1. (a) Funding Availability. Direct Loan funds may be made available through a NOFA or other similar governing document that includes the basic Application and funding requirements.
2. (b) Oversourced Developments. A Direct Loan request may be reduced or not recommended if an underwriting report issued by the Department's Real Estate Analysis Division concludes the Development does not need all or part of the MFDL funds requested in the Application because it is oversourced, and for which a timely appeal has been completed, as provided in 10 TAC §1.7 of this title (relating to Appeals Process) or 10 TAC §11.902 of this title (relating to Appeals Process for Competitive HTC Applications), as applicable.
3. (c) Funding Sources. Direct Loan funds are composed of annual HOME and National Housing Trust Fund (NHTF) allocations from HUD, repayment of TCAP or TCAP RF loans, HOME Program Income, NSP Program Income (NSP PI or NSP), and any other similarly encumbered funding that may become available by Board action, except as otherwise noted in this chapter. Similar funds include any funds that are identified by the Board to be loaned or granted for the development of multifamily property and are not governed by another chapter in this title, with the exception of State funds appropriated for a specific purpose.

4. (d) Eligible and Ineligible Activities.

   1. (1) Eligible Activities. Direct Loan funds may be used for the predevelopment, acquisition, new construction, reconstruction, rehabilitation, or preservation of affordable housing with suitable amenities, including real property acquisition, site improvements, conversion, demolition, or operating cost reserves, subject to applicable HUD guidance. Other expenses, such as financing costs, relocation expenses of any displaced persons, families, businesses, or organizations may be included. MFDL funds may be used to assist Developments previously awarded by the Department when approved by specific action of the Board. Eligible Activities may have fund source restrictions or may be restricted by a NOFA.

   2. (2) Ineligible Activities. Direct Loan funds may not be used for:

      1. (A) Adaptive Reuse Developments; or
      2. (B) Developments layered with Housing Tax Credits that have elected the income averaging election under Section 42(g)(1)(C) of the Internal Revenue Code that have more than 15% of the Units designated as Market Rate Units.

5. (e) Ineligible Costs. All costs associated with the Development and known by the Applicant must be disclosed as part of the Application. Costs ineligible for reimbursement with Direct Loan funds in accordance with 24 CFR Part 91, Part 92, Part 93, Part 570, and 2 CFR Part 200, as federally required or identified in the NOFA, include but are not limited to:

   1. (1) Offsite costs;
   2. (2) Stored Materials;
   3. (3) Site Amenities;
   4. (4) Detached Community Buildings;
   5. (5) Carports and/or parking garages, unless attached as a feature of the Unit;
   6. (6) Swimming pools;
   7. (7) Commercial Space costs;
   8. (8) Reserve accounts except Operating Deficit Reserve accounts;
   9. (9) TDHCA fees;
   10. (10) Syndication and organizational costs;
   11. (11) Delinquent fees, taxes, or charges;
   12. (12) Costs incurred more than 24 months prior to the effective date of the Direct Loan contract, unless the Application is awarded TCAP RF, and if specifically allowed by the Board;
   13. (13) Costs that have been allocated to or paid by another fund source, including but not limited to: Deferred Developer Fee, contingency, and general partner loans and advances;
   14. (14) Deferred Developer Fee;
   15. (15) Texas Bond Review Board (BRB) fees;
   16. (16) Community Facility spaces that are not for the exclusive use of tenants and their guests;
   17. (17) The portion of soft costs that are allocated to support ineligible hard costs; and
   18. (18) Other costs limited by Award or NOFA, or as established by the Board.

Source Note:The provisions of this §13.3 adopted to be effective November 26, 2020, 45 TexReg 8316.