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Capital Needs Assessment
Extend Affordability Restrictions by Retention or Sale
5-1. Purpose.
The purpose of this Chapter is to outline the steps Loan
Management staff must take when it receives an Initial Notice of Intent
to extend affordability by either retaining the project or selling it.
It explains what Loan Management staff needs to know about the Capital
Needs Assessment and Appraisal process and explains how the information
developed in these steps will be used.
5-2. Windfall Profits Test.
A. To prevent windfall profits to owners, the Department may make available
incentives only to owners in those rental markets where there is an inadequate
supply of decent, affordable housing or where it is necessary to accomplish
the other public policy objectives. The preservation solution is not to
be used to provide incentives to owners who would not have prepaid, given
local market conditions. Therefore, this test is part of the criteria
for determining a project's eligibility to receive incentives.
B. Consistent with the statutory requirements, the test will be carried
out in three parts in a manner to encompass the concerns about affordability
and adequacy of supply and other public policy objectives.
1. The Windfall Profits Test will be conducted in accordance with the
Notice published in Federal Register 3177.
2. Immediately upon receiving an Initial NOI to extend affordability by
retention or sale, Loan Management staff will forward the Initial NOI
to the Economic and market Analysis Staff (EMAS) for review under the
Windfall Profits Test LOG date sent .
3. If the Loan Management staff determines that the owner should be denied
eligibility to apply for incentives because of the results of the Windfall
Profits Test, the owner will be informed within 30 days of submitting
an Initial NOI and the process under this Handbook will end. LOG end of
process If Loan Management staff determines that the project is eligible
to receive incentives, it will continue the process as described in the
remainder of this Handbook.
5-3. Submission of the Initial Notice of Intent to Housing Programs Branch.
A. Concurrently with submission of the Initial NOI to EMAS, Loan Management
staff will also forward three copies of the Initial NOI to the Housing
Programs Branch, Attention: Architectural and Engineering (A & E)
Branch and Valuation Branch. LOG date sent Loan Management staff must
also provide the following information:
1. Last three years' physical inspection reports and owner's responses
and clearance of findings from the Housing Management loan files;
2. Any correspondence relating to the condition of the project during
the last three years;
3. Last three years of project financial statements;
4. As-built plans and specifications (if available);
5. Page 1 of Form HUD-92013, completed by Housing Management;
6. Expiration date of the current Section 8 contracts.
B. A & E will perform a Capital Needs Assessment in accordance with
Housing development's Processing Instructions for Implementing Title VI
(Implementation Memorandum), but if unable to do so, will arrange with
the Regional Contracting Officer (RCO) to contract for a Capital Needs
Assessment. Within 15 days of receipt of the Initial NOI, the RCO will
contract for the Capital Needs Assessment, if applicable, and Housing
Development staff will schedule the Assessment and report the date to
the Loan Management Branch. LOG receipt of date for inspection. Please
note that since a portion of the Capital Needs Assessment, in accordance
with Paragraph 5-7, must be completed within 60 days of receipt of the
initial NOI, Loan Management staff should not wait for the results of
the Windfall Profits Test before scheduling the inspection. The inspection
may have to be cancelled if the project does not pass the Windfall Profits
Test.