HCCP Financial Analysis 3

Question 1

A developer underwrites replacement reserves at $350 per unit per year for a 50-unit LIHTC project. What is the annual reserve deposit?

Accepted Answer

$17,500

Answer

$350 × 50 units = $17,500 annual replacement reserve deposit.

Question 2

Which of the following best describes 'credit pricing' in a tax credit transaction?

Accepted Answer

The cents-per-dollar investors pay for each dollar of tax credit

Answer

Credit pricing is the amount equity investors pay per dollar of allocated tax credit, expressed in cents (e.g., $0.90 per credit dollar).

Question 3

When analyzing a LIHTC permanent loan, an underwriter typically requires that the DSCR not fall below which minimum threshold?

Accepted Answer

1.15

Answer

Most LIHTC lenders require a minimum DSCR of 1.15 to ensure adequate cushion for debt repayment above breakeven.

Question 4

In a tax credit financial model, 'syndication costs' are classified under which category?

Accepted Answer

Soft costs

Answer

Syndication costs—including legal, accounting, and partnership fees related to the tax credit transaction—are soft costs in the development budget.

Question 5

A LIHTC project generates $10,000 in annual tax credits for 10 years. At a credit price of $0.92, what is the approximate equity raised?

Accepted Answer

$92,000

Answer

Total credits = $10,000 × 10 = $100,000; equity = $100,000 × $0.92 = $92,000.

(HCCP) Housing Credit Certified Professional Practice Test