Agenda - 09-09-2008- 1 - Laserfiche WebLink

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LIHTC Program Exaerlence in North Carolina, there have been approximately 1700 rental projects awarded tax credits in the 21 year history of the program. To date, only six (6) rental complexes have experienced foreclosure with the majority occun'ing after the initial 15 year tax credit tax credit compliance period. That experience mirrors the nationwide foreclosure rate of tax credit projects whid~ the Office of Community Affairs Department of the US Department of the Treasury estimates at .03 percent. They state that °by comparison, loans to non-tax credit apartment real estate have a foreclosure rate of .29 percent.° Foreclosure has occurred in our state for different reasons including: a lack of oversight, death of the owner, and, other outside influences including land use pressures. When foreclosures have occurred, about half of the projects have been transferred to non-profit organizations that continua to operate the property as affardabie housing and the other half have been sold and converted to market rate housing. The penalty for #oreclosure include: ineligibility for any future award of tax credits and the flnandal recapture of tax credits for 15 years if the foreclosure occurs within the initial 15 compliance period. It should be Hated that most developers and investors do all possible to prevent foreclosure during the initial period to avoid the high cost of recapture of the tax credits. And, the associated risks are the same for both for-profit organizations and non-profit organizations. Deed Restrictions and Lien Positions The LIHTC Program requires that the property remain affordable for 30 years and a document entitled "Declaration of Land Use Restrictive Covenants for Low Income Housing Tax Credits" is recorded on the deed to the property. Orange County, however, has a 99 year long term affordability requirement that is secured by a Declaration of Restrictive Covenants as well. In this deal, Orange County's Covenant will be recorded after the Tax Credit Declaration. The flnanclng for the project is summarized on the next page and the lien position wi11 be as ordered in the summary. All mortgages will be secured by a Deed of Trust and Promissory Note. It should be noted that the County's loan will be in second lien position to the bank loan. The County loan will be repaid at the end of the loan term (30 years), the project owner will refinance the property to pay the balloon payment of $1 M. Hopefully, this addi#ional information addresses the issues raised at your last meeting. If you have questions or need more information, please advise. Thanks for your continuing support for affordable housing in our community.