Coffelt-Lamoreaux Apartment Homes is the largest and most complex single Rental Assistance Demonstration (RAD) conversion combined with Federal Housing Administration (FHA) financing in the State of Arizona and perhaps the southwest region. RAD was created in order to give public housing authorities (PHAs) a powerful tool to preserve and improve public housing properties.
The Coffelt RAD project has several different layers of financing, all of which make it challenging, unique and notable. In addition, the conversion involves a complete gut rehabilitation of the project, numerous archaeological, architectural and cost reporting requirements, as well as environmental issues to address.
The development partners and their principal participants had successfully worked with Paragon on similar projects in the past. Paragon staff members have specific experience processing and underwriting Department of Housing and Urban Development (HUD)-insured loans for complex substantial rehabilitation projects which have 4% LIHTC (low income housing tax credit) bonds. Paragon staff members have extensive HUD closing experience, and were able to provide information and direction on the many secondary financing requirements associated with the Coffelt transaction. What’s more, the team already familiar with the new HUD RAD program was able to provide helpful guidance to the development team throughout the application process.
The six layers that comprise the Coffelt financing include the FHA first mortgage, CDBG (Community Development Block Grant) funding, Federal Home Loan Bank AHP (Affordable Housing Program) funds, State Housing Trust Funds from the Arizona Department of Housing, and two seller carryback notes from the Housing Authority of Maricopa County. It also has 4% LlHTCs and short-term tax exempt bond financing, and an additional layer of historic tax credits with a Master Lease structure.
Paragon submitted an application to the U.S. Department of HUD for Coffelt-Lamoreaux Apartment Homes to request mortgage insurance pursuant to the provisions of Section 221(d)(4) of the National Housing Act. As a MAP-approved lender, Paragon is able to apply for HUD-insured loans for qualifying projects.
Additionally, Paragon Mortgage assisted the developer in meetings with the State of Arizona on the 4% LlHTC application, when they had questions about the underwriting parameters. The State accepted the development team’s conclusions and awarded the credits.
Paragon Mortgage’s specific knowledge of HUD underwriting requirements, procedures and closing requirements, along with experience combining 221(d)(4) HUD-insured financing with tax exempt bond financed projects, allowed us to provide our client with support and guidance throughout the application process.
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