Standard Underwriting Criteria

Program Description

Bonds are issued with appropriate credit enhancement (minimum AA/Aa long term rating) with the proceeds utilized to construct and/or permanently finance affordable housing projects in the general range of $5,000,000 - $30,000,000 in debt. Available for properties throughout Nevada.

    Criteria Description
    Loan Amounts: $5,000,000 - $30,000,000 smaller amounts permitted on a case by case basis
     Local Government approval: All projects must have local governmental council approval. A minimum of 50% of total bonding authority must be provided by local government. Rural communities with less than 50% private activity bond CAP available per year reviewed on a case by case basis.  
    Credit Enhancement: Minimum long term rating of credit enhancer must be AA/Aa even for floating rate transactions. Form of credit enhancement may be bond or FHA insurance, MBS or Letter of Credit. Credit enhancement must cover the full amount of the bonds for the life of the bonds. Mandatory put in the event of non-renewal. 
    Loan Term: All loans (fixed and floating) must be fully amortizing. A 25-30 year length maximum, FHA insured exceptions allowed.
    Prepayment: Pursuant to the bond documents. Yield maintenance on issuer and trustee fees for first 10 years.
    Recourse: Non-recourse, except for standard lender and issuer carve-outs.
    Borrower: All properties must be owned by single asset or single purpose entity. No cross collateralization from properties not part of original financing.
    Debt Service Coverage: Minimum of 115:100 on new construction; 125:100 on acquisition rehabilitation
    Loan to Value: 85% maximum; for projects with 4% tax credits, 90% allowed if market justified
     Subordinate Financing: Soft secondary financing allowed up to 98% of appraised value but must be serviced by no more than 75% of available cash flow
    Occupancy: Must be 90% occupied for 90 consecutive days prior to permanent loan financing
    Assumability: Yes, but subject to Housing Division approval with payment of processing fee and 1% assumption fee.
    Reserves: Tax and insurance escrows are required as are repair and replacement reserves
    Application Fee: $3,000 plus $75,000 down payment toward costs of issuance upon approval of loan application. Balance of bond costs of issuance due at closing.
    Financing Fees: Typically, 2-3% of total bond amount, with maximum of 2% payable from tax-exempt bond proceeds.
    Land Costs: A copy of the land sale contract is required documentation. High percentage markups of land costs, without documented value added improvements will be carefully scrutinized and may be disallowed. Related party sales receive careful review.
    Timing:  Typically 60-75 days from loan approval
    Developer Profits & overhead: Limited to 15% maximum. No more than 10% of total taken on a % of completion of improvements; 10% more allowed at permanent loan conversion; balance allowed from cash flows after senior debt service & funded reserves; interest rate on deferred note limited to amount needed to maintain present value on unpaid developer fee.
    Contractor Profit & overhead: Limited to 14% maximum on improvements taken on a % of completion basis.
    Regulatory Agreement: Per IRS Code for bonds not less than 20% @ 50%AMI or 40% @ 60% AMI; 4% tax credits are a separate regulatory obligation and add onto the tax exempt bond minimums. NOTE: Local governments may require higher set aside levels in addition to federal minimums.
    Signage: All bond & 4% tax credit projects must allow for Housing Division signage during construction.
    Third party reports: See list of underwriting documents required
    Energy Savings Requirement The Division requires several energy efficiency standards be achieved in bond financed projects. (Multifamily Bond Program Energy and Weatherization Requirements)