OHFA Updates

By Jack Kukura

OHFA has been very busy these days processing the 2007 - 2008 tax credit applications that requested ARRA (American Recovery & Reinvestment Act) Funds as well as currently processing all of the 2009 applications for ARRA Funds. But OHFA cannot focus solely on ARRA right now; they are generating the 2010 QAP and AHFA. OHFA has also created a draft for the 2011 QAP which has gone through a major revision. Let me explain in more detail.

The QAP’s

The 2010 QAP will similarly follow the same time line as the 2009 QAP. But for 2011, OHFA has thrown out the book and is starting a QAP from scratch. In the 2011 QAP, OHFA has a new timeline starting with the initial applications due to OHFA in October 2010. OHFA will then have Proposal Meetings with Developers to discuss which projects OHFA wants to fund. In November and December 2010, OHFA will complete site visits just as they have in the past. In January 2011, OHFA will make the award announcements and issue conditional reservation letters. OHFA will continue their new financial underwriting process in some form of each deal and this will happen from March thru December. The projects will be underwritten to determine Gap financing requirements and final LIHTC award amounts. OHFA is still working out the details at this moment. If you have any comments feel free to contact Arthur Krauer at OHFA.

Equity Bridge Loans

The Equity Bridge Loan (EBL) Program that OHFA has used for years to help bridge investor equity will be ending. OHFA funded the EBL Program with monies borrowed from the Department of Commerce. Recently, the Department of Commerce lost an Ohio Supreme Court case regarding Unclaimed Funds. As a result, the Department of Commerce now has to pay interest on these funds paid back to people from Unclaimed Funds. Because of this change, OHFA will no longer be able to borrow money from the Department of Commerce to fund the EBL program. This is very unfortunate because the EBL program was very successful, with OHFA having made over 500 loans and less than 1% of those loans not performing.

New Resources

With the economy slowing dramatically, we were very fortunate to get a few new tools to help develop affordable housing. The first was HERA (Housing and Economic Recovery Act). HERA was enacted on July 30, 2008. Under this act, states were given the ability to give the 130% Basis boost based on need. OHFA also received approximately $2.3 Million of HERA credits, which they allocated to 2007-2008 projects.

TCAP

Next, OHFA received ARRA (American Recovery and Reinvestment Act). ARRA was huge!! With ARRA we received TCAP (Tax Credit Assistance Program) and TCE (Tax Credit Exchange). TCAP is guided by HUD Rules. Every state housing credit agency has received a formula allocation based on their pro-rata share of 2008 HOME Funds. Ohio received approximately $84 million.

TCE

Also included in ARRA was the ability for states to “exchange” up to 40% of their 2009 allocation, and 100% of any returned credit from 2007 or 2008. The TCE program is also referred to as Sect 1602. In 2009, OHFA received approximately $26.6 million of credits. OHFA exchanged the maximum of credits receiving about $95.4 million of TCE funds. The exchange program works by states exchanging to the Treasury Credits in exchange for $.85 for each $1 of LIHTC. But we have to remember the LIHTC is a two year credit so you take the .85 and multiply by 10!

OHFA has been using their resources very wisely and very creatively. They realized with the TCAP money that if they loaned the TCAP money to projects to bridge investor equity and the investors paid those loans back, that under HUD rules those repayments would be program income. Under the HUD program income rules, the repayments have to be used for the same activity. But if you lend those funds out a second time and they are repaid a second time then the funds have become “cleansed” and are unrestricted cash to the agency. OHFA, at present, looks to be using over $70 million of their TCAP money for this purpose. At a time when OHFA is experiencing a reduction of other resources they will eventually receive over $70 million from these TCAP loans that will be available to help finance affordable housing in the future.

In summary, OHFA has been very busy crafting two new QAP’s while processing all of the 2007-2009 deals that requested ARRA Funds. Unfortunately we will be losing the EBL program as a way to help finance affordable housing but because of the ARRA resources and ingenuity at OHFA they have structured their ARRA resources to be able to recycle millions of dollars over and over again.