The Mississippi Development Authority (MDA) Small Rental Assistance Program (SRAP) Round 2 applicants got a startling letter yesterday (See Here – opens in new window). The letter basically was sent to all Option D applicants, which encompassed anyone who bought new construction as a means of receiving the forgivable loan from the MDA. The SRAP program is designed to get affordable rental housing to low and medium income families in the areas hardest hit from the impacts of Hurricane Katrina. You can get more information by clicking on SRAP (opens all posts tagged with SRAP).
This letter, effectively stated that anyone who was under option D and has not gotten proof of fee simple ownerships (at minimum of a lot deed) would be automatically disqualified for the program as of January 14th, 2009. To make things worse, they sent out an email to recipients on Friday evening, right before a three day weekend, making it almost impossible to get any information. Luckily, we found out about it several hours in advance and were able to get a little bit of information from the MDA.
According to a discussion between my business partner (Andries) and an MDA representative, ONLY option D applicants are effected by this. It MAY be possible to change from option D to Option B (least likely depending on circumstances) or Option A (no completion bonus). It was also said that if your deed was RECORDED at the courthouse prior to January 14th, there is a possibility that you may still qualify under option D IF you get the recorded deed to them ASAP. Note that this information was received via a telephone call and I am still waiting on an official WRITTEN response from the SRAP 2 officials.
For those of you that were using SRAP in conjunction with Go-Zone, have no fear. SRAP and Go-Zone are two different things and the denial of SRAP will in no way effect your Go-Zone eligibility.
I expect to have much more information on this by Tuesday (MDA offices will most likely be closed on Monday for MLK day) and will update this post, and my clients as soon as I know more. If you would like to get notification of the update, or if you have additional questions that I may be able to help with, please do not hesitate to Contact Me.
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There was a slight delay in receiving the email and posting this information as I wanted to make sure that our current clients had it before posting. The results below are the question and answers I received from our contact with SRAP 2.
1. Is the drop off of funding only for Option D, or does it encompass all properties that have yet to show their deeds?
The oversubscription occurred in Harrison, Hancock and Jackson counties for Option D only. Pearl River County is not affected. Options A, B and C in all counties are not affected.
2. One client has closed on his lot (last week) but has not received his deed. It was recorded at the courthouse prior to the 14th but he will not have it in his hands until next week. Is he automatically disqualified? He has not started building but has bought his lot.
If the applicant provides us with a deed that was recorded on or before January 14, 2009, they will be allowed to participate. In this case, the applicant will be fine.
3. For those that went option D – is it still possible for them to build and convert application to option B, or worst case, option A? Obviously, the completion bonus is substantial and would be favored under option B, but if faced with nothing, option A would still be the best last resort if possible.
This is something that would have to be examined on a case by case basis. Any applicant with a newly constructed property that has a Certificate of Occupancy dated on or before the date of application should have come in as an Option A regardless of this decision. Applicants that are rebuilding on a property that previously had a structure that was destroyed by Katrina should have come in under Option B. Applicants that are rebuilding on a property that previously had a structure that was destroyed by any other cause should have come in under Option C. As I said, though, Option changes for those persons that were subject to last weeks ruling will have to be examined on a case by case basis. There is no guarantee that they will be allowed and I have received no permission from MDA which would indicate that this would be allowed.
4. Have additional monies been set aside for a round 3, strictly on rehabs (option B & C). I have heard that money was set aside strictly for this purpose and that there would be a round 3 only for rehabs. Is there any truth to this statement or does the MDA expect all allocated funds to be used on this round?
MDA has not communicated any plans regarding a Round 3.
I hope this helps. If you are currently under contract to purchase but are unsure about SRAP, feel free to call or email me and I will do my best to help where I can. To alleviate potential for lost earnest money from canceling contractual agreements, we may be able to resell properties for you and get you at a break-even or potential gain.
I am a successful applicant for SRAP Round 2 and Option D was not “killed.” Whomever was advising the guy who bought the property in the new subdivision either misled his client to make the sale or didn’t know the details of the program. The consequences for non-owners at the time of any potential oversubscription was disclosed up front. Please see below — actual verbiage from Page 13 of the SRAP Application Guidebook (which was online during the entire application period), from Section 3 – Eligibility Requirements:
3.2 Property Ownership Requirements
MDA is aware that not every applicant will have property ownership at the time that they apply for the program. In the first round of SRAP, this caused numerous problems which resulted in significant delays in application processing. Those problems included:
• The failure to construct subdivision infrastructure (streets, roads, water lines and sewer) in a timely fashion.
• The inability of applicants to provide a legal description for the property which they were purchasing which delayed environmental review, site inspection and initial title verification.
• The inability of applicants to confirm financing for construction or acquisition of units at the time of the loan closing.
• Applicants repeatedly requested that they be allowed to switch properties.
In an effort to avoid these problems, MDA is now requiring that an Applicant OWN the property prior to application processing. A lease, contract for purchase, option to purchase, or a reservation will not meet this requirement.
For the purposes of this program, property ownership is defined as “fee ownership”. In other words, the applicant must be able to provide MDA with a recorded warranty deed, quitclaim deed or other documented proof of ownership. In the event that title has been obtained through a tax deed, the applicant must also provide a judgment from the Chancery court confirming the tax title in the applicant or a predecessor in title pursuant to Miss. Code Ann. 11-17-1. Additionally, the property must be owned by the actual applicant. Ownership by a third party developer, realtor, broker or other entity or person will not suffice, even if an agreement to transfer the property to the applicant at a later date exists.
Any applicant who does not own their property at the time of application and wishes to provide proof of ownership at a later date acknowledges that the application MAY be ubject to the following restrictions:
• Applicants who can prove ownership at the time of their personal consultation session will have their applications processed first.
• Applicants who can prove ownership at the time of their personal consultation session will be given priority if the program is oversubscribed. Applicants who cannot prove
ownership at the time of their application risk being removed from the program if they cannot prove ownership before oversubscription to the program occurs.
• Applicants who will be providing proof of ownership AFTER their personal consultation session will experience delays because processing of the application cannot begin until
proof of ownership is submitted. We will not begin site inspection, environmental inspection, or an eligibility determination until after the applicant provides proof of
ownership.
Thank you for your reply Denise. You are correct that Option D was not “killed”, but anyone not showing ownership of the property with a deed recorded on or before January 14th was immediately dropped from the program.
As for the guy you are referring to – the agents involved knew all about the program. They did not tell him because they were fearful of losing their commission (my assumption as I could not come up with any other reason why they would not tell him).
I am glad you were successful with Option D of SRAP. We have numerous clients who were also successful and the program is absolutely great. SRAP 2 being much more organized than round 1, it has definitely been a much more pleasant experience.
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