The Illinois Housing Development Authority (IHDA) released the following guidance for new four percent bond deals:

  • Only bonds issued on or after January 1, 2021 will be eligible for the four percent Fixed Rate Floor.
  • If the bonds were not fully funded in 2020, the prior rate elected will apply; this includes draw down bonds issued prior to January 1, 2021.
  • Cost overruns that result in the issuance of bonds on or after January 1, 2021 will be subject to the prior rate elected (i.e., additional bonds issued are not eligible for the four percent Minimum Rate).
  • Existing deals that have not closed will be re-underwritten using the four percent Minimum Rate to assure overall financial feasibility is satisfactory and that the transaction is not over-sourced.
    • A revised 42(m) letter may be issued to account for the additional LIHTC as determined and approved by the Authority.
  • Additional credits as a result of the four percent Minimum Rate should be used to reduce subordinate debt, pay for additional necessary hard construction costs and/or reduce the first mortgage.
    • Before making an offer on a property, sponsors are encouraged to have conversations with the Authority related to the overall financial structure and financial feasibility related to the overall LIHTC basis and equity requested.
    • Additional equity generated is not intended to allow for a higher purchase price.
  • Deferred developer fees will be sized based on the IHDA’s QAP and the ability to repay any deferred fee through at least year 12 of the initial compliance period.
    • In some cases, the amount of deferred fee will exceed the 25 percent minimum required in the QAP.