Housing RAP proving to be solid benefit for nonprofit developers

BOSTON, April 11, 2013 --- Nonprofit developers using tax credits to develop affordable rental housing should consider using MHP's Housing Reserve Assurance Program (Housing RAP), which in two years has helped five community development organizations realize $1.2 million in developer fees that might otherwise have gone toward cash-funded operating reserves or other long-term reserves.

Used in combination with MHP first-mortgage permanent financing, Housing RAP provides a credit facility that reduces the amount of cash a developer needs to put aside in reserve by up to 80 percent. This helps developers collect more of their development fee prior to closing while the MHP credit facility helps provide a developer's tax credit investors with the same assurance that additional funds will be available during the life of the loan if needed.

A $6 million program funded by MHP and The Boston Foundation, Housing RAP has been used to support six new affordable housing developments and has provided between $124,000 and $256,000 in immediate additional liquidity to nonprofit developers. There is $4.8 million left in the program's initial round of funding.

"Housing RAP is a terrific innovation for community-focused development organizations like ours because it allowed us to get more of our development fee up front," said Jeanne Pinado, executive director of the Madison Park Development Corporation. "This helped strengthen our bottom line and gave us more resources to pursue development opportunities that will make our neighborhoods even stronger."

Since 2011, Housing RAP has been used in the following affordable housing developments:

• Falmouth - School House Green, Falmouth Housing Corp., $950,000 MHP first mortgage, $200,000 Housing RAP loan.

• Jamaica Plain - Centre-Creighton Apartments, Jamaica Plain Neighborhood Development Corp., 36 units, $1.9 million MHP first mortgage, $124,000 Housing RAP loan

• Jamaica Plain - 270 Centre Street, Jamaica Plain Neighborhood Development Corp., 30 units, $584,000 MHP first mortgage, $150,000 Housing RAP loan

• Lawrence - Union Crossing, $1.1 million MHP first mortgage, $256,000 Housing RAP loan.

• North Andover - Stevens Corner, Neighborhood of Affordable Housing Inc. (NOAH), $1.4 million MHP first mortgage, $231,000 Housing RAP loan

• Roxbury - Dudley Greenville Rental Housing, Madison Park Development Corp., $3.1 million MHP first mortgage, $205,000 Housing RAP loan.

Housing RAP can also be used as a gap-filler when more of the developer's fee is deferred prior to closing as a result of construction cost overruns, loss of funding from other sources, costly closing delays and other unanticipated costs. For example, Stevens Corner in North Andover experienced significant water damage during the Halloween snowstorm of 2011. The project incurred higher construction and carrying costs from the delayed permanent loan closing. However, Housing RAP's credit facility enabled the developer, NOAH, to collect its developer fee in spite of these higher costs since less cash was needed to fund the reserves.

"Housing RAP proved to be a unique solution for us when we experienced water damage during a freak storm just prior to occupancy," said Phil Giffee, NOAH's executive director. "We were able to deal with the cost overruns caused by the storm, and were still able to receive rather than defer our much-needed developer's fee at closing while still providing necessary operating reserve assurances to our investors."

For more information about MHP permanent financing and Housing RAP, read the RAP term sheet. and email Director of Business Development Nancy McCafferty at nmccafferty@mhp.net.