coverage. SA For clarity, change in (A) to and correct the The subsection reference has been corrected. The term “project “projected”, “project” subsection reference in (B). is grammatically correct. CHW CHW supports the DSCR changes, but the changes would be HCD believes that the cost to public subsidy sources that would further improved if the test for positive cash flow was for 30 result from a 30-year look outweighs the potential risk reduction. years, as is typical for underwriting. HCD has revised (e)(2)(C) to allow exceeding its normal debt service coverage limit where required to meet the underwriting requirements of a direct federal lending program. Federal agencies have the same public purpose orientation as CalHFA, and on issues like this should receive equal treatment. §8310f MPH To avoid the high costs of long-term fixed rate debt with low HCD has revised its proposal to allow balloon payment loans, so prepayment penalties, HCD should allow different structures long as there is an independent, senior regulatory agreement based on underwriting standards set forth in separate (sometimes referred to as a regulatory -- “bifurcated agreement” guidelines, which would allow change based on market fundamental non-financial regulatory requirements HCD’s conditions. are incorporated into a covenant or similar document recorded senior to the otherwise first lender documents, while provisions related to financial arrangements are recorded junior. Since many different methods and instruments may be used to effect the bifurcated agreement, this subsection is worded to allow multiple possibilities, including recording a covenant separate from the normal regulatory agreement, recording a regulatory agreement with specified (department approved) provisions that are automatically extinguished in the event of foreclosure, or recording a regulatory agreement that provides for amendment upon foreclosure. The last option is intended to address situations where appropriate title insurance is not available for the other options. BH Use a set of assumptions to demonstrate an exit strategy or See response to MPH comment and proposed revisions the repayment of balloon loan. original amendment text.
coverage. SA For clarity, change “project in (A) to “projected”, and correct the subsection reference in (B). The subsection reference has been corrected. The term “project” is grammatically correct. CHW CHW supports the DSCR changes, but the changes would be further improved if the test for positive cash flow was for 30 years, as is typical for underwriting. HCD believes that the cost to public subsidy sources that would result from a 30-year look outweighs the potential risk reduction. HCD has revised (e)(2)(C) to allow exceeding its normal debt service coverage limit where required to meet the underwriting requirements of a direct federal lending program. Federal agencies have the same public purpose orientation as CalHFA, and on issues like this should receive equal treatment. §8310f MPH To avoid the high costs of long-term fixed rate debt with low prepayment penalties, HCD should allow different structures based on underwriting standards set forth in separate guidelines, which would allow change based on market conditions. HCD has revised its proposal to allow balloon payment loans, so long as there is an independent, senior regulatory agreement (sometimes referred to as a “bifurcated regulatory agreement” HCD’s fundamental non-financial regulatory requirements are incorporated into a covenant or similar document recorded senior to the otherwise first lender documents, while provisions related to financial arrangements are recorded junior. Since many different methods and instruments may be used to effect the bifurcated agreement, this subsection is worded to allow multiple possibilities, including recording a covenant separate from the normal regulatory agreement, recording a regulatory agreement with specified (department approved) provisions that are automatically extinguished in the event of foreclosure, or recording a regulatory agreement that provides for amendment upon foreclosure. The last option is intended to address situations where appropriate title insurance is not available for the other options. BH Use a set of assumptions to demonstrate an exit strategy or repayment of balloon loan. See response to MPH comment and proposed revisions the original amendment text. --
summary-and-response-to-comments.docx