Notice received from OHFA regarding HOME & LIHTC Funding after year 15:
OHFA Staff has noted an increased interest in the refinancing of HOME/LIHTC developments after Year 15 of the LIHTC Compliance Period. Many of these projects have a number of years remaining on the HOME Period of Affordability. One partner/member of the General Partner or Managing Member is typically proposing to buy out the other, and the proposition typically includes a proposal to pay off the HOME Program loan, in whole or in part.
While OHFA does not wish to involve itself in the private business negotiations of the parties, OHFA Staff believes the parties should be fully aware of the position of OHFA and the HOME Program regarding the status of the HOME requirements during the remainder of the Period of Affordability (POA). OHFA must answer to HUD ultimately as to HOME compliance throughout the project’s POA. OHFA must retain the ability to recapture (“claw back”) HOME funds from the project’s awardee/developer throughout the POA. All parties involved in HOME/LIHTC developments should therefore be advised of the following:
Regardless of any repayment of the HOME loan or any change in ownership, the HOME Program requirements, including these recapture/‟claw back” rights and obligations, cannot be released or modified during the remainder of the Period of Affordability. All parties are urged to contact OHFA Staff for verification of the date the POA expires.
The party that was originally awarded the HOME funds must be given the option of re-subordinating the HOME funds to any new financing in lieu of repayment of the HOME loan. If the HOME entity chooses to re-subordinate, OHFA must be informed of this, but no other documentation is required.
If the negotiations involve a buyout or payoff of the HOME loan, the parties should be aware that:
· If the project was funded as a CHDO project, the CHDO must remain involved in some way.
· Even if the HOME loan is repaid, the original HOME grantee/awardee may still be liable for recapture if the HOME affordability requirements are not met during the POA.
· The new owner will assume primary responsibility for compliance with all HOME Program requirements, and may also be liable for recapture. It must certify that it will abide by all the HOME Program requirements for the remainder of the POA.
· OHFA must prepare a Modification of the Contract/Written Agreement that all parties must sign. The modified Written Agreement will specifically set forth all the HOME requirements. It may contain more detail than the original Written Agreement. The Modification will be signed by OHFA, the HOME entity, and the non-HOME entity.
· Any other protections, warranties, terms, and etc. beyond those in the OHFA Modification may be part of a separate agreement between the parties.