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Notice2022-04718

Section 514 Off-Farm Labor Housing Loans and Section 516 Off-Farm Labor Housing Grants To Improve, Repair, or Make Modifications to Existing Off-Farm Labor Housing Properties for Fiscal Year 2022

Primary source

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Published

March 9, 2022

Issuing agencies

Agriculture DepartmentRural Housing Service

Abstract

The Rural Housing Service (RHS), a Rural Development agency of the United States Department of Agriculture, announces that it is accepting pre-applications for subsequent Section 514 Off-Farm Labor Housing (Off-FLH) loans and subsequent Section 516 Off-FLH grants to improve, repair, or make modifications to existing Off-Farm Labor Housing Properties for fiscal year 2022. Funds made available under this notice are $5,500,000 for Section 514 loans and $17,000,000 for Section 516 grants. This Notice describes the method used to distribute funds, the pre-application and final application process, and submission requirements.

Full Text

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<title>Federal Register, Volume 87 Issue 46 (Wednesday, March 9, 2022)</title>
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[Federal Register Volume 87, Number 46 (Wednesday, March 9, 2022)]
[Notices]
[Pages 13374-13449]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-04718]

[[Page 13373]]

Vol. 87

Wednesday,

No. 46

March 9, 2022

Part II

Department of Agriculture

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Rural Housing Service

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Section 514 Off-Farm Labor Housing Loans and Section 516 Off-Farm Labor
Housing Grants To Improve, Repair, or Make Modifications to Existing
Off-Farm Labor Housing Properties for Fiscal Year 2022; Notice

Federal Register / Vol. 87 , No. 46 / Wednesday, March 9, 2022 /
Notices

[[Page 13374]]

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DEPARTMENT OF AGRICULTURE

Rural Housing Service

[Docket No.: RHS-22-MFH-0003]

Section 514 Off-Farm Labor Housing Loans and Section 516 Off-Farm
Labor Housing Grants To Improve, Repair, or Make Modifications to
Existing Off-Farm Labor Housing Properties for Fiscal Year 2022

AGENCY: Rural Housing Service, USDA.

ACTION: Notice of Funds Availability (NOFA).

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SUMMARY: The Rural Housing Service (RHS), a Rural Development agency of
the United States Department of Agriculture, announces that it is
accepting pre-applications for subsequent Section 514 Off-Farm Labor
Housing (Off-FLH) loans and subsequent Section 516 Off-FLH grants to
improve, repair, or make modifications to existing Off-Farm Labor
Housing Properties for fiscal year 2022. Funds made available under
this notice are $5,500,000 for Section 514 loans and $17,000,000 for
Section 516 grants. This Notice describes the method used to distribute
funds, the pre-application and final application process, and
submission requirements.

DATES: Eligible pre-applications submitted to the Production and
Preservation Division, Processing and Report Review Branch, for this
Notice will be accepted until April 25, 2022, 12 p.m., Eastern Standard
Time. Pre-applications that are deemed eligible but are not selected
for further processing, will be withdrawn from processing. RHS will not
consider any application that is received after the established
deadlines unless the date and time are extended by another Notice
published in the Federal Register. The RHS may at any time supplement,
extend, amend, modify, or supersede this Notice by publishing another
Notice in the Federal Register. Additional information about this
funding opportunity can be found on the <a href="http://Grants.gov">Grants.gov</a> website at <a href="https://www.grants.gov">https://www.grants.gov</a>.
The application deadlines are as follows:
1. Pre-applications must be submitted by April 25, 2022, 12 p.m.,
Eastern Standard Time.
2. RHS notification to applicants by June 27, 2022.
3. Final applications must be submitted by August 29, 2022, 12
p.m., Eastern Standard Time.
4. Awards communicated to applicants by October 31, 2022.
5. Awards posted to the RHS website by November 30, 2022.

ADDRESSES: Applications to this Notice must be submitted electronically
to the Production and Preservation Division, Processing and Report
Review Branch.
At least two business days prior to the application deadline, the
applicant must email the RHS a request to create a shared folder in
CloudVault. The email must be sent to the following address: <a href="/cdn-cgi/l/email-protection#c887aeaee58e8480a9b8b8a4a1aba9bca1a7a688bdbbaca9e6afa7be">[email&#160;protected]</a>. The email must contain the following
information:
1. Subject line: ``Off-FLH Repair Application Submission.''
2. Body of email: Borrower Name, Project Name, Borrower Contact
Information, Project State.
3. Request language: ``Please create a shared CloudVault folder so
that we may submit our application documents.''
Once the email request to create a shared CloudVault folder has
been received, a shared folder will be created within 2 business days.
When the shared CloudVault folder is created by the RHS, the system
will automatically send an email to the applicant's submission email
with a link to the shared folder. All required application documents in
accordance with this Notice must be loaded into the shared CloudVault
folder. When the submission deadline is reached the applicant's access
to the shared CloudVault folder will be removed. Any document uploaded
to the shared CloudVault folder after the application deadline will not
be reviewed or considered.
For further instructions, please refer to Section C. Pre-
Application and Submission Information of this Notice.

FOR FURTHER INFORMATION CONTACT: Jonathan Bell, Director, Processing
and Report Review Branches, Production and Preservation Division,
Multifamily Housing Programs, Rural Development, United States
Department of Agriculture, via email: <a href="/cdn-cgi/l/email-protection#6d202b251d1f020e081e1e04030a5c2d181e090c430a021b">[email&#160;protected]</a> or
telephone: (254) 742-9764.
For information regarding the Addendum: Capital Needs Assessment
Process located at the end of this notice, contact: Jonathan Bell,
Director, Processing and Report Review Branches, Production and
Preservation Division, Multifamily Housing Programs, Rural Development,
United States Department of Agriculture, via email:
<a href="/cdn-cgi/l/email-protection#5e1318162e2c313d3b2d2d3730396f1e2b2d3a3f70393128">[email&#160;protected]</a> or telephone: (254) 742-9764.

SUPPLEMENTARY INFORMATION:

Authority

This solicitation is authorized pursuant to the Title V of the
Housing Act of 1949 (Pub. L. 81-171), as amended; 7 CFR 3560, subpart
L; 42 U.S.C. 1484; 42 U.S.C. 1486(h); and 42 U.S.C. 1480.

Rural Development: Key Priorities

The RHS encourages applicants to consider projects that will
advance the following key priorities:
<bullet> Assisting Rural communities recover economically from the
impacts of the COVID-19 pandemic, particularly disadvantaged
communities;
<bullet> Ensuring all rural residents have equitable access to RD
programs and benefits from RD funded projects; and
<bullet> Reducing climate pollution and increasing resilience to
the impacts of climate change through economic support to rural
communities.
For further information, visit <a href="https://www.rd.usda.gov/priority-points">https://www.rd.usda.gov/priority-points</a>.

Background

USDA's Rural Development Agencies, comprising the Rural Business-
Cooperative Service (RB-CS), Rural Housing Service (RHS), and the Rural
Utilities Service (RUS), are leading the way in helping rural America
improve the quality of life and increase the economic opportunities for
rural people. RHS offers a variety of programs to build or improve
housing and essential community facilities in rural areas. The Agency
also offers loans, grants, and loan guarantees for single- and multi-
family housing, child-care centers, fire and police stations,
hospitals, libraries, nursing homes, schools, first responder vehicles
and equipment, housing for farm laborers and much more. The Agency also
provides technical assistance loans and grants in partnership with non-
profit organizations, Indian tribes, state and Federal government
agencies, and local communities.
Sections 514 and 516 of the Housing Act of 1949 allows the RHS to
provide competitive financing and grants, respectively, for affordable
multi-family rental housing. The program objective is to better
administer repair funds in a fair, equitable, and transparent manner.
Funds will be used to improve, repair, or make modifications to
existing Off-FLH properties currently financed by the RHS that serve
domestic farm laborers, retired domestic farm laborers, or disabled
domestic farm laborers.
To focus investments in areas where the need for increased
prosperity is greatest, the RHS will set aside 10 percent of the
available funds for

[[Page 13375]]

applications that will serve persistent poverty counties. Persistent
poverty counties are areas where at least 20 percent of the population
is living in poverty over the last 30 years (measured by the 1980,
1990, 2000 and 2010 decennial censuses and 2007-2011 American Community
Survey 5-year estimates) according to the American Community Survey
census tract data. Information on which counties are considered
persistent poverty counties can be found through the United States
Department of Agriculture's (USDA) Economic Research Service (ERS)
(<a href="https://ers.usda.gov/">https://ers.usda.gov/</a>). ERS is the main source of economic information
and research for USDA and a principal agency of the U.S. Federal
Statistical System located in Washington, DC. Set-aside funds will be
awarded in the order of receipt of pre-applications. Once the set-aside
funds are exhausted, any further set-aside applications will be
evaluated and ranked with the other applications submitted in response
to this Notice. If the RHS does not receive enough eligible
applications to fully utilize the 10 percent set aside in the service
of these areas, the RHS will award any unused set aside funds to other
eligible applicants.

Overview

Federal Agency: Rural Housing Service.
Funding Opportunity Title: Section 514 Off-Farm Labor Housing Loans
and Subsequent Section 516 Off-Farm Labor Housing Grants to Improve,
Repair, or Make Modifications to existing Off-Farm Labor Housing
Properties for Fiscal Year 2022.
Funding Opportunity Number: USDA-RD-HCFP-FLH-2022.
Available Funds: Section 514 Loans: $5,500,000; Section 516 Grants:
$17,000,000.
Maximum Award: Award may not exceed $15,000 per unit (total loan
and grant). There is no minimum award.
Announcement Type: Request for applications from qualified
applicants for Fiscal Year 2022.
Assistance Listing Numbers (formerly CFDA): 10.405.
Please Note: Expenses incurred in developing pre-applications and
final applications will be at the applicant's sole risk.

A. Federal Award Description

(1) Pre-applications will only be accepted through the date and
time listed in this Notice. The maximum award per selected project may
not exceed $15,000 per unit (total loan and grant). There is no minimum
award requirement. Substantial rehabilitation or proposals for limited
improvements, repairs, or modifications such as accessibility
compliance and health and safety issues will be considered under this
Notice.
(2) A State will not receive more than 50 percent of the Off-FLH
funding unless there are remaining Section 514 and Section 516 funds
after all eligible applications nationwide have been funded. In this
case, funds will be awarded to the next highest-ranking eligible
applications among all of the remaining unfunded applications. The
allocation of these funds may result in a State or States exceeding the
50 percent limitation.
(3) Section 516 Off-FLH grants may not exceed 90 percent of the
total development cost (TDC) of the proposed transaction. TDC is
defined in 7 CFR 3560.11. Section 514 Off-FLH loans may not exceed the
limits set forth in 7 CFR 3560.562(b).
(4) Applications that propose the use of Low-Income Housing Tax
Credits (LIHTC), will not be considered and are not eligible under this
Notice.
(5) Any proposed leveraged funds must be in the form of a grant or
similar funding source with no debt service. No other source of
leveraged funds is acceptable. Pre-applications that propose the use of
leveraged funds must include firm commitment letters within their final
application, if available. If the applicant is unable to secure a
third-party firm commitment letter within 180 calendar days from the
issuance of the award letter under this NOFA, the application will be
deemed incomplete, and the award letter will be considered null and
void.
(6) A firm commitment letter is defined as a grantor's unqualified
pledge to the applicant that they meet their guidelines, and they are
willing to offer the applicant a grant under specified terms. The
letter validates that the applicant's grant has been fully approved and
that the grantor is prepared to close the transaction. Preliminary
commitment letters, term sheets, or any other letter from the grantor
that does not meet the definition above will not be considered a firm
commitment letter and will not meet the requirements specified in this
Notice. Rental Assistance (RA) and Operating Assistance (OA) are not
available for this Notice.
(7) To maximize the use of the limited supply of FLH funds, the RHS
may contact eligible applicants selected for an award in point score
order starting with the highest score, with proposals to modify the
transaction's proportions of loan and grant funds. In addition, if
funds remain after the highest scoring eligible applications are
selected for awards, we may contact those eligible applicants selected
for the awards, in point score order starting with the highest score,
to ascertain whether those respondents will accept the remaining funds.
(8) To enhance customer service and the transparency of this
program, the RHS will publish a list of awardees including the project
name and location and the loan and/or grant amounts of their respective
awards in accordance with the date listed in this Notice. This
information can be found at: <a href="https://www.rd.usda.gov/programs-services/farm-labor-housing-direct-loans-grants">https://www.rd.usda.gov/programs-services/farm-labor-housing-direct-loans-grants</a>. The RHS reserves the right to
post all information submitted as part of the pre-application and final
application package, which is not protected under the Privacy Act, on a
public website with free and open access to any member of the public.

B. Eligibility Information

(1) Housing Eligibility
(a) Housing that is improved, repaired, or modified with subsequent
Off-FLH loan and/or grant funds must meet the standards contained in 7
CFR part 1924, subparts A and C. Off-FLH must be managed in accordance
with 7 CFR part 3560.
(b) Off-FLH must be operated on a non-profit basis and tenancy must
be open to all qualified domestic farm laborers, regardless of which
farm they work at.
(c) Section 514(f)(3) of the Housing Act of 1949, as amended (42
U.S.C. 1484(f)(3)) defines domestic farm laborers to include any person
regardless of the person's source of employment, who receives a
substantial portion of his/her income from the primary production of
agricultural or aqua cultural commodities in the unprocessed or
processed stage, and also includes the person's family.
(2) Tenant Eligibility
(a) Tenant eligibility is limited to persons who meet the
definition of a ``domestic farm laborer,'' or a ``disabled domestic
farm laborer,'' or a ``retired domestic farm laborer'' as defined in
Section 514(f)(3) of the Housing Act of 1949, as amended (42 U.S.C.
1484(f)(3)).
Section 514(f)(3)(A) of the Housing Act of 1949 (42 U.S.C.
1484(f)(3)(A)) has been amended to extend FLH tenant eligibility to
agricultural workers legally admitted to the United States and
authorized to work in agriculture. It is important to note, that
persons admitted legally for agricultural work remain ineligible for RA
as set forth in 7 CFR

[[Page 13376]]

3560.254(c). In addition, under no circumstance may any currently
eligible FLH tenants be displaced from their homes as a result of this
statutory change.
(b) Owners are responsible for verifying tenant income eligibility.
Only very low or low-income households are eligible for operating or
rental assistance rents. Households with incomes above the low-income
limits, moderate income households, must pay the full rent.
(c) Migrant or migrant agricultural laborer is a person (and the
family of such person) who receives a substantial portion of his or her
income from farm labor employment and who establishes a residence in a
location on a seasonal or temporary basis, in an attempt to receive
farm labor employment at one or more locations away from their home
base state, excluding day-haul agricultural workers whose travels are
limited to work areas within one day of their residence.
(d) Seasonal housing is housing that is operated on a seasonal
basis, typically for migrants or migrant agricultural laborers as
opposed to year-round. Off-FLH subsequent loan and grant funds may be
used to improve, repair, or modify existing properties currently
financed by the RHS for seasonal or temporary residential use. A
temporary residence is a dwelling which is used for occupancy, usually
for a short period of time, but is not the legal residence for the
occupant.
(e) The requirements established in Sec. 3560.60 apply to all
applications for Off-FLH loans and grants except that seasonal Off-FLH
that will be occupied for eight months or less per year by migrant
farmworkers while they are away from their residence, may be improved
in accordance with Exhibit I of 7 CFR part 1924, subpart A.
(f) For Off-FLH operating on a seasonal basis, the management plan
must establish specific opening and closing dates. During the off-
season, Off-FLH may be used as defined in 7 CFR 3560, subpart A, under
short-term lease provisions. Where rents are charged on a per-unit
basis and family income qualifies the household for rental assistance,
rental assistance may be used.
(g) Off-FLH is subject to the tenant contribution and rental unit
rent requirements for Plan II housing established under 7 CFR 3560,
subpart E, except where seasonal housing will be occupied for less than
a 3-month period. In such instances the best available and practical
income verification methods may be used with prior approval of the RHS.
(h) Actual dollars earned from farm labor by domestic farm laborers
other than migrant farmworkers must equal at least 65 percent of the
annual income limits indicated for the Standard Federal regions as
published by the RHS for their particular region of the country. For
migrant farmworkers living in seasonal housing the actual dollars
earned from farm labor by a domestic farm laborer must equal at least
50 percent of annual income limits indicated for the Standard Federal
regions, as published by the RHS.
(3) Applicant Eligibility
All eligible applicants must meet the following requirements:
(a) To be eligible to receive a subsequent Section 514 loan for
Off-FLH, the applicant must meet the requirements of 7 CFR 3560.555(a)
and be a broad-based nonprofit organization, a nonprofit organization
of farmworkers, a federally recognized Indian tribe, a community
organization, or an agency or political subdivision of State or local
government, and must meet the requirements of Sec. 3560.55, excluding
Sec. 3560.55(a)(6). A broad-based nonprofit organization is a
nonprofit organization that has a membership that reflects a variety of
interests in the area where the housing will be located; or a limited
partnership with a non-profit general partner which meets the
requirements of Sec. 3560.55(d).
(b) To be eligible to receive a subsequent Section 516 grant for
Off-FLH, the applicant must meet the requirements of 7 CFR 3560.555(b)
and be a broad-based nonprofit organization, a nonprofit organization
of farmworkers, a federally recognized Indian tribe, a community
organization, or an agency or political subdivision of State or local
government, and must meet the requirements of Sec. 3560.55, excluding
Sec. 3560.55(a)(6). A broad-based nonprofit organization is a
nonprofit organization that has a membership that reflects a variety of
interests in the area where the housing will be located and be able to
contribute at least one-tenth of the total farm labor housing
development cost from its own or other resources. The applicant's
contribution must be available at the time of the grant closing. An
Off-FLH loan financed by the RHS may be used to meet this requirement,
however, an RHS grant cannot be used to meet this requirement. Limited
partnerships with a non-profit general partner are eligible for Section
514 loans, however, they are not eligible for Section 516 grants.
(c) The applicant must be unable to obtain similar credit elsewhere
at rates that would allow for rents within the payment ability of
eligible residents. (Note: not applicable for State or local public
agencies or Indian tribes.)
(d) Possess the legal and financial capacity to carry out the
obligations required for the subsequent loan and/or grant.
(e) Broad-based non-profit organizations must have a membership
that reflects a variety of interests in the area where the housing will
be located.
(f) Be able to maintain, manage, and operate the Off-FLH for its
intended purpose and in accordance with all RHS requirements as
demonstrated with its compliance with RHS servicing requirements. Non-
compliance with RHS servicing requirements with other projects owned
and/or managed by natural person(s) managing/controlling (whether
directly or indirectly through other entities) the borrowing entity,
will render the applicant ineligible to participate in this Notice
nationwide until the non-compliance event(s) is/are remedied or are in
compliance with an RHS approved workout plan.
(g) With the exception of applicants who are a non-profit
organization, housing cooperative or public body, be able to provide
the borrower contribution from their own resources (this contribution
must be in the form of cash).
(h) Not be suspended, debarred, or otherwise excluded from, or
ineligible for, participation in Federal assistance programs under 2
CFR parts 180 and 417.
(i) Not be delinquent on Federal debt or a Federal judgment debtor,
with the exception of those debtors described in 7 CFR 3560.55 (b).
(j) Be in compliance with the requirements of the Improper Payments
Elimination and Recovery Improvement Act (IPERIA) as applied by RHS.
(k) Additional requirements for applicants: If an applicant, the
managing general partner, managing member, or key principal in the
organization decision-making and operational authority that have
control of the applicant and any sub-applicant entities involved
including the actual natural person(s) of any sub-entity (i.e., other
organizations, partnerships, etc.) exercising management and/or
financial control of an applicant borrower, as well as any affiliated
entity having a 10 percent or more ownership interest, having a prior
or existing RHS debt, the following additional requirements must be
met:
(i) The applicant must be in compliance with any existing loan or
grant agreements and with all legal and regulatory requirements or be
compliant with an RHS approved workout plan.

[[Page 13377]]

The RHS may require that applicants with monetary or non-monetary
deficiencies be in compliance with an RHS approved workout plan for a
minimum of six (6) consecutive months before becoming eligible for
further assistance, as determined by the RHS.
(ii) The applicant must be in compliance with Title VI of the Civil
Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, and
all other applicable civil rights laws. Under this Notice, the project
will also be considered eligible to apply if there is a current and
accepted Self-Evaluation Transition Plan for the project.
(l) Additional requirements for non-profit organizations. In
addition to the eligibility requirements of the paragraphs above, non-
profit organizations must meet the following criteria:
(i) The applicant must have received a tax-exempt ruling from the
IRS designating the applicant as a 501(c)(3) or 501(c)(4) organization.
(ii) The applicant must have in its charter the provision of
affordable housing.
(iii) No part of the applicant's earnings may benefit any of its
members, founders, or contributors.
(iv) The applicant must be legally organized under State and local
law.
(2) Additional requirements for limited partnerships. In addition
to the applicant eligibility requirements of the paragraphs above,
limited partnership loan applicants must meet the following criteria:
(i) The general partners must be able to meet the borrower
contribution requirements if the partnership is not able to do so at
the time of loan request.
(ii) The general partners must maintain a minimum 5 percent
financial interest in the residuals or refinancing proceeds in
accordance with the partnership organizational documents.
(iii) The partnership must agree that new general partners can be
brought into the organization only with the prior written consent of
the RHS.
(m) This Notice requires selected applicants to make the required
equity contribution as outlined in 3560.63(c) for any new Section 514
loan. Applicants may be eligible to receive additional Return to Owner
(RTO) for this required contribution, if applicable.
(n) Eligibility also includes the continued ability of the
borrower/applicant to provide acceptable management and will include an
evaluation of any current outstanding deficiencies. Any outstanding
violations or extended open operational findings associated with the
applicant/borrower or any affiliated entity having an identity of
interest (IOI) with the project ownership and which are recorded in the
RHS's automated Multi-Family Information System (MFIS), will preclude
further processing of any application unless there is a current and
approved RHS workout plan and the applicant is in compliance with the
provisions of the workout plan. The RHS may require that applicants
with deficiencies be in compliance with an RHS approved workout plan
for a minimum of six (6) consecutive months, as determined by the RHS.
(4) Project Eligibility
This Notice solicits pre-applications from the current borrowers/
owners of existing Off-FLH projects currently participating in the
RHS's Section 514/516 Off-FLH portfolio for the purpose of improving,
repairing, modifying, revitalizing, and preserving the facility to
ensure that it will continue to provide decent, safe, and sanitary
housing. Any Off-FLH project that is not already participating in the
RHS's Section 514/516 Off-FLH portfolio as evidenced by currently
having an outstanding Section 514 Off-FLH loan is not eligible under
this Notice.
(a) On-Farm Labor Housing projects are not eligible under this
Notice.
(b) This Notice is for stay in owner transactions only where the
current owner, with an outstanding Section 514 Off-FLH loan, may apply
for subsequent loan and/or grant funds to improve, repair, or make
modifications to their Off-FLH property. Proposals that are for a
transfer of ownership, to sell the property, to complete a
recapitalization, or for an IOI or third-party acquisition transaction
will not be considered and are not eligible under this Notice.
(c) Applications that propose the use of LIHTC, will not be
considered and are not eligible under this Notice as stated above.
(d) Any Off-FLH property that currently has an RHS approved
Diminished Needs Waiver (DNW) or is in the process of applying for a
DNW, is not eligible under this Notice. All of the tenants residing in
the project must be eligible farm labor tenants as defined in this
Notice. A DNW allows non-farm labor tenants to reside in farm labor
housing if the diminished need for such housing has been determined and
accepted by RHS.
(e) The average physical vacancy rate for the twelve (12) months
preceding this Notice's pre-application submission due date of February
1, 2022, can be no more than ten (10) percent for projects consisting
of sixteen (16) or more revenue units and no more than fifteen (15)
percent for projects with less than sixteen (16) revenue units unless
the project is seasonal Off-FLH or unless the applicant has an RHS
approved workout plan and is in compliance with the provisions of the
workout plan and provides sufficient market documentation or a market
study that clearly demonstrates to the RHS that sufficient market
demand exists. If the project is seasonal Off-FLH, the applicant must
provide detailed documentation for the twenty-four (24) months
preceding this Notice's pre-application submission due date that
verifies the project's operations including information regarding the
open and close date, lease-up, vacancy, rent rolls, operating budgets,
and any other information the applicant can provide to document the
need for the seasonal Off-FLH project. All of the tenants in the
project must be eligible farm labor tenants as defined in this Notice.
(f) A positive cash flow for the previous full three (3) years of
operations is required unless an exception applies for projects with an
RHS approved workout plan where the applicant is in compliance with the
provisions of the workout plan. The RHS may require that applicants
with monetary or non-monetary deficiencies be in compliance with the
RHS approved workout plan for a minimum of six (6) consecutive months
before becoming eligible for a loan and/or grant under this Notice.
Additionally, an exception may apply to projects that have a negative
cash flow in operations if surplus cash exists in either the general
operating account as defined in 7 CFR 3560.306(d)(1) or the reserve
account. Surplus cash exists when the balance is greater than the
required deposits minus authorized withdrawals. The applicant must
provide the project's annual financial report(s) to document the
project complies with this exception for each year the project has a
negative cash flow, if applicable. Seasonal Off-FLH properties that
receive OA may also be exempt from this requirement at the sole
discretion of the RHS, if applicable.
(g) An RHS approved As-Is Capital Needs Assessment (CNA) and an RHS
financial evaluation and analysis must be conducted to ensure that
utilization of the subsequent loan and/or grant funds are financially
feasible and necessary to improve, repair, modify, and preserve the
project as affordable housing.
Specifically, a CNA provides a repair schedule for the property in
its present condition, indicating repairs and replacements necessary
for a property to function properly and efficiently over a

[[Page 13378]]

span of 20 years. At the end of this funding Notice, a CNA Addendum is
provided with detailed instructions to assist the applicant in
completing CNA reports, expected useful life tables, and forms.
Additionally, there are six attachments which accompany the CNA
addendum identified as followed: A CNA is comprised of nine main
sections:
<bullet> Definitions;
<bullet> Contract Addendum;
<bullet> Requirements and Statement of Work (SOW) for a CNA;
<bullet> The CNA Review Process;
<bullet> Guidance for the Multi-Family Housing (MFH) CNA Recipient
Regarding Contracting for a CNA;
<bullet> Revising an Accepted CNA During Underwriting;
<bullet> Updating a CNA;
<bullet> Incorporating a Property's Rehabilitation into a CNA; and
<bullet> Repair and Replacement Schedule.
Additionally, there are seven attachments which accompany the CNA
addendum identified as follows:
<bullet> Attachment A, ADDENDUM TO THE CAPITAL NEEDS ASSESSMENT
CONTRACT.
<bullet> (B) Attachment B, CAPITAL NEEDS ASSESSMENT STATEMENT OF
WORK.
<bullet> (C) Attachment C, FANNIE MAE PHYSICAL NEEDS ASSESSMENT
GUIDANCE TO THE PROPERTY EVALUATOR.
<bullet> (D) Attachment D, CNA e-Tool Estimated Useful Life Table.
<bullet> (E) Attachment E, CAPITAL NEEDS ASSESSMENT REPORT.
<bullet> (F) Attachment F, SAMPLE CAPITAL NEEDS ASSESSMENT REVIEW
REPORT.
<bullet> (G) Attachment G, CAPITAL NEEDS ASSESSMENT GUIDANCE TO THE
REVIEWER.
The CNA may be submitted with the final application. The Agency
suggests that this information should be made available to RD MFH Off-
Farm Labor Housing (FLH) property owners, applicants and CNA Providers
who are or are planning to submit transactions for the Off-FLH program.
(h) Initial eligibility for any processing will be determined as of
the pre-application submission due date of February 1, 2022. The RHS
reserves the right to discontinue the processing of any application due
to material changes in the applicant's status occurring any time after
the initial eligibility determination.
(5) Priority of Funding
(a) Subsequent Section 514 loan and subsequent Section 516 grant
funds will be awarded under this Notice in accordance with the
following priorities:
<bullet> Health and Safety deficiencies.
<bullet> Deferred maintenance and Fair Housing compliance.
<bullet> Repairs that are needed to improve the sustained rental
marketability of the property.
(b) Proposals to build community rooms, playgrounds, or laundry
rooms may be considered and are eligible under this Notice.
Furthermore, proposals to develop or construct additional units within
the existing building envelope to comply with accessibility
requirements will be considered and are eligible under this Notice.
Funds may be used to repair or renovate existing project items
identified in the CNA and to satisfy accessibility transition plans and
fair housing requirements. Additional items may be added to the scope
of work, if practical and feasible, at the sole discretion of the RHS,
which could include accessibility, energy efficiency or energy
generation items.
(c) Subsequent Section 514 Off-FLH loan funds may be used to
establish a tenant protection account, if applicable and if required by
the RHS, for existing unsubsidized tenants residing at the property on
the day the transaction closes, to the extent necessary to reduce the
rental payment to the pre-transaction rent, or thirty (30) percent of
adjusted income, if higher. If applicable and if required by the RHS,
the applicant will only be required to subsidize the difference in
rents that exists at the time of the transaction closing for any
unsubsidized tenant that is negatively impacted by the post-transaction
rents. If applicable and if required by the RHS:
<bullet> This analysis and the required tenant protection amount
will be evaluated and calculated by the RHS.
<bullet> all tenant protection costs must be included in the
Sources and Uses analysis for the full amount needed to fund the
initial two-year minimum period following the transaction closing date.
<bullet> the applicant must agree to protect currently eligible
tenants affected by the rent increase as long as the tenant resides in
the project. The obligation with respect to each unsubsidized tenant in
place at the time of the transaction closing will end when the tenant
receives rental assistance, receives a housing voucher, voluntarily
leaves the property, is evicted for proper cause, or has income
increased to pay the post-transaction basic rent without being rent
over-burdened. The tenant protection account will be applicable and
required at the sole discretion of the RHS.
(d) Grant Limit--the amount of any Off-FLH grant must not exceed 90
percent of the TDC as provided in 7 CFR 3560.562(c)(1).
(e) Other Requirements--the following requirements apply to
subsequent loans and grants made in response to this Notice:
(i) 7 CFR part 1901, subpart E, regarding equal opportunity
requirements.
(ii) For grants only, 2 CFR parts 200 and 400, which establishes
the uniform administrative and audit requirements for grants and
cooperative agreements to State and local Governments and to non-profit
organizations.
(iii) 7 CFR part 1901, subpart F, regarding historical and
archaeological properties.
(iv) 7 CFR 1970.11, Timing of the environmental review process.
Please note, the environmental information must be submitted by the
applicant to the RHS. The RHS must review and determine that the
environmental information is acceptable before the obligation of funds.
(v) 7 CFR part 3560, subpart L, regarding the loan and grant
authorities of the Off-FLH program.
(vi) 7 CFR part 1924, subpart A, regarding planning and performing
construction and other development.
(vii) 7 CFR part 1924, subpart C, regarding the planning and
performing of site development work.
(viii) For construction financed with a Section 516 grant, the
provisions of the Davis-Bacon Act (40 U.S.C. 276(a)-276(a)-5) and
implementing regulations published at 29 CFR parts 1, 3, and 5.
(ix) Current (not older than six months from the date of issuance)
combination comprehensive credit reports for the applicant, entity and
principals must be submitted and considered during the Agency's review
for eligibility determination. In the past, the Agency has required the
applicant to submit the credit report fee. In lieu of the applicant
submitting the fee, the Agency will require the applicant to provide
the credit report. It is the Agency's expectation that this change will
create an efficiency in the application process that did not exist,
which should assist with streamlining the application process for the
applicant. Only Credit reports provided by accredited major credit
bureaus will be accepted.
(x) Borrowers and grantees must take reasonable steps to ensure
that tenants receive the language assistance necessary to afford them
meaningful access to USDA programs and activities,

[[Page 13379]]

free of charge. Failure to provide this assistance to tenants who can
effectively participate in or benefit from Federally assisted programs
or activities may violate the prohibition under Title VI of the Civil
Rights Act of 1964, 42 U.S.C. 2000d et seq. and Title VI regulations
against national origin discrimination.
(xi) In accordance with 7 CFR 3560.60, the housing must be
economical to construct, operate, and maintain and must not be of
elaborate design or materials.
(xii) All other requirements contained in 7 CFR part 3560,
regarding the Sections 514/516 Off-FLH programs.
(xiii) System for Awards Management. All program applicants must be
registered in the System for Awards Management (SAM) prior to
submitting an application, unless determined exempt under 2 CFR 25.110.
Federal award recipients must maintain an active SAM registration with
current information at all times during which it has an active Federal
award or an application under consideration by the RHS. The applicant
must ensure that the information in the database is current, accurate,
and complete. Applicants must ensure they complete the Financial
Assistance General Certifications and Representations in SAM.
(6) Dun and Bradstreet Data Universal Numbering System (DUNS) for Award
Management (SAM)
A Dun and Bradstreet Data Universal Numbering System (DUNS) number
must be obtained and registered in the System for Award Management
(SAM) prior to submitting an application pursuant to 2 CFR 25.200(b).
In addition, an entity applicant must maintain registration in SAM at
all times during which it has an active Federal award or an application
or plan under consideration by the Agency. The applicant must ensure
that the information in the database is current, accurate, and
complete. Applicants must ensure they complete the Financial Assistance
General Certifications and Representations in SAM. Similarly, all
recipients of Federal financial assistance are required to report
information about first-tier subawards and executive compensation in
accordance to 2 CFR part 170. So long as an entity applicant does not
have an exception under 2 CFR 170.110(b), the applicant must have the
necessary processes and systems in place to comply with the reporting
requirements should the applicant receive funding. See 2 CFR
170.200(b). An applicant, unless excepted under 2 CFR 25.110(b), (c),
or (d), is required to:
(a) Be registered in SAM before submitting its application;
(b) Provide a valid DUNS number or unique entity identifier (UEI)
in its application; and
(c) Continue to maintain an active SAM registration with current
information at all times during which it has an active Federal award or
an application or plan under consideration by a Federal awarding
agency. The Federal awarding agency may not make a federal award to an
applicant until the applicant has complied with all applicable DUNS and
SAM requirements and, if an applicant has not fully complied with the
requirements by the time the Federal awarding agency is ready to make a
Federal award, the Federal awarding agency may determine that the
applicant is not qualified to receive a Federal award and use that
determination as a basis for making a Federal award to another
applicant. As required by the Office of Management and Budget (OMB),
all applications must provide a DUNS number when applying for Federal
assistance, on or after November 12, 2020. Organizations can receive a
DUNS number at no cost by calling the dedicated toll-free number at 1-
866-705-5711 or via internet at <a href="https://fedgov.dnb.com/webform">https://fedgov.dnb.com/webform</a>.
Additional information concerning this requirement can be obtained on
the <a href="http://Grants.gov">Grants.gov</a> website at <a href="https://www.grants.gov">https://www.grants.gov</a>. Similarly, applicants
may register for SAM at <a href="https://www.sam.gov">https://www.sam.gov</a> or by calling 1-866-606-
8220. The applicant must provide documentation that they are registered
in SAM and their DUNS or UEI number. If the applicant does not provide
documentation that they are registered in SAM and their DUNS or UEI
number, the application will not be considered for funding. The
following forms for acceptance of a federal award are now collected
through your registration or annual recertification in <a href="http://SAM.gov">SAM.gov</a> in the
Financial Assistance General Certifications and Representations
section:
<bullet> Form AD-1047, ``Certification Regarding Debarment,
Suspension, and Other Responsibility Matters-Primary Covered
Transactions.''
<bullet> Form AD-1048, ``Certification Regarding Debarment,
Suspension, Ineligibility and Voluntary Exclusion. Lower Tier Covered
Transactions.''
<bullet> Form AD-1049, ``Certification Regarding Drug-Free
Workplace Requirements (Grants).''
<bullet> Form AD-3031, ``Assurance Regarding Felony Conviction or
Tax Delinquent Status for Corporate Applicants.''
<bullet> Form AD-3030, ``Representations Regarding Felony
Conviction and Tax Delinquent Status for Corporate Applicants.''

C. Pre-Application and Submission Information

(1) Pre-Application Submission
The application process will be in two phases: The initial pre-
application and the submission of a final application. Only those pre-
applications that are selected for further processing will be invited
to submit a final application. In the event that a pre-application is
selected for further processing and the applicant declines, the next
highest ranked pre-application will be selected for further processing.
All pre-applications for Section 514 and 516 funds must meet the
requirements of this Notice. Incomplete pre-applications will be
rejected and returned to the applicant. No pre-application will be
accepted after the deadline unless the date and time are extended by
another Notice published in the Federal Register.
(a) Pre-applications must be submitted electronically. The process
for submitting an electronic application to the RHS is as follows:
(i) At least two business days prior to the application deadline,
the applicant must email the RHS a request to create a shared folder in
CloudVault. The email must be sent to the following address: <a href="/cdn-cgi/l/email-protection#521d34347f141e1a3322223e3b3133263b3d3c12272136337c353d24">[email&#160;protected]</a>. The email must contain the following
information:
a. Subject line: ``Off-FLH Repair Application Submission.''
b. Body of email: Borrower Name, Project Name, Borrower Contact
Information, Project State.
c. Request language: ``Please create a shared CloudVault folder so
that we may submit our application documents.''
(ii) Once the email request to create a shared CloudVault folder
has been received, a shared folder will be created within 2 business
days. When the shared CloudVault folder is created by the RHS, the
system will automatically send an email to the applicant's submission
email with a link to the shared folder. All required application
documents in accordance with this Notice must be loaded into the shared
CloudVault folder. When the submission deadline is reached the
applicant's access to the shared CloudVault folder will be removed. Any
document uploaded to the shared CloudVault folder after the application
deadline will not be reviewed or considered.

[[Page 13380]]

(iii) The applicant should upload a Table of Contents of all of the
documents that have been uploaded to the shared CloudVault folder.
Last-minute requests and submissions may not allow adequate time for
the submission process to take place prior to the deadline. Note:
Applicants are reminded that all submissions must be received by the
deadline and the application will be rejected if it is not received by
the deadline date and time, regardless of when the application was
submitted.
(b) The RHS plans to host a workshop to discuss this Notice, the
application process and the borrower's responsibilities, among other
topics. Further information regarding the date and time of this
workshop as well as information on how to participate will be issued at
a later date via a public notice.
(c) If a pre-application is accepted for further processing, the
applicant must submit a final application, acceptable to the RHS, by
June 30, 2022, 12 p.m., Eastern Daylight Savings Time. If the pre-
application is not accepted for further processing due to being
incomplete or ineligible, the applicant will be notified of appeal
rights under 7 CFR part 11. Pre-applications that are deemed eligible
but are not selected for further processing will be withdrawn from
processing and will be encouraged to apply to future Notices, if
applicable. This action is not appealable.
2. Pre-Application Requirements
The pre-application must contain the following:
(a) An executed and dated Executive Summary on the applicant's
letterhead that must include at least the following:
(i) Brief description of the project and its history. Include the
borrower's name, project name, project location, number of units,
number of Rental Assistance (RA) or Operating Assistance (OA) units,
unit mix, etc. Be sure to address if the project is year-round or
seasonal. Also provide the year the property was built and placed in
service, the original sources of funding, and the original amounts of
funding it received. Include a description of any significant
improvements, repairs, or modifications that have been made since the
property was placed in service, which would comprise substantial
rehabilitations and significant repairs that were needed due to natural
disasters, floods, fires, etc. Provide any other information that you
may want to disclose regarding the project and its history.
(ii) Brief description of the proposed transaction. Provide a
narrative of the loan and/or grant funds that the applicant is seeking
from the RHS or any other third-party grant source and a description of
what the funds will be utilized for. Describe the scope of work and
explain how the transaction will come together overall including
information on how the project will absorb any additional debt service,
if applicable.
(iii) Description of the current ownership structure with an
organizational chart.
(iv) Narrative verifying the applicant's ability to meet the
eligibility requirements stated earlier in this Notice.
(v) A statement of the applicant's experience in operating labor
housing or other rental housing.
(vi) Description of the applicant's legal and financial capability
to carry out the obligation of the subsequent loan and/or grant.
(vii) Current management. A brief description of how the property
is currently managed. As stated earlier in this Notice, the housing
must be managed in accordance with the management regulations, 7 CFR
part 3560.
(viii) Any financial commitments, financial concessions, or other
economic benefits proposed to be provided by the RHS.
(ix) Third-party grant funding, if applicable. For each third-party
grant funding source, discuss briefly the grant provider, grant amount,
including terms, commitment status, timing issues, any restrictions
that will be applicable to the project, and whether any accommodation
from the RHS is proposed, such as a subordination in lien position. The
desired lien position of any third-party grant funding source must be
clearly disclosed as well as any proposal for the RHS to subordinate
its lien position.
(x) Any proposed compensation to parties having an identity of
interest with either the consultant or technical assistance provider,
etc.
(xi) Any proposed construction financing, for example, a
construction or bridge loan or the use of multiple advances.
(xii) Type and method of construction such as owner builder,
negotiated bid, or contractor method.
(xiii) If an FLH grant is desired, a statement concerning the need
for an FLH grant. The statement must include estimates of the rents
required with a grant and rents required without a grant. Documentation
to demonstrate how the rent figures were computed must be provided.
Documentation must be in the form of a completed Form RD 3560-7,
``Multiple Family Housing Project Budget/Utility Allowance,'' completed
as if a grant were received and another form completed as if a grant
would not be received. The RHS will review each budget to determine
that the income and expenses are reasonable and customary for the area.
The RHS will then verify that the proposed rental rates provided on the
budget that considers rents without a grant, are at or above market
rate rents or at a level that would overburden the residents.
(xiv) Statement by the applicant that they will pay any cost
overruns.
(xv) Estimated development timeline to include estimated start and
end date as well as any other important milestones.
(xvi) Description of any required state or local approvals, if
applicable.
(xvii) Description of the required and intended applicant
contribution, if applicable.
(xviii) Any other pertinent information that the applicant feels
should be disclosed as part of this proposal, if applicable.
(b) Form RD 3560-1, ``Application for Partial Release,
Subordination, or Consent,'' can be obtained at: <a href="https://formsadmin.sc.egov.usda.gov//efcommon/eFileServices/eFormsAdmin/RD3560-0001.pdf">https://formsadmin.sc.egov.usda.gov//efcommon/eFileServices/eFormsAdmin/RD3560-0001.pdf</a>.
(c) Standard Form 424, ``Application for Federal Assistance,'' can
be obtained at: <a href="https://www.grants.gov/">https://www.grants.gov/</a>.
(d) Current (within 6 months of this Notice's pre-application
submission due date) financial statements for each entity within the
ownership structure with the following paragraph certified by the
applicant's designated and legally authorized signer:
``I/we certify the above is a true and accurate reflection of our
financial condition as of the date stated herein. This statement is
given for the purpose of inducing the United States of America to make
a loan or to enable the United States of America to make a
determination of continued eligibility of the applicant for a loan as
requested in the loan application of which this statement is a part.''
(e) Evidence that the applicant is unable to obtain credit from
other sources. At least two letters from two separate credit
institutions which normally provide real estate and repair loans in the
area must be obtained and these letters must indicate the rates and
terms upon which a loan might be provided. The RHS will review each
letter to verify that the applicant is only able to obtain market rate
financing, which would include a market rate interest rate and term of
less than 30 (thirty) years.

[[Page 13381]]

(f) Letter from the IRS indicating the applicant's tax
identification number.
(g) Documentation verifying the applicant's DUNS number, if
applicable.
(h) Current and fully executed limited partnership agreement and
certificates of limited partners, if applicable. (Agency requirements
should be contained in one section of the agreement and their location
identified by the applicant in a cover sheet.)
(i) If a nonprofit organization:
i. Tax-exempt ruling from the IRS designating them as a 501(c)(3)
or 501(c)(4) organization.
ii. Purpose statement, including the provision of low-income
housing.
iii. Evidence of organization under state and local law and a copy
of the applicant's charter, Articles of Incorporation, and By-laws.
iv. List of Board of Directors including their names, occupations,
phone numbers, and addresses.
v. If a member or subsidiary of another organization, the
organization's name, address, and nature of business.
(j) Document the need for the project. As provided earlier in this
Notice, the applicant must provide documentation that the average
physical vacancy rate for the twelve (12) months preceding this
Notice's pre-application submission due date has been no more than ten
(10) percent for projects consisting of sixteen (16) or more revenue
units and no more than fifteen (15) percent for projects with less than
sixteen (16) revenue units unless the project is seasonal Off-FLH or
unless the applicant has an RHS approved workout plan and is in
compliance with the provisions of the workout plan and provides
sufficient market documentation or a market study that clearly
demonstrates to the RHS that sufficient market demand exists. If the
project is seasonal Off-FLH, the applicant must provide detailed
documentation for the twenty-four (24) months preceding this Notice's
pre-application submission due date that verifies the project's
operations including information regarding the open and close date,
lease-up, vacancy, rent rolls, operating budgets, and any other
information the applicant can provide to document the need for the
seasonal Off-FLH project. All of the tenants in the project must be
eligible farm labor tenants as defined in this Notice.
(k) If the project does not meet the vacancy requirements above a
description of the cause of the vacancy and the plan to increase the
occupancy must be submitted. The requested loan or grant funds must be
needed in order to stabilize occupancy. In addition, a market study
must be submitted to document the need for the project and must meet
the following requirements. The market area must be clearly identified
and may include only the area from which tenants can reasonably be
drawn to the project. Documentation must be provided to justify the
need within the primary market area for the housing of domestic farm
laborers. The documentation must also consider disabled and retired
farm workers and adjusted medium incomes of very-low, low, and
moderate. The market study must include the following information:
<bullet> A complete description of the proposed site and a map
showing the site, location of services, and their distances from the
site.
<bullet> Names and qualifications of members of the community
interviewed during the site visit and a discussion of their comments.
<bullet> Major employers in the area and year established.
<bullet> Employment opportunities and rates for the area for the
past 5 years.
<bullet> Services available in the area, including shopping,
schools, and medical facilities as well as community services such as
recreational, transportation, and day care that are available.
<bullet> Population by year plus the annual increase or decrease
for the past 5 years.
<bullet> Population characteristics by age.
<bullet> Number of households by year and number of persons per
household for the past 5 years.
<bullet> Historical breakdown of households by owners and renters.
<bullet> Households by income groups.
<bullet> A survey of existing or proposed rental housing, including
complex name, location, number of units, bedroom mix, family or elderly
type, year built, rent charges, vacancies, waiting lists, amenities,
and the availability of RA or other subsidies.
<bullet> Available mobile homes, if part of housing stock.
<bullet> The existing vacancy rate of all available rental units in
the community, including houses.
<bullet> Proportionate need for project type.
<bullet> Building permits issued per year for the last 3 years for
single and multiple unit dwellings.
<bullet> For proposals where the applicant is requesting LIHTCs,
the number of LIHTC units and the maximum LIHTC incomes and rents by
unit size. This information will determine the levels of incomes in the
market area, which will support the basic rents while also qualifying
the applicant for tax credits.
<bullet> The amount of RA necessary to ensure the project's
success.
<bullet> The annual income level of farmworker families in the
area.
<bullet> A realistic estimate of the number of farm workers who
remain in the area where they harvest and the number of farm workers
who normally migrate into the area. Information on migratory workers
should indicate the average number of months the migrants reside in the
area and an indication of what type of family groups are represented by
the migrants (i.e., single individuals as opposed to families).
<bullet> General information concerning the type of labor-intensive
crops grown in the area and prospects for continued demand for farm
laborers.
<bullet> The overall occupancy rate for comparable rental units in
the area and the rents charged and customary rental practices for these
units (i.e., will they rent to large families, do they require annual
leases, etc.).
<bullet> The number, condition, adequacy, rental rates and
ownership of units currently used or available to farm workers.
<bullet> Information on any proposed new construction of housing
units within the primary market area.
<bullet> A description of the project's units, including the
number, type, size, rental rates, amenities such as carpets and drapes,
related facilities such as a laundry room or a community room and other
facilities providing supportive services in connection with the housing
and the needs of the tenants such as a health clinic or day care
facility.
<bullet> The applicant must also include documentation of the
following applicable elements and provide the page number of the report
which contains the information that satisfies each element:
<bullet> Services available in the area include shopping, schools,
and medical facilities as well as community services such as
recreational, transportation, and day care. Services appear to be
appropriate for the project type and within reasonable proximity of the
site.
<bullet> Building permits issued during the past 3 years and new
employment opportunities show the community to be growing, rather than
declining.
<bullet> Major employers in the area provide employment
opportunities sufficient to support a population base of renters for
the proposed project.
<bullet> Employment rates for the area have been high over the past
5 years.
<bullet> The analyst makes realistic recommendations supported by
the statistical information provided:
<bullet> Population characteristics and household data for the
community are stable or show an increase during the past 5 years.
<bullet> Population characteristics by age shows support for the
type of project

[[Page 13382]]

being proposed and the type of complex proposed reflects the greater
proportionate need and demand of the community. To establish this,
compare the share or percentage of the community's total rental units
that are designated for the elderly (62 years or older or disabled) to
the community's share of elderly households, and the share of total
rental units for families to the share of family households in the
community.
<bullet> For mixed projects, the unit mix must reflect the
proportionate need of each household type.
<bullet> Statistical data showing households by income group shows
that there are households in the eligible income group that could rent
in the project.
<bullet> Historical breakdown of households by owners and renters
shows that there is a tradition of renters.
<bullet> The Market Feasibility Documentation (MFD) addresses the
need for more than just one and two bedroom units.
<bullet> The bedroom mix of the proposed units is proportional to
the need in the market area based on renter household size and the
bedroom mix of existing units.
<bullet> The bedroom mix of fully accessible units (5 percent) is
comparable to the bedroom mix of non-accessible units.
<bullet> The MFD shows evidence of need for the housing in that
there are rent overburdened households and/or households in substandard
housing.
<bullet> A discussion of existing housing supply includes reference
to the single-family housing rental and sale units available and shows
these to be inadequate.
<bullet> Temporary residents of a community, including college
students, military personnel, or others not claiming their current
residence as their legal domicile, have not been included in
determining need and project size.
<bullet> The MFD includes a discussion on the current market for
single-family houses and how sales, or the lack of sales, will affect
the demand for elderly rental units. If the market study discusses how
elderly homeowners reinforce the need for rental housing, it does so
only as a secondary market and not as the primary market.
<bullet> The vacancy rates in existing rental housing, including
available single-family housing and mobile homes, is 5 percent (or the
State-approved vacancy standard, if different) or less, or there is an
acceptable explanation where higher rates occur. Existing rental
complexes should also show waiting lists.
<bullet> The Conventional Rents for Comparable Units (CRCU) shown
is less than or equal to the rents proposed for the project.
The market study must be obtained from and performed by an
independent third-party provider that has no identity of interest with
the property owner, management agent, applicant or any other principle
or affiliate.
Project funds may be used to obtain the market study if there are
adequate funds available and the request to use project funds is
approved by the Field Operations Division servicing official.
(l) Document the project has a positive cash flow. As provided
earlier in this Notice, the applicant must provide documentation that
the project had a positive cash flow for the previous full three (3)
years of operations preceding this Notice's pre-application submission
due date unless an exception applies for projects with an RHS approved
workout plan where the applicant is in compliance with the provisions
of the workout plan. The RHS may require that applicants with monetary
or non-monetary deficiencies be in compliance with the RHS approved
workout plan for a minimum of six (6) consecutive months before
becoming eligible for a loan and/or grant under this Notice.
Additionally, an exception may apply to projects that have a negative
cash flow in operations if surplus cash exists in either the general
operating account as defined in 7 CFR 3560.306(d)(1) or the reserve
account. Surplus cash exists when the balance is greater than the
required deposits minus authorized withdrawals. The applicant must
provide the project's annual financial report(s) to document the
project complies with this exception for each year the project has a
negative cash flow, if applicable. Seasonal Off-FLH properties that
receive OA may also be exempt from this requirement at the sole
discretion of the RHS, if applicable.
(m) Current tenant supportive services plan which describes
services that are currently provided on-site or made available to
tenants through cooperative agreements with service providers in the
community, such as a health clinic or day care facility, if applicable.
Off-site services must be accessible and affordable to farm workers and
their families. A map showing the location of support services must be
included in the plan, if applicable. Letters of commitment from the
current service providers must also be submitted with the plan, if
applicable. The plan must describe how the services are funded. Project
funds may not be used to pay for these services, however, costs
associated with a Resident Services Coordinator or coordination of
resident services are an eligible expense and could be included in the
project budget, if applicable.
(n) Preliminary plans and specifications, including type of
construction and materials, if available. The preliminary plans and
specifications, including type of construction and materials may be
submitted with the final application. The housing must meet RHS's
design and construction standards contained in 7 CFR part 1924,
subparts A and C and must also meet all applicable Federal, State, and
local accessibility standards. Also, applications for Off-FLH loans and
grants must meet the design requirements in 7 CFR 3560.559.
For projects that do not currently have interior/exterior washing
facilities, applicants should consider incorporating interior/exterior
washing facilities for tenants, as necessary to protect the asset and
the tenants from excess dirt and chemical exposure. Such facilities
might include a boot washing station or hose bibs, among others.
(o) The applicant must submit a checklist, certification, and
signed affidavit by the project architect or engineer, as applicable,
for any energy programs the applicant intends to participate in.
(p) A Sources and Uses Statement which shows all sources of funding
included in the proposed transaction. The terms and schedules of all
sources included in the project should be included in the Sources and
Uses Statement. (Note: A Section 516 grant may not exceed 90 percent of
the TDC of the transaction)
(q) Evidence of the submission of the project description to the
applicable State Housing Preservation Office (SHPO), and/or Tribal
Historic Preservation Officer (THPO) with the request for comments, if
applicable.
(r) Evidence of compliance with Executive Order 12372. The
applicant must send a copy of Form SF-424, ``Application for Federal
Assistance,'' to the applicant's State clearinghouse for
intergovernmental review. If the applicant is located in a State that
does not have a clearinghouse, the applicant is not required to submit
the form. However, evidence that the State does not have a
clearinghouse must be submitted. Applications from Federally recognized
Indian tribes are not subject to this requirement.
(s) Comments regarding relevant offsite conditions.
(t) The following forms are required to be submitted with the pre-
application:
(i) Awards made under this Notice are subject to the provisions
contained in the Consolidated Appropriations Act, 2019 (Pub. L. 116-6)
sections 745 and

[[Page 13383]]

746 regarding felony convictions and corporate Federal tax
delinquencies. To comply with these provisions, applicants that are or
propose to be corporations will submit form AD-3030, ``Representations
Regarding Felony Conviction and Tax Delinquent Status for Corporate
Applicants,'' as part of their pre-application. This form is now
collected through your registration or annual recertification in
<a href="http://SAM.gov">SAM.gov</a> in the Financial Assistance General Certifications and
Representations section.
(ii) Form HUD-935.2A, ``Affirmative Fair Housing Marketing Plan
(AFHMP)- Multifamily Housing,'' in accordance with 7 CFR 1901.203(c).
The AFHMP will reflect that occupancy is open to all qualified
``domestic farm laborers,'' regardless of which farming operation they
work and that they will not discriminate on the basis of race, color,
sex, age, disability, marital or familial status or National origin in
regard to the occupancy or use of the units. The AFHMP must include all
attachments and supporting documentation. The form can be found at:
<a href="https://portal.hud.gov/hudportal/documents/huddoc?id=935-2a.PDF">https://portal.hud.gov/hudportal/documents/huddoc?id=935-2a.PDF</a>.
If the project has a current AFHMP in place that is approved by the
RHS, the applicant may submit the current approved AFHMP as part of
their pre-application.
The Native American Housing Enhancement Act of 2005 (NAHEA), Public
Law 109-136, Codified at 25 U.S.C. 4101 et seq., amended Title V of the
Housing Act of 1949 (42 U.S.C. 1471 et seq.) which created the housing
programs administered by the U.S. Department of Agriculture, Rural
Housing Service. The NAHEA excludes Indian Tribes, including
instrumentalities of such Indian Tribes, from the requirement to comply
with Title VI of the Civil Rights Act of 1964, and Title VIII of the
Civil Rights Act of 1968, allowing members of Indian Tribes to be given
preference for housing in accordance to the Native American Housing
Assistance and Self Determination Act of 1996 (25 U.S.C. 4101 et seq.)
The NAHEA does not exempt Indian Tribes from complying with other
laws that apply to recipients of federal financial assistance.
Therefore, federally recognized Indian Tribes must continue to comply
with Section 504 of the Rehabilitation Act of 1973, the Age
Discrimination Act of 1975, and Title IX of the Education Amendments
Act of 1972, where applicable. The NAHEA also did not exempt the Indian
Tribes from complying with the accessibility requirements of the Fair
Housing Amendments Act (FHAA) of 1988. This Act amended Title VIII of
the Fair Housing Act of 1968, to include disability and familial
status. Therefore, the NAHEA did not specifically exempt Indian Tribes
from the accessibility requirements of the FHAA. The requirements to
construct multi-family housing properties accessible to or adaptable
for persons with disabilities are to be followed. This requirement
shall be consistent with RD Instructions 7 CFR 3560, Section 3560.60,
Design Requirements.
(iii) A proposed post-transaction operating budget utilizing Form
RD 3560-7, ``Multiple Family Housing Project Budget/Utility
Allowance,'' can be found at: <a href="https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD3560-7.PDF">https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD3560-7.PDF</a>. The budget must include the debt
service of the new RHS loan, if applicable. This will be a post
transaction budget that must include a narrative that provides
justification for any changes between the current budget and proposed
budget.
The RHS will review the budget to determine that the income and
expenses are reasonable and customary for the area. The RHS will also
verify that the budget reflects the new RHS loan debt service, if
applicable, the existing RHS loan debt service, the number of units,
unit mix, and rents. Overall, the RHS must review the budget for
feasibility, accuracy, and reasonableness.
(iv) An estimate of development costs utilizing Form RD 1924-13,
``Estimate and Certificate of Actual Cost,'' can be found at: <a href="https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD1924-13.PDF">https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD1924-13.PDF</a>.
(v) Form RD 3560-30, ``Certification of no Identity of Interest
(IOI),'' can be found at: <a href="https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD3560-30.PDF">https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD3560-30.PDF</a>.
(vi) Form RD 3560-31, ``Identity of Interest Disclosure/
Qualification Certification,'' can be found at: <a href="https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD3560-31.PDF">https://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD3560-31.PDF</a>.
An IOI is defined in 7 CFR 3560.11. The RHS must review Form RD
3560-30 and Form RD 3560-31, as applicable, to determine if they are
completed in accordance with the Forms Manual Insert and to determine
that all IOI's have been disclosed. Technical assistance will not be
funded by the RHS when an IOI exists between the technical assistance
provider and the loan or grant applicant.
(vii) Form HUD 2530, ``Previous Participation Certification,'' if
applicable, can be found at: <a href="https://www.hud.gov/sites/dfiles/OCHCO/documents/2530.pdf">https://www.hud.gov/sites/dfiles/OCHCO/documents/2530.pdf</a>.
Applicants are strongly encouraged to use the Active Partners
Performance System (APPS) available on HUD's website to electronically
submit the Form HUD 2530 for HUD staff review and approval, if
applicable. If obtained, the applicant would submit the review from HUD
indicating approval in the application. The website can be found at:
<a href="https://www.hud.gov/program_offices/housing/mfh/apps/appsmfhm">https://www.hud.gov/program_offices/housing/mfh/apps/appsmfhm</a>.
(viii) Form RD 400-4, ``Assurance Agreement,'' can be found at:
<a href="http://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD400-4.PDF">http://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/RD400-4.PDF</a>.
(ix) RD Instruction 1940-Q, Exhibit A-1, ``Certification for
contracts, grants and loans,'' can be found at: <a href="https://www.rd.usda.gov/files/1940q.pdf">https://www.rd.usda.gov/files/1940q.pdf</a>.
(u) A separate one-page information sheet listing each of the pre-
application scoring criteria contained in this Notice, followed by a
reference to the page numbers of all relevant material and
documentation that is contained in the proposal that supports the
criteria.
Applicants are encouraged to include a checklist of all of the
application requirements and to have their application indexed and
tabbed to facilitate the review process.
If any of the required items listed above are not submitted within
the pre-application in accordance with this Notice or are incomplete,
the pre-application will be considered incomplete and will not be
considered for funding.
The RHS will not consider information from the applicant after the
pre-application deadline. The RHS may contact the applicant to clarify
other items in its application. The RHS will uniformly notify
applicants of each curable deficiency. A curable deficiency is an error
or oversight that if corrected it would not alter, in a positive or
negative fashion, the review and rating of the application. An example
of a curable (correctable) deficiency would be inconsistencies in the
amount of the funding request. Non-curable deficiencies are threshold
components that effect the review and rating of the application,
including but not limited to, evidence of an eligible entity and
evidence of the need for the project.

D. Pre-Application Review Information

The RHS will accept, review, and score pre-applications in
accordance with this Notice.
Section 514 Off-FLH subsequent loan funds and Section 516 Off-FLH
subsequent grant funds will be distributed based on a national
competition, as follows:

[[Page 13384]]

(1) Updates or enhancements (12 points). This factor is for
applications that include updates or enhancements to existing plans to
meet current tenant needs and enhance the marketability of the
property. The updated or revised tenant supportive services plan must
be submitted and describe the existing supportive services and the
proposed new or enhanced tenant services, including a description of
the public or private funds that are expected to fund the new services
as well as the way the services will be delivered, who will administer
them, and where they will be administered. All tenant supportive
services plans must include letters of commitment that clearly state
the service that will be provided at the project for the benefit of the
residents from any party administering each service, including the
applicant. These services may include, but are not limited to,
transportation related services, on-site English as a Second Language
classes, move-in funds, emergency assistance funds, homeownership
counseling, food pantries, after school tutoring, and computer learning
centers. The tenant supportive services plan must describe how the new
or enhanced services will meet the identified needs of the tenants and
how the services will be provided on a consistent, long-term basis to
support the tenants. The plan must clearly state how the services will
be funded. Project funds may not be used to pay for these services,
however, costs associated with a Resident Services Coordinator or
coordination of resident services are an eligible expense and could be
included in the project budget, if applicable. Applicants must provide
a detailed tenant supportive services plan and clearly document and
outline at least two new or enhanced services in relation to the
services already being provided in order to receive the maximum amount
of points.
(2) Owner and management capacity (25 points). This factor
addresses the extent to which the applicant, or a member of the
applicant's team, and the management agent has the experience and
organizational resources to successfully implement the proposed
activities in a timely manner. In this rating factor, the RHS will
consider the extent to which the application demonstrates the
applicant's and management agent's ability to develop, operate, and
manage FLH on a long-term basis. In the case of co-sponsored
applications, the rating will be based upon the combination of the
experience of all co-sponsors in the area under review.
A firm resume must be provided for the applicant and all Sponsors/
Co-Sponsors, including the management agent. Each resume must include
evidence of development experience and services experience, as
applicable. In addition, the resume should include a description of all
similar projects that the applicant and Sponsors/Co-Sponsors have been
involved with, to include whether they were federal housing projects,
and information regarding the success of the projects.
(3) Development Experience (15 points). Applicants should
demonstrate how the scope, extent, and quality of the Sponsor's and/or
their consultant team's recent experience in developing, operating and
managing housing is consistent with the details of the proposed
project. The evaluation will consider experience with utilizing federal
financing programs and experience that shows familiarity with FLH and
experience operating federally assisted housing, which may be
demonstrated by providing supporting data related to actual
performance. Also, the evaluation will consider if funds that were
received for previous transactions were spent within the regulatory
timeframes of the funding source. The description or firm resumes must
include any rental housing projects and supportive services facilities
that the applicant sponsored, owns or operates.
The RHS will make a determination on the level of experience of the
applicant, all Sponsors/Co-Sponsors, if applicable, and the management
agent based on the information and documentation presented within the
pre-application. Points will be awarded as follows:
<bullet> No development experience (0 points)
<bullet> Low level of development experience--less than 50 units (2
points)
<bullet> Medium level of development experience--more than 50 units (5
points)
<bullet> High level of development experience--over 100 units (15
points)
To score the highest number of points for this factor, applicants
must describe significant previous experience in providing housing to
farm laborer's generally and significant previous experience
implementing development activities with the type of financing
proposed.
(4) Supportive Services Experience (10 points). Applicants should
demonstrate how the scope, extent, and quality of the applicant's
experience and/or the experience of committed partners, including
property managers, in providing services is consistent with the details
of the proposed supportive services plan. The description and firm
resumes must identify specific services provided. Applicants must
explain their experience in RHS subsidy administration and/or their
partners' experience in providing property management and coordinating
supportive services.
The RHS will make a determination on the level of experience of the
applicant and all Sponsors/Co-Sponsors, if applicable, based on the
information and documentation presented within the pre-application.
Points will be awarded as follows:
<bullet> No supportive services experience (0 points)
<bullet> Low level of supportive services experience--less than 50
units (2 point)
<bullet> Medium level of supportive services experience--more than 50
units (5 points)
<bullet> High level of supportive services experience--over 100 units
(10 points)
To score the highest number of points for this factor, applicants
and/or committed partners must describe and provide evidence of
significant previous experience in providing and coordinating
supportive services to farm laborers.
(5) Market (18 points). Applicants must demonstrate that the
location of the project supports farm labor housing. The applicant must
identify the location, the proximity, and ease of access of the project
site to amenities important to the residents that supplement the
services provided on-site. The site location will be rated on the
following:
<bullet> Health care and social services (hospital, medical clinic,
social service organization that offers services to farm workers) (3
points);
<bullet> Grocery stores (e.g., supermarket or other store that
sells produce and meat) (3 points);
<bullet> Recreational facilities (e.g., parks and green space,
community center, gym, health club, or family entertainment venue,
library) (3 points);
<bullet> Civic facilities (e.g., place of worship, police or fire
station, post office) (3 points);
<bullet> Other neighborhood-serving amenities (e.g., apparel store,
convenience store, pharmacy, bank, hair care, and restaurants) (3
points).
<bullet> Educational facilities adequate to meet the spectrum of
tenant needs at the property (e.g., higher education institutions, K-
12, pre-k, and childcare) (3 points).

[[Page 13385]]

Applicants must describe how residents could reasonably access
critical amenities. Amenities will generally be considered readily
available if they are within one-half mile walking distance or they can
be accessed by public transportation (within one-quarter walking mile)
including accessible public transportation option, and/or affordable
private door-to-door shuttle/van service that is reliable and
accessible. Applicants may commit to providing such transportation
services if the nature of the commitment and the financing of the
commitment is adequately described. Project funds cannot be used for
this purpose.
To score the maximum number of points on this factor, applicants
must make a compelling argument that the location of the project is
well suited with respect to proximate amenities to meet the needs of
farm workers. Documentation must be provided that clearly outlines the
project site and its proximity to the applicable amenities.
(6) COVID-19 Impacts (5 points). Priority points will be awarded if
the project is located in or serving one of the top 10% of counties or
county equivalents based upon county risk score in the United States.
if the project is located in or serving one of the top 10% of counties
or county equivalents based upon the county risk score in the United
States. Information on whether your project qualifies for priority
points can be found at the following website: <a href="https://www.rd.usda.gov/priority-points">https://www.rd.usda.gov/priority-points</a>. The US Territories would obtain points by using local
data regarding how COVID-19 has impacted the project area. Priority
points may be awarded if the project is located in or serving a
community with score 0.75 or above on the CDC Social Vulnerability
Index. Information on whether your project qualifies for priority
points can be found at the following website: <a href="https://www.rd.usda.gov/priority-points">https://www.rd.usda.gov/priority-points</a>.
(7) Equity (5 points). Priority points will be awarded if the
project is located in or servicing a community with a score of 0.75 or
above on the CDC Social Vulnerability Index. Information on whether
your project qualifies for priority points can be found at the
following website: <a href="https://www.rd.usda.gov/priority-points">https://www.rd.usda.gov/priority-points</a>.
(8) Climate Impacts (5 points). Priority points will be awarded if
the project is located in or serving coal, oil and gas, and power plant
communities whose economic well-being ranks in the most distressed tier
of the Distressed Communities Index. Information on whether your
project qualifies for priority points can be found at the following
website: <a href="https://www.rd.usda.gov/priority-points">https://www.rd.usda.gov/priority-points</a>.
(9) Points will be allocated for Energy initiatives (the aggregate
points for all the Energy Initiative categories may not exceed (10
points).
(a) Properties may receive points for energy initiatives in the
categories of energy conservation, water conservation and green
property management. Properties may earn ``energy initiative'' points
for rehabilitation.
(b) National energy programs including the U.S. Green Building
Council's Leadership in Energy and Environmental Design (LEED),
National Association of Homebuilders 2020 ICC 700 National Green
Building Standard, U.S. Department of Energy (DOE) Zero Energy Ready
Homes, International Living Future Institute's Living Building
Challenge, U.S. Environmental Protection Agency (EPA) Energy Star for
Homes, Passive House Institute's PHIUS +, Enterprise Community Partners
Green Communities, and local energy conservation programs, will each
have an initial checklist indicating prerequisites for participation in
its energy program. The applicable energy program checklist will
establish whether prerequisites for the energy program's participation
will be met. All checklists must be accompanied by a signed affidavit
by the project architect or engineer stating that the goals are
achievable, and the project has been enrolled in these programs if
enrollment is applicable to that program. These programs evolve and
newer versions are published, sometimes annually. Projects must
participate in the current version of the programs and must consult
with the program provider for the most current, applicable and
available programs for their project location. In addition, projects
that apply for points under the energy generation category must include
calculations of savings of energy. Compare property energy usage of
three scenarios: (1) Property built to required code of state with no
renewables, to (2) property as-designed with commitments to stated
energy conservation programs without the use of renewables and (3)
property as-designed with commitments to stated energy conservation
programs and the use of proposed renewables. Use local average metrics
for weather and utility costs and detail savings in kWh and dollars.
Provide payback calculations. These calculations must be done by a
licensed engineer or credentialed renewable energy provider. Include
with the application, the provider/engineer's credentials including
qualifications, recommendations, and proof of previous work. The
checklist, affidavit, calculations, and qualifications of the engineer/
energy provider must be submitted together with the pre-application.
(c) Enrollment in EPA Portfolio Manager Program. All projects
awarded scoring points for energy initiatives must enroll the project
in the EPA Portfolio Manager program to track post-construction energy
consumption data. More information about this program may be found at:
<a href="https://www.energystar.gov/buildings/facility-owners-and-managers/existing-buildings/use-portfolio-manager">https://www.energystar.gov/buildings/facility-owners-and-managers/existing-buildings/use-portfolio-manager</a>.
(d) Energy Conservation for rehabilitation. Projects may be
eligible for scoring points when the pre-application includes a written
certification by the applicant to participate and achieve certification
in the following energy efficiency programs.
The points will be allocated as follows:
<bullet> Participation in the EPA's Energy Star Multifamily
Certification Process (5 points). <a href="https://www.energystar.gov/partner_resources/residential_new/homes_prog_reqs/multifamily_national_page">https://www.energystar.gov/partner_resources/residential_new/homes_prog_reqs/multifamily_national_page</a>
or
<bullet> Participation in the Green Communities program by the
Enterprise Community Partners (2020 Criteria). (5 points) <a href="https://www.enterprisecommunity.org/solutions-and-innovation/green-communities">https://www.enterprisecommunity.org/solutions-and-innovation/green-communities</a>
or
<bullet> Participation in the DOE Zero Energy Ready Homes program.
(5 points) <a href="https://www.energy.gov/eere/buildings/zero-energy-ready-homes">https://www.energy.gov/eere/buildings/zero-energy-ready-homes</a>
or
<bullet> PHIUS+ Passive Building Standard (2018) (5 points) <a href="https://multifamily.phius.org/service-category/phius-within-reach">https://multifamily.phius.org/service-category/phius-within-reach</a>
or
<bullet> International Living Future Institute Living Building
Challenge (5 points) <a href="https://living-future.org/lbc/">https://living-future.org/lbc/</a>.
(e) Water Conservation in Irrigation Measures. Projects may be
awarded two points (2 points) for the use of an engineered recycled
water (gray water or storm water) for landscape irrigation covering 50
percent or more of the property's site landscaping needs.
(f) Property Management Credentials. Projects may be awarded three
points (3 points) if the designated property management company or
individuals that will assume maintenance and operation responsibilities
upon completion of construction work have a Credential for Green
Property Management. Credentialing can be

[[Page 13386]]

obtained from the National Apartment Association (NAA), National
Affordable Housing Management Association, The Institute for Real
Estate Management, USGBC LEED for Operations and Maintenance, or
another source with a certifiable credentialing program. Credentialing
must be illustrated in the resume(s) of the property management team
and included with the pre-application.

E. Federal Award Administration Information

(1) Federal Award Notices
(a) Applicants must submit their pre-application by the due date
specified in this Notice. The RHS will rank by score, highest to
lowest, eligible pre-applications. Based on available funding, the 10
percent persistent poverty counties set-aside, and the 50 percent
limitation per State, the RHS will determine which pre-applications
will be selected for further processing starting with the highest
scoring pre-application. The RHS will notify applicants with pre-
applications found eligible and selected for further processing.
(b) Applicants will be notified if there are insufficient funds
available for the proposal and such notification is not appealable. For
applications found ineligible or incomplete, the RHS will send notices
of ineligibility that provide appeal rights under 7 CFR part 11, as
appropriate.
(c) The RHS will rank all pre-applications nationwide. When
proposals have an equal score and not all pre-applications can be
funded, preference will be given first to Indian tribes as defined in
Sec. 3560.11, then local non-profit organizations or public bodies
whose principal purposes include low-income housing that meet the
conditions of Sec. 3560.55(c), and the following conditions:
<bullet> Is exempt from Federal income taxes under section
501(c)(3) or 501(c)(4) of the Internal Revenue Service code;
<bullet> Is not wholly or partially owned or controlled by a for-
profit or limited-profit type entity;
<bullet> Whose members, or the entity, do not share an identity of
interest with a for-profit or limited-profit type entity;
<bullet> Is not co-venturing with another entity; and
<bullet> The entity or its members will not be receiving any direct
or indirect benefits pursuant to LIHTC.
(d) If after all the above evaluations are completed and there are
two or more pre-applications that have the same score, and all cannot
be funded, a lottery will be used to break the tie. The lottery will
consist of the names of each pre-application with equal scores printed
onto a same size piece of paper, which will then be placed into a
receptacle that fully obstructs the view of the names. The Director of
the Production and Preservation Division, in the presence of two
witnesses, will draw a piece of paper from the receptacle. The name on
the piece of paper drawn will be the applicant to be funded.
If insufficient funds remain for the next ranked proposal, that
applicant will be given a chance to modify their pre-application to
bring it within the remaining available funding. This will be repeated
for each next ranked eligible proposal until an award can be made or
the list is exhausted.
(2) Administrative and National Policy
Projects receiving subsequent Off-FLH loans and/or grants are
subject to additional restrictive-use provisions contained in 7 CFR
3560.72(a)(2).
(a) An FLH grant agreement, prepared by the RHS, must be dated, and
executed by the applicant on the date of closing, if applicable. The
form of resolution to be adopted by the applicant must contain policy
and procedural requirements that should be read and be fully understood
by the applicant's Board of Directors and officers.
(b) The grant agreement will remain in effect for so long as there
is a need for the FLH project and will not expire until an official
determination has been made by the RHS that there is no longer a need
for the FLH project, if applicable.
(3) Reporting
(a) Borrowers must maintain separate financial records for the
operation and maintenance of the project and for tenant services.
(b) Project funds may not be used to pay for these services,
however, costs associated with a Resident Services Coordinator or
coordination of resident services are an eligible expense and could be
included in the project budget, if applicable.
(c) Funds allocated to the operation and maintenance of the project
may not be used to supplement the cost of tenant services, nor may
tenant service funds be used to supplement the project operation and
maintenance.
(d) Detailed financial reports regarding tenant services will not
be required unless specifically requested by the RHS, and then only to
the extent necessary for the RHS and the borrower to discuss the
affordability (and competitiveness) of the service provided to the
tenant.
(e) The project audit, or verification of accounts on Form RD 3560-
10, ``Borrower Balance Sheet,'' together with an accompanying Form RD
3560-7, ``Multiple Family Housing Project Budget/Utility Allowance,''
must allocate revenue and expenses between project operations and the
tenant services component.

F. Preliminary Eligibility Assessment

The RHS shall make a preliminary eligibility assessment using the
following criteria:
(1) The pre-application was received by the submission deadline
specified in this Notice;
(2) The pre-application is complete as specified by this Notice;
(3) The applicant is an eligible entity and is not currently
debarred, suspended, or delinquent on any Federal debt; and
(4) The proposal is for authorized purposes.

G. Final Application and Submission Information

(1) Final Application Submission
(a) The pre-applications that are selected for further processing
will be invited to submit final applications. If a pre-application is
selected for further processing and the applicant declines, the next
highest ranked pre-application will be selected for further processing.
The final applications will be due by June 30, 2022, 12 p.m., Eastern
Standard Time.
(b) All final applications must be filed with the RHS and must meet
the requirements of this Notice. Incomplete final applications will be
rejected and returned to the applicant. No final applications will be
accepted after the deadline unless the date and time are extended by
another Notice published in the Federal Register.
(c) A final application in accordance with this Notice must be
submitted and approved by the RHS prior to the obligation of funds.
(d) The final application submission process will be the same as
previously explained and outlined for the pre-application submission
process in Section C(1), ``Pre-application and Submission
Information.''
(2) Final Application Requirements
The final application must contain the following information in
addition to the pre-application documents that were previously
submitted:
(a) Description of any changes from the pre-application submission
including funding, scope of work, etc.

[[Page 13387]]

(b) If any document that was submitted within the pre-application
has since changed or needs to be updated with the final application,
please submit the updated form(s) with the final application:
(i) Final Form RD 3560-1, ``Application for Partial Release,
Subordination, or Consent,'' can be obtained at: <a href="https://formsadmin.sc.egov.usda.gov//efcommon/eFileServices/eFormsAdmin/RD3560-0001.pdf">https://formsadmin.sc.egov.usda.gov//efcommon/eFileServices/eFormsAdmin/RD3560-0001.pdf</a>.
(ii) Final Standard Form 424, ``Application for Federal
Assistance.''
(iii) Final proposed Form RD 1924-13, ``Estimate and Certificate of
Actual Cost.''
(iv) Final proposed post-transaction operating budget utilizing
Form RD 3560-7, ``Multiple Family Housing Project Budget/Utility
Allowance.'' The budget must include the debt service of the new RHS
loan, if applicable. This will be a post transaction budget that must
include a narrative that provides justification for any changes between
the current budget and proposed budget.
(c) Updated financial statements, if applicable (must be within 6
months of this Notice's final application submission due date).
(d) Submit a current (no older than six months from the date of
issuance) combination comprehensive credit report for both the entity
and the actual individual principals, partners, members, etc. within
the applicant entity, including any sub-entities, who are responsible
for controlling the ownership and operations of the entity. Although a
commercial credit report for a new entity may have limited information
available, a combination report ties the entity and individual
principal(s) together under the applicant/borrower name based on the
credit report agency's ability to provide a single reporting source.
However, if any of the principals in the applicant entity are not
natural persons (i.e., corporations, other limited liability companies,
trusts, etc.) separate commercial credit reports must be submitted on
those organizations as well. Individual personal consumer credit
reports are not required if a combination report is being provided.
Only Credit reports provided by accredited major credit bureaus will be
accepted. If the credit report(s) is not submitted by the final
application deadline, the application will be considered incomplete and
will not be considered for funding.
(e) Document the continued need for the project. The applicant must
provide documentation that the average physical vacancy rate for the
twelve (12) months preceding this Notice's final application submission
due date has been no more than ten (10) percent for projects consisting
of sixteen (16) or more revenue units and no more than fifteen (15)
percent for projects with less than sixteen (16) revenue units unless
the project is seasonal Off-FLH or unless the applicant has an RHS
approved workout plan and is in compliance with the provisions of the
workout plan and provides sufficient market documentation or a market
study that clearly demonstrates to the RHS that sufficient market
demand exists. If the project is seasonal Off-FLH, the applicant must
provide detailed documentation for the twenty-four (24) months
preceding this Notice's final application submission due date that
verifies the project's operations including information regarding the
open and close date, lease-up, vacancy, rent rolls, operating budgets,
and any other information the applicant can provide to document the
need for the seasonal Off-FLH project. All of the tenants in the
project must be eligible farm labor tenants as defined in this Notice.
(f) Document the project has maintained a positive cash flow. The
applicant must provide documentation that the project had a positive
cash flow for the previous full three (3) years of operations preceding
this Notice's final application submission due date unless an exception
applies for projects with an RHS approved workout plan where the
applicant is in compliance with the provisions of the workout plan and
has remained in compliance. The RHS may require that applicants with
monetary or non-monetary deficiencies be in compliance with the RHS
approved workout plan for a minimum of six (6) consecutive months
before becoming eligible for a loan and/or grant under this Notice.
Additionally, an exception may apply to projects that have a negative
cash flow in operations if surplus cash exists in either the general
operating account as defined in 7 CFR 3560.306(d)(1) or the reserve
account. Surplus cash exists when the balance is greater than the
required deposits minus authorized withdrawals. The applicant must
provide the project's annual financial report(s) to document the
project complies with this exception for each year the project has a
negative cash flow, if applicable. Seasonal Off-FLH properties that
receive OA may also be exempt from this requirement at the sole
discretion of the RHS, if applicable.
(g) Form RD 1910-11, ``Applicant Certification, Federal Collection
Policies for Consumer or Commercial Debts'' can be found at: <a href="https://forms.sc.egov.usda.gov//efcommon/eFileServices/eForms/RD1910-11.PDF">https://forms.sc.egov.usda.gov//efcommon/eFileServices/eForms/RD1910-11.PDF</a>.
(h) Form RD 400-1, ``Equal Opportunity Agreement,'' can be found
at: <a href="https://forms.sc.egov.usda.gov/eForms/browseFormsAction.do?pageAction=displayPDF&formIndex=1">https://forms.sc.egov.usda.gov/eForms/browseFormsAction.do?pageAction=displayPDF&formIndex=1</a>.
(i) Form RD 400-6, ``Compliance Statement,'' if available, can be
found at: <a href="https://forms.sc.egov.usda.gov/eForms/browseFormsAction.do?pageAction=displayPDF&formIndex=4">https://forms.sc.egov.usda.gov/eForms/browseFormsAction.do?pageAction=displayPDF&formIndex=4</a>.
The following forms for acceptance of a federal award are now
collected through your registration or annual recertification in
<a href="http://SAM.gov">SAM.gov</a> in the Financial Assistance General Certifications and
Representations section:
(j) Form AD-1047, ``Certification Regarding Debarment, Suspension,
and Other Responsibility Matters Primary Covered Transactions,'' can be
found at: <a href="https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1047_PrimaryCoveredTransactions_final.pdf">https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1047_PrimaryCoveredTransactions_final.pdf</a>.
(k) Form AD-1048, ``Certification of Debarment, Suspension,
Ineligibility and Voluntary Exclusion Lower Tier Covered
Transactions,'' if applicable, can be found at: <a href="https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1048_LowerTierCoveredTransactions_final.pdf">https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1048_LowerTierCoveredTransactions_final.pdf</a>.
(l) Form AD-1049, ``Certification Regarding Drug-Free Workplace
Requirements (Grants) Alternative I--For Grantees Other Than
Individuals,'' can be found at: <a href="https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1049_Alt1_GranteesOtherThanIndividuals_v2_final.pdf">https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1049_Alt1_GranteesOtherThanIndividuals_v2_final.pdf</a>. <a href="https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1049_Alt1_GranteesOtherThanIndividuals_v2_final.pdf">https://www.ocio.usda.gov/sites/default/files/docs/2012/AD1049_Alt1_GranteesOtherThanIndividuals_v2_final.pdf</a>.
(m) Form RD 3560-13, ``Multi-Family Project Borrower's/Management
Agent's Management Certification,'' if applicable, can be found at:
<a href="https://forms.sc.egov.usda.gov//efcommon/eFileServices/eForms/RD3560-13.PDF">https://forms.sc.egov.usda.gov//efcommon/eFileServices/eForms/RD3560-13.PDF</a>. This document is required only if the owner is changing the
management agent or the management fee as part of this proposal.
(n) Management plan with all attachments including the proposed
record keeping system, the proposed lease with an attorney's
certification, if applicable, and the proposed occupancy rules. This
document is required only if the owner is changing the management agent
or revising the management plan and any attachments as part of this
proposal.
(o) Management Agreement, if applicable. This document is required
only if the owner is changing the

[[Page 13388]]

management agent or revising the management agreement and any
attachments as part of this proposal.
(p) Certificate of Good Standing.
(q) Attorney Certification. Letter from the applicant's attorney
certifying the legal sufficiency of the organizational documents. The
attorney must certify:
(1) The applicant's legal capacity to successfully operate the
proposed project for the life of the loan and/or grant.
(2) The organizational documents comply with RHS regulations.
(3) For partnership purchasers, that the term of the partnership
extends at least through the latest maturity of all proposed RHS debt.
(4) That the organizational documents required prior written RHS
approval for any of the following: Withdrawal of a general partner/
managing member, admission of a general partner/managing member,
amending the organizational documents, and selling all or substantially
all of the assets of the purchaser.
(5) That there have been no changes to either the ownership entity
or the property that have not been approved by the RHS.
(r) Acceptable appraisal, if applicable. Applicants may contact the
RHS to discuss the appraisal requirements including the Appraisal
Assignment Guidance prior to engaging an appraiser. Appraisals prepared
for any other participants or lenders may not satisfy the RHS Appraisal
Assignment Guidance requirements and may require the applicant to incur
additional costs. You may contact the RHS at <a href="/cdn-cgi/l/email-protection#d29f949aa2a0bdb1b7a1a1bbbcb5e392a7a1b6b3fcb5bda4">[email&#160;protected]</a> to
obtain Appraisal Assignment Guidance prior to ordering the appraisal.
Project funds may be used to obtain the appraisal if there are
adequate funds available and the request to use project funds is
approved by the Field Operations Division servicing official. No
appraisal is required for subsequent Section 516 Off-FLH grant only
requests.
(s) An acceptable As-Is CNA in accordance with the requirements set
forth in this funding notice and the addendum to this notice.
<bullet> The minimum requirements for a CNA acceptable to the RHS
can be found in the Addendum: Capital Needs Assessment Process at the
end of this notice, Attachment B, CNA Statement of Work and Attachment
C, Fannie Mae Physical Needs Assessment Guidance to the Property
Evaluator.
<bullet> The CNA report must be obtained by the CNA recipient from
an independent third-party CNA provider that has no identity of
interest with the property owner, management agent, applicant or any
other principle or affiliate.
<bullet> The CNA recipient will contract with the CNA provider and
is therefore, the client of the provider. However, the CNA recipient
must consult with RHS, before contracting with a CNA provider to review
Guidance Regarding Contracting for a CNA.
<bullet> The RHS CNA reviewer will evaluate a proposed agreement or
engagement letter between the CNA recipient and the CNA provider using
Attachment D, CNA e-Tool Estimated Useful Life Table, prior to
reviewing any CNA report.
<bullet> Unacceptable CNA proposals, contracts or reports will be
returned to the CNA recipient for appropriate corrections before they
will be used for any underwriting determinations.
<bullet> The CNA reviewer will also review the cost of the CNA
contract. In most cases, the CNA service contract amount has not
exceeded $3,500 based on the RHS's most recent cost analysis. Borrowers
and applicants are encouraged to obtain multiple bids in all cases.
However, there is no RHS requirement to select the ``low bidder.''
<bullet> All of the information and requirements, including the CNA
Template that the can must be submitted on, can be found at: <a href="https://www.rd.usda.gov/programs-services/multi-family-housing-direct-loans">https://www.rd.usda.gov/programs-services/multi-family-housing-direct-loans</a>.
Project funds may be used to obtain the As-Is CNA if there are
adequate funds available and the request to use project funds is
approved by the Field Operations Division servicing official. The
rehabilitation plan should be developed in accordance with the CNA and
the applicant should submit documentation of the detailed plan and
timeline for completion of the rehabilitation work.
(t) Final plans and specifications along with the proposed manner
of construction, if available. The housing must meet RHS's design and
construction standards contained in 7 CFR part 1924, subparts A and C
and must also meet all applicable Federal, State, and local
accessibility standards. The final plans and specifications along with
the proposed manner of construction must be submitted prior to the
approval of the final application.
(u) Final construction planning, bidding, and contract documents,
including the construction contract and architectural agreement, etc.,
if available. The final construction planning, bidding, and contract
documents, including the construction contract and architectural
agreement, etc., must be submitted prior to the approval of the final
application.
(v) Environmental information in accordance with the requirements
in 7 CFR 1970. The applicant may consult with the RHS to determine the
appropriate level of environmental review and to obtain publicly
available resources at the earliest possible time for guidance in
identifying all relevant environmental issues that must be addressed
and considered during early project planning and design throughout the
process. Requests for a consult can be sent to the following email
address: <a href="/cdn-cgi/l/email-protection#9ed3d8d6eeecf1fdfbededf7f0f9afdeebedfaffb0f9f1e8">[email&#160;protected]</a>. The applicant is responsible for
preparing and submitting the environmental review document in
accordance with the format and standards provided by RHS in 7 CFR 1970.
Applicants may employ a design or environmental professional or
technical service provider to assist them in the preparation of their
environmental review documents at their own expense.
(w) The environmental information must include evidence of
compliance with the requirements of the applicable State Housing
Preservation Office (SHPO), and/or Tribal Historic Preservation Officer
(THPO), if applicable. A letter from the SHPO and/or THPO where the
Off-FLH project is located signed by their designee will serve as
evidence of compliance, if applicable.
(x) All applications that propose the use of any leveraged grant
funds must submit firm commitment letters within their final
application, if available. This includes any interim lender commitment
letters with evidence of license to do business in the applicable
state. If the applicant is unable to secure third-party firm commitment
letters within 180 calendar days from the issuance of the award letter
under this NOFA, the application will be deemed incomplete, and the
award letter will be considered null and void and the applicant will be
notified in writing that the application will be rejected.
(y) Description of how the applicant will meet the equity
contribution requirement as applicable.
(z) Signed statement from the applicant agreeing to pay cost
overruns.
(aa) Tenant relocation plan, if applicable. Subsequent Section 514
Off-FLH loans or subsequent Section 516 Off-FLH grants that are made
for major repair and rehabilitation may require the temporary
relocation of tenants while the project is undergoing work. The
applicant must provide a plan and financial assistance for relocation
of displaced persons from a site on which a project will be located.
The plan must

[[Page 13389]]

meet the requirements of HB-1-3560, Chapter 3, Paragraph 3.19.
(3) Final Application Guidance
The RHS will follow 7 CFR 3560 and this Notice for the processing
of final applications. Final applications will need to follow the
bidding process as set forth in 7 CFR part 1924.
(4) Documentation of Underwriting and Costs
(a) All final applications including the loan and/or grant requests
will be analyzed using an underwriting template that the RHS has
developed. A complete analysis and underwriting of the proposed
transaction will be completed to ensure all regulatory requirements are
met and to ensure overall project feasibility as well as to determine
the minimum amount of assistance that is needed for the proposal.
(b) Once the loan and/or grant funds have been obligated, the
applicant should be prepared to close the transaction and promptly
complete construction within 12-18 months.
(5) Technical Assistance Providers
Please be aware that technical assistance services may not be used
to reimburse a nonprofit or public body applicant for technical
services provided by a nonprofit organization, with housing and/or
community development experience, to assist the nonprofit applicant
entity in the development and packaging of its loan/grant docket and
project. In addition, technical assistance will not be funded by the
RHS when an identity of interest exists between the technical
assistance provider and the loan or grant applicant. Identity of
interest is defined in 7 CFR 3560.11. In instances where technical
assistance is allowed, eligible costs will be limited to those allowed
under 2 CFR part 200.
(6) Equal Opportunity Survey
RHS should provide applicants the voluntary OMB 1890-0014 form,
``Survey on Ensuring Equal Opportunity for Applicants'', (or other
forms currently being used by RHS) and ask the applicant to complete it
and return it to the RHS.
(7) Substantial Portion of Income From Farm Labor
The Notice restates the requirement that domestic farm laborers
must receive a substantial portion of their income from ``farm labor.''
Further explanation of this requirement can be found in the regulation
at 7 CFR 3560.576(b)(2) and this notice for processing of final
applications. The term ``farm labor'' is defined in 7 CFR 3560.11.

G. Paperwork Reduction Act

The information collection requirements contained in this Notice
have received approval from the Office of Management and Budget (OMB)
under Control Number 0575-0189.

H. Equal Opportunity and Non-Discrimination Requirements

In accordance with Federal civil rights law and the United States
Department of Agriculture (USDA) civil rights regulations and policies,
the USDA, its Agencies, offices, and employees, and institutions
participating in or administering USDA programs are prohibited from
discriminating based on race, color, national origin, religion, sex,
gender identity (including gender expression), sexual orientation,
disability, age, marital status, family/parental status, income derived
from a public assistance program. Political beliefs, or reprisal or
retaliation for prior civil rights activity, in any program or activity
conducted or funded by USDA (not all bases apply to all programs).
Remedies and complaint filing deadlines vary by program or incident.
Persons with disabilities who require alternative means of
communication for program information (e.g., Braille, large print,
audiotape, American Sign Language, etc.) should contact the responsible
Agency or USDA's TARGET Center at (202) 720-2600 (voice and TTY) or
contact USDA through the Federal Relay Service at (800) 877-8339.
Additionally, program information may be made available in languages
other than English.
To file a program discrimination complaint, complete the USDA
Program Discrimination Complaint Form, AD-3027, found online at:
<a href="https://www.ascr.usda.gov/complaint_filing_cust.html">https://www.ascr.usda.gov/complaint_filing_cust.html</a>, and at any USDA
office or write a letter addressed to USDA and provide in the letter
all of the information requested in the form. To request a copy of a
complaint form, call, (866) 632-9992. Submit your completed form or
letter to USDA by:
(1) Mail: United States Department of Agriculture, Office of the
Assistant Secretary for Civil Rights, 1400 Independence Avenue SW,
Washington, DC 20250-9410;
(2) Fax: (202) 690-7442; or
(3) Email at: <a href="/cdn-cgi/l/email-protection#3e4e4c51594c5f531057504a5f555b7e4b4d5a5f10595148">[email&#160;protected]</a>.
USDA is an equal opportunity provider, employer, and lender.

Addendum: Capital Needs Assessment Process

A Capital Needs Assessment (CNA) provides a repair schedule for the
property in its present condition, indicating repairs and replacements
necessary for a property to function properly and efficiently over a
span of 20 years.
The purpose of this Addendum is to provide clarification and
guidance on the Rural Development CNA process. The document includes
general instructions used in completing CNA reports, specific
instructions on how to use the expected useful life tables, and a set
of applicable forms including the Terms of Reference form; Systems and
Conditions forms; and Evaluator's Summary forms.
1. Definitions
The following definitions are provided to clarify terms used in
conjunction with the CNA process:
CNA Recipient: This will be who enters into the contract with the
CNA Provider. The Recipient can be either the property owner or
applicant/transferee.
``As-Is'' CNA: This type of CNA is prepared for an existing MFH
property and reports the physical condition including all Section 504
Accessibility and Health and Safety items of the property based on that
moment in time. This CNA can be useful for many program purposes other
than the MPR Demonstration program such as: an ownership transfer,
determining whether to offer pre-payment aversion incentive and
evaluating or resizing the reserve account. The ``as-is'' report will
include all major repairs and likely some minor repairs that are
typically associated with the major work: Each major component, system,
equipment item, etc. inside and outside; building(s); property; access
and amenities in their present condition. A schedule of those items
showing the anticipated repair or replacement timeframe and the
associated hard costs for the ensuing 20-year term of the CNA serves as
the basis or starting point in evaluating the underwriting that will be
necessary to determine the feasibility and future viability of the
property to continue serving the needs of eligible tenants.
``Post Rehabilitation'' CNA: This type of CNA builds on the
findings of the accepted ``as-is'' CNA and is typically prepared for a
project that will be funded for major rehabilitation. The Post
Rehabilitation CNA is adjusted to reflect the work intended to be
performed during the rehabilitation. The

[[Page 13390]]

assessment must be developed from the rehabilitation project plans and
any construction contract documents to reflect the full extent of the
planned rehabilitation.
Life Cycle Cost Analysis (LCCA): A LCCA is an expanded version of a
CNA and is defined at 7 CFR Section 3560.11. The LCCA will determine
the initial purchase cost, the operation and maintenance cost, the
``estimated useful life'', and the replacement cost of an item selected
for the project. The LCCA provides the borrower with the information on
repair or replacement costs and timeframes over a 20-year period. It
also provides information that will assist with a more informed
component selection and can provide the borrower with a more complete
financial plan based on the predictive maintenance needs associated
with those components. If the newly constructed project has already
been completed without any previous LCCA requirements, either an ``as-
is'' CNA or LCCA can be provided to establish program mandated reserve
deposits. An Architect or Engineer is the best qualified person(s) to
prepare this report.
Consolidation: In some circumstances, RD may permit two or more
properties to be consolidated as defined in 7 CFR 3560, Sec. 3560.410
when it is in the best interests of the Government. The CNA Recipient
must consult with the RD loan official before engaging the CNA Provider
in any case where the CNA intends to encompass more than a single (one)
existing RD property to determine if a consolidated CNA may be
acceptable for RD underwriting.
2. Contract Addendum
RD uses a Contract Addendum to supplement the basic CNA Agreement
or ``Contract'', between the CNA Recipient and CNA Provider, with
additional details and conditions. It can be found in Attachment A,
Addendum to Capital Needs Assessment Contract and must accompany all
contracts executed between the CNA Recipient and CNA Provider for CNAs
used in RD transactions. If any conflicts arise between the
``Contract'' and ``Contract Addendum'', the ``Contract Addendum'' will
supersede.
The Contract Addendum identifies the responsibilities and
requirements for both the CNA Recipient and the CNA Provider. To assure
proper completion of the contract documents the following key
provisions must be completed:
a. The Contract Addendum will include the contract base amount for
the CNA Provider's cost for services on page A-2, and provisions for
additional services to establish the total price for the CNA.
b. Item I e, will require an itemized listing for any additional
anticipated services and their unit costs including future updates and
revisions that may be required before the CNA is accepted by RD. Note:
Any cost for updating a CNA must be included, in the ``additional
services'' subpart, of the original CNA Contract.
c. The selection criteria boxes in II a, will identify the type of
CNA being provided.
d. In III a, the required language for the blank on ``report
format'' is: ``USDA RD CNA Template, current RD version, in Microsoft
Excel format''. This format will import directly into the RD
underwriting template for loan underwriting purposes.
3. Requirements and Statement of Work (SOW) for a CNA
Minimum requirements for a CNA acceptable to RD can be found in
Attachment B, Capital Needs Assessment Statement of Work. This is
supplemented by Attachment C, Fannie Mae Physical Needs Assessment
Guidance to the Property Evaluator. To resolve any inconsistency in the
two documents, Attachment B, the CNA SOW, will in all cases prevail
over Attachment C, Fannie Mae Physical Needs Assessment Guidance to the
Property Evaluator. (For example, on page C-2 of Attachment C, Fannie
Mae defines the ``term'' as ``term of the mortgage and two years
beyond''. For USDA, the ``term'' will be 20 years, as defined in the
CNA SOW.)
Attachment B includes the required qualifications for the CNA
Provider, the required SOW for a CNA assignment, and general
distribution and review instructions to the CNA Provider. The CNA
Providers must be able to report the current physical condition of the
property and not base their findings on the financial condition of
either the property or the CNA Recipient.
Attachment C is a three-part document RD has permission to use as
reference to the CNA process throughout the RD MFH program efforts. The
three key components of this Attachment are: (1) Guidance to the
property evaluator; (2) expected useful life tables; and (3) a set of
forms.
An acceptable CNA must appropriately address within the report and
narrative all Accessibility Laws and Requirements that apply to Section
515 and Sections 514/516 MFH properties. The CNA Provider must assess
how the property meets the requirements of accessibility to persons
with disabilities in accordance the Uniform Federal Accessibility
Standards (UFAS) and Section 504 Accessibility Requirements. It is the
responsibility of the Provider to inspect and verify whether all
accessibility features are compliant.
4. The CNA Review Process
A CNA used by RD will be reviewed by the designated RD CNA Reviewer
with experience in construction, rehabilitation, and repair of MFH
properties, especially as it relates to repair and replacement.
A CNA report must be obtained by the CNA Recipient from an
independent third-party CNA Provider that has no identity of interest
with the property owner, management agent, applicant/transferee or any
other principle or affiliate defined in 7 CFR part 3560, Sec. 3560.11.
The CNA Recipient will contract with the CNA Provider and is therefore
the client of the provider. However, the CNA Recipient must consult
with RD, before contracting with a CNA Provider to review Guidance
Regarding Contracting for a CNA. The RD CNA Reviewer will evaluate a
proposed agreement or engagement letter between the CNA Recipient and
the CNA Provider using Attachment D, Capital Needs Assessment Guidance
to the Reviewer, prior to reviewing any CNA report. Unacceptable CNA
proposals, contracts or reports will be returned to the CNA Recipient
for appropriate corrections before they will be used for any
underwriting determinations.
The CNA Reviewer will also review the cost of the CNA contract. The
proposed fee for the CNA must be approved as an eligible housing
project expense under 7 CFR 3560.103 (c) for the agreement to be
acceptable and paid using project funds. In most cases, the CNA service
contract amount has not exceeded $3,500 based on the Agency's most
recent cost analysis.
Borrowers and applicants are encouraged to obtain multiple bids in
all cases. However, there is no Agency requirement to select the ``low
bidder'' under this UL and the CNA Recipient may select a CNA Provider
that will provide the best value, based on qualifications, as well as
price after reviewing references and past work.
If the CNA is funded by the property's reserve account, a minimum
of two bids is required if the CNA service contract amount is estimated
to exceed $5,000 as specified in HB-2-3560, Chapter 4, Paragraph 4.17
B. If the CNA contract under this UL is funded by another source, or
will be under $5,000, a single bid is acceptable.

[[Page 13391]]

If the proposed agreement is acceptable, the reviewer will advise
the appropriate RD servicing official, who will in turn inform the CNA
Recipient. If the proposed agreement is unacceptable, the reviewer will
notify the servicing official, who will notify the CNA Recipient and
the CNA Provider in writing and identify actions necessary to make the
proposed CNA agreement acceptable to RD. Upon receipt of a satisfactory
agreement, the RD CNA Reviewer should advise the appropriate RD
servicing official or underwriting official to accept the proposal.
The CNA Reviewer will review the preliminary CNA report submitted
to RD by the CNA Provider using Attachment D and write the preliminary
CNA review report. During the CNA review process, the CNA Reviewer and
underwriter will consult with the servicing field office most familiar
with the property for their input and knowledge of the property. Any
differences of opinion that exist regarding the findings must be
mutually addressed by RD staff. If corrections are needed, the loan
official will notify the CNA Recipient, in writing, of any revisions
necessary to make the CNA report acceptable to RD. The CNA Reviewer
will review the final CNA report and deliver it to the loan official.
The final report must be signed by both the CNA Reviewer and the loan
official (underwriter). Upon signature by both, this report becomes the
``accepted'' CNA indicating the actual condition of the property at the
time of the CNA inspection--a ``snapshot'' in time--and will be marked
``Current Property Condition'' for indefinite retention in the borrower
case file.
A CNA Provider should be fully aware of the intended use for the
CNA because it can impact the calculations necessary to perform
adequate accessibility assessments and can impact the acceptability of
the report by RD. Unacceptable reports will not be used for any RD
underwriting purposes even though they may otherwise be acceptable to
the CNA Recipient or another third-party lender or participant in the
transaction being proposed.
5. Guidance Regarding Contracting for a CNA
CNA Recipients are responsible for choosing the CNA Provider they
wish to contract with, and for delivering an acceptable CNA to Rural
Development. RD in no way guarantees the performance any Provider nor
the acceptability of the Provider's work.
CNA Recipients are advised to request an information package from
several CNA Providers and to evaluate the information before selecting
a provider. At a minimum, the information package should include a list
of qualifications, a list of references, a client list, and a sample
CNA report. However, the CNA Recipient may request any additional
information they feel necessary to evaluate potential candidates and
select a suitable provider for this service. Consideration for the type
of CNA required should be part of the CNA Recipient's selection
criteria and inserted into the contract language as well. The necessary
skill set to perform the ``as-is'' versus the Post Rehabilitation CNA
or a LCCA needs to be considered carefully. Knowledge of the
accessibility laws and standards and the ability to read and understand
plans and specifications should also be among the critical skill
elements to consider.
Attachment A, Contract Addendum must be submitted to RD with the
contract and signed by the CNA Recipient and CNA Provider. The proposed
agreement with the CNA Recipient and CNA Provider must meet RD's
qualification requirements for both the provider and the CNA SOW, as
specified in Attachment B, Capital Needs Assessment Statement of Work.
RD must review the proposed agreement between the CNA Recipient and the
CNA Provider, and concur only if all of the RD requirements and
conditions are met. (See the previous Section 3 of this UL, The CNA
Review Process.)
Please note: It is in the CNA Recipient's best interest to furnish
the CNA Provider with the most current and up-to-date property
information for a more comprehensive and thorough CNA report. RD
recommends that the CNA Recipient conduct a pre-inspection meeting with
the Owner, Property Manager, maintenance persons familiar with the
property, CNA Provider, and Agency Representatives at the site. This
meeting will allow a forum to discuss specific details about the
property that may not be readily apparent to all parties involved
during the review process, as well as making some physical observations
on-site. Certain issues that may not be evident to the CNA Provider due
to weather conditions at the time of review should also be discussed
and included in the report. Additionally, other issues that may need to
be addressed include environmental hazards, structural defects, and
complex accessibility issues. It is imperative that the Agency be fully
aware of the current physical condition of the property at the time the
CNA is prepared. An Agency representative must make every effort to
attend the CNA Providers on-site inspection of the property unless the
Agency has performed a physical inspection of the property within the
previous 12 months.
This pre-inspection meeting also allows the CNA Provider to discuss
with the CNA Recipient total number of units to be inspected, as well
as identifying any specific units that will be inspected in detail. The
minimum number of inspected units required by the Agency for an
acceptable CNA is 50 percent. However, inspecting a larger number of
units generally provides more accurate information to identify the
specific line items to be addressed over the ``term'' being covered by
the CNA report. CNA Recipients are encouraged to negotiate with the CNA
Provider to achieve inspection of all units whenever possible. The
ultimate goal for the CNA Recipient and CNA Provider, as well as the
Agency, is to produce the most accurate ``baseline or snapshot'' of
current physical property conditions for use as a tool in projecting
future reserve account needs.
6. Revising an Accepted CNA During Underwriting (Applies to RD Actions)
During transaction underwriting and analysis, presentation of the
information contained in the ``accepted'' CNA may need to be revised by
RD to address financing and other programmatic issues. The loan
underwriter and the CNA Reviewer will work together to determine if
revisions are necessary to meet the financial and physical needs of the
property, and established RD underwriting or servicing standards and
principals. These may involve shifting individual repair line items
reported in the CNA, moving work from year to year, or other
adjustments that will improve cash flow. The revised underwriting CNA
will be used to establish reserve funding schedules as well as
operating budget preparation and analysis and will be maintained by RD
as supporting documentation for the loan underwriting.
The initial CNA, prepared by the CNA Provider, will be maintained
as an independent third- party record of the current condition of the
property at the beginning of the 20-year cycle.
Original CNAs will be maintained in the case file, clearly marked
as either ``Current Property Condition'' (``As-is''), ``Post
Rehabilitation Condition'', or ``Revised Underwriting/Replacement
Schedule'', as applicable. Note: The CNA Provider is not the
appropriate party to ``revise'' a CNA which has already been approved
by the CNA Recipient and concurred with by the Agency. The CNA
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the ``As is'' or ``Post Rehabilitation'' CNA. The CNA developed for
underwriting may only be revised by RD staff during the underwriting
process or as part of a post-closing servicing action.
7. Updating a CNA (Applies to ``As-Is'' and ``Post-Rehabilitation''
That Have Not Been Accepted by RD)
A completed CNA more than a year old at the time of the RD CNA
review and approval must be ``updated' prior to RD approval. Likewise,
if at the time of underwriting the CNA is more than a year old (but
less than two years old), it must be updated before the transaction can
be approved.
To update a CNA, the CNA Provider must review property changes
(repairs, improvements, or failures) that have occurred since the date
of the original CNA site visit with the CNA Recipient, review costs and
quantities, and submit an updated CNA for approval. However, if the
site visit for the CNA occurred more than two years prior to the loan
underwriting, the CNA Provider should perform a new site visit to
verify the current project condition.
Once the CNA has been updated, the CNA Provider will include a
statement noting ``This is an updated CNA of the earlier CNA dated
______,'' at the beginning of the CNA's Narrative section. The CNA
Provider should reprint the CNA with a new date for the updated CNA,
and provide a new electronic copy to the CNA Recipient and RD.
If the CNA age exceeds 2 years at the time of the RD CNA review and
approval, the CNA Provider will need to repeat the site visit process
to re-evaluate the condition of the property. The original report can
remain the basis of the findings.
8. Incorporating a Property's Rehabilitation Into a CNA
A CNA provides a repair schedule for the property in its present
condition, indicating repairs and replacements necessary for a property
to function properly and efficiently over a span of 20 years. It is not
an estimate of existing rehabilitation needs, or an estimate of
rehabilitation costs. If any rehabilitation of a MFH development is
planned as part of the proposed transaction, a rehabilitation repair
list (also called a ``Scope of Work'') must be developed independently
based on the CNA repair schedule. This rehabilitation repair list may
be developed by the CNA Recipient, a project Architect, or an outside
party (such as the CNA Provider, when qualified) hired by the CNA
Recipient.
The CNA Recipient must not use repair line-item costs taken from
the CNA to develop the rehabilitation cost estimates for the
rehabilitation loan, as these costs will not be accurate. The repair
costs in a CNA are based on estimated costs for the property.
Typically, these costs include the labor, materials, overhead and
profit, but do not include applicable ``soft costs''. For example, for
CNA purposes, the probable cost is to send a repairman out, remove an
appliance, and put a new one in its place. For rehabilitation cost
estimates, the CNA Recipient typically intends to hire a general
contractor to oversee and supervise the rehabilitation work, which is
then considered a ``soft cost''. The cost of rehabilitation includes
the costs for that general contractor, the general contractor's
requirements, the cost of a project Architect (if one is used), tenant
relocation (if needed), and interim financing (if used), which are
considered ``soft costs'' attributed to the rehabilitation costs for
the project.
If a ``Post Rehabilitation'' CNA is required and authorized by RD,
a copy of the rehabilitation repair list or SOW must be provided to the
CNA Provider. The CNA Provider will prepare a
``Post Rehabilitation'' CNA indicating what repairs are planned for
the property in the coming 20 years based on conditions after the
rehabilitation is completed. Items to be replaced during rehabilitation
that will need to be replaced again within the 20 years, such as
appliances, will be included in the ``Post Rehabilitation'' CNA. Items
that will not need replacement during the coming 20 years, such as a
new roof, will not need to be calculated in the ``Post Rehabilitation''
CNA. The line item should not be removed from the CNA, but the cost
data should be zeroed out. Appropriate comments should be included in
the CNA report to acknowledge the SOW or rehabilitation/repairs that
were considered.
9. Repair and Replacement Schedule
A CNA is not a formal repair and replacement schedule and cannot be
used as an exact replacement schedule. A CNA is an estimate of the
anticipated replacement needs for the property over time, and the
associated replacement costs. The goal of a CNA is to estimate the
replacement times based on the Expected Useful Life (EUL) to assure
funds are available to replace equipment as it is needed. Hopefully,
materials will be well maintained and last longer than estimated in the
CNA. However, the CNA cannot be used to mandate replacement times for
the identified building components. The RD underwriter may find it
necessary to adjust the proposed replacement schedule during the course
of the underwriting to allow for an adequate Annual Deposit to
Replacement Reserves (ADRR) payment that will sustain the property over
a 20-year period and keep rents below the maximum rents that are
allowed.
BILLING CODE 3410-XV-P

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Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2022-04718 Filed 3-8-22; 8:45 am]
BILLING CODE 3410-XV-C

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