Replacement Reserve Escrow Disbursement Process Training

1. Replacement Reserve Escrow Disbursement Process Training April 2012 CHFA – The Connecticut Housing Finance Authority 999 West Street, Rocky Hill, CT 06067

2. Replacement Reserve Escrow Revision: Intent • Goals: • Reduce the time between review and approval for owners • Establish a formalized process for review of various projects • Eliminate capital replacement review on HUD insured properties

3. Replacement Reserve Escrow Revision: Outcome • Eliminates Technical Services review for properties w/o CHFA debt • Eliminates CHFA reviews for HUD insured properties • Created Appendix G to CHFA Standards of Design and Construction – establishing classifications for review certifications • Created Capital Improvements Guidelines (CIG) • Revised the Replacement Reserve Policy • Created Capital Improvement Schedule

4. No CHFA Financing • Technical Services’ review will not be required for properties that do not have CHFA financing. • Examples: • DECD transferred grants • Certain TCAP, Exchange • CDBG Grants, Green Retrofit Program

5. HUD Insured Projects • Eliminates CHFA reviews for HUD insured properties • CHFA will rely on HUD authorizations for project review and escrow disbursement. • 9250 will be acceptable verification • Electronic copies will be acceptable

6. CHFA Standards ofDesign & Construction • Goal: Develop affordable, safe housing, with as much quality, energy efficiency, durability, comfort, air quality, and environmental sustainability as the marketplace, resources and need will permit. • Volume I – Project Planning and Technical Review Process • Volume II – Health, Safety and Sustainability Standards and Guidelines • Volume III – Appendices • CHFA Capital Improvement Guidelines (CIG)

7. Section 00054 & Appendix G • Volume I – Section 00054: Capital Improvements – Repairs/Replacements/Installations • References Appendix G and Capital Improvement Guidelines(CIG) • Written description of review/approval process • Appendix G: CHFA Capital Improvement Project Classifications for Repairs/Replacements/ Installations • Classifications A, B.1 & B.2 and C • Project classifications describe the level of required certification of conformance to CHFA Standards for repairs/replacements/installations, as determined by the complexity and costs of the project(s).

8. Classification A • If the Owner will be completing “A” projects, the Owner may certify that work has been completed according to CHFA Standards of Design and Construction • Examples: Carpet, Storm Doors, Appliances • Owners must submit Request for Pre-Approval (HM 6-21) if ≥$10,000 • Owners must submit Request to Release Escrow Funds (HM 6-24) for reimbursement

9. Classification B • If the Owner will be completing “B” projects • B.1: Less than 20K – Owner may self-certify • B.2: Greater than or equal to 20K – A Building Design Professional (BDP) must determine scope of work and certify completion • Examples Roofing/Siding/MEP Repairs/Replacements • BDPs: CT-licensed/insured Building and/or Home Inspector, HUD-approved Inspector, insured FHA 203K Compliance Consultant, Architect, Professional Engineer, Licensed Environmental Consultant, or Approved Vendor • Owners must submit Request for Pre-Approval (HM 6-21) if ≥$10,000 • Owners must submit Request to Release Escrow Funds (HM 6-24) for reimbursement

10. Classification C • If the Owner will be completing “C” projects • Tech Services (TS) review and acceptance of scope, final bid documents and contract required • Examples: Site utility work, structural repairs and heat/smoke/fire detection/suppression/elevator repairs • May require a Field Observer (determined by TS) • Building Design Professional certification required • BDPs: CT-licensed/insured Building and/or Home Inspector, HUD-approved Inspector, insured FHA 203K Compliance Consultant, Architect, Professional Engineer, Licensed Environmental Consultant, or Approved Vendor • Owners must submit Request for Technical Services Review and Approval (HM 6-21TS) • Owners must submit (HM 6-21) & (HM 6-24) as required under Classification A & B

11. Capital Improvement Guidelines • “CIG” – created to assist Owners, Property Managers, Developers and internal CHFA staff • Provides general guidelines for repair and replacement projects identified in Appendix G • Divided into three sections (Classifications A, B &C) with specific project examples • Includes documentation requirements • Includes “Questions to Consider” – suggested related issues and conditions • References to related Standards section(s) • Energy-efficient measures and suggestions • Project-specific questions and related issues to consider

12. Replacement Reserve Observations • Observation and verification policy change: • Observations will occur as determined by scope of work and may include one or more observations by Building Design Professional (Classification B) and or Technical Services (Classification C). • Asset Management will observe a sampling of the work completed or items purchased at the next scheduled site visit. • Asset Management reserves the right to require observations prior to release of funds for any reason.

13. Capital Improvement Schedule • Capital Improvement Schedule (HM 6-xx) submitted with annual budget • For owners to estimate when work will be completed throughout fiscal year… • …and costs associated with the work • Provides Asset Management, Finance and Technical Services with a schedule to forecast potential workload demands • Standardized for potential electronic analysis via MFaSys • Owners may revise during fiscal year Y:\Common Area\TSAM Committee Items\Capital Improvement Schedule.xls

14. Process & Forms • Technical Services Review and Approval (HM6-21TS) - NEW • Escrow Release Pre-Approval (HM6-21) - Revised • Request To Release Escrow Funds (HM6-24) - Slight Revision • Authorization to Release Escrow (HM6-20) - Revised • Replacement Reserve Descriptive Codes (HM6-22) - Slight Revision • Residual Receipts & General Operating Descriptive Codes (HM6-23) – No Change • Escrow Disbursement Policy - Revised • Capital Improvement Schedule (HM 6-xx) - NEW

15. Classification A: Scenario 1 • Owner intends to install 30 storm doors. The total cost is less than $10,000. • Storm doors are on Capital Improvement Schedule submitted with annual budget. • Owner does not need to seek pre-approval. • Following completion of installation, the Request to Release Escrow Funds is submitted. Y:\Common Area\TSAM Committee Items\Sample Forms for PP\PP Scenario 1.xls

16. Classification A: Scenario 2 • Owner intends to rehab 4 kitchens by replacing cabinets and plumbing for $15,000. • Owner reviews Appendix G to determine certification requirements. • Project falls under Classification A; Owner can certify but must obtain Asset Management pre-approval. • Owner submits Escrow Release Pre-Approval form with Recommended Vendor, Scope of Work, and 3 quotes attached. • Asset Manager gives pre-approval; Owner completes work and submits HM 6-24. Y:\Common Area\TSAM Committee Items\Sample Forms for PP\PP Scenario 2.xls

17. Classification B: Scenario 3 • The community building roof needs replacing at a total cost of $9,000. • Owner reviews Appendix G to determine certification requirements and the guidance provided in the CIG. • Project falls under Classification B.1; Owner or Building Design Professional (BDP) must certify. • Owner completes work and submits HM 6-24. Y:\Common Area\TSAM Committee Items\Sample Forms for PP\PP Scenario 3.xls

18. Classification B: Scenario 4 • Owner intends to pave entire parking area at a cost of $50,000. • Owner reviews Appendix G to determine certification requirements and the guidance provided in the CIG. • Project falls under Classification B.2 • Owner retains BDP to certify compliance with Standards, scope of work & construction • Owner submits Escrow Release Pre-Approval form (HM 6-21) with Scope of Work and 3 quotes attached. • Pre-Approval form must be signed by Owner and BDP • Asset Manager gives pre-approval; Owner completes work and submits HM 6-24. Y:\Common Area\TSAM Committee Items\Sample Forms for PP\PP Scenario 4.xls

19. Classification C: Scenario 5 • Owner intends to replace a boiler at a cost of $50,000. • Owner reviews Appendix G to determine certification requirements and the guidance provided in the CIG. • Project falls under Classification C • Owner retains BDP to certify compliance with Standards, scope of work & construction • TS/AM & BDP meet and review proposed scope • Technical Services requires at least a 2 week turnaround time for review of plans and specs • Owner submits CHFA Technical Services Review & Approval form (HM 6-21TS) with scope of work, plans, drawings • Asset Manager sends to Technical Services for review Y:\Common Area\TSAM Committee Items\Sample Forms for PP\PP Scenario 5.xls

20. Classification C: Scenario 5 Continued • Technical Services communicates directly with BDP during the review process • Technical Services signs off and notifies Asset Management • Owner obtains 3 quotes and submits Escrow Release Pre-Approval (HM 6-21) to Asset Manager • Technical Services reviews and accepts • Asset Manager approves and notifies Owner to proceed • Owner completes work and submits HM 6-24 • Owner & BDP sign HM 6-24 for certification of standards

21. Owner Benefits • More direct input and control of construction project • Compresses timeline by eliminating CHFA review time for Classifications A & B • Defines Capital Improvement process • For HUD insured properties, eliminates review and inspection, shortening the escrow release time • Consolidates escrow disbursement processes • Provides clear & direct guidelines for specific projects

22. Conclusion No Technical Services Participation: • Properties with no CHFA funding • HUD Insured Developments • All projects under Classifications A & B Technical Services Participation: • Any projects under Classification C • CNA Review • Loans, Refinancing, Workout and Preservation • Environmental Testing Review • Emergency Participation • Any Asset Management inquiries

23. Questions & Comments