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by Kristopher Rengert, Community Development Expert, OCC Wachovia Corporation supports the preservation of affordable multifamily housing through multiple lines of business, including its Community Development Finance, Agency Lending, Municipal Products and Tax Credit Investment groups. These groups invest Wachovia resources directly and link clients to the resources of partner institutions to finance affordable multifamily housing preservation across the United States. Community Development Finance By providing acquisition loans to developer clients, Wachovia’s Community Development Finance (CDF) group enables clients initially to purchase affordable multifamily housing developments, and hold them, while arranging permanent financing. The group also provides construction loans for projects requiring significant rehabilitation. CDF invests directly in projects and participates in multi-lender consortiums, such as the New York City Acquisition Fund, to support affordable multifamily housing preservation efforts. CDF also provides short-term letters of credit during the construction period to enhance tax-exempt bonds issued to support affordable multifamily housing preservation. Agency Lending Wachovia’s Agency Lending Group includes the Affordable Housing Group (AHG). The group focuses on issuing permanent debt for affordable multifamily housing projects. Wachovia defines affordable housing for those purposes as any project with income or rent restrictions from federal affordability programs. AHG issues permanent debt on housing projects with LIHTCs of 9 percent and 4 percent with tax-exempt bonds, and on preservation deals, including the refinance of Section 8 properties, Section 236 decoupling transactions, and Section 202 refinances. This debt may be issued as conventional loan products or a direct bond purchase. AHG is a pass-through lender and does not hold these loans in its portfolio. It is an agency lender for both Fannie Mae and Freddie Mac, providing clients access to permanent debt to refinance affordable multifamily housing developments. Through the Fannie Mae and Freddie Mac product lines, Wachovia shares in the risk with any affordable loan. The bank is also an FHA-approved lender and is authorized to issue Ginnie Mae mortgage-backed securities through the FHA Group within the AHG. This provides clients with access to government-insured permanent loan products. Municipal Products The Municipal Products Group (MPG) houses Wachovia’s municipal bond investment banking, sales and trading, and derivatives businesses. MPG is an active underwriter of tax-exempt housing bonds, serving in the bond underwriting syndicates of more than 20 state and local housing agencies. MPG is also an active investor and trader of all types of municipal bonds with a portfolio of $5 billion. MPG supports the preservation of affordable multifamily housing by underwriting for sale or directly purchasing multifamily housing bonds as part of Wachovia’s direct bond purchase program. For the direct bond purchase program, MPG provides municipal bond structuring, funding, and interest rate hedging resources. MPG also relies on the affordable housing lending and construction risk management expertise of the Affordable Housing and Community Development Finance groups to maintain the credit quality of its multifamily bond portfolio. Tax Credit Investments The Tax Credit Investment Group (TCIG) provides equity for affordable multifamily housing preservation efforts through the purchase and syndication of LIHTCs (and in some instances, historic tax credits) associated with these deals. Supporting its roles as both LIHTC investor and syndicator, Wachovia’s Tax Credit Asset Management (TCAM) group monitors the construction and post-construction performance of LIHTC projects, in which Wachovia or its clients have equity investments. To identify LIHTC opportunities for both affordable housing preservation and new construction, the TCIG divides the United States into six territories, each of which is covered by a tax credit investment team of up to five people. These teams develop and maintain relationships with developers active in the LIHTC industry. They also monitor the state allocation processes for LIHTCs in individual states to ensure that they are aware of, and in a position to bid for, emerging LIHTC purchase opportunities. Counterparts in other Wachovia groups also are alert for potential LIHTC opportunities, which they refer as appropriate to the TCIG. Integration Across Business UnitsWhenever possible, Wachovia employs multiple lines of business to support one project. Each business unit considering a deal weighs which other business units within Wachovia might appropriately participate and makes such referrals to their clients. This collaboration produces additional business opportunities for Wachovia as well as better customer service for the bank’s clients. Wachovia draws on the expertise of different business units to provide funding terms that are attractive to borrowers while also adequately managing the risks of financing affordable multifamily housing preservation. For further information, e-mail Eileen Stenerson, Senior Vice President, Wachovia Community Development Finance. (The following sidebar illustrates an example of a project in which Wachovia employed multiple business units to support preservation in a housing development that was previously a market-rate affordable property.)
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