Date: January 4, 2021
From: Jan Miyagishima
Director, Mortgage Operations
MULTI-FAMILY LOAN PURCHASE PROGRAM
CONTACT ERIC HAVELOCK (907-330-8245)
Maximum total loan principal (Section 1002.02M)
AHFC would like to clarify the nature of the allowable costs that can be included in the total loan amount. Applications for a refinance of an existing AHFC multifamily loan may include closing costs and pre-paids in the total loan amount, subject to loan-to-value requirements. For a refinance of a non-AHFC multifamily loan, closing costs may be financed in the total loan amount, subject to loan-to-value requirements, and pre-paids (deposits to the new loan's tax and insurance reserve account) may not be financed.
For purchase transactions, closing costs and pre-paids may not be financed.
For all transactions, property rehabilitation costs may be included in the total loan principal, subject to loan-to-value requirements. Lenders must use caution to not refund excess loan proceeds in a rehabilitation escrow to the borrower, instead using any excess loan proceeds to lower the principal balance.
property income and expense statements and pro-forma financial statements
AHFC would like to clarify the scope of the projected operating expense that are to be used when determining that the debt service coverage ratio meets or exceeds the 1.250 requirement as described in Section 1002.02.F. Effective with the date of this memo, the following guidance should be considered when submitting an application for commitment consideration.
Income - the Lender must reconcile the difference between historic rents, contract rents, and projected rents. File submissions without this information will be considered using the lower of historic rents or contract rents.
Other income - the use of other income is discouraged unless the appraiser identifies historical income streams within the property. Acceptable examples include parking fees, storage fees, or laundry income. Ancillary income from cable services may not be included.
Vacancy rate - As stated in SS Multifamily memo 18-03, the vacancy and credit loss used in underwriting, in most instances, shall not be less than 6% and can be adjusted upward if property and/or market conditions require. Additional information is located at https://www.ahfc.us/efficiency/research-information-center/alaska-housing-market-indicators.
Management - As stated in SS Multifamily memo 18-03, AHFC will evaluate all multi-family loan commitment requests by stabilizing the anticipated property management expense at 9% of projected gross rents for the purpose of determining that the debt service coverage ratio meets or exceeds the 1.250 requirement as described in Section 1002.F of this Guide.
Insurance - The Lender must use the insurance premium as identified on the binder provided for the upcoming year of coverage.
Real Property Taxes - The Lender must use the real property tax payment based on the property's assessed value for the upcoming year, when available. Real property tax expenses should not be lower than the prior year without supporting evidence of a successful real property tax appeal from the local taxing authority.
Utilities - The Lender must reconcile the difference between historic utility expenses and projected utility expenses. The appraisal must address property improvements if the projected utility expense is lower than historical averages.
Repair & Maintenance - The Lender must reconcile the difference between historic repair and maintenance expenses and projected repair and maintenance expenses. File submissions without this information will be considered using the higher of historic or projected repair and maintenance expenses, when available.
Reserves - As stated in SS Multifamily memo 18-03, in order to ensure adequate funds are available for the intended purpose, AHFC established minimum deposit amounts of $300 per unit, per year for new construction, and $350 per unit, per year for existing construction. A larger number may be considered based on project amenities or higher transportation costs as determined by the Lender and AHFC.
Lenders are cautioned that failure to follow these guidelines may result in an adjustment to the application package including, but not limited to, a lower loan amount than what was originally requested.