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#2053799 - 12/11/15 05:40 PM CDL Loans in Upper Income Areas
FancyMe Offline
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Joined: Dec 2012
Posts: 44
Florida
The CRA Dept. is reviewing closed HMDA multi-family loans for possible CDL eligibility and located a few existing multi-unit complexes where the loan proceeds are to acquire such properties in upper income census tracts. However, in reviewing the loan and appraisals, the rents are WELL below fair market rents. Any issues in writing this up for CDL loans and reporting?

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#2053805 - 12/11/15 06:03 PM Re: CDL Loans in Upper Income Areas FancyMe
Kathleen O. Blanchard Offline

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I would want much more information. What are the long term plans...upgrade and raise rents? Who is renting...middle and upper income wanting a cheap rent? What is the landlords intent...provide affordable housing in a nice area?

This could be tricky.
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#2053808 - 12/11/15 06:07 PM Re: CDL Loans in Upper Income Areas FancyMe
CompliantOkie Offline
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Joined: Dec 2013
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OOOOOOklahoma
We had several properties that fell in that same category. We wrote up the loans as CDL's and received examiner consideration for them. We included a map of the AA showing several low-income properties nestled in upper income census tracts. The map helped a lot.
Our particular properties did not accept HUD waivers but the rent being well below market helped sway the examiners. If your properties accept waivers, be sure to include that!
Last edited by CompliantOkie; 12/11/15 06:08 PM.
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#2053811 - 12/11/15 06:21 PM Re: CDL Loans in Upper Income Areas FancyMe
Care4RCommunity Offline
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NJ
I have also successfully had multi-family loans in middle and upper-income considered for CDL credit. I had the proper documentation in the file in terms of number of rooms etc. along with the rents so that the examiners could clearly see what the rents are. Some were Section 8, but not all. I have had situations in NJ where affordable housing is created as part of a new development because of a specific state regulation (Mt. Laurel).

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#2053891 - 12/11/15 10:02 PM Re: CDL Loans in Upper Income Areas Care4RCommunity
corkygirl Offline
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middle of the country
I have also researched the school that any children in those units would more than likely attend and often found the schools to sufficiently over 50% LMI. That documentation is also presented with the other documentation to the exam team. Has worked in the past.
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#2053896 - 12/11/15 11:21 PM Re: CDL Loans in Upper Income Areas FancyMe
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Extensive documentation is key. If the property was just purchased and will be upgraded and rents raised, current rents won't matter. We don't know enough.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2053909 - 12/12/15 03:05 PM Re: CDL Loans in Upper Income Areas FancyMe
Len S Offline
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Joined: Oct 2004
Posts: 1,848
Connecticut
The occupancy costs must be "affordable" meaning they cannot exceed 30% of the occupant's income. Since affordable housing for CD credit pertains to affordable housing primarily for low and moderate-income occupants, the first thing to do is to check to see if the rents would be <= 30% of the maximum income that qualifies as moderate-income. If they don't then don't waste your time pursuing a potential affordable housing project. But if they are <=30% then the next thing to do is to establish that the tenants are primarily LMI qualified. There are several ways to do this including proxies if you don't have the information regarding tenants income.
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#2053913 - 12/12/15 03:42 PM Re: CDL Loans in Upper Income Areas FancyMe
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,277
But again, find out the new owners intent. If the intent is to throw out the tenants and upgrade the building to get higher rents, it won't count.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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