROBABLY
BENEFIT A LOT OF OUR RISK SHARE PROJECTS AND OUR VOLUME IS —
HAS SEEN QUITE AN UP TICK RECENTLY. FOR INSTANCE, I’VE GOT 25, 30 ON
MY DESK RIGHT NOW WITH THE RISK SHARE PROGRAM AND THE NONPROFIT
HAS 45 BOARD MEMBERS AND EACH ONE OF THOSE BOARD MEMBERS IS ON
THE 2530. IF THIS HAD BEEN SUBMITTED IN A
COUPLE OF WEEKS, THAT WOULD HAVE BEEN TWO BOARD MEMBERS BECAUSE
TWO OF THE BOARD MEMBERS ARE ALSO THE CONTROLLING
PARTICIPANTS WITHIN THE NONPROFIT ITSELF RATHER THAN
JUST BEING ON THE BOARD. AND JUST LIKE NOW, THE FIRST
DETERMINATION OF WHO WAS A CONTROLLING PARTICIPANT IS MADE
BY THE APPLICANT AND/OR THE F.H.A. LENDER. WE WANT TO SEE WHO YOU THINK IS
IN FINANCIAL OR OPERATIONAL CONTROL OF THE PROJECTS AND HAVE
THAT SUPPORTED AND WE’LL APPROVE THAT AND MOVE ON TO OTHER
PORTIONS OF THE APPLICATION. ALL RIGHT. IDENTIFYING CONTROLLING
PARTICIPANTS A LITTLE BIT MORE. ONE OF THE NEW TERMS THAT WAS
BROUGHT UP IN THE RULE AND PREVIOUS PARTICIPATION GUIDE IS
THE SPECIFIED CAPACITY. AND A SPECIFIED CAPACITY ARE BY
DEFINITION ENTITIES THAT HAVE OPERATIONAL OR FINANCIAL CONTROL
OF THE PROJECT AND THESE ARE PRETTY CLEARLY DEFINED FOR EACH
OF THE PROGRAMS. FOR INSTANCE, FOR HOUSING
PROGRAMS WHICH IS WHAT I’M INVOLVED WITH MOSTLY, SPECIFIED
CAPACITIES ARE GOING TO BE THE BORROWER, THE OWNER, THE
MANAGEMENT AGENTS, AND IF APPLICABLE, THE CONTRACTOR. AND THEN IN ADDITION TO
SPECIFIED CAPACITIES BEING IDENTIFIED AUTOMATICALLY AS
CONTROLLING PARTICIPANTS, ANY ENTITY OR INDIVIDUAL THAT HAS
OPERATIONAL OR FINANCIAL CONTROL OF A SPECIFIED CAPACITY IS ALSO
CONSIDERED A CONTROLLING PARTICIPANT. AND KATHY IS GOING TO GET INTO
THAT MORE SPECIFICALLY IN JUST A MINUTE. SO SPECIFICALLY IS THAT THE GIST
FOR ANY GIVEN PROJECT IS WE, THE CONTROLLING PARTICIPANTS ARE
GOING TO INCLUDE THE SPECIFIED CAPACITIES AND THEN ANY ENTITY
OR INDIVIDUAL THAT IS IN CONTROL OF THE SPECIFIED CAPACITIES. AND AS WE’VE EXPECTED FOR QUITE
SOMETIME, FOR MOST OF THE PROJECTS, WE ARE GOING TO EXPECT
THAT AT LEAST ONE LIVING, BREATHING HUMAN BEING IS
IDENTIFIED AS A CONTROLLING PARTICIPANT FOR EACH PROJECT. THANK YOU VERY MUCH. AND I’M GOING TO TURN IT OVER TO
KATHY NOW.>>OK. SO JUST TO DIVE A LITTLE BIT
DEEPER ON WHAT YOU JUST SAID, SARAH, QUESTION IS, YOU KNOW,
WHO MUST FILE, RIGHT? SO WE’VE GOT THE USUAL SUSPECTS. THESE ARE THE ENTITIES THAT
YOU’RE USED TO DEALING WITH NOW. OWNERS OF 25% OR MORE OF THE
SPECIFIED CAPACITY. RIGHT? SO IN MULTIFAMILY, YOUR BORROWER
IS A SINGLE PURPOSE ENTITY AND DOESN’T DO A WHOLE HECK OF A LOT
OF GOOD TO CHECK THE PREVIOUS PARTICIPATION OF AN ENTITY
THAT’S BEEN CREATED JUST TO RUN THIS PROJECT. WE WANT TO KNOW WHO IS IN
CONTROL OF THAT SPECIFIED CAPACITY. SO OWNERS OF 25% OR MORE OF THE
ENTITY THAT CONTROLS THE SPECIFIED CAPACITY ARE ALSO
PROBABLY GOING TO BE THE CONTROLLING PARTICIPANTS. WE GOT — WE GOT A QUESTION ON
THIS WHEN WE WENT OUT FOR QUESTIONS. THERE’S BEEN A LOT OF CONFUSION
OVER THE YEARS ABOUT OWNERSHIP, DIRECT OWNERSHIP, INDIRECT
OWNERSHIP, 25% IF I’M — OH, WHERE DO I — HOW DO I DO THE
CALCULATION? SO IF YOU THINK ABOUT IT, A
GENERAL PARTNER MAY ONLY HAVE .01% OF AN ENTITY BUT IF THEY’RE
THE GENERAL PARTNER, THEY CLEARLY ARE — THEY HAVE THE
FINANCIAL AND OPERATIONAL CONTROL SO WE WOULD EXPECT THEM
TO BE FILING. IN THE SAME WAY, IF THE GENERAL
PARTNER, RIGHT, IF THERE’S TWO DUDE WHO’S CONTROL THE GENERAL
PARTNER AND THEY EACH HAVE 50%, EACH OF THEM ARE OWNERS OF 25%
OR MORE OF THE ENTITY THAT CONTROLS THE SPECIFIED CAPACITY. SO WE WOULD ALL THINGS BEING
EQUAL EXPECT THOSE TWO DUDES TO FILE. AS SARAH MENTIONED, FOR THE
NONPROFITS, WE PRETTY MUCH WANT THE EXECUTIVE DIRECTOR BUT NOT
THE BOARD MEMBERS FOR A FOR PROFIT CORPORATION, WE WOULD
EXPECT MEMBERS OF THE BOARD WHO ARE ALSO OFFICERS OF THE
CORPORATION AND WE WOULD EXPECT AND THIS SHORT TRANSACTIONS, THE
PEOPLE OR ENTITY TABS ARE LISTED IN THE SECTION OF THE REGULATORY
AGREEMENT. WE WOULD EXPECT THOSE PEOPLE TO
BE IDENTIFIED THERE BECAUSE THEY’RE THE CONTROLLING
PARTICIPANTS. WE WOULD EXPECT THEM TO FILE
PREVIOUS PARTICIPATION CERTIFICATIONS. AND AGAIN, THE BOTTOM LINE IS
WHO EXERCISES THE FINANCIAL AND/OR OPERATIONAL CONTROL. SO ANY OF THE OTHER ASSUMPTIONS
THAT WE’RE MAKING, THE POINT IS THESE ARE — THESE ARE THE —
WE’RE IDENTIFYING IN CERTAIN SITUATIONS WHO WE WOULD EXPECT
TO BE FILING. AS SARAH MENTIONED, IT’S THE
LENDER AND THE BORROWER, IT’S THE APPLICANT THAT’S PROVIDING
JUST LIKE NOW THE SUBMISSIONS, THE CERTIFICATIONS, GOING
THROUGH THE PROCESSING GUIDE, GOING THROUGH THE REGULATIONS
AND DETERMINING WHO IS IN CONTROL. WE EXPECT THE ORGANIZATIONAL
CHARTS TO REFLECT THAT DETERMINATION AND WE EXPECT IT
TO MAKE SENSE. IF IT DOESN’T, WE’RE GOING TO
ASK ABOUT IT. WE ALSO SPECIFY IN THE
PROCESSING GUIDE SOME OF THOSE ENTITYS THAT HAVE BEEN A LITTLE
TRICKY RECENTLY, RIGHT? SO IF THERE’S A WIDELY HELD
CORPORATION OR PRETTY MUCH ANY KIND OF CORPORATION, IF THERE’S
A CONTROLLING SHAREHOLDER OR STOCKHOLDER, WE’RE GOING TO
EXPECT THAT PERSON OR ENTITY TO FILE. FOR A TRUST WEEKS GOING TO
EXPECT THE TRUSTEE TO FILE. AND FOR REITS, WE’LL EXPECT THE
REIT TO FILE AND THE C.E.O. AND ANY COMPANY OFFICERS THAT
EXERCISE CONTROL BUT NOT THE OFFICERS THAT DON’T EXERCISE
CONTROL.>>THERE’S A SPECIAL REQUIREMENT
FOR HOSPITALS. WE DO A LIMITED NUMBER OF
HOSPITAL TRANSACTIONS EVERY YEAR. AND THOSE REQUIRE MORE
SPECIALIZED VETTING SO THE EXECUTIVE MANAGEMENT, THE CHIEF
EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER, CHIEF
OPERATING OFFICER OR EQUIVALENCE OF THE BORROWER AND THE MEMBERS
OF THE BOARD OF THE DIRECTORS THAT H.U.D. DETERMINES HAVE
CONTROL OVER THE FINANCES OR OPERATION OF THE HOSPITAL. THAT WOULD TYPICALLY BE
PRESIDENT, VICE PRESIDENT, TREASURER, CHAIRMAN OF THE
FINANCE COMMITTEE OR THE EQUIVALENCE. BUT AGAIN, IF YOU’RE DOING A
HOSPITAL TRANSACTION, YOU’RE GOING TO HAVE MORE OF A
COLLABORATION WITH H.U.D. ON
THOSE STEPS BECAUSE WE DO A LIMITED NUMBER OF THOSE EVERY
YEAR. THE PROCESSING GUIDE ALSO LISTS
EXCLUSIONS. THOSE INDIVIDUALS AND ENTITIES
THAT WE WOULD NOT EXPECT TO FILE. ALL OTHER THINGS BEING EQUAL. AS WE LISTED OUT A BUNCH OF
SCENARIO WHERE’S WE THOUGHT THESE ARE INDIVIDUALS AND
ENTITIES THAT WE DON’T THINK EXERCISE CONTROL. SO, FOR EXAMPLE, WHOLLY OWNED
ENTITIES AND SHELL ENTITIES. IF THE ENTITY IS CREATED JUST
FOR A LEGAL PURPOSE TO BE A VEHICLE FOR OTHERS TO ACT
THROUGH, WE DON’T NEED TO BE CHECKING THE PREVIOUS
PARTICIPATION OF THAT ENTITY. SIMILARLY, TAX CREDIT
INVESTIGATORS AND PASSIVE INVESTORS, NOT JUST LOW INCOME
HOUSING TAX CREDITS BUT HISTORIC TAX CREDITS, NEW MARKETS, WHAT
HAVE YOU, TAX CREDIT INVESTORS AND PASSIVE INVESTORS, THEY’RE
NOT EXERCISING THE DAY-TO-DAY CONTROL OVER THE OPERATIONS. THEY’RE IN IT TO PROVIDE THE
INVESTMENT. THEY LET THE GENERAL PARTNERS
AND THE OTHER MEMBERS OF THE ORGANIZATION EXERCISE THE
CONTROL. WE WANT TO FACILITATE THAT KIND
OF INVESTMENT, NOT HINDER IT. MINOR OFFICERS, CHANCES ARE THAT
ALL OF THE OFFICERS OF THE CORPORATION ARE NOT GOING TO BE
IN A POSITION TO PREVENT A VIOLATION FROM OCCURRING. THEY’RE NOT ACTUALLY GOING TO BE
THE ONES IN CONTROL OF THE PROJECT SO DOESN’T DO US ANY
GOOD TO BE TRACKING THEIR PARTICIPATION. SAME THING. MEMBERS OF THE BOARD OF
DIRECTORS, IF YOU’VE GOT A NONPROFIT BOARD OF DIRECTORS OR
EVEN A FOR PROFIT BOARD OF DIRECTORS, THEY’RE PROVIDING
SOME OVERSIGHT BUT THEY’RE NOT PROVIDING THE DAY-TO-DAY
OPERATIONAL CONTROL IN MOST CASES. SO WE DON’T NEED TO BE TRACKING
ALL OF THOSE BOARD MEMBERS BECAUSE THAT’S JUST NOISE FOR
US. SIMILARLY, INDIVIDUALS AND
ENTITIES WITH LESS THAN 25% OWNERSHIP PROBABLY IF YOU HAVE
LESS THAN 25% OWNERSHIP, YOU’RE NOT REALLY EXERCISING CONTROL. BUT THE PROCESSING GUIDE IS
EXPLICIT. WE’RE LOOKING FOR THOSE
INDIVIDUALS AND ENTITIES THAT EXERCISE CONTROL. SO AS HAS HAPPENED, IF YOU SET
UP AN ENTITY SO THAT YOU OWN 20% AND YOUR WIFE OWNS 20% AND YOUR
SON OWNS 20%, WELL, JUST BECAUSE NONE OF YOU GUYS HAVE 25%
DOESN’T MEAN THAT, YOU KNOW, NOBODY IS IN CONTROL. YOU’RE JUST TRYING TO BE TRICKY
AND THE POINT OF THIS RULE IS JUST TO PUT IN SOME COMMONSENSE
SO THAT THE FORM DOESN’T SUPERSEDE THE FUNCTION. THE POINT IS WHO IS IN CONTROL? ALSO, PEOPLE WHO WE DO NOT THINK
ARE IN CONTROL. NURSING HOME ADMINISTRATORS,
MORTGAGEES, LENDERS, WE HAVE DIFFERENT PARTS OF OVERSIGHT AND
INDIVIDUALS AND ENTITIES THAT DO NOT EXERCISE FINANCIAL OR
OPERATIONAL CONTROL. RACHEL?>>ALL RIGHT. MY NAME IS RACHEL COLEMAN AND I
WORK IN THE OFFICE OF HEALTH CARE PROGRAMS AND I AM VERY
EXCITED TO BE HERE TODAY. AND PARTICULARLY I’M EXCITED TO
TALK ABOUT ORGANIZATION CHARTS. SO AN ORGANIZATION CHART IS A
VISUAL REPRESENTATION OF THE OWNERSHIP STRUCTURE OF AN
ORGANIZATION. OUR EXPECTATION IS THAT OUR
LENDERS AND APPLICANTS WILL SUBMIT A SEPARATE ORGANIZATION
CHART FOR EACH SPECIFIED CAPACITY. THAT MEANS WE WANT ONE CHART FOR
YOUR OWNER. WE WANT ONE CHART FOR YOUR
MANAGEMENT AGENT AND ONE FOR YOUR GENERAL CONTRACTOR AND ONE
FOR YOUR OPERATOR. A LOT OF TIMES, WE’LL SEE CHARTS
LUMPED TOGETHER WHERE YOU HAVE A WHOLE BUNCH OF DIFFERENT CHARTS
AND IT’S VERY CONFUSING AND HARD TO READ. SO, YOU KNOW, THE KEY POINT HERE
WITH ORG CHARTS IS WE WANT THEM TO BE CLEAR ENOUGH SO SOMEONE
UNFAMILIAR WITH THE PROJECT AND THE ENTITIES INVOLVED CAN
UNDERSTAND THE OWNERSHIP AND CONTROL STRUCTURE VERY QUICKLY. THAT’S REALLY THE KEY, THE KEY,
THE KEY. THE BETTER YOUR ORG CHART, THE
FASTER OUR STAFF WILL REVIEW IT. WHEN WE GET INCOMPLETE OR
CONFUSING ORG CHARTS, IT TAKES US A TON OF TIME TO FIGURE OUT
WHAT’S HAPPENING. IF I GET A NICE CLEAR ORG CHART,
I CAN MOVE ON IN FIVE MINUTES. I CAN FINISH MY PREVIOUS
PARTICIPATION REVIEW. THAT’S WHAT WE’RE LOOKING FOR. VERY CLEAR. OUR PROCESSING GUIDE DOES HAVE A
LOT OF INFORMATION IN IT ON ORG CHARTS SO I ENCOURAGE YOU TO
REALLY STUDY THAT CAREFULLY. ONE THING THAT YOU’RE GOING TO
NOTICE IS NOT EVERYONE LISTED ON THE ORG CHART IS REQUIRED TO
FILE A PREVIOUS PARTICIPATION SUBMISSION. AND THE ORG CHART REALLY, THE
REASON THAT WE NEED THE ORG CHART IS THAT IS HOW WE CHECK TO
MAKE SURE THAT THE IDENTIFIED CONTROLLING PARTICIPANTS MAKE
SENSE. WE’RE REALLY LOOKING TO THE
LENDER HERE TO PUT TOGETHER THE ORG CHART AND LET US KNOW WHO
THE CONTROLLING PARTICIPANTS ARE. IF THEY MAKE SENSE, WE’RE GOING
TO MOVE ON. ALL RIGHT. ORGANIZATION CHARTS NEED TO SHOW
ALL TIERS OF THE OWNERSHIP STRUCTURE INCLUDING MEMBERS OR
OWNERS OF THE ENTITIES LISTED. AND THEY NEED TO SHOW ALL THE
PARTICIPANTS, NOT JUST THE CONTROLLING PARTICIPANTS. THE PROCESSING GUIDE DOES LAY
OUT SOME PROVISIONS FOR WIDELY HELD ENTITIES MANY WE DON’T NEED
TO HAVE YOU LIST EVERY SINGLE PERSON IF IT’S WIDELY HELD OR IF
THE AMOUNT OF PEOPLE WOULD BE OVERLY BURDENSOME. SO CHECK THAT OUT IF YOU HAVE,
YOU KNOW, A SITUATION LIKE THAT. OUR INTENT IS NOT TO BE OVERLY
BURDENSOME. OUR INTENT IS TO JUST HELP US
GET THE FULL PICTURE QUICKLY AND EASILY. ALSO, WE NEED TO SEE THE
PERCENTAGES OF OWNERSHIP AND THE ROLE AND THE ENTITY. AND THEY NEED TO ADD UP TO 100%
AND THEN WE NEED AT LEAST ONE NATURAL PERSON. SO AS I MENTIONED, YOU KNOW,
WE’RE REALLY LOOKING TO THE LENDER HERE. AND, YOU KNOW, IT’S OUR
EXPECTATION THAT THE LENDER WILL HANDLE THIS. AND WILL PROVIDE IT TO US. YOU KNOW, THE ORGANIZATION CHART
IS AN EXHIBIT TO THE APPLICATION AND SO IT’S SUBJECT TO ALL THE
CERTIFICATIONS OF CORRECTNESS AND COMPLETENESS SO JUST LIKE
ALL OF THE APPLICATION EXHIBITS, THE EXPECTATION IS IT WILL BE
SUBMITTED CLEAR AND CORRECTLY AND COMPLETELY. NOW, WE’LL MOVE ON TO SOME
EXAMPLES.>>OH, GOSH. OK, A LITTLE NERVOUS. WE’RE JUMPING IN — WE’RE
JUMPING IN HERE. THIS IS AN EXAMPLE. INDIANA AVENUE LLC, AS THE
BORROWER ENTITY. WHAT WE HAVE HERE LOOKS LIKE A
JOINT VENTURE WITH LOCAL HOUSING NONPROFIT AND LOCAL DEVELOPER. AND THE DEVELOPER HAS FOUR —
FOUR MEMBERS THERE. WHO MUST FILE HERE. IN THIS CASE, WHAT WE’VE BEEN
TOLD IN THIS SUBMISSION, WE’RE NOT MAKING THE INITIAL
DETERMINATION. WE’RE USING THE ORG CHART TO
CHECK WHAT HAS BEEN — WHAT HAS BEEN SUBMITTED. DOES IT MAKE SENSE? DOES IT MAKE SENSE, RIGHT? IF THE LOCAL HOUSING NONPROFIT,
HEY, LOTS OF TIMES, THE NONPROFIT MIGHT BE IN TO PROVIDE
SOME OUTREACH TO THE COMMUNITY OR IT MIGHT BE WORKING WITH THE
DEVELOPER TO LEARN HOW TO DO DEVELOPMENT AND SO IN THIS
PARTICULAR CASE, IF THE LOCAL HOUSING NONPROFIT IS NOT
PROVIDING, IS NOT EXERCISING THE DAY-TO-DAY CONTROL, THE
OPERATIONAL AND FINANCIAL CONTROL, THEN THERE’S NO REASON
FOR THE NONPROFIT TO FILE. HERE, THEY ARE LISTED AS HAVING
20%. 20% FALLS BELOW THE 25%
THRESHOLD AND WE ARE TOLD THEY HAVE NO AUTHORITY OVER THE
DAY-TO-DAY OPERATIONS SO WE WOULD NOT EXPECT A FILING FROM
THE LOCAL HOUSING NONPROFIT. HERE, LOOKS LIKE LOCAL DEVELOPER
INC. IS EXERCISING THE CONTROL. AND IT HAS FOUR MEMBERS. PERSON A HAS ONLY 10% CONTROL. BUT THEY’RE THE MANAGING MEMBER. PROBABLY SHOULD HAVE BEEN LOCAL
HOUSING DEVELOPER LLC. SO LOCAL DEVELOPER LLC, AND
PERSON A IS THE MANAGING MEMBER. SO EVEN THOUGH PERSON A ONLY HAS
10%, PERSON A IS GOING TO BE THE CONTROLLING PARTICIPANT. PERSON B HAS 55%. MAYBE THEY’RE PERSON A’S PRIMARY
PARTNER. WE DON’T — YOU KNOW, WE DON’T
KNOW INDEPENDENTLY. DEPENDS ON THE INFORMATION THAT
WE GET. PERSONS C AND D HAVE A LOWER
PERCENTAGE OF OWNERSHIP AND WE’RE TOLD THEY HAVE NO CONTROL
OVER DAY-TO-DAY OPERATIONS. SO IN THIS CASE, WE WOULD HAVE
PERSONS A AND B FILE ALONG WITH THE SPECIFIED CAPACITY AND THE
BORROWER.>>CAN I ASK A QUESTION, KATHY?>>PLEASE, SARAH.>>NOW, IT LOOKS LIKE LOCAL
DEVELOPER LLC IS 80% MANAGING MEMBER. WHEN I THINK MANAGING MEMBER, I
THINK CONTROL. WHY DOESN’T THE 80% MANAGING
MEMBER HAVE TO FILE?>>THAT’S A REALLY GOOD QUESTION
AND THERE’S GOING TO BE LOTS OF SITUATIONS WHERE LOCAL DEVELOPER
LLC SHOULD BE FILING. RIGHT? IT DEPENDS ON THE SPECIFICS OF
THE TRANSACTION. IN THIS CASE, WHAT WE WOULD —
WHAT WE COULD BE TOLD IN ORDER TO MAKE THIS MAKE SENSE, WE
COULD SAY HEY, LOCAL DEVELOPER LLC HAS JUST BEEN CREATED FOR
THESE FOUR DUDES IN THIS ONE CASE. IT’S NOT AN INDEPENDENT ENTITY. IT’S REALLY A SHELL FOR THOSE
FOUR PARTNERS. IT DOESN’T HAVE OTHER
PARTICIPATION AND IT’S NOT ACTUALLY A CONTROLLING
PARTICIPANT. IT’S PERSONS A AND B PRIMARILY
WORKING THROUGH THAT ENTITY AS A LEGAL VEHICLE. BUT IF I GOT AN ORG CHART LIKE
THIS, THIS WOULD BE — AND I DIDN’T HAVE THAT EXPLANATION
FROM THE LENDER OR THE APPLICANT, THAT WOULD BE A GREAT
QUESTION FOR ME TO ASK LIKE HEY, THIS GUY HAS 80%. WHY WOULDN’T THEY FILE? AND DEPENDING ON, YOU KNOW, THE
ANSWER, THAT — THAT COULD BE ACCEPTABLE OR IF THE ANSWER
COMES BACK OH, YEAH, WE FORGOT, LET’S HAVE THEM FILE.>>SO THIS LOOKS LIKE AN EXAMPLE
OF WHERE IF THE LENDER PROVIDES SOME CLEAR AND SUPPORTABLE
INFORMATION ABOUT WHY A LOCAL DEVELOPER LLC DOESN’T HAVE TO
FILE, THEN — AND IT’S SUPPORTED BY THE ORG CHART, THEN WE WILL
FOLLOW WHAT THEY SAY AND APPROVE AND MOVE ON.>>YEAH. AND I THINK IT’S REALLY HELPFUL
IN THE ORG CHART WHERE, YOU KNOW, FOLKS HAVE INDICATED NO
AUTHORITY OVER DAY-TO-DAY OPERATIONS OR, YOU KNOW, SHELL
ENTITY OR WHAT NOT. I THINK THAT KIND OF HELPS US
FRAME THE CONVERSATION.>>DEFINITELY.>>ALL RIGHT. OK, NEXT EXAMPLE, THIS IS A
NONPROFIT HOUSING ARE US LOCAL PROJECT INC. IT IS 100% OWNED FOR HOUSING BY
ALL INC. WHICH IS A NATIONAL NONPROFIT AND THE NONPROFIT
SPONSOR OF THE SINGLE ENTITY AND THAT’S THE BORROW OTHER AND
PERSON A IS THE CEO AND PERSON B IS THE CFO. WE HAVE LISTED ON THE SIDE THERE
THE BOARD OF DIRECTORS FOR HOUSING FOR ALL INC.
NOW, IN THE PAST, WE MIGHT HAVE EXPECTED ALL OF THE BOARD OF
DIRECTORS — ALL OF THE DIRECTORS ON THE BOARD OF
DIRECTORS TO FILE. BUT IN THIS CASE, WHAT WE’RE
REALLY LOOKING FOR IS HOUSING FOR ALL INC., THE NONPROFIT
SPONSOR AND PERSON A AND PERSON B AS THE PRESIDENT, CEO AND CFO
AS WELL AS THE SPECIFIED CAPACITY, THE NONPROFIT
BORROWER, ENTITY THAT’S THE SPECIFIED CAPACITY IN THIS ONE. DEPENDING ON THE INFORMATION,
THAT WE HAD GOTTEN AND DEPENDING ON THE KIND OF PROJECT THAT —
THE KIND OF WHAT PROGRAM IT IS, IT’S QUITE POSSIBLE THAT HOUSING
FOR ALL INC. ISN’T A NATIONAL NONPROFIT SPONSOR. IT COULD JUST BE A SHELL ENTITY
FOR THE JOINT VENTURE BETWEEN PERSON A AND PERSON B.
BUT THE INFORMATION HERE THAT WE GOT SAYING OH, NO, THIS IS OUR
NATIONAL NONPROFIT. THIS IS THE ENTITY THAT’S ACTING
AND THEY’VE CREATED THE SINGLE PURPOSE ENTITY, HOUSING ARE US
LOCAL PROJECT SO THAT’S WHY HOUSING FOR ALL INC. SHOULD
FILE.>>KATHY, I HAVE A QUESTION FOR
YOU.>>YEP.>>SO ONE OF THE THINGS THAT I
KNOW HAS BEEN SORT OF CONFUSING FOR SOME PEOPLE IS, YOU KNOW, IF
WE’RE TALKING ABOUT DAY-TO-DAY CONTROL, ISN’T THAT THE BOARD OF
DIRECTORS ON A NONPROFIT? AREN’T THEY REALLY THE ONES WHO
ARE, YOU KNOW, THEY’RE ON THE, YOU KNOW, THEY’VE HAD MEETINGS
AND THINGS. WHY AREN’T THEY CONSIDERED A
CONTROLLING PARTICIPANT?>>THAT’S A REALLY GREAT
QUESTION. AND I THINK, YOU KNOW, IT’S
POSSIBLE WE COULD SEE A SCENARIO WHERE THE BOARD OF DIRECTORS ARE
VERY INVOLVED IN THE RUNNING OF A NONPROFIT. BUT IN MOST CASES, THAT’S JUST
NOT THE CASE. RIGHT? THE BOARD OF DIRECTORS WILL MEET
MAYBE QUARTERLY, MAYBE MONTHLY, DEPENDS ON THE NONPROFIT. AND THEY’RE OVERSEEING THE
DECISIONS THAT ARE BEING MADE BY THE EXECUTIVE DIRECTOR OR THE
PRESIDENT OR THE OTHER OFFICERS OF THE NONPROFIT. AGAIN, DEPENDING ON HOW THAT
PARTICULAR NONPROFIT IS SET UP. OFTENTIMES ESPECIALLY IN THE
NONPROFIT, THE BOARD OF DIRECTORS ARE COMMUNITY MEMBERS
THAT ARE JUST VOLUNTEERING THEIR TIME. RIGHT? SO AGAIN, IT’S NOT A
PARTICULARLY FRUITFUL USE OF H.U.D.’S TIME TO BE CHECKING UP
ON THE BOARD OF DIRECTORS BECAUSE THEY’RE NOT ACTUALLY
APPROVING EVERY SINGLE ACTION THAT THE EXECUTIVE DIRECTOR
TAKES OR CONTROLLING THE INDIVIDUAL PROJECT. THEY’RE PROVIDING BROADER
OVERSIGHT OVER THE — OVER THE NONPROFIT. BUT THAT’S WHY IF THERE’S
SOMEBODY ON THE BOARD OF DIRECTORS THAT’S ALSO AN OFFICER
FOR THE COMPANY OR IS ALSO EXERCISING DAY-TO-DAY CONTROL,
THAT’S THE INDIVIDUAL THAT WE WANT TO SEE FILE. BECAUSE THAT INDIVIDUAL IS IN A
POSITION TO PREVENT A VIOLATION FROM OCCURRING OR CURE A
VIOLATION IF IT HAPPENS. RIGHT? IF YOU THINK ABOUT EVEN THE
OTHER OFFICERS ON THE BOARD OF DIRECTORS, YOU KNOW, YOU LOOK AT
THE — YOU KNOW, THE SECRETARY OF THE BOARD OF DIRECTORS FOR
THE NONPROFIT, PROBABLY THE SECRETARY’S ONLY JOB IS TO KEEP
NOTES OF THE BOARD MEETING, TO KEEP THE MINUTES OF THE BOARD
MEETING. TREASURER MAY BE DOING SOME
AUDIT WORK OF THE NONPROFIT OR MIGHT LITERALLY JUST BE IN
CHARGE OF LIKE BUYING THE PIZZA THAT NIGHT. RIGHT? THERE’S A HUGE RANGE IN
NONPROFITS. SOME OF THEM ARE REALLY
SOPHISTICATED AND THE BOARDS OF DIRECTORS ARE REALLY
SOPHISTICATED AND DO A LOT OF OVERSIGHT AND SOME OF THEM ARE
MORE OF A COMMUNITY ORGANIZATION AND DON’T EXERCISE THAT KIND OF
CONTROL.>>GREAT EXPLAINER, KATHY.>>THANKS.>>LET’S HOPE I’M RIGHT. OK. ATLANTIC AVENUE LIMITED
PARTNERSHIP. THIS IS A MORE OF A COMPLICATED
STRUCTURE AND HERE WE SEE THIS WOULD BE A TAX CREDIT
TRANSACTION. OK? SO WE SEE THAT THE MANAGING
GENERAL PARTNER IS LISTED AS B&OGP1, LLC. THERE’S ANOTHER GENERAL PARTNER
LISTED, ILLINOIS AVENUE GP2. THERE’S ALSO AN INVESTOR,
MONEYBAGS EQUITY FUND LP, AND SQUISHED IN THERE, THERE’S
MONEYBAGS SLP, SPECIAL LIMITED PARTNER WITH 0% INTEREST. SO AGAIN, MOST OF THE TIME WE’LL
SEE ONE GENERAL PARTNER BUT SOMETIMES, YOU COULD SEE A
COUPLE AND I KNOW THERE’S A TAX CREDIT, CALIFORNIA STATE TAX
CREDIT THAT REQUIRES NONPROFIT PARTICIPATION SO OFTEN, THERE
COULD BE AN ADMINISTRATIVE MANAGING PARTNER OR VARIATIONS
ON THAT. BUT WHAT’S IMPORTANT AGAIN IS
WHO IS IN CONTROL OF THE DAY TO DAY. ALL RIGHT? SO HERE, WE ARE TOLD THAT B&O,
GP1 IS REALLY THE MANAGING GENERAL PARTNER. IT HAS TWO MEMBERS, CONNECTICUT
AVENUE MANAGEMENT 2LLC, 80% MEMBER AND MANAGER AND BALTIC
AVENUE LLC, 20% MEMBER WITH SOME INVESTORS THERE INVESTING IN IT.
AND PERSON F AND PERSON G ACTING THROUGH CONNECTICUT AVENUE
MANAGEMENT 2. THIS IS REALLY OUR CONTROLLING,
OUR CONTROLLING ENTITY ON THIS ONE. THIS IS, WE’RE TOLD THIS IS THE
MANAGING GENERAL PARTNER. WHAT WE’RE TOLD IS BALTIC AVENUE
DOESN’T HAVE CONTROL OVER THE DAY TO DAY. IT’S REALLY GOING TO BE
CONNECTICUT AVENUE MANAGEMENT LLC.
AND IT’S GOING TO BE PERSONS F AND PERSONS G.
ILLINOIS AVENUE GP2, AGAIN, THERE COULD BE A SCENARIO, A
SIMILAR STRUCTURE WHERE ILLINOIS AVENUE GP IS REALLY EXERCISING
THE CONTROL EVEN THOUGH IT’S ONLY A .0035% MEMBER. PERCENTAGE OF INTEREST IN THAT
CASE ISN’T WHAT’S IMPORTANT. IT’S HOW DOES THE PARTNERSHIP
AGREEMENT SPLIT OUT THE — THE CONTROL RIGHTS? AND IF THE LENDER IN THEIR
VETTING HAS DETERMINED THAT IT’S REALLY B&O, GP1 AND CONNECTICUT
AVENUE MANAGEMENT 2LLC, THAT IS CERTAINLY PLAUSIBLE IF YOU’RE
WILLING TO CERTIFY THE VET, WE’RE WILLING TO ACCEPT THAT. COUPLE OF OTHER THINGS THAT I
COULD POINT OUT, MONEYBAGS LLC VERY LIKELY HAS A NUMBER OF
INVESTOR MEMBERS IN THAT FUND. WE DON’T CARE! WE STOP AT THE INVESTOR MEMBER
LEVEL. SO ALL WE NEED — ALL WE NEED IS
THE LLCI, THE CERTIFICATION FROM MONEYBAGS EQUITY FUND LP. AGAIN, THE REVISED FORM AT THE
END OF THE PROCESSING GUIDE ELIMINATES THE H.U.D. APPROVAL. SO WE JUST NEED THEM TO SUBMIT
THAT FORM SAYING YES, WE DON’T EXERCISE DAY-TO-DAY CONTROL, WE
ARE THE INVESTOR MEMBER. SIMILARLY, WE VERY FREQUENTLY
SEE SPECIAL LIMITED PARTNER MEMBERS AS — IN THE OWNERSHIP
STRUCTURE. NOW, THERE MIGHT BE A SCENARIO
IN WHICH THE SPECIAL LIMITED PARTNER, THE INVESTOR WANTS A
SPECIAL LIMITED PARTNER TO BE PREAPPROVED SO THAT IF THEY NEED
TO — IF THE INVESTOR NEEDS TO REMOVE THE GENERAL PARTNER, THE
SPECIAL LIMITED PARTNER CAN TAKE OVER. WE HAVE A PROCESS SET UP FOR
THAT AND IF THAT WERE THE CASE, WE WOULD EXPECT A FILING BY
MONEYBAGS SLP, LLC. BUT IF EQUALLY LIKELY, THE
INVESTOR DOESN’T NEED THAT PREAPPROVAL, DOESN’T WANT TO GO
THROUGH THAT NOW UP FRONT, WE DON’T NEED A FILING FROM
MONEYBAGS SLP. SO THE NEXT SLIDE GOES THROUGH
— I KNOW IT’S A LITTLE BIT HARD TO SEE ON THE TWO SLIDES. THIS ONE IS A LITTLE BIT
COMPLICATED. BUT IN THIS CASE, WE’D HAVE THE
SPECIFIED CAPACITY. I’LL TOGGLE BACK AND FORTH. ATLANTIC AVENUE LIMITED
PARTNERSHIP, RIGHT? AND THEN WE’VE BEEN TOLD
CONNECTICUT AVENUE MANAGEMENT 2, LLC IS NOT A SHELL ENTITY. IT’S AN ENTITY THAT HAS
DEVELOPMENT EXPERIENCE AND IT’S CONTROLLED BY PERSONS F AND G SO
WE WOULD GET PERSONS F AND G AND CONNECTICUT AVENUE MANAGEMENT
LLC. AND ALL THE REST WOULD BE NOT —
WE WOULD NOT EXPECT TO FILE. INCLUDING THE BOARD OF DIRECTORS
OF AFFORDABLE HOUSING FOUNDATION INC., THE SPONSOR OF ILLINOIS
AVENUE GP-2, LLC BECAUSE IF ILLINOIS AVENUE ISN’T EXERCISING
CONTROL, WE CERTAINLY DON’T CARE WHO IS EXERCISING CONTROL OVER
AN ENTITY THAT ISN’T EXERCISING CONTROL. WE DON’T CARE. TOO MUCH NOISE.>>AND, YOU KNOW, IT’S IMPORTANT
TO POINT OUT ON A COMPLICATED ORG STRUCTURE LIKE THIS ONE
THAT, YOU KNOW, IF WE GOT A CHART THAT WAS REALLY UNCLEAR,
THIS WOULD TAKE US FOREVER TO FIGURE OUT. SO KEEP THOSE ORG CHARTS SUPER
CLEAR AND TO THE POINT AND MAKE SURE YOU’RE INCLUDING ALL THE
INFORMATION SO WE CAN QUICKLY AND EASILY UNDERSTAND.>>IF IT TAKES US FOREVER, THAT
MEANS WE’RE PROBABLY SENDING A LOT OF QUESTIONS OR HAVING PHONE
CALLS WITH OUR LENDER AND I MEAN, NOT ONLY IS IT TAKING OUR
TIME BUT TAKING YOUR TIME AS WELL.>>OK. ANOTHER EXAMPLE AND WE’RE ALMOST
DONE WITH EXAMPLES. WE HAVE ANOTHER EXAMPLE HERE
MARVIN GARDENS LLC. PERSON A IS THE PRESIDENT AND
CEO. THEY ARE WHOLLY OWNED BY PARK
PLACE LLC AND PARK PLACE HAS TWO MEMBERS, PENNSYLVANIA AVENUE AND
KENTUCKY — KENTUCKY AVENUE PERSON A WE’RE TOLD IS THE
CONTROLLING MEMBER, 50% SHAREHOLDER OF PENNSYLVANIA
AVENUE INC. THERE ARE ALSO OTHER
SHAREHOLDERS AT 25% BUT WE ARE TOLD THEY DO NOT EXERCISE
CONTROL. SO IN THIS CASE THE SUBMISSION
COMES IN AND PERSON A SUBMITS AND THE SPECIFIED CAPACITY
MARVIN GARDENS AND THE INFORMATION THAT WE RECEIVE IS
PARK PLACE LLC IS A — IS JUST A SHELL ENTITY FOR KENTUCKY AVENUE
AND PENNSYLVANIA AVENUE. PENNSYLVANIA AVENUE WE’RE TOLD
IS A SHELL FOR PERSONS A, B AND C.
IT DOES NOT HAVE AN INDEPENDENT ENTITY. IT’S GOING TO BE USED SOLELY FOR
THIS — SOLELY FOR THIS TRANSACTION. IT WILL NOT EXIST WITHOUT
PERSONS A, B AND C. SO PERSON A IS THE CONTROLLING
— IS THE CONTROLLING MEMBER. AND THE OTHER — THE OTHER
MEMBERS ARE NOT — ARE NOT INCLUDED INCLUDING KENTUCKY
AVENUE INC. WHICH IS A 50% MEMBER OF PARK PLACE. IN THIS CASE, WE’RE TOLD IT HAS
NO CONTROL OVER THE DAY-TO-DAY OPERATIONS. MAYBE THEY’RE JUST PROVIDING,
YOU KNOW, AN INVESTOR MEMBER IN PARK PLACE LLC. WE MIGHT NEED — HAVE SOME
QUESTIONS AS TO TELL ME MORE ABOUT THAT, HOW DOES IT WORK? IF THERE ARE PLAUSIBLE SCENARIOS
WHERE THERE WOULD BE A MEMBER IN LLC.>>QUESTIONS ON THIS ONE?>>MAKES SENSE.>>GREAT.>>THIS IS OUR FINAL EXAMPLE. WHOLLY OWNED BY ST. JAMES PLACE
THAT HAS PACIFIC AVENUE LLC AND NORTH CAROLINA LLC AS ITS
MEMBERS. WE — AS WE ROLL DOWN THE ORG
CHART ON NORTH CAROLINA AVENUE, VERMONT AVENUE LIMITED
PARTNERSHIP IS ITS SOLE MEMBER AND VERMONT AVENUE PARTNER LLC
AND ATLANTIC AVENUE REIT GP ARE ITS MEMBERS WITH ATLANTIC AVENUE
REIT INC. AS THE SOLE MEMBER OF VERMONT AVENUE PARTNER. SO IN OTHER WORDS, THIS SIDE OF
THE ORG CHARTS NORTH CAROLINA AVENUE LLC, THIS WHOLE BRANCH,
THIS IS REALLY AN INVESTMENT ON ITS SIDE. SO IT’S POSSIBLE THAT WE COULD
HAVE STOPPED ON THE DISCLOSURE ON THIS AS AN INVESTOR FUND
DEPENDING ON THE — THE SPECIFICS OF THE TRANSACTIONS
THAT WE WANT TO DISCLOSE. MORE DISCLOSURES ARE BETTER. HERE WE’VE LEARNED THERE’S A
REIT THERE. IT’S NOT THE BORROWER IN THIS
CASE, IT’S JUST AN INVESTOR IN THE BORROWER, RIGHT? IT’S INVESTING THROUGH NORTH
CAROLINA AVENUE LLC. SO WE — BECAUSE THOSE ARE JUST
INVESTING, WE’RE TOLD THAT IF NORTH CAROLINA AVENUE LLC
DOESN’T EXERCISE DAY-TO-DAY CONTROL, THEN WE DON’T CARE
ABOUT ITS MEMBERS. RIGHT? IF PACIFIC AVENUE LLC IS THE 1%
MANAGING MEMBER, THEN THAT’S THE ENTITY THAT’S EXERCISING —
THAT’S EXERCISING CONTROL. AND PERSON A, IF IT’S THE 100%
MEMBER OF PACIFIC AVENUE, THAT MAKES PACIFIC AVENUE A SHELL
ENTITY. AND THAT MEANS PACIFIC AVENUE
DOESN’T ACT INDEPENDENT OF ITS SOLE MEMBER, THE PERSON WE
REALLY CARE ABOUT IS PERSON A, THE SOLE MEMBER OF PACIFIC — OF
PACIFIC AVENUE. NOW, WE MIGHT HAVE SOME
QUESTIONS ON THIS. LIKE AGAIN, PACIFIC AVENUE LLC,
IF, YOU KNOW, DOES IT ACT INDEPENDENTLY OF PERSON A? AGAIN, IT’S HARD TO SEE HOW THEY
WOULD IF THEY’RE 100% MANAGING MEMBER. SIMILARLY, ST. JAMES PLACE LLC,
RIGHT, IT SEEMS A LITTLE ODD THAT PACIFIC AVENUE LLC AND
NORTH CAROLINA WOULDN’T GO DIRECTLY INTO THE BORROWER SO I
MIGHT HAVE A QUESTION ON THAT. BUT IF I’M TOLD ST. JAMES PLACE
ALSO LIKE SOME OF OUR OTHER ENTITIES ISN’T AN INDEPENDENT
ENTITY, IT’S CREATED JUST FOR THIS — CREATED JUST FOR THIS
TRANSACTION, IT DOESN’T ACTUALLY EXERCISE CONTROL. IT’S REALLY PERSON A AND WE SEE
THAT PERSON A IS THE PRESIDENT OF ST. JAMES PLACE LLC. SO THAT KIND OF FITS. WE CAN KIND OF SEE HOW PERSON A
IS REALLY THE PERSON IN CONTROL OF THIS ENTITY.>>I JUST HAVE ONE QUICK
QUESTION, IF THIS WAS A PROJECT THAT I CAME ACROSS MY DESK AND I
WAS UNDERWRITING, IF THE ORG CHART SHOWED THAT NORTH CAROLINA
AVENUE LLC WAS A 99% INVESTOR MEMBER, THEN THEY COULD JUST
STOP RIGHT THERE. LIKE WE WOULDN’T — THEY
WOULDN’T HAVE TO SHOW VERMONT AVENUE LIMITED PARTNERSHIP,
ETC., IS THAT RIGHT?>>I THINK THAT’S RIGHT. CERTAINLY, IF IT WAS A TAX
CREDIT ENTITY AND WE HAD THAT — THAT LEGISLATION THAT TOLD US TO
STOP ASKING SO MANY QUESTIONS ABOUT TAX CREDIT ENTITIES, BUT
THIS MIGHT NOT BE A TAX CREDIT TRANSACTION. THEY COULD JUST BE AN INVESTOR
IN A SITUATION AND, YOU KNOW, FOR UNDERWRITING PURPOSES, THEY
MIGHT HAVE BEEN PROVIDING MORE — MORE DETAIL BECAUSE NORTH
CAROLINA AVENUE LLC, YOU KNOW, IN A TAX CREDIT SCENARIO, YOU
WOULD HAVE A SYNDICATOR, THE UNDERWRITING WOULD BE BETTING
THE SYNDICATOR AS WELL AND HERE, IT MIGHT JUST BE A VEHICLE FOR
THE ATLANTIC AVENUE REIT AND SO, THAT COULD BE A SCENARIO UNDER
WHICH YOU WOULD WANT THAT ADDITIONAL INFORMATION SO THAT
YOU COULD DO YOUR VETTING OF THE ACTUAL — OF THE ACTUAL
INVESTOR, YOU KNOW, FOR UNDERWRITING PURPOSES AND IF YOU
PUT IT TOGETHER FOR UNDERWRITING, WHY NOT PROVIDE IT
ALREADY FOR PREVIOUS PARTICIPATION REVIEW BUT YOU’RE
RIGHT, YOU KNOW, WOULDN’T NEED TO GET BELOW THE INVESTOR — THE
INVESTOR MEMBER BECAUSE WE’VE EXCLUDED INVESTOR MEMBERS FROM
PREVIOUS PARTICIPATION REVIEW.>>THANKS.>>I THINK THAT IS ALL.>>SO NOW WE’RE GOING TO MOVE ON
TO A QUICK TRANSITION HERE. WE’RE GOING TO DISCUSS FLAGS IN
A COUPLE OF MINUTES. SO DON’T HANG UP YET. STICK WITH US. WE WILL BE RIGHT BACK IN A
COUPLE OF MINUTES. WE’RE GOING TO TRANSITION A FEW
FOLKS IN. AND A FEW FOLKS OUT. SO IN A MINUTE WE’LL DISCUSS
FLAGS. I WANTED TO CLARIFY HOW WE’RE
GOING TO HANDLE QUESTIONS AND SUGGESTIONS FOR THE PREVIOUS
PARTICIPATION REVIEWS IN THE FUTURE. FOR MULTIFAMILY HOUSING
PROJECTS, YOU CAN E-MAIL MF UNDERSCORE PREVIOUS
PARTICIPATION AT HUD.GOV. FOR OFFICE OF RESIDENTIAL CARE
FACILITIES PROJECTS WHICH IS THE 232 PROGRAM, YOU CAN E-MAIL LEAN
THINKING AT HUD.GOV. FOR THE OFFICE OF HOSPITAL
FACILITIES PROGRAM, WHICH IS THE 242 PROGRAM, YOU CAN E-MAIL
HOSPITALS AT HUD.GOV. FOR THE HOSPITALS PROGRAM, IT
WOULD PROBABLY BE BENEFICIAL IF YOU COULD INCLUDE A SUBJECT LINE
THAT IS KIND OF SPECIFIC AS TO, YOU KNOW, PREVIOUS PARTICIPATION
REVIEW QUESTION OR SUGGESTION. IF YOU HAVE QUESTIONS ABOUT WHO
WOULD BE CONSIDERED A CONTROLLING PARTICIPANT, AS YOU
PUT TOGETHER YOUR APPLICATIONS, FEEL FREE TO CONTACT THE E-MAIL
ADDRESS FOR THE APPROPRIATE OFFICE. I WOULD ENCOURAGE YOU TO KEEP IN
MIND THE KEY POINTS THAT WE JUST DISCUSSED BEFORE YOU CONTACT
H.U.D. WITH QUESTIONS. SO FIRST, WE ARE LOOKING FOR
THOSE INDIVIDUALS WITH FINANCIAL AND/OR OPERATIONAL CONTROL OVER
THE PROJECT. WE NEED TO KEEP THAT IN MIND. I KNOW THERE ARE GOING TO BE ALL
SORTS OF SCENARIO HERE. BUT THAT’S REALLY WHAT WE’RE
LOOKING FOR AND WE ARE LOOKING TO THE LENDER TO TELL US WHO
THAT IS. WE WANT TO KNOW WHO HAS THE
ABILITY TO PRESENT OR RESOLVE VIOLATIONS OR CIRCUMSTANCES
GIVING RISE TO FLAGS RELATED TO THE PROJECT SO WE WANT TO KNOW
WHO HAS THE AUTHORITY TO, YOU KNOW, RESOLVE ANY ISSUES OR
PREVENT THEM OR DEAL WITH THEM AND THEN WE ALSO WANT TO MAKE
SURE THE ORGANIZATION CHARTS ARE CLEAR AND COMPLETE. SO, YOU KNOW, BEFORE YOU CONTACT
US ABOUT YOUR DEAL, PLEASE MAKE SURE TO KEEP THOSE PROCESSES IN
— OR THOSE NOTES IN MIND AND THEN AS ROGER LUKOFF MENTIONED
WE ARE, OF COURSE, ALWAYS INTERESTED IN CONTINUOUS
IMPROVEMENT AND FEEL FREE TO SUBMIT SUGGESTIONS TO OUR E-MAIL
BOXES AS WELL AND WE WILL, YOU KNOW, DO OUR BEST TO CONTINUALLY
IMPROVE THE PROCESS AS WE GO FORWARD.>>ALL RIGHT. SO NOW, I AM GOING TO TURN IT
OVER TO OUR TEAM TO DISCUSS FLAGS.>>HI, MY NAME IS RITA DOCKERY
AND I’M WITH THE OFFICE OF HEALTH CARE PROGRAMS. I’M GOING TO TALK FIRST ABOUT
THE BASICS OF FLAGS. THERE ARE THREE TIERS OF RISK
THAT WE WILL DISCUSS MOMENTARILY IN FURTHER DETAIL. FLAGS ARE JUST ONE PIECE OF THE
CHARACTER OF A PARTICIPANT REVIEW. SINCE WE ARE LOOKING TO HAVE
FLAGS BE BETTER TOOLS FOR ASSESSING RISK, THE FLAGGING
PROCESS HAS BEEN REVISED TO ALIGN WITH THOSE RISKS
ASSOCIATED WITH A PARTICIPANT. WHILE A FLAG DOES NOT
AUTOMATICALLY EXCLUDE AN APPLICANT FROM PARTICIPATING IN
H.U.D.’S PROGRAMS, THEY ARE CONSIDERED RISK FACTORS THAT
REQUIRE APPROPRIATE MITIGATION, WHEN POSSIBLE. FOR THIS REASON, FLAGS SHOULD
NOT BE PLACED WILLIE NILLY FOR MINOR INFRACTIONS THAT DO NOT
POSE A RISK TO H.U.D. WHEN THERE’S A VIOLATION OF
CIRCUMSTANCE THAT WARRANTS A FLAG IN CONNECTION WITH A
COVERED PROJECT, H.U.D. WILL
PLACE A FLAG ON ALL CONTROLLING PARTICIPANTS THAT CONTRIBUTED TO
THE VIOLATION OR THOSE WHO FAILED TO INTERVENE
APPROPRIATELY TO AVOID THE CIRCUMSTANCE IN THE FIRST PLACE. BY THAT SAME TOKEN, H.U.D. WILL
NOT PLACE FLAGS ON THOSE CONTROLLING PARTICIPANTS THAT
H.U.D. HAS DETERMINED NOT — DID
NOT CONTRIBUTE TO THE VIOLATION OR THE CIRCUMSTANCE. FOR ADDITIONAL INFORMATION,
PLEASE SEE SECTION G-1 OF THE PROCESSING GUIDE. ABOUT FLAG PLACEMENT. ANOTHER THING ON FLAGS THAT’S
GOOD TO KNOW, THE FLAGGING PROCESS HAS CHANGED. H.U.D. WILL NOTIFY PARTICIPANTS
IN WRITING WHEN FLAGS ARE PLACED DOWN. ANOTHER BIG IMPROVEMENT IS THAT
THE APPS SYSTEM WILL NOW INCLUDE VERY DETAILED INTERNAL COMMENTS
RELATED TO ANY FLAGS THAT HAVE BEEN PLACED. PREVIOUSLY, THERE HAVE NOT BEEN
CLEAR NOTES TO DETAIL THE REASONS BEHIND FLAG PLACEMENT. THIS CAN BE ESPECIALLY
PROBLEMATIC IF YOU ARE REVIEWING A PARTICIPANT AND THE EMPLOYEE
WHO ORIGINALLY PLACED THE FLAG IS NO LONGER INVOLVED WITH THAT
PROJECT. FOR WHATEVER REASON. FOR EXAMPLE, THEY MAY NO LONGER
WORK IN THE SAME CAPACITY WITHIN THE DEPARTMENT OR, PERHAPS, THEY
EVEN RETIRED. THEREFORE, IT’S CRITICAL THAT
VERY DETAILED NOTES ARE KEPT IN THE SYSTEM AND UPDATED AS
APPROPRIATE SO THAT ANYONE REVIEWING THE FLAGS OF A
PARTICIPANT WILL HAVE A FULL PICTURE REGARDING THE FLAG
PLACEMENT. IN ORDER TO AVOID STARTING FROM
SCRATCH AND TRACKING THE REASONS FOR FLAG PLACEMENT ON PARTICULAR
PARTICIPANTS. ONE OTHER IMPORTANT THING TO
NOTE IS THAT PREVIOUS PARTICIPATION REVIEW IS JUST ONE
PART OF THE OVERALL REVIEW THAT’S GOING TO BE CONDUCTED BY
H.U.D. AND I’M GOING TO NOW TURN OVER
THE MIKE TO JIM LARSON WHO IS GOING TO TALK ABOUT THE TIER
LEVELS.>>THANKS. I’M JEN LARSON WITH THE
MULTIFAMILY OFFICE OF ASSET MANAGEMENT. AND I’M REALLY EXCITED ABOUT THE
NEW TIERS OF FLAGS IN THE PARTICIPATION AND PROCESSING
GUIDE AS IT’S BEEN ISSUED. I THINK IT WILL REALLY HELP OUR
STAFF TO BETTER ASSESS WHETHER ISSUES ARE GOING TO BE A PROBLEM
GOING FORWARD OR WHETHER IT’S SOMETHING THAT CAN BE QUICKLY
RESOLVED SO I’M GOING TO GO THROUGH THE THREE LEVELS OF THE
FLAGS THAT WE HAVE NOW. THE FIRST IS A TIER THREE FLAG. AND THESE ARE OUR LOWEST RISK
FLAGS. THIS IS A SINGLE EVENT,
SOMETHING — AN ISSUE THAT’S HAPPENED THAT CAN BE RESOLVED
AND THE FLAG CAN BE REMOVED WHEN THE NONCOMPLIANCE IS RESOLVED. SO THERE’S SOME EXAMPLES OF
THESE TYPES OF FLAGS IF THERE’S A FAILURE TO FILE FINANCIAL
STATEMENTS, IF THERE’S UNACCEPTABLE PHYSICAL CONDITION
OF THE PROPERTY LIKE A BELOW 60 REAX SCORE OR OTHER CONDITIONS
THAT ARE OBSERVED BY STAFF TO BE UNACCEPTABLE. IF THERE’S AN UNSATISFACTORY
MANAGEMENT REVIEW DONE BY OUR PROJECT BASED CONTRACT
ADMINISTRATOR OR BY H.U.D. STAFF, EITHER ONE OF THOSE CAN
RESULT IN A FLAG. OR IF THEIR UNAUTHORIZED
DISTRIBUTIONS IS NOTED ON THE FINANCIAL STATEMENT. AND IN ALL OF THOSE THINGS, WHEN
THE — EITHER A NEW MANAGEMENT REVIEW IS DONE OR A NEW PHYSICAL
INSPECTION IS DONE, OR SOME OTHER EVENT HAPPENS TO RESOLVE
THAT NONCOMPLIANCE, THEN THOSE FLAGS CAN BE REMOVED. AS AN EXAMPLE OF THE TEMPORARY
RISK, PROJECT A MAY NOT HAVE FILED THEIR FINANCIAL STATEMENTS
ON TIME. AT THAT POINT, AN AUTOMATIC TIER
THREE FLAG IS PLACED BY OUR SYSTEM. AND THE ENTITY IS REFERRED TO
THE DEPARTMENTAL ENFORCEMENT CENTER OR THE DEC FOR A
FOLLOW-UP ON THAT NONFILER INCIDENT. IF A FINANCIAL STATEMENT IS
FILED, THEN THE FLAG IS RESOLVED AUTOMATICALLY. IF IT’S NOT FILED, THEN THERE
MAY BE FURTHER ENFORCEMENT ACTION THAT TAKES PLACE. ANOTHER EXAMPLE OF A TIER THREE
FLAG IS A PROJECT THAT MAYBE GOT A REAX INSPECTION THAT WAS 25
AND THAT’S UNACCEPTABLE PHYSICAL CONDITION. THE PROJECT IS FLAGGED WITH A
TIER THREE FLAG FOR UNACCEPTABLE PHYSICAL CONDITION AND IT’S
REFERRED TO THE DEPARTMENTAL ENFORCEMENT CENTER OR THE DEC
FOR A FOLLOW-UP. THERE’S A NOTICE OF VIOLATION OR
DEFAULT THAT IS SENT OUT. THE OWNER AT THAT POINT HAS 60
DAYS TO MAKE ALL THE REPAIRS THAT ARE DETAILED IN THE
PHYSICAL INSPECTION THAT WERE OBSERVED, ALL THE DEFICIENCIES
HAVE TO BE CORRECTED. AND THEN THE PROPERTY IS
REINSPECTED AFTER THAT 60 DAY PERIOD. ASSUMING THAT THE OWNER HAS DONE
WHAT THEY NEEDED TO DO AND THE REPAIRS HAVE TAKEN PLACE AND THE
REAX SCORE IS ABOVE 60 AND ACCEPTABLE PHYSICAL CONDITION,
THAT FLAG CAN BE REMOVED. IF THE SCORE IS STILL BELOW 60,
THERE MAY BE A TIER TWO FLAG PLACED AND THERE MAY BE
ADDITIONAL ENFORCEMENT ACTION THAN TAKEN AGAINST THAT OWNER. NOW WE MOVE ON TO TIER 2 FLAG
WHICH ARE FLAGS FOR ONGOING COMPLIANCE RISK. AND ONGOING TO COMPLIANCE RISK
REPRESENTS AN OWNER THAT’S DONE EITHER A TIER 3 FLAG, WE SEE IT
AT SEVERAL DIFFERENT PROPERTIES FOR THE SAME OFFENSE OR MAYBE
THEY’VE DONE THE SAME THING AT THE SAME PROPERTY YEAR AFTER
YEAR AFTER YEAR AND WE’RE REALLY GETTING TIRED OF IT AND WE HAVE
TO SAY, YOU KNOW, WE NEED TO KNOW THIS FOR FUTURE BEFORE WE
DO ANY FURTHER BUSINESS WITH YOU, WE WANT TO KNOW THAT YOU
HAVE NOT FOLLOWED OUR REGULATIONS IN THE PAST AND
YOU’RE NOT COMPLYING WITH H.U.D. REQUIREMENTS ON MULTIPLE
PROPERTIES. THESE FLAGS WILL REMAIN FOR FIVE
YEAR PERIOD OF TIME. AS A RISK FACTOR, EVEN IF THE
UNDERLYING ISSUES ARE RESOLVED. SO SOME EXAMPLES OF TIER TWO
FLAGS ARE REPEATED FAILURE TO FILE ANNUAL FINANCIAL
STATEMENTS. UNACCEPTABLE PHYSICAL CONDITION,
IF IT OCCURS AT MULTIPLE PROPERTIES OR AT THE SAME
PROPERTY MULTIPLE TIMES. IF THERE’S A CONVERSION TO AN
UNAPPROVED USE, UNAUTHORIZED CHANGE OF PARTICIPANT, IF A
PROPERTY SALE TAKES PLACE WITHOUT GETTING H.U.D.’S
APPROVAL FOR IT FIRST OR UNAUTHORIZED TRANSFER OR
SOMETHING LIKE THAT, OR IF THERE’S REPEATED UNRESOLVED
AUDIT FINDINGS. SO SAY THERE’S AN AFS THAT’S
NONCOMPLIANT FOR SEVERAL YEARS IN A ROW, WE MAY FACE A TIER TWO
FLAG FOR THAT. LET’S TALK THROUGH SOME EXAMPLES
OF TIER TWO FLAGS. SO FIRST EXAMPLE IS WHERE THE
CONTROLLING PARTICIPANT, HE OWNS PROJECT A, B AND C.
DOESN’T FILE ANY FINANCIAL STATEMENTS BY THE DEADLINE FOR
ANY OF THOSE PROJECTS AND DOES NOT RESPOND TO H.U.D. CORRESPONDENCE SO THREE TIER
THREE FLAGS WILL BE PLACED AUTOMATICALLY ONE FOR EACH
PROJECT. THOSE WILL BE REMOVED WHEN THE
ANNUAL FINANCIAL STATEMENT IS FILED. BUT OUR STAFF IN LOOKING AT THAT
WILL SAY HEY, THERE’S A PATTERN OF BEHAVIOR HERE OF FILING LATE
ANNUAL FINANCIAL STATEMENTS AND THEY MAY PLACE A TWO TIER FLAG
THAT WILL BE RETAINED FOR FIVE YEARS EVEN IF AFS HAD BEEN FILED
AND THE TIER THREE FLAGS HAVE BEEN RESOLVED, THE TIER TWO FLAG
WILL STAY AND THERE MAY BE ADDITIONAL ENFORCEMENT ACTIONS
AS TAKEN BY THE DEPARTMENTAL ENFORCEMENT CENTER FOR THOSE
TYPES OF ISSUES. ANOTHER EXAMPLE OF THE TIER TWO
FLAG IS WHERE THE CONTROLLING PARTICIPANT OF PROJECT D FILES
ANNUAL FINANCIAL STATEMENTS LATE AND SIGNIFICANTLY LATE. 90 DAYS LATE FOR THREE YEARS IN
A ROW. EVERY YEAR, THERE’S A TIER THREE
FLAG THAT’S PLACED. IT’S REMOVED EVERY YEAR WHEN THE
AFS IS FILED. BUT AFTER THREE YEARS, WE SAY NO
REALLY, THIS IS — WE NEED TO MAKE SURE THAT WE UNDERSTAND
THAT THIS IS GOING ON FOR THIS PARTICIPANT GOING FORWARD. AND TIER TWO FLAG IS PLACED IN
YEAR THREE. THAT WILL BE RETAINED FOR FIVE
YEARS EVEN IF THE ANNUAL FINANCIAL STATEMENTS ARE FILED. AND THERE ALSO MIGHT BE
ADDITIONAL ACTIONS TAKEN BY OUR ENFORCEMENT CENTER. ANOTHER EXAMPLE OF A TIER TWO
FLAG IS WHERE CONTROLLING PARTICIPANT OF PROJECT E TAKES
ON DISTRIBUTION FOR SEVERAL YEARS IN A ROW. OFTEN WE HAVE THIS WITH NEW
OWNERS IN PROJECTS WHERE THEY DON’T UNDERSTAND H.U.D.’S
DISTRIBUTION SCHEDULE. FIRST YEAR THEY TAKE
UNAUTHORIZED DISTRIBUTIONS. WE SAY NO, DON’T DO THAT. YOU HAVE TO WAIT UNTIL YOUR
FINANCIAL STATEMENTS HAVE BEEN FILED. AND YOU’RE CLEAR TO TAKE THOSE
DISTRIBUTIONS. SO SAY THEY DO THAT THE FIRST
YEAR. TIER THREE FLAG IS PLACED. LET’S SAY THEY DO IT AGAIN NEXT
YEAR. NO, REALLY, TIER THREE FLAG IS
PLACED AND THEN WHEN THE DISTRIBUTIONS ARE REPAID, OR
WHEN THE SITUATION IS RESOLVED, THE TIER THREE FLAG GETS
RESOLVED. BUT AFTER THREE YEARS IN A ROW,
WE’VE SAID NO, REALLY, WE TOLD YOU DON’T TAKE DISTRIBUTIONS
UNTIL YOU’RE ALLOWED TO UNDER YOUR H.U.D. AGREEMENT AND PLACE
A TIER TWO FLAG THAT WILL BE RETAINED FOR FIVE YEARS EVEN IF
THE DISTRIBUTIONS ARE REPAID. AND AGAIN, THERE MAY BE
ADDITIONAL ENFORCEMENT ACTIONS THERE AS WELL. NOW, THE LAST LEVEL OF FLAG IS
THE MOST SERIOUS LEVEL OF FLAG. TIER ONE FLAG. THIS REPRESENTS SOMETHING THAT’S
SO SERIOUS THAT THE DEPARTMENT WANTS TO CONSIDER IT FOR ANY
FUTURE BUSINESS WITH THE PARTICIPANT. SO IT’S A SIGNIFICANT — IT
REPRESENTS A SIGNIFICANT LONG TERM RISK TO THE DEPARTMENT AND
IT’S SOMETHING THAT WE NEED TO BE AWARE OF BEFORE CONSIDERING
FUTURE BUSINESS. THESE ARE PERMANENT FLAGS. THINGS THAT WE WANT TO STAY ON
THE RECORD AS LONG AS THE PARTICIPANT IS DOING BUSINESS
WITH H.U.D. EXAMPLES OF TIER ONE FLAGS ARE
MORTGAGE ASSIGNMENT OR MORTGAGE CLAIM WHERE THERE’S A CLAIM
AGAINST THE FHA FUND OR ASSIGNMENT OF THE MORTGAGE. SUSPENSION OR DEBARMENT CURRENT
OR PAST OF ANY OF THE PARTICIPANTS IN THE PROJECT AND
CONVICTION OF FRAUD OR ANY OTHER CRIMINAL PROBLEM THAT’S
EXPERIENCED BY THE PROPERTY OWNER OR MANAGEMENT AGENT. EXAMPLE OF ONE THAT MIGHT BE
PLACED. SAY THEY SUBMITTED A FRAUDULENT
INFORMATION DURING THE UNDERWRITING. WE DIDN’T DISCOVER IT AT THE
TIME BUT DISCOVERED IT LATER. THERE’S A MORTGAGE ASSIGNMENT. AS A RESULTED, THERE WILL BE A
TIER ONE FLAG PLACED FOR MORTGAGE ASSIGNMENT AND ALSO A
TIER ONE FLAG PLACED FOR FRAUD CONVICTION AND, OF COURSE, THERE
MAY BE ADDITIONAL ENFORCEMENT ACTIONS IN THOSE CASES BOTH FROM
H.U.D. AND OUTSIDE H.U.D. AND THROUGH LAW ENFORCEMENT. ANOTHER ONE WILL BE THEY VIOLATE
THE HOUSING ASSISTANT PAYMENTS CONTRACT, NO OTHER INVOLVEMENT
WITH H.U.D. OUTSIDE OF THE
CONTRACT. BUT THE CONTROLLING PARTICIPANT
BEGINS USING THE ASSETS FOR THEIR PERSONAL GAIN AND
SIPHONING OFF FUNDS AND IT GOES UNDER. IT MAY BE REFERRED FOR
FORECLOSURE TO BE SOLD AT AUCTION. A TIER ONE WOULD BE PLACED ON
THAT PARTICIPANT TO ENSURE THEY CAN’T DO ANY FURTHER BUSINESS
WITH H.U.D. WITHOUT A REALLY
HIGH LEVEL OF REVIEW AND THERE MAY BE ADDITIONAL ENFORCEMENT
ACTIONS IN THAT CASE ALSO. THAT’S IT FOR AN OVERVIEW OF THE
FLAGS. TALK ABOUT HOW HE’S GOING TO
REVIEW PARTICIPANTS.>>THANK YOU. MY NAME IS KENDALL ALLEN AND I
WORK OUT OF THE JACKSONVILLE SATELLITE OFFICE IN OUR
MULTIFAMILY PRODUCTION DIVISION. SO WE’RE GOING TO TALK ABOUT
REVIEWING PARTICIPANTS. SO H.U.D.’S OPTIONS WHERE WE
RECEIVE THE APPLICATIONS EITHER TO APPROVE A PARTICIPANT,
CONDITIONALLY APPROVE A PARTICIPANT WHICH MEANS THAT WE
WILL APPROVE YOU UNDER CERTAIN CONDITIONS. YOU CAN HAVE LIMITED
PARTICIPATION WHERE YOU’RE JUST LIMITED TO SOME ASPECTS OF
PROJECT AND WE CAN DISAPPROVE YOU BUT NOTE IN THE PROCESSING
GUIDE, THERE ARE WAYS TO TALK TO DIRECTORS OR JUST RECONSIDER OUR
DISAPPROVAL FOR THE DISAPPROVED 2530. SO MOVING RIGHT ALONG, WE’RE
TALKING ABOUT REVIEWING PARTICIPANTS WITH NO FLAGS. SO IF THERE ARE NO FLAGS IN THE
APP SYSTEM AND THE APPLICANT IS ABLE TO MAKE ALL CERTIFICATIONS,
THE PREVIOUS PARTICIPATION REVIEW IS PRETTY MUCH CONSIDERED
COMPLETE. BUT DO KNOW THAT JUST BECAUSE
THE PREVIOUS PARTICIPATION APPROVAL IS COMPLETE, THAT
DOESN’T MEAN UNDERWRITING OR THE TOTAL PACKAGE IS COMPLETE. STILL HAD TO GO THROUGH ALL THE
OTHER THINGS YOU NEED TO CLOSE. SO REVIEWING PARTICIPANT WITH
CURRENT FLAGS, IF THERE ARE CURRENT FLAGS IN THE SYSTEM,
H.U.D. WILL REVIEW COMMENTS IN
THE SYSTEM RELATED TO A FLAG. WHICH IF IT’S BEEN A FLAG FOR A
PARTICIPANT THAT’S BEEN IN OUR SYSTEM, ASSET MANAGEMENT MIGHT
HAVE ALREADY HAD COMMENTS IN THERE. MITIGATIONS WILL BE PART OF THE
REVIEW. WITH THE FLAG BEING RESOLVED AND
RATHER, THE FLAG HISTORY TO ASSESS PATTERNS OF MISCONDUCT
AND RISK TO THE DEPARTMENT. SO GET INTO REVIEWING TIER THREE
FLAGS WHICH ARE BASICALLY OUR LOW FLAGS. AND ALL TIER THREE FLAGS HAVE A
DURATION OF FIVE YEARS. SO IF A PARTICIPANT ELECTS NOT
TO DO ANYTHING, THEY CAN WAIT FIVE YEARS BEFORE THEY CAN
PARTICIPATE AGAIN AND ALL THE STUFF WILL FALL OFF FOR TIER
THREE FLAGS. BUT PARTICIPANTS MAY BE APPROVED
IF CONDITIONS AND THEIR APPROVED CONDITIONS ARE MET. SO AN EXAMPLE WOULD BE PROJECT A
RECEIVES A SCORE OF 50. THE SECOND IS BELOW 60. CONTROL PARTICIPANTS IN PROJECT
A IS FLAGGED UNTIL IT RECEIVES INSPECTION OVER 59 ON THE NEXT
INSPECTION. CONTROLLING PARTICIPANT AND
PROJECT A WOULD LOIK TO DO NEW BUSINESS WITH H.U.D. IN PROJECT
B. H.U.D.>>GOOD AFTERNOON.
I’M DEPUTY ASSISTANT SECRETARY OF MULTIFAMILY HOUSING HERE AT
H.U.D. I AM PLEASED TO WELCOME YOU TO
THE PREVIOUS PARTICIPATION REVIEW WEBCAST TODAY.
THIS HAS BEEN A JOINT EFFORT OF OUR OFFICE TO OFFICE OF
MULTIFAMILY HOUSING, THE OFFICE OF HEALTH CARE PROGRAMS AS WELL
AS THE OFFICE OF GENERAL COUNSEL AND IT HAS BEEN ALMOST FOUR
YEARS IN THE MAKING. AS A FORMER STAKEHOLDER I KNOW
AS WELL AS ANYONE THAT THE PREVIOUS PARTICIPATION PROCESS
HAS BEEN A SOURCE OF CONFUSION FOR THE INDUSTRY AND H.U.D.
STAFF. THAT’S WHY I’M REALLY EXCITED TO
BE HERE TODAY AND TO HELP LAUNCH THE NEW PREVIOUS PARTICIPATION
RULE AND SUPPLEMENTAL PROCESSING GOOD THAT ADDRESSES THOSE
CONCERNS BY STREAMLINING THE APPROACH, ADDING CONSISTENCY AND
FOCUSING THE REVIEW ON THE PEOPLE AND ENTITY TABS ARE IN
CONTROL OF THE PROJECTS AND MATTER MOST.
I’M GOING TO TURN IT OVER TO MY COLLEAGUE, THE ACTING DEPUTY AND
ASSISTANT SECRETARY OF THE OFFICE OF HEALTH CARE PROGRAMS.
THANK YOU FOR JOINING US.>>THANK YOU, EVERYONE, FOR
JOINING US. AS MENTIONED, I’M THE ACTING
OFFICER FOR HEALTH CARE AND WE’RE PROUD AFTER A LONG EFFORT,
ALMOST FOUR YEARS NOW, WE’RE PLEASED TO WELCOME YOU TO THIS
WEBCAST THAT WILL GO THROUGH THE DETAILS OF HOW WE’VE MADE THE
REVIEW PROCESS MORE REPEATABLE, PREDICTABLE AND CONSISTENT FOR
THOSE OF YOU WITH THE LEARNING PROCESS, YOU KNOW WHAT THAT
MEANS AND WE’RE VERY PROUD OF THIS PARTICULAR EFFORT.
WHILE THE REGULATION AND THE PROCESSING GUIDE WENT THROUGH
PUBLIC COMMENT AND WE’VE DONE OUR BEST TO ADDRESS BOTH
INDUSTRY AND STAFF CONCERNS AND MANY SUGGESTIONS, I’D LIKE TO
REMIND YOU, WE’LL BE RESPONSIVE TO FURTHER INPUT FOR THE PURPOSE
OF CONTINUOUS IMPROVEMENT AS THIS PROGRESSES.
RIGHT NOW, WE HAVE MORE FLEXIBILITY TO ADAPT TO CHANGES,
ANNUAL FEEDBACK THROUGH THE 30 DAY COMMENT PERIOD AND IN THE
PROCESSING GUIDE. THANK YOU FOR PARTICIPATING.
>>GREAT! SO I’M IN THE OFFICE OF GENERAL
COUNSEL. AND THE FIRST THING THAT WE’D
LIKE TO DO DURING THIS TRAINING IS PROVIDE YOU WITH AN OVERVIEW
OF THE REGULATION TEXT. THE REGULATIONS ARE FOUND IN 24
C.F.R. PART 200 SUBPART H. THAT’S 24C.F.R. PART 200-210
THROUGH 222 AND AT ONE POINT OR ANOTHER, THIS LINK MIGHT BE
HYPERLINKED TO THE FEDERAL REGISTER NOTICE, THE REGULATIONS
WERE ANNOUNCED IN THE FEDERAL REGISTER ON OCTOBER 14TH.
SO THERE, YOU CAN SEE NOT ONLY THE REGULATORY TEXT AND SEE THE
PROCESSING GUIDE TEXT BUT YOU CAN ALSO FIND THE COMMENTS THAT
WE RECEIVED DURING THE REGULATION PROMULGATION PERIOD
AND OUR RESPONSES SO IF YOU HAD SOME QUESTIONS AS TO WHY WE MADE
SOME DECISIONS OR HOW WE RESPONDED TO SOME COMMENTS, YOU
CAN SEE THAT IN THE FEDERAL REGISTER NOTICE.
THE MAIN PURPOSE OF THE REGULATION IS TO PUT EVERYBODY
ON NOTICE THAT H.U.D. WANTS TO CHECK THE PREVIOUS PARTICIPATION
OF THE INDIVIDUALS AND ENTITIES IN CONTROL OF OUR PROJECTS.
SO DESPITE WHAT MIGHT BE IN THE FOUR CORNERS OF AN APPLICATION,
WE’RE GOING TO LOOK TO THE PREVIOUS PARTICIPATION OF THE
INDIVIDUALS AND ENTITIES IN CONTROL OF THE PROJECT.
THE APPLICATION MIGHT LOOK GREAT BUT IF THAT CONTROLLING
PARTICIPANT HAS DEFAULTED ON FIVE OTHER LOANS, WE WANT TO
THINK TWICE BEFORE PROVIDING THEM ANOTHER F.H.A. INSURED
LOAN. THE NEW RULE SUPERSEDES THE
PREVIOUS REGULATION SO THAT WAS SOME QUESTIONS EARLY ON, DO THE
TERMS AND THE EXISTING REGULATION AND THE PREVIOUS
REGULATION, DO THEY STILL COME INTO PLAY?
SOME OF THE NUMBERS ARE DIFFERENT.
HOW DOES THAT WORK? IT’S A CLEAN SLATE.
THE OLD REGULATION IS GONE AND THE NEW REGULATION SUPERSEDES
IT. WHAT YOU’LL FIND IN THE
REGULATIONS ARE SOME DEFINED TERMS, SOME DEFINITIONS.
A LIST OF WHAT KINDS OF PROJECTS AND WHAT PROGRAMS THIS APPLIES
TO. AND IT’S IMPORTANT TO NOTE THAT
THIS PROJECT — THAT THIS RULE APPLIES ONLY TO THE OFFICE OF
HOUSING. PROGRAMS THAT ARE ADMINISTERED
BY THE OFFICE OF HOUSING. NOT P.I.H., NOT C.P.D.
THE HEART OF THE REGULATION IS REALLY SECTION 200.220.
UPON THE OCCURRENCE OF A TRIGGERING EVENT, THE
COMMISSIONER SHALL REVIEW THE PREVIOUS PARTICIPATION OF THE
RELEVANT CONTROLLING PARTICIPANTS IN CONSIDERING
WHETHER TO APPROVE THEIR PARTICIPATION.
THAT’S THE HEART OF IT. AND AGAIN, NO MATTER WHAT IT
SAYS IN THE FOUR CORNERS OF THE APPLICATION, WE’RE GOING TO LOOK
TO THE PREVIOUS PARTICIPATION IN ORDER TO DECIDE WHETHER OR NOT
TO ALLOW THAT CONTROLLING PARTICIPANT TO CONTINUE.
THE REGULATIONS ALSO SPECIFY A RECONSIDERATION PROCESS AND THE
PROCESSING GUIDE IS ALSO REFERENCED IN THE REGULATION.
SO THAT IT SAYS THE MORE SPECIFIC DETAILS ARE IN THE
PROCESSING GUIDE AND IF WE WANT TO CHANGE THE PROCESSING GUIDE,
WE’LL PROVIDE 30 DAYS OF PUBLIC COMMENT.
SO SARAH, MAYBE YOU COULD GIVE US AN OVERVIEW OF THE PROCESSING
GUIDE.>>GEE, THANKS, KATHY.
MY NAME IS SARAH BERGEN AND I’M AN UNDERWRITER IN THE HOUSING
DIVISION IN THE MINNEAPOLIS FIELD OFFICE AND I’M HAPPY TO BE
WITH YOU HERE TODAY TO TALK ABOUT THE PROCESSING GUIDE.
THE PROCESSING GUIDE IS A ONE STOP SHOP FOR THE PREVIOUS
PARTICIPATION REVIEW GUIDANCE. IT WAS DEVELOPED IN RESPONSE TO
THE VERY INITIAL PUBLISHING OF THE RULE WHICH WAS BACK IN
AUGUST OF 2015. THE FEEDBACK THAT H.U.D.
RECEIVED WAS THAT THE RULE WAS TOO BROAD.
AND IN RESPONSE TO THAT, THE PROCESS — PROCESSING GUIDE WAS
DEVELOPED TO PROVIDE SOME MORE SPECIFICITY.
IT WAS PUBLISHED AS AN APPENDIX TO THE RULE AND THEN IT WAS ALSO
PUBLISHED AS A STAND ALONE DOCUMENT AS HOUSING NOTICE
2016-15. AS HAS BEEN MENTIONED BEFORE,
THERE’S A 30-DAY COMMENT PERIOD BEFORE H.U.D. CAN MAKE
SUBSTANTIVE CHANGES TO THE GUIDE.
THIS WAS DONE TO PROVIDE SOME FLEXIBILITY SO THAT H.U.D. IS
BETTER ABLE TO RESPOND TO A CHANGING INDUSTRY LANDSCAPE
WHICH WE THINK IS AN IMPROVEMENT UPON THE PREVIOUS GUIDANCE WHICH
KIND OF LOCKED ON TO THE CORPORATE STRUCTURES THAT WERE
IN EFFECT WHEN THE GUIDANCE WAS DEVELOPED.
AS KATHY SAID, THIS IS A BRAND NEW PROCESS.
IT SUPERSEDES AND CLARIFIES THE PAST PRACTICE AND GUIDANCE THAT
HAS BEEN PUT OUT BEFORE. SO IF YOU’RE LIKE ME, PERHAPS
YOU HAVE SOME OF THE HANDBOOKS BOOKMARKED THAT YOU REFERRED TO
WHEN YOU’RE REVIEWING OR FILLING OUT PREVIOUS PARTICIPATION
INFORMATION. SO JUST SO YOU’RE ON NOTICE, THE
PREVIOUS PARTICIPATION HANDBOOK 4065.1 IS NO LONGER GOING TO BE
IN EFFECT. ANYWHERE, WHERE THE PROCESSING
GUIDE AND THE NEW RULE CONFLICT WITH THE MAP GUIDE, THE
PROCESSING GUIDE AND THE NEW RULE WILL TAKE PRECEDENCE.
THE MULTIFAMILY ASSET MANAGEMENT AND PROJECT SERVICING HANDBOOK
4350.1, I’M SURE MANY ACCOUNTING EXECUTIVES HAVE THAT BOOKMARKED.
THAT’S NO LONGER GOING TO BE IN EFFECT.
THE TWO PROGRAM BOOKS ALSO ARE BOTH SUPERSEDED BY THIS NEW
RULE. WE ENCOURAGE YOU, OBVIOUSLY, TO
READ THE PROCESSING GUIDE CAREFULLY.
THE GOAL OF THE PROCESSING GUIDE REALLY REINFORCES THE GOAL OF
THE NEW RULE WHICH IS TO FOCUS ON THE PEOPLE AND ENTITIES WITH
ORGANIZATIONAL OR OPERATIONAL AND/OR FINANCIAL CONTROL.
I KNOW QUITE A LARGE PORTION WAS INVOLVED INVOLVING FLAGS.
THIS PROVIDES A LEVEL OF TRANDZ PARN SI THAT WAS NOT THERE
PREVIOUSLY. AND AN OVERVIEW OF THE FLOW OF
THE PROCESSING GUIDE, IT STARTS OUT THE FIRST PAGES CLARIFIES
WHICH PROGRAMS ARE SUBJECT TO THE PREVIOUS PARTICIPATION
REVIEW. THE NEXT PORTION ON PAGES THREE
THROUGH NINE OF THE NOTICE DISCUSSES WHO MUST FILE AND HAS
A PRETTY DECENT LIST OF WHO IS EXCLUDED FROM FILING AND THERE’S
AN ADDITIONAL ADDED PORTION REGARDING ORGANIZATIONAL CHARTS
WHICH RACHEL IS REALLY THRILLED TO DISCUSS IN A FEW MINUTES.
THE PROCESSING GUIDE ALSO DISCUSSES HOW TO FILE.
AS ALWAYS, OUR PREFERRED METHOD IS TO FILE ELECTRONICALLY VIA
APPS. I KNOW THERE IS SOME ISSUE WITH
APPS BUT WE ARE WORKING WITHIN THE CONSTRAINTS OF OUR —
WORKING WITHIN OUR LIMITS TO MAKE THAT A BETTER PROGRAM
THAT’S EASIER FOR EVERYONE TO USE.
IF YOU DO USE A 2530 FORM, THE FORM ITSELF HAS NOT BEEN
UPDATED. BUT THE PROCESSING GUIDE DOES
INCLUDE NEW INSTRUCTIONS FOR THE FORM THAT WE’RE HOPING IS GOING
TO MAKE IT SIMPLER PROCESS TO FILL OUT.
SO IF YOU FEEL OUT THE 2530 FORM IN THE FUTURE, PLEASE REFER TO
THE GUIDANCE AND THE PROCESSING GUIDE RATHER THAN THE
INSTRUCTIONS ON THE FORM ITSELF.>>JUST A QUICK NOTE ON THAT, WE
ARE, OBVIOUSLY, WE ARE WORKING WITH THE PROPER AUTHORITIES TO
HAVE THE PAPER FORM INSTRUCTIONS BE UPDATED SINCE THEY JUST MIMIC
THE REGULATION. SO SHORTLY, THE FORM WILL HAVE
THE PROPER INSTRUCTIONS ON THERE.
BUT AGAIN, AS YOU MENTIONED, THE INFORMATION COLLECTED AND
CERTIFICATIONS WILL NOT CHANGE UNLESS IT GOES THROUGH ANOTHER
P.R.A. PROCESS FOR THE FORM SPECIFICALLY.
>>YES. RIGHT.
THANK YOU, KATHY, FOR THAT CLARIFICATION.
AND THE PROCESSING GUIDE HAS A SIGNIFICANT PORTION DEVOTED TO
FLAGS. I THINK IT’S FIVE PAGES.
PAGES 16 THROUGH 21. THIS DIVIDES FLAGS INTO THREE
TIERS IN ORDER OF DESCENDING RISK TO THE DEPARTMENT WITH A
TIER 3 FLAG BEING THE LEAST AMOUNT OF RISK AND TIER ONE
BEING CONSIDERED THE HIGHEST AMOUNT OF RISK.
THE PROCESSING GUIDE ALSO DESCRIBES HOW TRIVIAL THOSE
RISKS AND UNDER WHAT CIRCUMSTANCES FLAGS CAN BE
PLACED AND UNDER WHAT CIRCUMSTANCES THOSE CAN BE
REMOVED. FINALLY, THE LAST TWO PAGES OF
THE PROCESSING GUIDE INCLUDE A NEW CERTIFICATION FOR LIMITED
LIABILITY INVESTOR ENTITIES. THIS CERTIFICATION WILL SIMPLY
NEED TO BE SUBMITTED TO THE H.U.D. OFFICE AND DOES NOT NEED
TO UNDERGO AN APPROVAL PROCESS UNLIKE THE PREVIOUS
CERTIFICATION. AND NOW, WE ARE GOING TO GET
INTO SOME OF THE MEAT OF THE PROCESSING GUIDE.
AND START OFF WITH OVERVIEW OF IDENTIFYING THE CONTROLLING
PARTICIPANTS.>>WE’RE GOING TO DIVE IN!
BECAUSE I KNOW THERE’S A LOT OF — THERE’S A LOT OF CONFUSION ON
THIS PART. SO WE’RE GOING TO JUMP IN AND
WE’RE GOING TO BE — WE’RE GOING TO CLEAR UP ALL THAT CONFUSION.
>>WE HOPE TO.>>SO THE KEY QUESTION IN THE
PROCESSING GUIDE THAT FOLLOWS THE RULE ITSELF IS AGAIN WHO HAS
OPERATIONAL AND/OR FINANCIAL CONTROL.
WE’RE TRYING TO TARGET THE FOLKS AND THE ENTITY WHO’S HAVE
DECISION-MAKING AUTHORITY OVER THE COVERED PROJECT.
AND WE DON’T WANT TO REVIEW INDIVIDUALS OR ENTITIES THAT
DON’T HAVE ANY DECISION MAKING AUTHORITY OVER THE COVERED
PROJECTS. SO THIS PROCESSING GUIDE
INCLUDES A LIST OF EXCLUSION — OF ENTITIES AND INDIVIDUALS WHO
ARE EXCLUDED FROM FILING FOR PREVIOUS PARTICIPATION REVIEW.
SOME HIGHLIGHTS OF THE EXCLUSIONS ARE WHOLLY OWNED
ENTITIES, SHELL ENTITIES AND ONE OF MY FAVORITES IS NONPROFIT
BOARD MEMBERS WHO DO NOT ALSO HAVE A ROLE IN THE EXECUTIVE
MANAGEMENT OF THE NONPROFIT ITSELF AS LONG AS YOU ARE JUST
SIMPLY A BOARD MEMBER OF A NONPROFIT, IN MOST CASES, YOU’RE
NOT GOING TO BE REQUIRED TO FILE PREVIOUS PARTICIPATION REVIEW.
I KNOW THIS IS GOING TO PROBABLY BENEFIT A LOT OF OUR RISK SHARE
PROJECTS AND OUR VOLUME IS — HAS SEEN QUITE AN UP TICK
RECENTLY. FOR INSTANCE, I’VE GOT 25, 30 ON
MY DESK RIGHT NOW WITH THE RISK SHARE PROGRAM AND THE NONPROFIT
HAS 45 BOARD MEMBERS AND EACH ONE OF THOSE BOARD MEMBERS IS ON
THE 2530. IF THIS HAD BEEN SUBMITTED IN A
COUPLE OF WEEKS, THAT WOULD HAVE BEEN TWO BOARD MEMBERS BECAUSE
TWO OF THE BOARD MEMBERS ARE ALSO THE CONTROLLING
PARTICIPANTS WITHIN THE NONPROFIT ITSELF RATHER THAN
JUST BEING ON THE BOARD. AND JUST LIKE NOW, THE FIRST
DETERMINATION OF WHO WAS A CONTROLLING PARTICIPANT IS MADE
BY THE APPLICANT AND/OR THE F.H.A. LENDER.
WE WANT TO SEE WHO YOU THINK IS IN FINANCIAL OR OPERATIONAL
CONTROL OF THE PROJECTS AND HAVE THAT SUPPORTED AND WE’LL APPROVE
THAT AND MOVE ON TO OTHER PORTIONS OF THE APPLICATION.
ALL RIGHT. IDENTIFYING CONTROLLING
PARTICIPANTS A LITTLE BIT MORE. ONE OF THE NEW TERMS THAT WAS
BROUGHT UP IN THE RULE AND PREVIOUS PARTICIPATION GUIDE IS
THE SPECIFIED CAPACITY. AND A SPECIFIED CAPACITY ARE BY
DEFINITION ENTITIES THAT HAVE OPERATIONAL OR FINANCIAL CONTROL
OF THE PROJECT AND THESE ARE PRETTY CLEARLY DEFINED FOR EACH
OF THE PROGRAMS. FOR INSTANCE, FOR HOUSING
PROGRAMS WHICH IS WHAT I’M INVOLVED WITH MOSTLY, SPECIFIED
CAPACITIES ARE GOING TO BE THE BORROWER, THE OWNER, THE
MANAGEMENT AGENTS, AND IF APPLICABLE, THE CONTRACTOR.
AND THEN IN ADDITION TO SPECIFIED CAPACITIES BEING
IDENTIFIED AUTOMATICALLY AS CONTROLLING PARTICIPANTS, ANY
ENTITY OR INDIVIDUAL THAT HAS OPERATIONAL OR FINANCIAL CONTROL
OF A SPECIFIED CAPACITY IS ALSO CONSIDERED A CONTROLLING
PARTICIPANT. AND KATHY IS GOING TO GET INTO
THAT MORE SPECIFICALLY IN JUST A MINUTE.
SO SPECIFICALLY IS THAT THE GIST FOR ANY GIVEN PROJECT IS WE, THE
CONTROLLING PARTICIPANTS ARE GOING TO INCLUDE THE SPECIFIED
CAPACITIES AND THEN ANY ENTITY OR INDIVIDUAL THAT IS IN CONTROL
OF THE SPECIFIED CAPACITIES. AND AS WE’VE EXPECTED FOR QUITE
SOMETIME, FOR MOST OF THE PROJECTS, WE ARE GOING TO EXPECT
THAT AT LEAST ONE LIVING, BREATHING HUMAN BEING IS
IDENTIFIED AS A CONTROLLING PARTICIPANT FOR EACH PROJECT.
THANK YOU VERY MUCH. AND I’M GOING TO TURN IT OVER TO
KATHY NOW.>>OK.
SO JUST TO DIVE A LITTLE BIT DEEPER ON WHAT YOU JUST SAID,
SARAH, QUESTION IS, YOU KNOW, WHO MUST FILE, RIGHT?
SO WE’VE GOT THE USUAL SUSPECTS. THESE ARE THE ENTITIES THAT
YOU’RE USED TO DEALING WITH NOW. OWNERS OF 25% OR MORE OF THE
SPECIFIED CAPACITY. RIGHT?
SO IN MULTIFAMILY, YOUR BORROWER IS A SINGLE PURPOSE ENTITY AND
DOESN’T DO A WHOLE HECK OF A LOT OF GOOD TO CHECK THE PREVIOUS
PARTICIPATION OF AN ENTITY THAT’S BEEN CREATED JUST TO RUN
THIS PROJECT. WE WANT TO KNOW WHO IS IN
CONTROL OF THAT SPECIFIED CAPACITY.
SO OWNERS OF 25% OR MORE OF THE ENTITY THAT CONTROLS THE
SPECIFIED CAPACITY ARE ALSO PROBABLY GOING TO BE THE
CONTROLLING PARTICIPANTS. WE GOT — WE GOT A QUESTION ON
THIS WHEN WE WENT OUT FOR QUESTIONS.
THERE’S BEEN A LOT OF CONFUSION OVER THE YEARS ABOUT OWNERSHIP,
DIRECT OWNERSHIP, INDIRECT OWNERSHIP, 25% IF I’M — OH,
WHERE DO I — HOW DO I DO THE CALCULATION?
SO IF YOU THINK ABOUT IT, A GENERAL PARTNER MAY ONLY HAVE
.01% OF AN ENTITY BUT IF THEY’RE THE GENERAL PARTNER, THEY
CLEARLY ARE — THEY HAVE THE FINANCIAL AND OPERATIONAL
CONTROL SO WE WOULD EXPECT THEM TO BE FILING.
IN THE SAME WAY, IF THE GENERAL PARTNER, RIGHT, IF THERE’S TWO
DUDE WHO’S CONTROL THE GENERAL PARTNER AND THEY EACH HAVE 50%,
EACH OF THEM ARE OWNERS OF 25% OR MORE OF THE ENTITY THAT
CONTROLS THE SPECIFIED CAPACITY. SO WE WOULD ALL THINGS BEING
EQUAL EXPECT THOSE TWO DUDES TO FILE.
AS SARAH MENTIONED, FOR THE NONPROFITS, WE PRETTY MUCH WANT
THE EXECUTIVE DIRECTOR BUT NOT THE BOARD MEMBERS FOR A FOR
PROFIT CORPORATION, WE WOULD EXPECT MEMBERS OF THE BOARD WHO
ARE ALSO OFFICERS OF THE CORPORATION AND WE WOULD EXPECT
AND THIS SHORT TRANSACTIONS, THE PEOPLE OR ENTITY TABS ARE LISTED
IN THE SECTION OF THE REGULATORY AGREEMENT.
WE WOULD EXPECT THOSE PEOPLE TO BE IDENTIFIED THERE BECAUSE
THEY’RE THE CONTROLLING PARTICIPANTS.
WE WOULD EXPECT THEM TO FILE PREVIOUS PARTICIPATION
CERTIFICATIONS. AND AGAIN, THE BOTTOM LINE IS
WHO EXERCISES THE FINANCIAL AND/OR OPERATIONAL CONTROL.
SO ANY OF THE OTHER ASSUMPTIONS THAT WE’RE MAKING, THE POINT IS
THESE ARE — THESE ARE THE — WE’RE IDENTIFYING IN CERTAIN
SITUATIONS WHO WE WOULD EXPECT TO BE FILING.
AS SARAH MENTIONED, IT’S THE LENDER AND THE BORROWER, IT’S
THE APPLICANT THAT’S PROVIDING JUST LIKE NOW THE SUBMISSIONS,
THE CERTIFICATIONS, GOING THROUGH THE PROCESSING GUIDE,
GOING THROUGH THE REGULATIONS AND DETERMINING WHO IS IN
CONTROL. WE EXPECT THE ORGANIZATIONAL
CHARTS TO REFLECT THAT DETERMINATION AND WE EXPECT IT
TO MAKE SENSE. IF IT DOESN’T, WE’RE GOING TO
ASK ABOUT IT. WE ALSO SPECIFY IN THE
PROCESSING GUIDE SOME OF THOSE ENTITYS THAT HAVE BEEN A LITTLE
TRICKY RECENTLY, RIGHT? SO IF THERE’S A WIDELY HELD
CORPORATION OR PRETTY MUCH ANY KIND OF CORPORATION, IF THERE’S
A CONTROLLING SHAREHOLDER OR STOCKHOLDER, WE’RE GOING TO
EXPECT THAT PERSON OR ENTITY TO FILE.
FOR A TRUST WEEKS GOING TO EXPECT THE TRUSTEE TO FILE.
AND FOR REITS, WE’LL EXPECT THE REIT TO FILE AND THE C.E.O. AND
ANY COMPANY OFFICERS THAT EXERCISE CONTROL BUT NOT THE
OFFICERS THAT DON’T EXERCISE CONTROL.
>>THERE’S A SPECIAL REQUIREMENT FOR HOSPITALS.
WE DO A LIMITED NUMBER OF HOSPITAL TRANSACTIONS EVERY
YEAR. AND THOSE REQUIRE MORE
SPECIALIZED VETTING SO THE EXECUTIVE MANAGEMENT, THE CHIEF
EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER, CHIEF
OPERATING OFFICER OR EQUIVALENCE OF THE BORROWER AND THE MEMBERS
OF THE BOARD OF THE DIRECTORS THAT H.U.D. DETERMINES HAVE
CONTROL OVER THE FINANCES OR OPERATION OF THE HOSPITAL.
THAT WOULD TYPICALLY BE PRESIDENT, VICE PRESIDENT,
TREASURER, CHAIRMAN OF THE FINANCE COMMITTEE OR THE
EQUIVALENCE. BUT AGAIN, IF YOU’RE DOING A
HOSPITAL TRANSACTION, YOU’RE GOING TO HAVE MORE OF A
COLLABORATION WITH H.U.D. ON THOSE STEPS BECAUSE WE DO A
LIMITED NUMBER OF THOSE EVERY YEAR.
THE PROCESSING GUIDE ALSO LISTS EXCLUSIONS.
THOSE INDIVIDUALS AND ENTITIES THAT WE WOULD NOT EXPECT TO
FILE. ALL OTHER THINGS BEING EQUAL.
AS WE LISTED OUT A BUNCH OF SCENARIO WHERE’S WE THOUGHT
THESE ARE INDIVIDUALS AND ENTITIES THAT WE DON’T THINK
EXERCISE CONTROL. SO, FOR EXAMPLE, WHOLLY OWNED
ENTITIES AND SHELL ENTITIES. IF THE ENTITY IS CREATED JUST
FOR A LEGAL PURPOSE TO BE A VEHICLE FOR OTHERS TO ACT
THROUGH, WE DON’T NEED TO BE CHECKING THE PREVIOUS
PARTICIPATION OF THAT ENTITY. SIMILARLY, TAX CREDIT
INVESTIGATORS AND PASSIVE INVESTORS, NOT JUST LOW INCOME
HOUSING TAX CREDITS BUT HISTORIC TAX CREDITS, NEW MARKETS, WHAT
HAVE YOU, TAX CREDIT INVESTORS AND PASSIVE INVESTORS, THEY’RE
NOT EXERCISING THE DAY-TO-DAY CONTROL OVER THE OPERATIONS.
THEY’RE IN IT TO PROVIDE THE INVESTMENT.
THEY LET THE GENERAL PARTNERS AND THE OTHER MEMBERS OF THE
ORGANIZATION EXERCISE THE CONTROL.
WE WANT TO FACILITATE THAT KIND OF INVESTMENT, NOT HINDER IT.
MINOR OFFICERS, CHANCES ARE THAT ALL OF THE OFFICERS OF THE
CORPORATION ARE NOT GOING TO BE IN A POSITION TO PREVENT A
VIOLATION FROM OCCURRING. THEY’RE NOT ACTUALLY GOING TO BE
THE ONES IN CONTROL OF THE PROJECT SO DOESN’T DO US ANY
GOOD TO BE TRACKING THEIR PARTICIPATION.
SAME THING. MEMBERS OF THE BOARD OF
DIRECTORS, IF YOU’VE GOT A NONPROFIT BOARD OF DIRECTORS OR
EVEN A FOR PROFIT BOARD OF DIRECTORS, THEY’RE PROVIDING
SOME OVERSIGHT BUT THEY’RE NOT PROVIDING THE DAY-TO-DAY
OPERATIONAL CONTROL IN MOST CASES.
SO WE DON’T NEED TO BE TRACKING ALL OF THOSE BOARD MEMBERS
BECAUSE THAT’S JUST NOISE FOR US.
SIMILARLY, INDIVIDUALS AND ENTITIES WITH LESS THAN 25%
OWNERSHIP PROBABLY IF YOU HAVE LESS THAN 25% OWNERSHIP, YOU’RE
NOT REALLY EXERCISING CONTROL. BUT THE PROCESSING GUIDE IS
EXPLICIT. WE’RE LOOKING FOR THOSE
INDIVIDUALS AND ENTITIES THAT EXERCISE CONTROL.
SO AS HAS HAPPENED, IF YOU SET UP AN ENTITY SO THAT YOU OWN 20%
AND YOUR WIFE OWNS 20% AND YOUR SON OWNS 20%, WELL, JUST BECAUSE
NONE OF YOU GUYS HAVE 25% DOESN’T MEAN THAT, YOU KNOW,
NOBODY IS IN CONTROL. YOU’RE JUST TRYING TO BE TRICKY
AND THE POINT OF THIS RULE IS JUST TO PUT IN SOME COMMONSENSE
SO THAT THE FORM DOESN’T SUPERSEDE THE FUNCTION.
THE POINT IS WHO IS IN CONTROL? ALSO, PEOPLE WHO WE DO NOT THINK
ARE IN CONTROL. NURSING HOME ADMINISTRATORS,
MORTGAGEES, LENDERS, WE HAVE DIFFERENT PARTS OF OVERSIGHT AND
INDIVIDUALS AND ENTITIES THAT DO NOT EXERCISE FINANCIAL OR
OPERATIONAL CONTROL. RACHEL?
>>ALL RIGHT. MY NAME IS RACHEL COLEMAN AND I
WORK IN THE OFFICE OF HEALTH CARE PROGRAMS AND I AM VERY
EXCITED TO BE HERE TODAY. AND PARTICULARLY I’M EXCITED TO
TALK ABOUT ORGANIZATION CHARTS. SO AN ORGANIZATION CHART IS A
VISUAL REPRESENTATION OF THE OWNERSHIP STRUCTURE OF AN
ORGANIZATION. OUR EXPECTATION IS THAT OUR
LENDERS AND APPLICANTS WILL SUBMIT A SEPARATE ORGANIZATION
CHART FOR EACH SPECIFIED CAPACITY.
THAT MEANS WE WANT ONE CHART FOR YOUR OWNER.
WE WANT ONE CHART FOR YOUR MANAGEMENT AGENT AND ONE FOR
YOUR GENERAL CONTRACTOR AND ONE FOR YOUR OPERATOR.
A LOT OF TIMES, WE’LL SEE CHARTS LUMPED TOGETHER WHERE YOU HAVE A
WHOLE BUNCH OF DIFFERENT CHARTS AND IT’S VERY CONFUSING AND HARD
TO READ. SO, YOU KNOW, THE KEY POINT HERE
WITH ORG CHARTS IS WE WANT THEM TO BE CLEAR ENOUGH SO SOMEONE
UNFAMILIAR WITH THE PROJECT AND THE ENTITIES INVOLVED CAN
UNDERSTAND THE OWNERSHIP AND CONTROL STRUCTURE VERY QUICKLY.
THAT’S REALLY THE KEY, THE KEY, THE KEY.
THE BETTER YOUR ORG CHART, THE FASTER OUR STAFF WILL REVIEW IT.
WHEN WE GET INCOMPLETE OR CONFUSING ORG CHARTS, IT TAKES
US A TON OF TIME TO FIGURE OUT WHAT’S HAPPENING.
IF I GET A NICE CLEAR ORG CHART, I CAN MOVE ON IN FIVE MINUTES.
I CAN FINISH MY PREVIOUS PARTICIPATION REVIEW.
THAT’S WHAT WE’RE LOOKING FOR. VERY CLEAR.
OUR PROCESSING GUIDE DOES HAVE A LOT OF INFORMATION IN IT ON ORG
CHARTS SO I ENCOURAGE YOU TO REALLY STUDY THAT CAREFULLY.
ONE THING THAT YOU’RE GOING TO NOTICE IS NOT EVERYONE LISTED ON
THE ORG CHART IS REQUIRED TO FILE A PREVIOUS PARTICIPATION
SUBMISSION. AND THE ORG CHART REALLY, THE
REASON THAT WE NEED THE ORG CHART IS THAT IS HOW WE CHECK TO
MAKE SURE THAT THE IDENTIFIED CONTROLLING PARTICIPANTS MAKE
SENSE. WE’RE REALLY LOOKING TO THE
LENDER HERE TO PUT TOGETHER THE ORG CHART AND LET US KNOW WHO
THE CONTROLLING PARTICIPANTS ARE.
IF THEY MAKE SENSE, WE’RE GOING TO MOVE ON.
ALL RIGHT. ORGANIZATION CHARTS NEED TO SHOW
ALL TIERS OF THE OWNERSHIP STRUCTURE INCLUDING MEMBERS OR
OWNERS OF THE ENTITIES LISTED. AND THEY NEED TO SHOW ALL THE
PARTICIPANTS, NOT JUST THE CONTROLLING PARTICIPANTS.
THE PROCESSING GUIDE DOES LAY OUT SOME PROVISIONS FOR WIDELY
HELD ENTITIES MANY WE DON’T NEED TO HAVE YOU LIST EVERY SINGLE
PERSON IF IT’S WIDELY HELD OR IF THE AMOUNT OF PEOPLE WOULD BE
OVERLY BURDENSOME. SO CHECK THAT OUT IF YOU HAVE,
YOU KNOW, A SITUATION LIKE THAT. OUR INTENT IS NOT TO BE OVERLY
BURDENSOME. OUR INTENT IS TO JUST HELP US
GET THE FULL PICTURE QUICKLY AND EASILY.
ALSO, WE NEED TO SEE THE PERCENTAGES OF OWNERSHIP AND THE
ROLE AND THE ENTITY. AND THEY NEED TO ADD UP TO 100%
AND THEN WE NEED AT LEAST ONE NATURAL PERSON.
SO AS I MENTIONED, YOU KNOW, WE’RE REALLY LOOKING TO THE
LENDER HERE. AND, YOU KNOW, IT’S OUR
EXPECTATION THAT THE LENDER WILL HANDLE THIS.
AND WILL PROVIDE IT TO US. YOU KNOW, THE ORGANIZATION CHART
IS AN EXHIBIT TO THE APPLICATION AND SO IT’S SUBJECT TO ALL THE
CERTIFICATIONS OF CORRECTNESS AND COMPLETENESS SO JUST LIKE
ALL OF THE APPLICATION EXHIBITS, THE EXPECTATION IS IT WILL BE
SUBMITTED CLEAR AND CORRECTLY AND COMPLETELY.
NOW, WE’LL MOVE ON TO SOME EXAMPLES.
>>OH, GOSH. OK, A LITTLE NERVOUS.
WE’RE JUMPING IN — WE’RE JUMPING IN HERE.
THIS IS AN EXAMPLE. INDIANA AVENUE LLC, AS THE
BORROWER ENTITY. WHAT WE HAVE HERE LOOKS LIKE A
JOINT VENTURE WITH LOCAL HOUSING NONPROFIT AND LOCAL DEVELOPER.
AND THE DEVELOPER HAS FOUR — FOUR MEMBERS THERE.
WHO MUST FILE HERE. IN THIS CASE, WHAT WE’VE BEEN
TOLD IN THIS SUBMISSION, WE’RE NOT MAKING THE INITIAL
DETERMINATION. WE’RE USING THE ORG CHART TO
CHECK WHAT HAS BEEN — WHAT HAS BEEN SUBMITTED.
DOES IT MAKE SENSE? DOES IT MAKE SENSE, RIGHT?
IF THE LOCAL HOUSING NONPROFIT, HEY, LOTS OF TIMES, THE
NONPROFIT MIGHT BE IN TO PROVIDE SOME OUTREACH TO THE COMMUNITY
OR IT MIGHT BE WORKING WITH THE DEVELOPER TO LEARN HOW TO DO
DEVELOPMENT AND SO IN THIS PARTICULAR CASE, IF THE LOCAL
HOUSING NONPROFIT IS NOT PROVIDING, IS NOT EXERCISING THE
DAY-TO-DAY CONTROL, THE OPERATIONAL AND FINANCIAL
CONTROL, THEN THERE’S NO REASON FOR THE NONPROFIT TO FILE.
HERE, THEY ARE LISTED AS HAVING 20%.
20% FALLS BELOW THE 25% THRESHOLD AND WE ARE TOLD THEY
HAVE NO AUTHORITY OVER THE DAY-TO-DAY OPERATIONS SO WE
WOULD NOT EXPECT A FILING FROM THE LOCAL HOUSING NONPROFIT.
HERE, LOOKS LIKE LOCAL DEVELOPER INC. IS EXERCISING THE CONTROL.
AND IT HAS FOUR MEMBERS. PERSON A HAS ONLY 10% CONTROL.
BUT THEY’RE THE MANAGING MEMBER. PROBABLY SHOULD HAVE BEEN LOCAL
HOUSING DEVELOPER LLC. SO LOCAL DEVELOPER LLC, AND
PERSON A IS THE MANAGING MEMBER. SO EVEN THOUGH PERSON A ONLY HAS
10%, PERSON A IS GOING TO BE THE CONTROLLING PARTICIPANT.
PERSON B HAS 55%. MAYBE THEY’RE PERSON A’S PRIMARY
PARTNER. WE DON’T — YOU KNOW, WE DON’T
KNOW INDEPENDENTLY. DEPENDS ON THE INFORMATION THAT
WE GET. PERSONS C AND D HAVE A LOWER
PERCENTAGE OF OWNERSHIP AND WE’RE TOLD THEY HAVE NO CONTROL
OVER DAY-TO-DAY OPERATIONS. SO IN THIS CASE, WE WOULD HAVE
PERSONS A AND B FILE ALONG WITH THE SPECIFIED CAPACITY AND THE
BORROWER.>>CAN I ASK A QUESTION, KATHY?
>>PLEASE, SARAH.>>NOW, IT LOOKS LIKE LOCAL
DEVELOPER LLC IS 80% MANAGING MEMBER.
WHEN I THINK MANAGING MEMBER, I THINK CONTROL.
WHY DOESN’T THE 80% MANAGING MEMBER HAVE TO FILE?
>>THAT’S A REALLY GOOD QUESTION AND THERE’S GOING TO BE LOTS OF
SITUATIONS WHERE LOCAL DEVELOPER LLC SHOULD BE FILING.
RIGHT? IT DEPENDS ON THE SPECIFICS OF
THE TRANSACTION. IN THIS CASE, WHAT WE WOULD —
WHAT WE COULD BE TOLD IN ORDER TO MAKE THIS MAKE SENSE, WE
COULD SAY HEY, LOCAL DEVELOPER LLC HAS JUST BEEN CREATED FOR
THESE FOUR DUDES IN THIS ONE CASE.
IT’S NOT AN INDEPENDENT ENTITY. IT’S REALLY A SHELL FOR THOSE
FOUR PARTNERS. IT DOESN’T HAVE OTHER
PARTICIPATION AND IT’S NOT ACTUALLY A CONTROLLING
PARTICIPANT. IT’S PERSONS A AND B PRIMARILY
WORKING THROUGH THAT ENTITY AS A LEGAL VEHICLE.
BUT IF I GOT AN ORG CHART LIKE THIS, THIS WOULD BE — AND I
DIDN’T HAVE THAT EXPLANATION FROM THE LENDER OR THE
APPLICANT, THAT WOULD BE A GREAT QUESTION FOR ME TO ASK LIKE HEY,
THIS GUY HAS 80%. WHY WOULDN’T THEY FILE?
AND DEPENDING ON, YOU KNOW, THE ANSWER, THAT — THAT COULD BE
ACCEPTABLE OR IF THE ANSWER COMES BACK OH, YEAH, WE FORGOT,
LET’S HAVE THEM FILE.>>SO THIS LOOKS LIKE AN EXAMPLE
OF WHERE IF THE LENDER PROVIDES SOME CLEAR AND SUPPORTABLE
INFORMATION ABOUT WHY A LOCAL DEVELOPER LLC DOESN’T HAVE TO
FILE, THEN — AND IT’S SUPPORTED BY THE ORG CHART, THEN WE WILL
FOLLOW WHAT THEY SAY AND APPROVE AND MOVE ON.
>>YEAH. AND I THINK IT’S REALLY HELPFUL
IN THE ORG CHART WHERE, YOU KNOW, FOLKS HAVE INDICATED NO
AUTHORITY OVER DAY-TO-DAY OPERATIONS OR, YOU KNOW, SHELL
ENTITY OR WHAT NOT. I THINK THAT KIND OF HELPS US
FRAME THE CONVERSATION.>>DEFINITELY.
>>ALL RIGHT. OK, NEXT EXAMPLE, THIS IS A
NONPROFIT HOUSING ARE US LOCAL PROJECT INC.
IT IS 100% OWNED FOR HOUSING BY ALL INC. WHICH IS A NATIONAL
NONPROFIT AND THE NONPROFIT SPONSOR OF THE SINGLE ENTITY AND
THAT’S THE BORROW OTHER AND PERSON A IS THE CEO AND PERSON B
IS THE CFO. WE HAVE LISTED ON THE SIDE THERE
THE BOARD OF DIRECTORS FOR HOUSING FOR ALL INC.
NOW, IN THE PAST, WE MIGHT HAVE EXPECTED ALL OF THE BOARD OF
DIRECTORS — ALL OF THE DIRECTORS ON THE BOARD OF
DIRECTORS TO FILE. BUT IN THIS CASE, WHAT WE’RE
REALLY LOOKING FOR IS HOUSING FOR ALL INC., THE NONPROFIT
SPONSOR AND PERSON A AND PERSON B AS THE PRESIDENT, CEO AND CFO
AS WELL AS THE SPECIFIED CAPACITY, THE NONPROFIT
BORROWER, ENTITY THAT’S THE SPECIFIED CAPACITY IN THIS ONE.
DEPENDING ON THE INFORMATION, THAT WE HAD GOTTEN AND DEPENDING
ON THE KIND OF PROJECT THAT — THE KIND OF WHAT PROGRAM IT IS,
IT’S QUITE POSSIBLE THAT HOUSING FOR ALL INC. ISN’T A NATIONAL
NONPROFIT SPONSOR. IT COULD JUST BE A SHELL ENTITY
FOR THE JOINT VENTURE BETWEEN PERSON A AND PERSON B.
BUT THE INFORMATION HERE THAT WE GOT SAYING OH, NO, THIS IS OUR
NATIONAL NONPROFIT. THIS IS THE ENTITY THAT’S ACTING
AND THEY’VE CREATED THE SINGLE PURPOSE ENTITY, HOUSING ARE US
LOCAL PROJECT SO THAT’S WHY HOUSING FOR ALL INC. SHOULD
FILE.>>KATHY, I HAVE A QUESTION FOR
YOU.>>YEP.
>>SO ONE OF THE THINGS THAT I KNOW HAS BEEN SORT OF CONFUSING
FOR SOME PEOPLE IS, YOU KNOW, IF WE’RE TALKING ABOUT DAY-TO-DAY
CONTROL, ISN’T THAT THE BOARD OF DIRECTORS ON A NONPROFIT?
AREN’T THEY REALLY THE ONES WHO ARE, YOU KNOW, THEY’RE ON THE,
YOU KNOW, THEY’VE HAD MEETINGS AND THINGS.
WHY AREN’T THEY CONSIDERED A CONTROLLING PARTICIPANT?
>>THAT’S A REALLY GREAT QUESTION.
AND I THINK, YOU KNOW, IT’S POSSIBLE WE COULD SEE A SCENARIO
WHERE THE BOARD OF DIRECTORS ARE VERY INVOLVED IN THE RUNNING OF
A NONPROFIT. BUT IN MOST CASES, THAT’S JUST
NOT THE CASE. RIGHT?
THE BOARD OF DIRECTORS WILL MEET MAYBE QUARTERLY, MAYBE MONTHLY,
DEPENDS ON THE NONPROFIT. AND THEY’RE OVERSEEING THE
DECISIONS THAT ARE BEING MADE BY THE EXECUTIVE DIRECTOR OR THE
PRESIDENT OR THE OTHER OFFICERS OF THE NONPROFIT.
AGAIN, DEPENDING ON HOW THAT PARTICULAR NONPROFIT IS SET UP.
OFTENTIMES ESPECIALLY IN THE NONPROFIT, THE BOARD OF
DIRECTORS ARE COMMUNITY MEMBERS THAT ARE JUST VOLUNTEERING THEIR
TIME. RIGHT?
SO AGAIN, IT’S NOT A PARTICULARLY FRUITFUL USE OF
H.U.D.’S TIME TO BE CHECKING UP ON THE BOARD OF DIRECTORS
BECAUSE THEY’RE NOT ACTUALLY APPROVING EVERY SINGLE ACTION
THAT THE EXECUTIVE DIRECTOR TAKES OR CONTROLLING THE
INDIVIDUAL PROJECT. THEY’RE PROVIDING BROADER
OVERSIGHT OVER THE — OVER THE NONPROFIT.
BUT THAT’S WHY IF THERE’S SOMEBODY ON THE BOARD OF
DIRECTORS THAT’S ALSO AN OFFICER FOR THE COMPANY OR IS ALSO
EXERCISING DAY-TO-DAY CONTROL, THAT’S THE INDIVIDUAL THAT WE
WANT TO SEE FILE. BECAUSE THAT INDIVIDUAL IS IN A
POSITION TO PREVENT A VIOLATION FROM OCCURRING OR CURE A
VIOLATION IF IT HAPPENS. RIGHT?
IF YOU THINK ABOUT EVEN THE OTHER OFFICERS ON THE BOARD OF
DIRECTORS, YOU KNOW, YOU LOOK AT THE — YOU KNOW, THE SECRETARY
OF THE BOARD OF DIRECTORS FOR THE NONPROFIT, PROBABLY THE
SECRETARY’S ONLY JOB IS TO KEEP NOTES OF THE BOARD MEETING, TO
KEEP THE MINUTES OF THE BOARD MEETING.
TREASURER MAY BE DOING SOME AUDIT WORK OF THE NONPROFIT OR
MIGHT LITERALLY JUST BE IN CHARGE OF LIKE BUYING THE PIZZA
THAT NIGHT. RIGHT?
THERE’S A HUGE RANGE IN NONPROFITS.
SOME OF THEM ARE REALLY SOPHISTICATED AND THE BOARDS OF
DIRECTORS ARE REALLY SOPHISTICATED AND DO A LOT OF
OVERSIGHT AND SOME OF THEM ARE MORE OF A COMMUNITY ORGANIZATION
AND DON’T EXERCISE THAT KIND OF CONTROL.
>>GREAT EXPLAINER, KATHY.>>THANKS.
>>LET’S HOPE I’M RIGHT. OK.
ATLANTIC AVENUE LIMITED PARTNERSHIP.
THIS IS A MORE OF A COMPLICATED STRUCTURE AND HERE WE SEE THIS
WOULD BE A TAX CREDIT TRANSACTION.
OK? SO WE SEE THAT THE MANAGING
GENERAL PARTNER IS LISTED AS B&OGP1, LLC.
THERE’S ANOTHER GENERAL PARTNER LISTED, ILLINOIS AVENUE GP2.
THERE’S ALSO AN INVESTOR, MONEYBAGS EQUITY FUND LP, AND
SQUISHED IN THERE, THERE’S MONEYBAGS SLP, SPECIAL LIMITED
PARTNER WITH 0% INTEREST. SO AGAIN, MOST OF THE TIME WE’LL
SEE ONE GENERAL PARTNER BUT SOMETIMES, YOU COULD SEE A
COUPLE AND I KNOW THERE’S A TAX CREDIT, CALIFORNIA STATE TAX
CREDIT THAT REQUIRES NONPROFIT PARTICIPATION SO OFTEN, THERE
COULD BE AN ADMINISTRATIVE MANAGING PARTNER OR VARIATIONS
ON THAT. BUT WHAT’S IMPORTANT AGAIN IS
WHO IS IN CONTROL OF THE DAY TO DAY.
ALL RIGHT? SO HERE, WE ARE TOLD THAT B&O,
GP1 IS REALLY THE MANAGING GENERAL PARTNER.
IT HAS TWO MEMBERS, CONNECTICUT AVENUE MANAGEMENT 2LLC, 80%
MEMBER AND MANAGER AND BALTIC AVENUE LLC, 20% MEMBER WITH SOME
INVESTORS THERE INVESTING IN IT. AND PERSON F AND PERSON G ACTING
THROUGH CONNECTICUT AVENUE MANAGEMENT 2.
THIS IS REALLY OUR CONTROLLING, OUR CONTROLLING ENTITY ON THIS
ONE. THIS IS, WE’RE TOLD THIS IS THE
MANAGING GENERAL PARTNER. WHAT WE’RE TOLD IS BALTIC AVENUE
DOESN’T HAVE CONTROL OVER THE DAY TO DAY.
IT’S REALLY GOING TO BE CONNECTICUT AVENUE MANAGEMENT
LLC. AND IT’S GOING TO BE PERSONS F
AND PERSONS G. ILLINOIS AVENUE GP2, AGAIN,
THERE COULD BE A SCENARIO, A SIMILAR STRUCTURE WHERE ILLINOIS
AVENUE GP IS REALLY EXERCISING THE CONTROL EVEN THOUGH IT’S
ONLY A .0035% MEMBER. PERCENTAGE OF INTEREST IN THAT
CASE ISN’T WHAT’S IMPORTANT. IT’S HOW DOES THE PARTNERSHIP
AGREEMENT SPLIT OUT THE — THE CONTROL RIGHTS?
AND IF THE LENDER IN THEIR VETTING HAS DETERMINED THAT IT’S
REALLY B&O, GP1 AND CONNECTICUT AVENUE MANAGEMENT 2LLC, THAT IS
CERTAINLY PLAUSIBLE IF YOU’RE WILLING TO CERTIFY THE VET,
WE’RE WILLING TO ACCEPT THAT. COUPLE OF OTHER THINGS THAT I
COULD POINT OUT, MONEYBAGS LLC VERY LIKELY HAS A NUMBER OF
INVESTOR MEMBERS IN THAT FUND. WE DON’T CARE!
WE STOP AT THE INVESTOR MEMBER LEVEL.
SO ALL WE NEED — ALL WE NEED IS THE LLCI, THE CERTIFICATION FROM
MONEYBAGS EQUITY FUND LP. AGAIN, THE REVISED FORM AT THE
END OF THE PROCESSING GUIDE ELIMINATES THE H.U.D. APPROVAL.
SO WE JUST NEED THEM TO SUBMIT THAT FORM SAYING YES, WE DON’T
EXERCISE DAY-TO-DAY CONTROL, WE ARE THE INVESTOR MEMBER.
SIMILARLY, WE VERY FREQUENTLY SEE SPECIAL LIMITED PARTNER
MEMBERS AS — IN THE OWNERSHIP STRUCTURE.
NOW, THERE MIGHT BE A SCENARIO IN WHICH THE SPECIAL LIMITED
PARTNER, THE INVESTOR WANTS A SPECIAL LIMITED PARTNER TO BE
PREAPPROVED SO THAT IF THEY NEED TO — IF THE INVESTOR NEEDS TO
REMOVE THE GENERAL PARTNER, THE SPECIAL LIMITED PARTNER CAN TAKE
OVER. WE HAVE A PROCESS SET UP FOR
THAT AND IF THAT WERE THE CASE, WE WOULD EXPECT A FILING BY
MONEYBAGS SLP, LLC. BUT IF EQUALLY LIKELY, THE
INVESTOR DOESN’T NEED THAT PREAPPROVAL, DOESN’T WANT TO GO
THROUGH THAT NOW UP FRONT, WE DON’T NEED A FILING FROM
MONEYBAGS SLP. SO THE NEXT SLIDE GOES THROUGH
— I KNOW IT’S A LITTLE BIT HARD TO SEE ON THE TWO SLIDES.
THIS ONE IS A LITTLE BIT COMPLICATED.
BUT IN THIS CASE, WE’D HAVE THE SPECIFIED CAPACITY.
I’LL TOGGLE BACK AND FORTH. ATLANTIC AVENUE LIMITED
PARTNERSHIP, RIGHT? AND THEN WE’VE BEEN TOLD
CONNECTICUT AVENUE MANAGEMENT 2, LLC IS NOT A SHELL ENTITY.
IT’S AN ENTITY THAT HAS DEVELOPMENT EXPERIENCE AND IT’S
CONTROLLED BY PERSONS F AND G SO WE WOULD GET PERSONS F AND G AND
CONNECTICUT AVENUE MANAGEMENT LLC.
AND ALL THE REST WOULD BE NOT — WE WOULD NOT EXPECT TO FILE.
INCLUDING THE BOARD OF DIRECTORS OF AFFORDABLE HOUSING FOUNDATION
INC., THE SPONSOR OF ILLINOIS AVENUE GP-2, LLC BECAUSE IF
ILLINOIS AVENUE ISN’T EXERCISING CONTROL, WE CERTAINLY DON’T CARE
WHO IS EXERCISING CONTROL OVER AN ENTITY THAT ISN’T EXERCISING
CONTROL. WE DON’T CARE.
TOO MUCH NOISE.>>AND, YOU KNOW, IT’S IMPORTANT
TO POINT OUT ON A COMPLICATED ORG STRUCTURE LIKE THIS ONE
THAT, YOU KNOW, IF WE GOT A CHART THAT WAS REALLY UNCLEAR,
THIS WOULD TAKE US FOREVER TO FIGURE OUT.
SO KEEP THOSE ORG CHARTS SUPER CLEAR AND TO THE POINT AND MAKE
SURE YOU’RE INCLUDING ALL THE INFORMATION SO WE CAN QUICKLY
AND EASILY UNDERSTAND.>>IF IT TAKES US FOREVER, THAT
MEANS WE’RE PROBABLY SENDING A LOT OF QUESTIONS OR HAVING PHONE
CALLS WITH OUR LENDER AND I MEAN, NOT ONLY IS IT TAKING OUR
TIME BUT TAKING YOUR TIME AS WELL.
>>OK. ANOTHER EXAMPLE AND WE’RE ALMOST
DONE WITH EXAMPLES. WE HAVE ANOTHER EXAMPLE HERE
MARVIN GARDENS LLC. PERSON A IS THE PRESIDENT AND
CEO. THEY ARE WHOLLY OWNED BY PARK
PLACE LLC AND PARK PLACE HAS TWO MEMBERS, PENNSYLVANIA AVENUE AND
KENTUCKY — KENTUCKY AVENUE PERSON A WE’RE TOLD IS THE
CONTROLLING MEMBER, 50% SHAREHOLDER OF PENNSYLVANIA
AVENUE INC. THERE ARE ALSO OTHER
SHAREHOLDERS AT 25% BUT WE ARE TOLD THEY DO NOT EXERCISE
CONTROL. SO IN THIS CASE THE SUBMISSION
COMES IN AND PERSON A SUBMITS AND THE SPECIFIED CAPACITY
MARVIN GARDENS AND THE INFORMATION THAT WE RECEIVE IS
PARK PLACE LLC IS A — IS JUST A SHELL ENTITY FOR KENTUCKY AVENUE
AND PENNSYLVANIA AVENUE. PENNSYLVANIA AVENUE WE’RE TOLD
IS A SHELL FOR PERSONS A, B AND C.
IT DOES NOT HAVE AN INDEPENDENT ENTITY.
IT’S GOING TO BE USED SOLELY FOR THIS — SOLELY FOR THIS
TRANSACTION. IT WILL NOT EXIST WITHOUT
PERSONS A, B AND C. SO PERSON A IS THE CONTROLLING
— IS THE CONTROLLING MEMBER. AND THE OTHER — THE OTHER
MEMBERS ARE NOT — ARE NOT INCLUDED INCLUDING KENTUCKY
AVENUE INC. WHICH IS A 50% MEMBER OF PARK PLACE.
IN THIS CASE, WE’RE TOLD IT HAS NO CONTROL OVER THE DAY-TO-DAY
OPERATIONS. MAYBE THEY’RE JUST PROVIDING,
YOU KNOW, AN INVESTOR MEMBER IN PARK PLACE LLC.
WE MIGHT NEED — HAVE SOME QUESTIONS AS TO TELL ME MORE
ABOUT THAT, HOW DOES IT WORK? IF THERE ARE PLAUSIBLE SCENARIOS
WHERE THERE WOULD BE A MEMBER IN LLC.
>>QUESTIONS ON THIS ONE?>>MAKES SENSE.
>>GREAT.>>THIS IS OUR FINAL EXAMPLE.
WHOLLY OWNED BY ST. JAMES PLACE THAT HAS PACIFIC AVENUE LLC AND
NORTH CAROLINA LLC AS ITS MEMBERS.
WE — AS WE ROLL DOWN THE ORG CHART ON NORTH CAROLINA AVENUE,
VERMONT AVENUE LIMITED PARTNERSHIP IS ITS SOLE MEMBER
AND VERMONT AVENUE PARTNER LLC AND ATLANTIC AVENUE REIT GP ARE
ITS MEMBERS WITH ATLANTIC AVENUE REIT INC. AS THE SOLE MEMBER OF
VERMONT AVENUE PARTNER. SO IN OTHER WORDS, THIS SIDE OF
THE ORG CHARTS NORTH CAROLINA AVENUE LLC, THIS WHOLE BRANCH,
THIS IS REALLY AN INVESTMENT ON ITS SIDE.
SO IT’S POSSIBLE THAT WE COULD HAVE STOPPED ON THE DISCLOSURE
ON THIS AS AN INVESTOR FUND DEPENDING ON THE — THE
SPECIFICS OF THE TRANSACTIONS THAT WE WANT TO DISCLOSE.
MORE DISCLOSURES ARE BETTER. HERE WE’VE LEARNED THERE’S A
REIT THERE. IT’S NOT THE BORROWER IN THIS
CASE, IT’S JUST AN INVESTOR IN THE BORROWER, RIGHT?
IT’S INVESTING THROUGH NORTH CAROLINA AVENUE LLC.
SO WE — BECAUSE THOSE ARE JUST INVESTING, WE’RE TOLD THAT IF
NORTH CAROLINA AVENUE LLC DOESN’T EXERCISE DAY-TO-DAY
CONTROL, THEN WE DON’T CARE ABOUT ITS MEMBERS.
RIGHT? IF PACIFIC AVENUE LLC IS THE 1%
MANAGING MEMBER, THEN THAT’S THE ENTITY THAT’S EXERCISING —
THAT’S EXERCISING CONTROL. AND PERSON A, IF IT’S THE 100%
MEMBER OF PACIFIC AVENUE, THAT MAKES PACIFIC AVENUE A SHELL
ENTITY. AND THAT MEANS PACIFIC AVENUE
DOESN’T ACT INDEPENDENT OF ITS SOLE MEMBER, THE PERSON WE
REALLY CARE ABOUT IS PERSON A, THE SOLE MEMBER OF PACIFIC — OF
PACIFIC AVENUE. NOW, WE MIGHT HAVE SOME
QUESTIONS ON THIS. LIKE AGAIN, PACIFIC AVENUE LLC,
IF, YOU KNOW, DOES IT ACT INDEPENDENTLY OF PERSON A?
AGAIN, IT’S HARD TO SEE HOW THEY WOULD IF THEY’RE 100% MANAGING
MEMBER. SIMILARLY, ST. JAMES PLACE LLC,
RIGHT, IT SEEMS A LITTLE ODD THAT PACIFIC AVENUE LLC AND
NORTH CAROLINA WOULDN’T GO DIRECTLY INTO THE BORROWER SO I
MIGHT HAVE A QUESTION ON THAT. BUT IF I’M TOLD ST. JAMES PLACE
ALSO LIKE SOME OF OUR OTHER ENTITIES ISN’T AN INDEPENDENT
ENTITY, IT’S CREATED JUST FOR THIS — CREATED JUST FOR THIS
TRANSACTION, IT DOESN’T ACTUALLY EXERCISE CONTROL.
IT’S REALLY PERSON A AND WE SEE THAT PERSON A IS THE PRESIDENT
OF ST. JAMES PLACE LLC. SO THAT KIND OF FITS.
WE CAN KIND OF SEE HOW PERSON A IS REALLY THE PERSON IN CONTROL
OF THIS ENTITY.>>I JUST HAVE ONE QUICK
QUESTION, IF THIS WAS A PROJECT THAT I CAME ACROSS MY DESK AND I
WAS UNDERWRITING, IF THE ORG CHART SHOWED THAT NORTH CAROLINA
AVENUE LLC WAS A 99% INVESTOR MEMBER, THEN THEY COULD JUST
STOP RIGHT THERE. LIKE WE WOULDN’T — THEY
WOULDN’T HAVE TO SHOW VERMONT AVENUE LIMITED PARTNERSHIP,
ETC., IS THAT RIGHT?>>I THINK THAT’S RIGHT.
CERTAINLY, IF IT WAS A TAX CREDIT ENTITY AND WE HAD THAT —
THAT LEGISLATION THAT TOLD US TO STOP ASKING SO MANY QUESTIONS
ABOUT TAX CREDIT ENTITIES, BUT THIS MIGHT NOT BE A TAX CREDIT
TRANSACTION. THEY COULD JUST BE AN INVESTOR
IN A SITUATION AND, YOU KNOW, FOR UNDERWRITING PURPOSES, THEY
MIGHT HAVE BEEN PROVIDING MORE — MORE DETAIL BECAUSE NORTH
CAROLINA AVENUE LLC, YOU KNOW, IN A TAX CREDIT SCENARIO, YOU
WOULD HAVE A SYNDICATOR, THE UNDERWRITING WOULD BE BETTING
THE SYNDICATOR AS WELL AND HERE, IT MIGHT JUST BE A VEHICLE FOR
THE ATLANTIC AVENUE REIT AND SO, THAT COULD BE A SCENARIO UNDER
WHICH YOU WOULD WANT THAT ADDITIONAL INFORMATION SO THAT
YOU COULD DO YOUR VETTING OF THE ACTUAL — OF THE ACTUAL
INVESTOR, YOU KNOW, FOR UNDERWRITING PURPOSES AND IF YOU
PUT IT TOGETHER FOR UNDERWRITING, WHY NOT PROVIDE IT
ALREADY FOR PREVIOUS PARTICIPATION REVIEW BUT YOU’RE
RIGHT, YOU KNOW, WOULDN’T NEED TO GET BELOW THE INVESTOR — THE
INVESTOR MEMBER BECAUSE WE’VE EXCLUDED INVESTOR MEMBERS FROM
PREVIOUS PARTICIPATION REVIEW.>>THANKS.
>>I THINK THAT IS ALL.>>SO NOW WE’RE GOING TO MOVE ON
TO A QUICK TRANSITION HERE. WE’RE GOING TO DISCUSS FLAGS IN
A COUPLE OF MINUTES. SO DON’T HANG UP YET.
STICK WITH US. WE WILL BE RIGHT BACK IN A
COUPLE OF MINUTES. WE’RE GOING TO TRANSITION A FEW
FOLKS IN. AND A FEW FOLKS OUT.
SO IN A MINUTE WE’LL DISCUSS FLAGS.
I WANTED TO CLARIFY HOW WE’RE GOING TO HANDLE QUESTIONS AND
SUGGESTIONS FOR THE PREVIOUS PARTICIPATION REVIEWS IN THE
FUTURE. FOR MULTIFAMILY HOUSING
PROJECTS, YOU CAN E-MAIL MF UNDERSCORE PREVIOUS
PARTICIPATION AT HUD.GOV. FOR OFFICE OF RESIDENTIAL CARE
FACILITIES PROJECTS WHICH IS THE 232 PROGRAM, YOU CAN E-MAIL LEAN
THINKING AT HUD.GOV. FOR THE OFFICE OF HOSPITAL
FACILITIES PROGRAM, WHICH IS THE 242 PROGRAM, YOU CAN E-MAIL
HOSPITALS AT HUD.GOV. FOR THE HOSPITALS PROGRAM, IT
WOULD PROBABLY BE BENEFICIAL IF YOU COULD INCLUDE A SUBJECT LINE
THAT IS KIND OF SPECIFIC AS TO, YOU KNOW, PREVIOUS PARTICIPATION
REVIEW QUESTION OR SUGGESTION. IF YOU HAVE QUESTIONS ABOUT WHO
WOULD BE CONSIDERED A CONTROLLING PARTICIPANT, AS YOU
PUT TOGETHER YOUR APPLICATIONS, FEEL FREE TO CONTACT THE E-MAIL
ADDRESS FOR THE APPROPRIATE OFFICE.
I WOULD ENCOURAGE YOU TO KEEP IN MIND THE KEY POINTS THAT WE JUST
DISCUSSED BEFORE YOU CONTACT H.U.D. WITH QUESTIONS.
SO FIRST, WE ARE LOOKING FOR THOSE INDIVIDUALS WITH FINANCIAL
AND/OR OPERATIONAL CONTROL OVER THE PROJECT.
WE NEED TO KEEP THAT IN MIND. I KNOW THERE ARE GOING TO BE ALL
SORTS OF SCENARIO HERE. BUT THAT’S REALLY WHAT WE’RE
LOOKING FOR AND WE ARE LOOKING TO THE LENDER TO TELL US WHO
THAT IS. WE WANT TO KNOW WHO HAS THE
ABILITY TO PRESENT OR RESOLVE VIOLATIONS OR CIRCUMSTANCES
GIVING RISE TO FLAGS RELATED TO THE PROJECT SO WE WANT TO KNOW
WHO HAS THE AUTHORITY TO, YOU KNOW, RESOLVE ANY ISSUES OR
PREVENT THEM OR DEAL WITH THEM AND THEN WE ALSO WANT TO MAKE
SURE THE ORGANIZATION CHARTS ARE CLEAR AND COMPLETE.
SO, YOU KNOW, BEFORE YOU CONTACT US ABOUT YOUR DEAL, PLEASE MAKE
SURE TO KEEP THOSE PROCESSES IN — OR THOSE NOTES IN MIND AND
THEN AS ROGER LUKOFF MENTIONED WE ARE, OF COURSE, ALWAYS
INTERESTED IN CONTINUOUS IMPROVEMENT AND FEEL FREE TO
SUBMIT SUGGESTIONS TO OUR E-MAIL BOXES AS WELL AND WE WILL, YOU
KNOW, DO OUR BEST TO CONTINUALLY IMPROVE THE PROCESS AS WE GO
FORWARD.>>ALL RIGHT.
SO NOW, I AM GOING TO TURN IT OVER TO OUR TEAM TO DISCUSS
FLAGS.>>HI, MY NAME IS RITA DOCKERY
AND I’M WITH THE OFFICE OF HEALTH CARE PROGRAMS.
I’M GOING TO TALK FIRST ABOUT THE BASICS OF FLAGS.
THERE ARE THREE TIERS OF RISK THAT WE WILL DISCUSS MOMENTARILY
IN FURTHER DETAIL. FLAGS ARE JUST ONE PIECE OF THE
CHARACTER OF A PARTICIPANT REVIEW.
SINCE WE ARE LOOKING TO HAVE FLAGS BE BETTER TOOLS FOR
ASSESSING RISK, THE FLAGGING PROCESS HAS BEEN REVISED TO
ALIGN WITH THOSE RISKS ASSOCIATED WITH A PARTICIPANT.
WHILE A FLAG DOES NOT AUTOMATICALLY EXCLUDE AN
APPLICANT FROM PARTICIPATING IN H.U.D.’S PROGRAMS, THEY ARE
CONSIDERED RISK FACTORS THAT REQUIRE APPROPRIATE MITIGATION,
WHEN POSSIBLE. FOR THIS REASON, FLAGS SHOULD
NOT BE PLACED WILLIE NILLY FOR MINOR INFRACTIONS THAT DO NOT
POSE A RISK TO H.U.D. WHEN THERE’S A VIOLATION OF
CIRCUMSTANCE THAT WARRANTS A FLAG IN CONNECTION WITH A
COVERED PROJECT, H.U.D. WILL PLACE A FLAG ON ALL CONTROLLING
PARTICIPANTS THAT CONTRIBUTED TO THE VIOLATION OR THOSE WHO
FAILED TO INTERVENE APPROPRIATELY TO AVOID THE
CIRCUMSTANCE IN THE FIRST PLACE. BY THAT SAME TOKEN, H.U.D. WILL
NOT PLACE FLAGS ON THOSE CONTROLLING PARTICIPANTS THAT
H.U.D. HAS DETERMINED NOT — DID NOT CONTRIBUTE TO THE VIOLATION
OR THE CIRCUMSTANCE. FOR ADDITIONAL INFORMATION,
PLEASE SEE SECTION G-1 OF THE PROCESSING GUIDE.
ABOUT FLAG PLACEMENT. ANOTHER THING ON FLAGS THAT’S
GOOD TO KNOW, THE FLAGGING PROCESS HAS CHANGED.
H.U.D. WILL NOTIFY PARTICIPANTS IN WRITING WHEN FLAGS ARE PLACED
DOWN. ANOTHER BIG IMPROVEMENT IS THAT
THE APPS SYSTEM WILL NOW INCLUDE VERY DETAILED INTERNAL COMMENTS
RELATED TO ANY FLAGS THAT HAVE BEEN PLACED.
PREVIOUSLY, THERE HAVE NOT BEEN CLEAR NOTES TO DETAIL THE
REASONS BEHIND FLAG PLACEMENT. THIS CAN BE ESPECIALLY
PROBLEMATIC IF YOU ARE REVIEWING A PARTICIPANT AND THE EMPLOYEE
WHO ORIGINALLY PLACED THE FLAG IS NO LONGER INVOLVED WITH THAT
PROJECT. FOR WHATEVER REASON.
FOR EXAMPLE, THEY MAY NO LONGER WORK IN THE SAME CAPACITY WITHIN
THE DEPARTMENT OR, PERHAPS, THEY EVEN RETIRED.
THEREFORE, IT’S CRITICAL THAT VERY DETAILED NOTES ARE KEPT IN
THE SYSTEM AND UPDATED AS APPROPRIATE SO THAT ANYONE
REVIEWING THE FLAGS OF A PARTICIPANT WILL HAVE A FULL
PICTURE REGARDING THE FLAG PLACEMENT.
IN ORDER TO AVOID STARTING FROM SCRATCH AND TRACKING THE REASONS
FOR FLAG PLACEMENT ON PARTICULAR PARTICIPANTS.
ONE OTHER IMPORTANT THING TO NOTE IS THAT PREVIOUS
PARTICIPATION REVIEW IS JUST ONE PART OF THE OVERALL REVIEW
THAT’S GOING TO BE CONDUCTED BY H.U.D.
AND I’M GOING TO NOW TURN OVER THE MIKE TO JIM LARSON WHO IS
GOING TO TALK ABOUT THE TIER LEVELS.
>>THANKS. I’M JEN LARSON WITH THE
MULTIFAMILY OFFICE OF ASSET MANAGEMENT.
AND I’M REALLY EXCITED ABOUT THE NEW TIERS OF FLAGS IN THE
PARTICIPATION AND PROCESSING GUIDE AS IT’S BEEN ISSUED.
I THINK IT WILL REALLY HELP OUR STAFF TO BETTER ASSESS WHETHER
ISSUES ARE GOING TO BE A PROBLEM GOING FORWARD OR WHETHER IT’S
SOMETHING THAT CAN BE QUICKLY RESOLVED SO I’M GOING TO GO
THROUGH THE THREE LEVELS OF THE FLAGS THAT WE HAVE NOW.
THE FIRST IS A TIER THREE FLAG. AND THESE ARE OUR LOWEST RISK
FLAGS. THIS IS A SINGLE EVENT,
SOMETHING — AN ISSUE THAT’S HAPPENED THAT CAN BE RESOLVED
AND THE FLAG CAN BE REMOVED WHEN THE NONCOMPLIANCE IS RESOLVED.
SO THERE’S SOME EXAMPLES OF THESE TYPES OF FLAGS IF THERE’S
A FAILURE TO FILE FINANCIAL STATEMENTS, IF THERE’S
UNACCEPTABLE PHYSICAL CONDITION OF THE PROPERTY LIKE A BELOW 60
REAX SCORE OR OTHER CONDITIONS THAT ARE OBSERVED BY STAFF TO BE
UNACCEPTABLE. IF THERE’S AN UNSATISFACTORY
MANAGEMENT REVIEW DONE BY OUR PROJECT BASED CONTRACT
ADMINISTRATOR OR BY H.U.D. STAFF, EITHER ONE OF THOSE CAN
RESULT IN A FLAG. OR IF THEIR UNAUTHORIZED
DISTRIBUTIONS IS NOTED ON THE FINANCIAL STATEMENT.
AND IN ALL OF THOSE THINGS, WHEN THE — EITHER A NEW MANAGEMENT
REVIEW IS DONE OR A NEW PHYSICAL INSPECTION IS DONE, OR SOME
OTHER EVENT HAPPENS TO RESOLVE THAT NONCOMPLIANCE, THEN THOSE
FLAGS CAN BE REMOVED. AS AN EXAMPLE OF THE TEMPORARY
RISK, PROJECT A MAY NOT HAVE FILED THEIR FINANCIAL STATEMENTS
ON TIME. AT THAT POINT, AN AUTOMATIC TIER
THREE FLAG IS PLACED BY OUR SYSTEM.
AND THE ENTITY IS REFERRED TO THE DEPARTMENTAL ENFORCEMENT
CENTER OR THE DEC FOR A FOLLOW-UP ON THAT NONFILER
INCIDENT. IF A FINANCIAL STATEMENT IS
FILED, THEN THE FLAG IS RESOLVED AUTOMATICALLY.
IF IT’S NOT FILED, THEN THERE MAY BE FURTHER ENFORCEMENT
ACTION THAT TAKES PLACE. ANOTHER EXAMPLE OF A TIER THREE
FLAG IS A PROJECT THAT MAYBE GOT A REAX INSPECTION THAT WAS 25
AND THAT’S UNACCEPTABLE PHYSICAL CONDITION.
THE PROJECT IS FLAGGED WITH A TIER THREE FLAG FOR UNACCEPTABLE
PHYSICAL CONDITION AND IT’S REFERRED TO THE DEPARTMENTAL
ENFORCEMENT CENTER OR THE DEC FOR A FOLLOW-UP.
THERE’S A NOTICE OF VIOLATION OR DEFAULT THAT IS SENT OUT.
THE OWNER AT THAT POINT HAS 60 DAYS TO MAKE ALL THE REPAIRS
THAT ARE DETAILED IN THE PHYSICAL INSPECTION THAT WERE
OBSERVED, ALL THE DEFICIENCIES HAVE TO BE CORRECTED.
AND THEN THE PROPERTY IS REINSPECTED AFTER THAT 60 DAY
PERIOD. ASSUMING THAT THE OWNER HAS DONE
WHAT THEY NEEDED TO DO AND THE REPAIRS HAVE TAKEN PLACE AND THE
REAX SCORE IS ABOVE 60 AND ACCEPTABLE PHYSICAL CONDITION,
THAT FLAG CAN BE REMOVED. IF THE SCORE IS STILL BELOW 60,
THERE MAY BE A TIER TWO FLAG PLACED AND THERE MAY BE
ADDITIONAL ENFORCEMENT ACTION THAN TAKEN AGAINST THAT OWNER.
NOW WE MOVE ON TO TIER 2 FLAG WHICH ARE FLAGS FOR ONGOING
COMPLIANCE RISK. AND ONGOING TO COMPLIANCE RISK
REPRESENTS AN OWNER THAT’S DONE EITHER A TIER 3 FLAG, WE SEE IT
AT SEVERAL DIFFERENT PROPERTIES FOR THE SAME OFFENSE OR MAYBE
THEY’VE DONE THE SAME THING AT THE SAME PROPERTY YEAR AFTER
YEAR AFTER YEAR AND WE’RE REALLY GETTING TIRED OF IT AND WE HAVE
TO SAY, YOU KNOW, WE NEED TO KNOW THIS FOR FUTURE BEFORE WE
DO ANY FURTHER BUSINESS WITH YOU, WE WANT TO KNOW THAT YOU
HAVE NOT FOLLOWED OUR REGULATIONS IN THE PAST AND
YOU’RE NOT COMPLYING WITH H.U.D. REQUIREMENTS ON MULTIPLE
PROPERTIES. THESE FLAGS WILL REMAIN FOR FIVE
YEAR PERIOD OF TIME. AS A RISK FACTOR, EVEN IF THE
UNDERLYING ISSUES ARE RESOLVED. SO SOME EXAMPLES OF TIER TWO
FLAGS ARE REPEATED FAILURE TO FILE ANNUAL FINANCIAL
STATEMENTS. UNACCEPTABLE PHYSICAL CONDITION,
IF IT OCCURS AT MULTIPLE PROPERTIES OR AT THE SAME
PROPERTY MULTIPLE TIMES. IF THERE’S A CONVERSION TO AN
UNAPPROVED USE, UNAUTHORIZED CHANGE OF PARTICIPANT, IF A
PROPERTY SALE TAKES PLACE WITHOUT GETTING H.U.D.’S
APPROVAL FOR IT FIRST OR UNAUTHORIZED TRANSFER OR
SOMETHING LIKE THAT, OR IF THERE’S REPEATED UNRESOLVED
AUDIT FINDINGS. SO SAY THERE’S AN AFS THAT’S
NONCOMPLIANT FOR SEVERAL YEARS IN A ROW, WE MAY FACE A TIER TWO
FLAG FOR THAT. LET’S TALK THROUGH SOME EXAMPLES
OF TIER TWO FLAGS. SO FIRST EXAMPLE IS WHERE THE
CONTROLLING PARTICIPANT, HE OWNS PROJECT A, B AND C.
DOESN’T FILE ANY FINANCIAL STATEMENTS BY THE DEADLINE FOR
ANY OF THOSE PROJECTS AND DOES NOT RESPOND TO H.U.D.
CORRESPONDENCE SO THREE TIER THREE FLAGS WILL BE PLACED
AUTOMATICALLY ONE FOR EACH PROJECT.
THOSE WILL BE REMOVED WHEN THE ANNUAL FINANCIAL STATEMENT IS
FILED. BUT OUR STAFF IN LOOKING AT THAT
WILL SAY HEY, THERE’S A PATTERN OF BEHAVIOR HERE OF FILING LATE
ANNUAL FINANCIAL STATEMENTS AND THEY MAY PLACE A TWO TIER FLAG
THAT WILL BE RETAINED FOR FIVE YEARS EVEN IF AFS HAD BEEN FILED
AND THE TIER THREE FLAGS HAVE BEEN RESOLVED, THE TIER TWO FLAG
WILL STAY AND THERE MAY BE ADDITIONAL ENFORCEMENT ACTIONS
AS TAKEN BY THE DEPARTMENTAL ENFORCEMENT CENTER FOR THOSE
TYPES OF ISSUES. ANOTHER EXAMPLE OF THE TIER TWO
FLAG IS WHERE THE CONTROLLING PARTICIPANT OF PROJECT D FILES
ANNUAL FINANCIAL STATEMENTS LATE AND SIGNIFICANTLY LATE.
90 DAYS LATE FOR THREE YEARS IN A ROW.
EVERY YEAR, THERE’S A TIER THREE FLAG THAT’S PLACED.
IT’S REMOVED EVERY YEAR WHEN THE AFS IS FILED.
BUT AFTER THREE YEARS, WE SAY NO REALLY, THIS IS — WE NEED TO
MAKE SURE THAT WE UNDERSTAND THAT THIS IS GOING ON FOR THIS
PARTICIPANT GOING FORWARD. AND TIER TWO FLAG IS PLACED IN
YEAR THREE. THAT WILL BE RETAINED FOR FIVE
YEARS EVEN IF THE ANNUAL FINANCIAL STATEMENTS ARE FILED.
AND THERE ALSO MIGHT BE ADDITIONAL ACTIONS TAKEN BY OUR
ENFORCEMENT CENTER. ANOTHER EXAMPLE OF A TIER TWO
FLAG IS WHERE CONTROLLING PARTICIPANT OF PROJECT E TAKES
ON DISTRIBUTION FOR SEVERAL YEARS IN A ROW.
OFTEN WE HAVE THIS WITH NEW OWNERS IN PROJECTS WHERE THEY
DON’T UNDERSTAND H.U.D.’S DISTRIBUTION SCHEDULE.
FIRST YEAR THEY TAKE UNAUTHORIZED DISTRIBUTIONS.
WE SAY NO, DON’T DO THAT. YOU HAVE TO WAIT UNTIL YOUR
FINANCIAL STATEMENTS HAVE BEEN FILED.
AND YOU’RE CLEAR TO TAKE THOSE DISTRIBUTIONS.
SO SAY THEY DO THAT THE FIRST YEAR.
TIER THREE FLAG IS PLACED. LET’S SAY THEY DO IT AGAIN NEXT
YEAR. NO, REALLY, TIER THREE FLAG IS
PLACED AND THEN WHEN THE DISTRIBUTIONS ARE REPAID, OR
WHEN THE SITUATION IS RESOLVED, THE TIER THREE FLAG GETS
RESOLVED. BUT AFTER THREE YEARS IN A ROW,
WE’VE SAID NO, REALLY, WE TOLD YOU DON’T TAKE DISTRIBUTIONS
UNTIL YOU’RE ALLOWED TO UNDER YOUR H.U.D. AGREEMENT AND PLACE
A TIER TWO FLAG THAT WILL BE RETAINED FOR FIVE YEARS EVEN IF
THE DISTRIBUTIONS ARE REPAID. AND AGAIN, THERE MAY BE
ADDITIONAL ENFORCEMENT ACTIONS THERE AS WELL.
NOW, THE LAST LEVEL OF FLAG IS THE MOST SERIOUS LEVEL OF FLAG.
TIER ONE FLAG. THIS REPRESENTS SOMETHING THAT’S
SO SERIOUS THAT THE DEPARTMENT WANTS TO CONSIDER IT FOR ANY
FUTURE BUSINESS WITH THE PARTICIPANT.
SO IT’S A SIGNIFICANT — IT REPRESENTS A SIGNIFICANT LONG
TERM RISK TO THE DEPARTMENT AND IT’S SOMETHING THAT WE NEED TO
BE AWARE OF BEFORE CONSIDERING FUTURE BUSINESS.
THESE ARE PERMANENT FLAGS. THINGS THAT WE WANT TO STAY ON
THE RECORD AS LONG AS THE PARTICIPANT IS DOING BUSINESS
WITH H.U.D. EXAMPLES OF TIER ONE FLAGS ARE
MORTGAGE ASSIGNMENT OR MORTGAGE CLAIM WHERE THERE’S A CLAIM
AGAINST THE FHA FUND OR ASSIGNMENT OF THE MORTGAGE.
SUSPENSION OR DEBARMENT CURRENT OR PAST OF ANY OF THE
PARTICIPANTS IN THE PROJECT AND CONVICTION OF FRAUD OR ANY OTHER
CRIMINAL PROBLEM THAT’S EXPERIENCED BY THE PROPERTY
OWNER OR MANAGEMENT AGENT. EXAMPLE OF ONE THAT MIGHT BE
PLACED. SAY THEY SUBMITTED A FRAUDULENT
INFORMATION DURING THE UNDERWRITING.
WE DIDN’T DISCOVER IT AT THE TIME BUT DISCOVERED IT LATER.
THERE’S A MORTGAGE ASSIGNMENT. AS A RESULTED, THERE WILL BE A
TIER ONE FLAG PLACED FOR MORTGAGE ASSIGNMENT AND ALSO A
TIER ONE FLAG PLACED FOR FRAUD CONVICTION AND, OF COURSE, THERE
MAY BE ADDITIONAL ENFORCEMENT ACTIONS IN THOSE CASES BOTH FROM
H.U.D. AND OUTSIDE H.U.D. AND THROUGH LAW ENFORCEMENT.
ANOTHER ONE WILL BE THEY VIOLATE THE HOUSING ASSISTANT PAYMENTS
CONTRACT, NO OTHER INVOLVEMENT WITH H.U.D. OUTSIDE OF THE
CONTRACT. BUT THE CONTROLLING PARTICIPANT
BEGINS USING THE ASSETS FOR THEIR PERSONAL GAIN AND
SIPHONING OFF FUNDS AND IT GOES UNDER.
IT MAY BE REFERRED FOR FORECLOSURE TO BE SOLD AT
AUCTION. A TIER ONE WOULD BE PLACED ON
THAT PARTICIPANT TO ENSURE THEY CAN’T DO ANY FURTHER BUSINESS
WITH H.U.D. WITHOUT A REALLY HIGH LEVEL OF REVIEW AND THERE
MAY BE ADDITIONAL ENFORCEMENT ACTIONS IN THAT CASE ALSO.
THAT’S IT FOR AN OVERVIEW OF THE FLAGS.
TALK ABOUT HOW HE’S GOING TO REVIEW PARTICIPANTS.
>>THANK YOU. MY NAME IS KENDALL ALLEN AND I
WORK OUT OF THE JACKSONVILLE SATELLITE OFFICE IN OUR
MULTIFAMILY PRODUCTION DIVISION. SO WE’RE GOING TO TALK ABOUT
REVIEWING PARTICIPANTS. SO H.U.D.’S OPTIONS WHERE WE
RECEIVE THE APPLICATIONS EITHER TO APPROVE A PARTICIPANT,
CONDITIONALLY APPROVE A PARTICIPANT WHICH MEANS THAT WE
WILL APPROVE YOU UNDER CERTAIN CONDITIONS.
YOU CAN HAVE LIMITED PARTICIPATION WHERE YOU’RE JUST
LIMITED TO SOME ASPECTS OF PROJECT AND WE CAN DISAPPROVE
YOU BUT NOTE IN THE PROCESSING GUIDE, THERE ARE WAYS TO TALK TO
DIRECTORS OR JUST RECONSIDER OUR DISAPPROVAL FOR THE DISAPPROVED
2530. SO MOVING RIGHT ALONG, WE’RE
TALKING ABOUT REVIEWING PARTICIPANTS WITH NO FLAGS.
SO IF THERE ARE NO FLAGS IN THE APP SYSTEM AND THE APPLICANT IS
ABLE TO MAKE ALL CERTIFICATIONS, THE PREVIOUS PARTICIPATION
REVIEW IS PRETTY MUCH CONSIDERED COMPLETE.
BUT DO KNOW THAT JUST BECAUSE THE PREVIOUS PARTICIPATION
APPROVAL IS COMPLETE, THAT DOESN’T MEAN UNDERWRITING OR THE
TOTAL PACKAGE IS COMPLETE. STILL HAD TO GO THROUGH ALL THE
OTHER THINGS YOU NEED TO CLOSE. SO REVIEWING PARTICIPANT WITH
CURRENT FLAGS, IF THERE ARE CURRENT FLAGS IN THE SYSTEM,
H.U.D. WILL REVIEW COMMENTS IN THE SYSTEM RELATED TO A FLAG.
WHICH IF IT’S BEEN A FLAG FOR A PARTICIPANT THAT’S BEEN IN OUR
SYSTEM, ASSET MANAGEMENT MIGHT HAVE ALREADY HAD COMMENTS IN
THERE. MITIGATIONS WILL BE PART OF THE
REVIEW. WITH THE FLAG BEING RESOLVED AND
RATHER, THE FLAG HISTORY TO ASSESS PATTERNS OF MISCONDUCT
AND RISK TO THE DEPARTMENT. SO GET INTO REVIEWING TIER THREE
FLAGS WHICH ARE BASICALLY OUR LOW FLAGS.
AND ALL TIER THREE FLAGS HAVE A DURATION OF FIVE YEARS.
SO IF A PARTICIPANT ELECTS NOT TO DO ANYTHING, THEY CAN WAIT
FIVE YEARS BEFORE THEY CAN PARTICIPATE AGAIN AND ALL THE
STUFF WILL FALL OFF FOR TIER THREE FLAGS.
BUT PARTICIPANTS MAY BE APPROVED IF CONDITIONS AND THEIR APPROVED
CONDITIONS ARE MET. SO AN EXAMPLE WOULD BE PROJECT A
RECEIVES A SCORE OF 50. THE SECOND IS BELOW 60.
CONTROL PARTICIPANTS IN PROJECT A IS FLAGGED UNTIL IT RECEIVES
INSPECTION OVER 59 ON THE NEXT INSPECTION.
CONTROLLING PARTICIPANT AND PROJECT A WOULD LOIK TO DO NEW
BUSINESS WITH H.U.D. IN PROJECT B.
H.U.D. IS APPROVE THE PARTICIPATION IN PROJECT B IF
THE FLAG PARTICIPANTS CERTIFY THAT THE 100% OF THE UNITS IN
PROJECT A THAT THEY GET FLAGGED FOR HAS BEEN EXPECTED AND ALL
PHYSICAL DEFICIENCIES HAVE BEEN REMOVED.
ANOTHER EXAMPLE OF TIER THREE FLAGS WILL BE FAIR TO FILE
FINANCIAL STATEMENT. PROJECT A HAS NOT FILED ANNUAL
FINANCIAL STATEMENT BY THE DEADLINE.
CONTROLLING PARTICIPANT IN PROJECT A HAD RECEIVED AUTOMATIC
FLAGS. SO THAT PARTICIPANT IN PROJECT A
WOULD LIKE TO PARTICIPATE IN ANOTHER PROJECT.
SO BEFORE THEY CAN PARTICIPATE IN THE NEXT PROJECT, THEY WILL
HAVE TO FILE THE AFS AND MAKE IT CURRENT AND H.U.D. WILL REMOVE
THE FLAGS AND MAY APPROVE PARTICIPATION IN PROJECT B.
SO BASICALLY, WHAT WE’RE SAYING HERE IS JUST HAVE THE
PARTICIPANT OR IF IT’S THE OWNER, HAVE THEM FILE THEIR
ANNUAL FINANCIAL STATEMENTS WHEN THEY’RE SUPPOSED TO AND TRY NOT
TO BE LATE WITH IT. SO ALSO KNOW THAT H.U.D. WILL
REMOVE THIS FLAG WHEN IT’S BEEN SUBMITTED OR FIVE YEARS AFTER
THE PLACEMENT DATE OF THE FLAG, WHICHEVER IS SOONER.
OTHER TIER THREE FLAGS ARE LISTED IN THE PROCESSING GUIDE
THAT I’LL MENTION RIGHT NOW. YOU HAVE DELINQUENT PAYMENTS OF
THREE OR MORE YOUR MORTGAGE AMOUNT OR YOUR MORTGAGE PAYMENT
SO THOSE ARE REMOVED BY EXPLAINING THE CAUSE OF THE
DELINQUENCY, MAYBE SOMETHING HAPPENED WITHIN THE PROJECT OR
LIKE THERE WAS A FIRE AT ONE OF THE BUILDINGS SO THEY HAD THE
HANDLES AND THINGS. AND THEY MIGHT HAVE BECAME LATE
ON THE PAYMENTS. SO JUST LETTING H.U.D. KNOW AND
RELAYING TO US WHY, JUST TELLING US WHY THERE WAS AN ISSUE IN
PAYING THE PAYMENT AND ANOTHER WOULD BE EXAMPLE OF APPROVAL
CONDITION WOULD BE EFFORTS, YOU KNOW, HAVE A PLAN — PRESENT TO
US A PLAN AHEAD OF TIME ON HOW YOU EXPECT TO MAKE THE PAYMENT
AND IF YOU’RE HAVING TROUBLES AND MAKING THE PAYMENTS.
SO THAT’S JUST AN EXAMPLE OF ANOTHER TIER THREE FLAG.
WE TALKED ABOUT THAT. UNSATISFACTORY MANAGEMENT REVIEW
SO IF YOUR PROJECT MANAGER GOES OUT TO YOUR PROJECT AND THEY DO
THEIR REVIEW AND YOU SCORE LOW, WAIT FOR IT TO GET AROUND, NOT
GET AROUND IT BUT A WAY TO GET IT APPROVED, CONDITION APPROVED,
JUST PROVIDE EVIDENCE THAT A SATISFACTORY RESPONSE WAS MADE
TO EITHER THE ACCOUNT EXECUTIVE OR THE COMPLIANCE OFFICER.
SO ANOTHER TIER THREE FLAG EXAMPLE WOULD BE UNAUTHORIZED
DISTRIBUTIONS. CONTROLLING PARTICIPANT IN THE
PROJECT HAVE TAKEN UNAUTHORIZED DISTRIBUTIONS.
THE TIER THREE FLAG WAS PLACED. CONTROLLING PARTICIPANT IN THE
PROJECT ALLOWED TO PARTICIPATE IN PROJECT B.
WHENEVER EVIDENCE THAT THE UNAUTHORIZED DISTRIBUTION HAVE
BEEN REPAID IS PROVIDED, H.U.D. WILL REMOVE THE FLAG AND MAY
APPROVE PARTICIPATION IN PROJECT B.
ALSO, H.U.D. WILL REMOVE THIS FLAG WHEN THE UNAUTHORIZED
DISTRIBUTION HAS BEEN PAID OR FIVE YEARS LATER.
SO IF YOUR PARTICIPANT TOOK SOME — TOOK A LARGE AMOUNT OF MONEY
MAYBE OUT OF THE PROJECT, AND THEY DON’T REALLY FEEL LIKE
PAYING IT BACK TO US, THEY CAN WAIT FIVE YEARS BEFORE THEY CAN
DO BUSINESS WITH US AGAIN OR PAY IT UP FRONT.
EITHER WAY WORKS FOR US. I’LL PASS IT BACK TO RACHEL FOR
TWO TIER FLAGS.>>THANK YOU.
SO AS YOU’LL RECALL, TIER TWO FLAGS ARE A COMPLIANCE RISK TO
THE DEPARTMENT. PARTICIPANTS WITH THE TIER TWO
FLAG MAY BE APPROVED IF H.U.D. DETERMINES THAT THE PARTICIPANT
HAS SUFFICIENTLY IMPROVED OPERATIONS AND OVERSIGHT IN
ORDER TO ENSURE THAT FURTHER VIOLATIONS WILL NOT OCCUR OR FOR
OTHER COMPELLING REASONS. THEY HAVE PROVED TO US THAT THE
FLAG IS NOT INDICATIVE OF ONGOING RISK.
ON THESE TYPES OF FLAGS, THE CONTROLLING PARTICIPANT HAS
SHOWN H.U.D. THAT THEY ARE EITHER UNWILLING OR UNABLE TO
COMPLY WITH SIGNIFICANT REQUIREMENTS OF OUR PROGRAMS AND
SO IT IS NOT SUFFICIENT TO JUST REMEDY THE SITUATION.
YOU ALSO NEED TO PROVE TO H.U.D. THAT YOU’VE DONE SOME SORT OF
OPERATIONAL CONTROL, DONE SOMETHING TO ASSURE THAT THIS IS
NOT GOING TO HAPPEN AGAIN. ALL RIGHT.
SO HERE IS A TIER TWO FLAG EXAMPLE FOR UNAUTHORIZED
DISTRIBUTIONS. CONTROLLING PARTICIPANTS AND
PROJECT A TOOK UNAUTHORIZED DISTRIBUTIONS IN 2013 AND 2014.
THE SAME CONTROLLING PARTICIPANTS TOOK UNAUTHORIZED
DISTRIBUTIONS IN PROJECT B AND C IN 2014 AND RECEIVED A TIER TWO
FLAG. THESE CONTROLLING PARTICIPANTS
REPAID ALL OF THEIR UNAUTHORIZED DISTRIBUTIONS IN 2015.
THE FLAG REMAINS FOR FIVE YEARS AS A RISK FACTOR.
AGAIN, THIS IS SERIOUS. YOU CAN’T JUST KEEP TAKING
UNAUTHORIZED DISTRIBUTIONS ON SEVERAL OF YOUR PROJECTS
REPEATEDLY. THAT’S A PROBLEM FOR H.U.D. AND
WE WANT TO KNOW ABOUT IT. THE FLAG REMAINS FOR FIVE YEARS
AS A RISK FACTOR. AND THE SAME — SO NOW, OK, SO
WE’VE GOT A FLAG ON THEM. SO NOW, THESE SAME PEOPLE WANT
TO COME IN TO PARTICIPATE IN PROJECT D.
SO THE EVIDENCE THAT THEY HAVE PROVIDED TO US IS THAT ALL OF
THE UNAUTHORIZED DISTRIBUTIONS HAVE BEEN REPAID FOR ALL OF THE
PROJECTS AND NO UNAUTHORIZED DISTRIBUTIONS WERE TAKEN IN
2015. OK, GOOD.
THEY’VE REPAID THE DISTRIBUTIONS.
THE SECOND THING THEY PROVIDE IS EVIDENCE THAT A NEW CFO WITH
SIGNIFICANT H.U.D. EXPERIENCE WAS HIRED.
THE CFO HAS IMPLEMENTED IMPROVED FINANCIAL CONTROLS TO AVOID
FUTURE UNAUTHORIZED DISTRIBUTIONS.
SO HERE’S THE SECOND PIECE. THEY’VE IMPROVED THEIR FINANCIAL
CONTROLS AND WE’VE BEEN GIVEN, YOU KNOW, SOME ASSURANCES THAT
THEY’VE MADE SOME TWEAKS TO THEIR PROCESS.
SO AS THEY’VE RESOLVED THEIR NONCOMPLIANCE AND IMPROVED THEIR
OVERSIGHT, H.U.D. CAN APPROVE THEM TO PARTICIPATE IN THE NEW
PROJECT. SO IN THIS SITUATION, AS WITH
ALL OF THE FLAGS, ONE OF THE TWEAKS THAT WE’RE HOPING THAT
OUR H.U.D. STAFF WILL REALLY TAKE TO HEART HERE, THE FLAGGED
COMMENTS, THEIR INTERNAL FLAGGED COMMENTS IN THE APP SYSTEM,
WE’RE ASKING THAT WHEN YOU APPROVE SOMEONE DESPITE A FLAG,
THAT YOU GO INTO THE APP SYSTEM AND PROVIDE SOME COMMENTS
RELATED TO, YOU KNOW, SPECIFICALLY WHAT EVIDENCE WAS
PROVIDED, EXPLAIN WHY H.U.D. APPROVED THESE PARTICIPANTS TO
PARTICIPATE IN PROJECT D DESPITE THE FLAGS.
SO THIS WILL BE VERY HELPFUL TO FUTURE H.U.D. STAFF.
AS RITA MENTIONED, A LOT OF TIMES WE RUN INTO SITUATIONS
WHERE WE HAVE A FLAG IN THE SYSTEM AND IT’S QUITE OLD AND
ALL THE STAFF IN THE OFFICE THAT THE FLAG WAS PLACED, THEY’VE ALL
RETIRED AND WE HAVE — WE’RE KIND OF AT A LOSS FOR FIGURING
OUT WHAT HAPPENED. SO THE FLAGS ARE REALLY
IMPORTANT. I WANT TO GO THROUGH AN EXAMPLE
OF TIER ONE ELEVATED RISK. THIS IS THE MOST SERIOUS FLAGS
AND THIS IS WHERE WE WANT OUR STAFF TO BE SPENDING THE
MAJORITY OF THE TIME. THIS IS WHERE THE RISK IS AND
THIS IS WHERE WE NEED TO FOCUS OUR EFFORTS SO PARTICIPANTS WITH
THE TIER ONE MAY BE APPROVED IF IT IS DETERMINED THAT THEY’VE
SUFFICIENTLY IMPROVED OPERATIONS AND OVERSIGHT TO ENSURE THAT THE
VIOLATIONS WILL NOT OCCUR BUT FOR OTHER COMPELLING REASONS,
THE FLAG IS NOT INDICATIVE OF ONGOING RISK AND AGAIN, WE WOULD
UPDATE THE APP SYSTEM. SO HERE’S AN EXAMPLE.
PROPERTY C HAD TWO CONTROLLING PARTICIPANTS.
PERSON A AND B WHEN THE MORTGAGE WAS ASSIGNED SEVEN YEARS AGO.
TIER ONE FLAGS ARE PLACED ON BOTH CONTROLLING PARTICIPANTS.
PERSON B HAS APPLIED TO REFINANCE A PROJECT WITH FHA
INSURANCE. PERSON B HAS DEMONSTRATED
SUCCESSFUL OWNERSHIP OF 20 OTHER PROJECTS IN THE LAST FIVE YEARS
INCLUDING THE PROPOSED REFINANCE PROJECT SO THEY’VE BEEN
SUCCESSFULLY OPERATING THIS EXACT PROJECT THEY’RE TRYING TO
REFINANCE WITH H.U.D. PERSON B HAS ALSO BROUGHT IN A
NEW PARTNER. PERSON C WITH SIGNIFICANT
POSITIVE H.U.D. EXPERIENCE. ALL RIGHT.
SO BECAUSE WE HAVE SEEN THAT THEY HAVE BETTER EXPERIENCE AND
THAT THEY’VE IMPROVED, YOU KNOW, OPERATIONS AND THAT THEY HAVE,
YOU KNOW, SIGNIFICANT EXPERIENCE AND THEY’VE BROUGHT IN THAT NEW
EXPERIENCE PARTNER, WE MAY APPROVE THEM AND, OF COURSE, WE
WOULD UPDATE THE APP SYSTEM WITH COMMENTS.
I’LL TURN IT OVER TO JEN.>>I’M GOING TO SUMMARIZE WHAT
WE’VE TALKED ABOUT IN TERMS OF FLAGGING AND REVIEWING
PARTICIPANTS SO FIRST OF ALL, JUST WE ARE REALLY EXCITED ABOUT
THIS NEW REGULATION IN TERMS OF GETTING US TO THE — WHO REALLY
PRESENTS A RISK FOR ONGOING BUSINESS.
JUST LIKE IN THE FIRST PART, WE WERE TALKING ABOUT CONTROLLING
PARTICIPANTS AND WHO REPRESENTS A RISK AS FAR AS WHO IS
CONTROLLING THE COMPANY. I THINK THE NEW FLAGGING
PARTICIPATE — OR THE NEW FLAGGING PROCEDURE IS GOING TO
HELP US DETERMINE WHO REPRESENTS A RISK FOR ONGOING BUSINESS WITH
THE DEPARTMENT. SO WITH THAT IN MIND, ONLY
PARTICIPANTS THAT HAVE CAUSE NONCOMPLIANCE OR INTERVENED WILL
BE FLAGGED. H.U.D. STAFF WILL NOTIFY THE
PARTICIPANTS OF THE FLAG. I KNOW THAT HAPPENS MOST OF THE
TIME NOW BUT NOT ALWAYS CONSISTENTLY AND THAT WILL
CHANGE. AND THEN H.U.D. STAFF WILL ENTER
INTERNAL COMMENTS INTO THE APP SYSTEM TO EXPLAIN THE SITUATION,
WHY THE PARTICIPANT WAS FLAGGED, WHAT COULD BE DONE TO RESOLVE,
IF ANYTHING IS POSSIBLE AND THEN WE’LL ENTER COMMENTS ALONG THE
WAY IN TERMS OF IF THE PEOPLE ARE APPROVED WITH FLAGS, WHY
THAT APPROVAL HAPPENED AND SO THAT HOPEFULLY PEOPLE DON’T HAVE
TO GO THROUGH THAT SAME APPROVAL PROCESS MULTIPLE TIMES WITH
DIFFERENT OFFICES ACROSS THE COUNTRY FOR DIFFERENT PROJECTS.
AND I’M GOING TO TURN IT OVER TO RITA.
TALK ABOUT FILING.>>TALK ABOUT FILING OF THE
PREVIOUS PARTICIPATION CERTIFICATION.
FILING OF THE PREVIOUS PARTICIPATION CERTIFICATION CAN
BE DONE BASICALLY ONE OF TWO WAYS.
EITHER ELECTRONICALLY OR BY PAPER.
ELECTRONIC SUBMISSIONS MAY BE FILED IN THE ACTIVE PARTNERS —
ACTIVE PARTNERS PERFORMANCE SYSTEM OR BETTER KNOWN AS APPS
SYSTEM. THE H.U.D. FORM 2530 MAY BE USED
TO FILE PAPER SUBMISSIONS FOR MULTIFAMILY HOUSING AND GRANTED
ADMINISTRATION PROJECTS AS WELL AS FOR THE OFFICE OF HOSPITAL
FACILITIES. FOR THE OFFICE OF RESIDENTIAL
CARE FACILITIES, HOWEVER, PAPER SUBMISSIONS MAY BE FILED BY
COMPLETING THE PREVIOUS PARTICIPATION SECTION OF THE
CONSOLIDATED CERTIFICATION FORM. THE 2530 FORM MAY NOT BE USED
FOR THESE PROJECTS. IT IS THE RESPONSIBILITY OF EACH
PARTICIPANT TO ENSURE THAT THE FILING IS CORRECT, COMPLETE AND
ACCURATE. THE PARTICIPANTS SHOULD ENSURE
THAT COMPLIANCE WITH THE CERTIFICATIONS IS MET.
IN THE RARE INSTANCES WHEN THERE IS A CERTIFICATION THAT THE
CONTROLLING PARTICIPANT CAN BE CERTIFY TO, THE PARTICIPANT MUST
PROVIDE A SIGNED LETTER OF EXPLANATION.
AS PART OF THE PREVIOUS PARTICIPATION CERTIFICATION,
PARTICIPANTS ARE ONLY REQUIRED TO LIST ALL PROJECTS THEY HAVE
PARTICIPATED IN OVER THE PREVIOUS 10 YEAR PERIOD.
HOWEVER, WHEN H.U.D. HAS INFORMATION THAT PRECEDES THE
PREVIOUS 10 YEARS, H.U.D. RESEVERS THE RIGHT TO REVIEW THE
FEDERAL PROJECTS BEYOND THE 10 YEAR PERIOD.
WHEN DETERMINING WHETHER TO APPROVE PARTICIPATION IN A
TRIGGERING AN EVENT. CONTROLLING PARTICIPANTS MUST
ALL PREVIOUS PARTICIPATION FOR THE PAST 10 YEARS FOR ANY
COVERED PROJECTS. HOUSING PARTICIPANTS IN THE
AGRICULTURE’S PREVIOUS PARTICIPATION REVIEW SYSTEM AND
ANY OTHER HOUSING PROJECT THAT PARTICIPATES IN A FEDERAL STATE
OR LOCAL GOVERNMENT PROGRAM IF DURING THAT PARTICIPATION, THE
HOUSING PROJECT WAS FORECLOSED UPON, TRANSFERRED BY A DEED IN
LIEU OF FORECLOSURE OR EVENT IN DEFAULT OR SIMILARLY TERMED
EVENT WAS DECLARED AND REMAINED AFTER ANY APPLICABLE NOTICE AND
CURE PERIODS DURING THE HOUSING PROJECT OR THE CONTROLLING
PARTICIPANT PURSUANT TO THE GOVERNMENT PROGRAM’S PROJECT
DOCUMENTS.>>MENTION THE TWO DIFFERENT
WAYS TO FILE A H.U.D. 2530. WE HAVE THE APPS SYSTEM THAT IN
OUR WORLD, EVERYTHING IS MORE ELECTRONIC AND H.U.D. IS TRYING
TO CATCH UP WITH EVERYTHING ELSE.
APPS IS THE WAY THAT WE DO THAT AND WE UNDERSTAND THAT AND WE
KNOW THAT THE LENDERS UNDERSTAND THAT THE APPS SYSTEM IS NOT
PERFECT. WE HAVE NEW WAYS THAT WE’VE
UPGRADED LIKE, YOU KNOW, YOU CAN SUBMIT WITH E SIGNATURES NOW SO
NOW YOU DON’T HAVE TO SUBMIT ON LINE AND THEN SEND IN THE
SIGNATURE. NOW YOU CAN DO IT ALL THERE.
ALSO, YOU CAN UPLOAD YOUR ORGANIZATIONAL CHARTS AND NOW
YOU ONLY HAVE TO INCLUDE THE CONTROLLING PARTICIPATE APT —
PARTICIPANTS SO NOT EVERYBODY, JUST THOSE CONTROLLING THE
PROJECTS. WE ENCOURAGE THAT YOU USE THIS
METHOD IN FILING BECAUSE IT’S A LITTLE BIT EASIER, SMOOTHER AND
IT HELPS US MOVE INTO THE NEW AGE OF JUST EVERYTHING
ELECTRONIC. ALSO, WE DO HAVE OUR FORM 2530,
THE PAPER FILING, JUST THE NOTICE INCLUDES SPECIFIC
COMPLETION INSTRUCTIONS TO CLARIFY, YOU KNOW, PAST
CONFUSIONS AND INCONSISTENCIES. STILL HAVE TO REGISTER THE
BUSINESS, PARTNER REGISTRATION SYSTEM AND ATTACH AN
ORGANIZATIONAL CHART WHEN YOU’RE SENDING IN THE 2530s.
SO PASS IT BACK TO RITA.>>THANKS, KENDALL.
WHEN FILING THE PAPER OPTION FOR OFFICE OF RESIDENTIAL CARE
FACILITIES, THE PREVIOUS PARTICIPATION CERTIFICATION IS
INCORPORATED INTO CONSOLIDATED CERTIFICATIONS.
AND AN ORGANIZATION CHART MUST BE ATTACHED TO THE CONSOLIDATED
CERTIFICATION. PARTICIPANTS MUST ALSO REGISTER
IN THE BUSINESS PARTNER REGISTRATION SYSTEM OR BETTER
KNOWN AS BPRS. THE ORGANIZATION CHART MUST
INCLUDE TAX I.D. NUMBERS, SOCIAL SECURITY NUMBERS FOR ALL
CONTROLLING PARTICIPANTS. AND LASTLY, AS STATED EARLIER
FORM 2530 NO LONGER IS USED FOR 232 PROJECTS.
PASS IT BACK TO KENDALL.>>ALL RIGHT.
SO WRAPPING UP AS RACHEL MENTIONED EARLIER, IF YOU HAVE
ANY QUESTIONS OR COMMENTS, PLEASE SEE THE LINKS LISTED
BELOW. OTHER THAN THAT, I KNOW HOW HARD
SOME OF US HAVE WORKED ON THIS PRESENTATION FOR YOU GUYS.
AND WE HOPE THAT YOU GUYS ENJOYED IT AND GOT SOMETHING OUT
OF IT. SO WE ASK YOU GUYS TO ENJOY THE
REST OF YOUR DAY AND SEE YOU SOON.