Issue link: https://read.dmtmag.com/i/76207
DEVELOPMENT MARKETING Ask Eddie BY ED HICKS WHAT TO DO WHEN YOUR COM- MUNITY LOAN COMES DUE? Community owners and residents of a coop- erative m/h land lease community may wish to know the alternatives when their conduit loans come due. The most obvious is to let the loan go to the end of it's term, and let the lender decide whether or not to make you a new loan or extend the current loan for a short period of time. A long extension period is not likely with today's low interest rates. In the case it is de- cided to do this, the lender will appoint a spe- cial master to oversee operations, since technically the loan is in default. Of course, it is very important to check with an experienced RE attorney if it is decided to do this, to feel comfortable about risks of foreclosure. Investor owned communities should have an easier time refinancing, however historically many lenders who finance communities for ex- perienced opera groups have been somewhat dubious of resident owned communities since there have been some notable mismanagement issues in the past. If you are lucky enough to find a lender who will refinance the property, they are liable to take a very conservative stance, meaning your interest rate will not be too favorable probably 5.5% plus a premium and itmay be underwritten at a higher rate, the amortization period will be relatively short 15 to 20 years or less, and the loan to value ratio will be 70% 75% or less. Family communities often have equity issues to resolve, sincemany residents are short of the cash required. In these cases, you may wish to consider the services of ROC USA (Resident Owned Communities) which is headed byMr. Paul Bradley. They have been able to assem- ble a combination of equity and debt investors to assist in the acquisition and refinance ofmany communities, Nationwide. Their website is: www.rocusa.org Youmay also want to contact the non-profit Corporation For Enterprise De- velopment (CFED) who have been working on AUGUST 2012 24 THE JOURNAL some legislation whichmay give residents of LL- Communities some new titling rights whichmay make individual homesite financing easier. You may contact Andrea Levere at: www.cfed.org A third alternative is to make an application for an FHA207 guaranteed loan. These are loans by private lenders with a HUD pre-ap- proved community to residents, community owners, and/or investors for refinance and re- habilitation of existing communities or acquisi- tion and development of new communities. Qualification will take up to 6 months or longer for approval, but the terms and rates are very attractive. Qualifying properties may obtain loans at 90% LTV, for 40 years, which are fixed rate and non recourse. Interest rates are now in the 4.5 to 5.5% range, and lower. Recently the HUD Staff in Seattle provided the residents of a community on an Island, across the Sound from downtown with ap- provals to process a loan for $4.2M which will allow them to payoff their existing conduit loan which has a much higher interest rate. It also provides for some physical rehabilitation of community structures which have declined in condition over the years. Processing the nec- essary documents will take a few more months, but the residents are very happy they now have a 40 year, fixed rate, loan under 4.25% With- out this type of financing, they have not been available to obtain the necessary funding to re- place their existing debt. Last year,HUD also approved a $4.0Mloan for a resident owned community on the Central California Coast. A change in the ownership became available and the residents took advan- tage of this to purchase their community. The program is not just for resident owned communities. Investors and owners of privately owned commercially operated communities in Oklahoma City, OK, Palmetto, FL, and In- dianapolis, IN are also processing their appli- cations through their respective RegionalHUD staff for these unique 40 year fixed rate loans. HUD staff review follows the TAP process in which the lender collects all relevant data and presents it to the staff for underwriting. At the Concept meeting for new community develop- ment with the HUD staff which is the fist step in the process, care is taken to assure there is an adequate supply of qualified home buyers to purchase new or used HUD code homes using available, viable home financing. Older, built out communities must demon- strate a need for rehabilitation which is aimed at the capital needs of the community. The fi- nancing doesn't include any provision for the acquisition or rehab of rental units. Another similar HUD program, the FHA221(d)4 may be used to purchase new homes and rent them out to residents as SFD apartments. Developers with new community develop- ment plans in Beaufort, SC and San Antonio, TX have been initiating the similar process. A newly developed website www. fha207m.com provides most of the technical aspects of the application process. This new interest in an old, rarely used loan guarantee program, will help to assure that ex- isting communities can bring their facilities up to date, and for new community development which is beginning to start in this "down" mar- ket, assurance there is adequate financing available. T J Mr. Hicks is a licensed Mortgage and Real Estate Broker, with his offices in the Tampa Bay area. He has been associated with the m/h industry as a re- tailer in California, and as a manufacturer in Ore- gon and California, and as a developer in Florida. He may be reached at 813 661-5901 easted- die@aol.com www.factorybuilthome.com www.mo- bilehomepark.com