1

Category Rating Insured (Including Insured assisted) Non-Insured

Troubled

Rating Explanation/Comments must be no older than 3 months

1

a. High likelihood of Full Claim within 6 months Any one of the following:a. HAP or other subsidy contract has been or expected to be abatedb. A foreclosure recommendation has or is being prepared for Property Disposition

Centerc. Property Disposition center is analyzing strategy or processing disposition of HUD Held

loan/property (Foreclosure, Note Sale, Sale or workout .).

2a. Request for Partial Payment of Claim or OAHP restructure has been received a. Not used. Intentionally left blank.

3

Any one of the following:a. TPA required to resolve identified issues, physical and/or financial and no TPA

transaction has been startedb. Current only through owner contributions – non-tax credit c. High probability of Full Claim or request for a Partial Claim in 6 months – 1 yeard. PASS/REAC below 30 Must remain a 3 until new inspection or refinance e. Owner or property is in Bankruptcy or Receivership

Any one of the following:a. TPA required to resolve identified issues, physical and/or financial and no TPA

transaction has been startedb. 202 or HUD held current only through owner contributions c. PASS below 30. Must remain a 3 until new inspectiond. Owner or property is in Bankruptcy or Receivership

4

Any one of the following:a. Delinquent 3 or more times in the last yearb. SOI Category/Stage is Execute - Require or Execute - Enforce (Uncooperative owner) c. Current only through owner contributions – tax creditd. SOI - Qualitative Assessment Score (QAS) >2.00

Any one of the following:a. Loan Delinquent 3 or more times in the last year (If applicable)b. SOI Category/Stage is Execute - Require or Execute - Enforce (Uncooperative owner) c. SOI - Qualitative Assessment Score (QAS) >2.00

5

Any one of the following:a. Economic vacancy greater than projected or expenses higher than expected. b. Audited financial statement shows DSC below 1.0 and owner is NOT taking

corrective action via Action Plan, refinance, modification or moving to sustaining occupancy (if new construction) to increase DSCR; Not applicable if PM analysis shows DSCR calculation in FASS is wrong

c. PASS between 30 and 59 and owner has NOT certified issues identified in the last inspection have been corrected

d. Open Referral to DECe. MROC Red and SOI Category/Stage is Investigate or Execute Recommend. Ex.

Monthly Accounting Reports have not been requested, received, or reviewedf. If new construction indicator Y and Monthly Accounting Reports are not requested

or receivedg. Viable TPA is in process to resolve problems

Any one of the following:a. For non-insured, unexplained or excessive vacancy in HAP units b. FASS Rating of Red unless Review of Monthly Accounting Reports documents

successful reversal c. PASS between 30 and 59 and owner has NOT certified issues identified in the last

inspection have been correctedd. Open Referral to DECe. IRA High and SOI Category/Stage is Investigate or Execute Recommend. Ex: Monthly

Accounting Reports have not been requested, received, or reviewedf. A property where the owner has indicated a desire to Opt out and is in the last 12

months of their contract. g. No MOR in the past 3.5 years (PRACS) 5 years non-PRACh. Standalone Use Agreement verified to not be in compliance or vacant land/building

and Use Agreement has not been reviewed by PD for possible actions. i. Viable TPA is in process to resolve problems

Occasionally exceptions to the Rating “any one bullet rule”, Monthly Accounting Report (MAR) or Management and Occupancy Review (MOR) requirements are appropriate and should be noted in the Rating Explanation/Comment field why the Guide was not followed. Comments should also indicate if the “Action Component” from the Risk Mitigation Road Map is not being followed.

2

Category Rating Insured (Including Insured assisted) Non-Insured

Potentially Troubled

Rating Explanation/Comments must be no older than 6 months

6

Any one of the following:a. PASS score 30-70, but ownership resolving problems (certified if under 60) and addressing

why situation was allowed to occur (Includes PASS/REAC under 30 refinanced)b. SOI - Qualitative Assessment Score (QAS) such that 1.5<QAS≤2.00c. MOR is less than Satisfactoryd. OAHP Watch List Contract

Any one of the following:a. PASS score 30-70, but ownership resolving problems (certified if under 60)

and addressing why situation was allowed to occurb. SOI - Qualitative Assessment Score (QAS) such that 1.50<QAS≤2.00c. MOR is less than Satisfactoryd. For non-insured, the HAP or subsidy contract expires in less than 4 months

and owner has not taken action to renew

7

Any one of the following:a. If new construction indicator Y and monthly accounting reports show sound operations and

ahead of underwritten projections, but occupancy is still not sustainingb. Not used. Intentionally left blank.c. DSC is greater than or equal to 1.0 but less than 1.15, and DSC has declined from that

reported in prior year’s Audited Financial Statements (AFS) d. Not used. Intentionally left blank.e. Not used. Intentionally left blank.f. DSCR is less than 1.0 and the owner is taking corrective action via Action Plan, refinance,

modification or moving to sustaining occupancy (if new construction) to increase DSCR, but 6 Months of MAR post corrective action have not been received/reviewed.

g. Refinance of a previous non-insured property. Must stay as a Rating of 7 until review of 6 months of Monthly Accounting reports (MAR)

h. SOI – Qualitative Assessment Score QAS such that 1.00<QAS≤1.50i. MROC Red/Yellow and management or ownership has minimal HUD experience

a. A non-insured property that is not required to submit financial statements AND MOR or PASS score older than 2 years (Exclude Stand alone Use Agreements)

b. Not used. Intentionally left blank.c. Not used. Intentionally left blank.d. Not used. Intentionally left blank.e. For IRA High/Medium and management or ownership has minimal HUD

experience f. SOI - Qualitative Assessment Score (QAS) such that 1.00<QAS≤1.50g. Standalone Use Agreement not verified in compliance within the last 3 years.

Or vacant land/building and Use Agreement has been reviewed for possible actions and no options available

Not Troubled

Rating Explanation/Comments must be no older than 1 year

8

a. Not used. Intentionally left blank.b. MROC Yellow Properties Over $25 million that have no other attributes that would lower

rating.c. MROC Green, but two sub-categories are non-green.d. FASS DSCR of less than 1.0 is wrong due to FASS handling of transactionse. If Red MROC and no other attributes that would lower rating.

a. Not used. Intentionally left blank.b. MDDR reports shows as delinquent, but verified not delinquent or under a

workout plan and all other attributes are Not Troubled.c. SOI - Qualitative Assessment Score (QAS) ≤1.00 AND IRA score is High and

Category/Stage is Investigation Complete No Action Necessary d. Not used. Intentionally left blank.e. Not used. Intentionally left blank.f. Not used. Intentionally left blank.

9

a. Not used. Intentionally left blank.b. MROC Yellow Property under $25 million that have no other attributes that would lower

ratingc. MROC Green, but one sub-category is non-greend. Not used. Intentionally left blank.

a. SOI - Qualitative Assessment Score (QAS) ≤1.00, IRA score is Medium and Category/Stage is Investigation Complete No Action Necessary

10

a. Occupancy and expenses better than or equal to projections or market comps; SOI - Qualitative Assessment Score (QAS) ≤1; All MROC sub-categories must be Green AND DSCR must be greater than or equal to 1.15 in FASS.

b. Not used. Intentionally left blank.c. Not used. Intentionally left blank.

a. SOI - Qualitative Assessment Score (QAS) ≤1.00, IRA score is Low and Category/Stage is Investigation Complete No Action Necessary

b. Not used. Intentionally left blank.c. A standalone Use Agreement verified to be in compliance within the last 3

years.