Meeting the needs of affordable housing with loan servicing

This blog was written by Elaine Magil, Director, Advisory & Transactions at TCAM, An MRI Company

Affordable housing loans are far more complex and varied than standard first mortgage commercial and homeownership loans. Often issued to fill gaps in the financing structure, affordable housing loans can have a wide variety of funding sources, payment terms, and compliance requirements – all of which have changed over time as programs have evolved. Most affordable housing loans are also very long-term; now, after decades of funding loans to promote affordable housing, most lenders find themselves with complex portfolios of non-standard loans.

TCAM, An MRI Company (TCAM) has first-hand experience of these complexities, having worked with affordable housing portfolios across the country for over 10 years. For instance, among our city housing department clients, TCAM recently found that one had more than 100 borrowers, 23 funding programs, a changing definition of “surplus cash” or “residual receipts” over time, multiple deferral period arrangements, and 46 different interest rates – all in a portfolio of roughly 300 housing loans. Similarly, a recent public housing authority client’s portfolio included not only developer interests in its properties, but a total of 76 loans that included seller notes, ground leases, gap financing to co-developers, and bond issuances on its own properties as well as others. For organizations involved in financing affordable multifamily and single-family homes as well as community facilities, the volume and complexity of oversight can rapidly grow overwhelming.

Why loan servicing?

Most loan servicers, and most mortgage servicing systems, are designed to service highly standardized loans – 30-year fixed single-family mortgages, for instance, or must-pay FHA or Fannie Mae multifamily loans. The affordable housing industry today lacks comprehensive loan servicing for government and non-profit housing lenders that provide a variety of debt products including single-family loans, cash-flow contingent subordinate loans and hard/must-pay amortizing loans. Most servicing systems are designed to help mortgage lenders track and collect payments on must-pay senior debt including amortizing single-family and multifamily loans. These traditional loan servicing systems and operations cannot handle loans on which regular payments are not due or loans that are repaid subject to available cash flow.

The complex and varied loans of many affordable housing and community development lenders call for specialized loan servicing. For these portfolios, loan servicers must have the technical skills and systems needed to process and track large volumes of transactions and information. However, they also need to be able to handle extensive variation in payment terms and amortization schedules, and to calculate cash contingent payments. They need to track complex and varying compliance requirements – on the part of both the borrower and the lender’s funding sources. They need to understand the client’s goals and stakeholders – and what those goals mean for the servicer’s interaction with borrowers.

How TCAM can help

Recognizing this need among our clients and colleagues, TCAM – supported by the technological capabilities of MRI Software, our parent company – is now providing specialized loan servicing. Our highly customized loan servicing is able to support organizations whose portfolios include:

• Multifamily property loans, including those funded by HOME, CDBG, NSP, trust funds, AHP and local housing programs
• Commercial facility loans
• Economic development loans
• Single family property loans including down payment assistance, shared appreciation, and local programs
• Ground leased or land trusted properties
• Loans repaid from cash flow or sales proceeds, as well as those making monthly payments of principal and interest
• Loans forgiven over time

Building on our extensive experience in loan oversight, reporting, compliance, and administration, as well as our well-earned reputation for providing flexible, responsive supports to affordable housing owners and capital providers, TCAM is ready to take on portfolios of any size. Our staff have worked with over 15 clients in markets across the country to carefully calculate soft- or non-traditional loan payments due, credit these payments correctly across principal, interest, and accrued balances, and even help lenders anticipate payoff events. We tailor a scope of work that responds to each client’s needs and in-house capabilities, but TCAM’s offering includes all major loan affordable housing loan administration needs, including:

• Client and borrower online portals to easily check balances, view reports, make electronic payments, and more
• Generate and send borrower invoices and statements
• Provide a call center for borrower questions
• Tailored investor reporting
• Operate a client-specific lockbox
• Bookkeeping of loan balances with careful administration of credits, accruals, and debits
• Reconciliation and data validation of bank and borrower data
• Delinquency management
• Specialized processing and data management software systems able to accommodate non-traditional loan types
• Online storage of key property and loan documents
• Multiple payment processing options

The TCAM-MRI platform provides a comprehensive solution to loan servicing that is uniquely capable of helping organizations service and meet their goals for subordinate, cash flow, and deferred payment loans as well as loans with periodic required payments. Clients are better able to maximize collections on cash flow loans and/or other debt with deferral periods. In addition, the TCAM-MRI platform provides the data and document collection and management information systems and reporting capacity needed to track the many program features that fall outside traditional mortgage servicing needs. Learn more about loan servicing here.