CFFP - How Does a PHA Apply?

In order to request HUD approval, PHAs must submit a minimum of one hard copy and three electronic copies on CD of the complete CFFP Proposal to:

Office of Public Housing Investments
451 7th Street SW
Washington, DC 20410
Attention: Dominique Blom
Deputy Assistant Secretary
Room 4130.

Streamlining

• Description of the status of other HUD approvals needed to implement the CFFP. Instead, HUD will make determinations about other approvals needed to implement the CFFP by coordinating its review amongst the relevant HUD offices. In order to expedite the approval of CFFP Proposals, approvals will be conditioned on other HUD approvals that would be required before the PHA could use the CFFP proceeds as planned.
• Effective Cost of Financing Schedule. While this is no longer required to be submitted as part of the Proposal, it remains a useful tool for PHAs that want to be able to compare the cost efficiency of different financial structures. The tool remains available for PHAs that would like to utilize it by following the useful tools link.

• Fairness Opinion
• Management Assessment
• Assurances in regard to construction management and financial controls

• PHAs undertaking Mixed Finance Transactions
• PHAs borrowing less than $2 million
• PHAs sizing their borrowing only base on projected RHF

• Physical Needs Assessments are no longer required for PHAs that size their financing based upon only projected RHF.
• PHAs that size their CFFP based only on RHF, and those that propose to utilize the CFFP as part of a mixed finance transaction, are not required to:
  • Submit a CFFP Budget as part of the CFFP Proposal
  • Submit quarterly reports to the Field Office
• DOTs are not required to be submitted for any mixed finance projects.

The below chart summarizes the streamlining that has been undertaken in regard to the CFFP, highlighting those items that are no longer required of Proposals meeting certain requirements.

Proposal Contents

1. A cover letter:

   The cover letter must be signed by the PHA Executive Director (or Chief Executive Officer, if applicable) and should transmit and request HUD’s approval of the CFFP Proposal. It should briefly describing the proposed financing and use of proceeds, the percentage of capital funds being dedicated to debt service, and the percent of the PHA’s public housing units benefiting from the financing. The letter should indicate any impact of the financing on the public housing portfolio, highlight any significant financial elements or legal provisions, and provide an overview of construction management and financial controls.
   
   

2. Term sheet, table of contents, and contact information

   The PHA must submit (a) a table of contents, (b) the HUD-prescribed Term Sheet (MS-Word), and (c) contact information for all of the key participating parties.

3. Financing schedules:

The PHA must submit the below financing schedules in the manner and format prescribed by HUD:

1. A debt service schedule. Please find HUD form debt service schedules by clicking on the below links.
   • Periodic payment debt service schedule (MS-Excel, 27 KB)
   • Monthly payment debt service schedule (MS-Excel, 85 KB)
2. A sources and uses schedule (MS-Excel, 20 KB)
3. A portfolio schedule (including projections for RHF as appropriate). The portfolio schedule should be used by the Authority to project any future adjustments in its capital funding due to activities such as demolition, disposition, conversion, merging units, casualty, condemnation, asset management, PIC data issues, etc. The CFP should also be adjusted to reflect items that would limit available CFP, such as Voluntary Compliance Agreements, other administrative or judicial actions, or contractual commitments to mixed finance projects (e.g. Regulatory and Operating Agreements).
   • Portfolio Schedule Sample (MS-Excel, 64 KB)
   • Portfolio Schedule Form (MS-Excel)
   • Portfolio Schedule Instructions (MS-Word, 24 KB)
   HUD generates per unit funding schedules and other Capital Fund Reports that can be used to complete the portfolio schedule. These schedules can be found at 2008 Capital Fund Reports page.
   
   
4. Other required submissions:

The following submissions are also required:

1. Capital Fund Financing budget detailing the use the CFFP loan proceeds. Sample Capital Fund Financing budget (MS-Excel, 97 KB) The Capital Fund Financing budget utilizes the Annual Statement form. HUD will accept an Annual Statement submitted in accordance with 4(b)(1) in satisfaction of the requirement for a Capital Fund Financing budget in this section 4(a). Qualified PHAs that are not required to submit Annual Statements as part of their PHA Plan must still submit a Capital Fund Financing budget as part of their CFFP Proposal, however Annual Statements and Five-Year Action Plans showing the use of Capital Funds for the payment of debt service will not be required of Qualified PHAs.
2. A copy of the following PHA Plan information: 1) an Annual Statement showing the use of the CFFP proceeds; and 2) an Annual Statement and Five-Year Action Plan (Capital Fund Program tables) showing the use of Capital Fund Program (CFP) grant amounts and/or Replacement Housing Factor (RHF) grant amounts for debt service payments. Where a PHA is requesting that HUD establish automatic payment of debt service from LOCCS to the lender or trustee, the PHA should use BLI 9000 to show debt service payments in their annual plan and Five Year Action Plan. The budgets in LOCCS for open grants which will be used to make debt service payments need to be revised to reflect the estimated debt service payment amounts on the BLI 9000. Where a PHA will be making direct payments of debt service, BLI 1501 should be used.
   The cover letter should include a statement confirming that the above items have been incorporated into an approved plan. However, to the extent a Qualified PHA is not required to submit Annual Statements or Five-Year Action Plans as part of their PHA Plan, these items are not required to be submitted as part of a CFFP Proposal.
3. An independent, third party management assessment (MS-Word, 69 KB)
4. An independent third party fairness opinion (MS-Word, 27 KB)
5. A physical needs assessment (MS-Excel 2.7MB) covering the Authority’s entire public housing portfolio, for the term of the financing, taking into consideration the life cycle replacement costs of all major building systems
   
   
5. Financing documents:

The PHA must submit a complete set of the legal documents that the PHA will execute in connection with the CFFP transaction. The legal documents are to be submitted to HUD only after they have been negotiated and agreed upon by the parties to the transaction. HUD will not review preliminary documents that are still under negotiation.

6. Declaration of Trust requirements:

The PHA will submit modernization DOTs for all of their Non-Mixed Finance public housing projects and a certification from their counsel that these represent all of their public housing properties, and that in each instance the DOTs are recorded in first position and will be effective for the term of the financing. If the PHA Counsel is unwilling to offer such a certification, the PHA may submit a title report, along with a certification from the PHA that the DOTs and the title report cover all properties in their public housing portfolio. As noted in the streamlining section of this page, DOTs are not required to be submitted for mixed finance projects.

	Consolidated Annual Contributions Contract (form HUD 53012A)
	Development Project Grant Amendment to Consolidated Annual Contributions Contract (form HUD 53010-D)
	Declaration of Restrictive Covenants (Standard) (MS-Word, 49 KB)
	Declaration of Restrictive Covenants (op sub only) (MS-Word, 49 KB)
	Capital Fund Program (CFP) Amendment to the Consolidated Annual Contributions Contract (form HUD-53012)
	Declaration of Trust Public Housing Modernization Grant Projects (form HUD-52190-B)
	PIH notice 2009-28, Guidance on the Recording of DOTs
	24 CFR Subpart D 941.401(c)
	24 CFR Subpart F 941.610(a)(2)(i)



7. Board Resolution, Counsel’s Opinion, and Depository Agreement:
   1. The PHA must submit evidence of a PHA Board resolution that authorizes the PHA to undertake the loan up to a specified amount; provide all security interests required by the loan; and repay the loan with capital funds as required by the financing documents. The Board resolution must also provide authorization for the Executive Director or other executive staff to negotiate and enter into all legal documents required as part of the transaction.
   2. The PHA must submit PHA counsel’s opinion, which opines that the PHA has the authority to enter into the transaction, and that the transaction complies with the requirements of the 1937 Act, as amended, federal regulations, and the ACC, as amended. Sample Opinion of Counsel (MS-Word, 72 KB)
   3. The PHA must submit a depository agreement that covers all of the CFFP funds, and a Capital Fund Financing Amendment to the ACC (Financing Amendment). Sample Depository Agreement

Pooled CFFP Transactions

While most Capital Fund Financing Program transactions involve a single PHA, an alternate model also exists. This model involves groups, or Pools, of PHAs within the same state, entering into agreements to jointly pursue CFFP financing. The CFFP Pool model is transferable and relevant to any CFFP transaction for PHAs and can provide benefits in the form of shared costs, expertise and the inherent support of a grouped approach.

The primary reason PHAs have chosen to engage in a Pool approach is because it enables PHAs to reduce transaction costs and make larger, complex transactions feasible for smaller PHAs or smaller projects. In these situations, Bonds may be issued through the state Housing Finance Agency (HFA), a lead PHA, an affiliate or a procured financial professional. In many cases, the Pool is able to set up an internal team comprised of HFA and/or PHA staff and procured legal and financial professionals who can help drive the process through approval. For these reasons and more, Pools are a viable alternative to a single CFFP transaction. There are advantages and disadvantages to seeking CFFP funds through a pooled transaction. Please feel free to contact the CFFP staff to discuss.

For Pooled transactions please provide:

1. Master list of participating PHAs;
   1. Pool Mailing List - Sample (MS-Excel, 42 KB)
   2. Pool Spreadsheet (MS-Excel, 24 KB)
2. Master Sources and Uses statement and Master Effective Cost of Financing;
3. Narrative statement on the structure of the Pool.