When an applicant indicates an intent in filing a preapplication, the District Director should schedule a preapplication conference to review program objectives and to provide copies of appropriate exhibits and forms, including those listed at § 1930.141 of subpart C of part 1930 of this chapter; furnish guidance necessary for orderly application processing; and initiate a processing checklist for use in establishing a schedule for completion of docket items.

(a) Preapplication. SF 424.2, “Application for Federal Assistance (For Construction),” with the additional information outlined in exhibit A-1 or A-2 of this subpart, as applicable, will be submitted to the District Director. This information is used to determine the applicant's eligibility and eliminate any proposals which have little or no chance for funding. The applicant should be instructed not to prepare an application until notified to proceed. General guidance to applicants is provided in the Labor Housing Loan and Grant Application Handbook, exhibit A.

(b) Actions by District Director. The preapplication, with attachments, will be reviewed by the District Director. The District Director will inspect the site and consider its desirability if it appears that the applicant is eligible.

(1) If the preapplication proposes an LH loan of a type and amount within the approval authority of the District Director according to subpart A of part 1901 of this chapter, the District Director should determine the applicant's eligibility and execute Form AD-622, “Notice of Preapplication Review Action.”

(2) If the preapplication proposes an LH loan and/or grant which requires State Office approval, the preapplication, including the comments and recommendations of the District Director and any additional material considered necessary, will be forwarded to the State Director.

(c) Actions by State Director. (1) If the applicant is an organization adopting without change the “Articles and Bylaws” prescribed by State supplements, the preapplication need not be submitted to OGC.

(2) In all other cases involving loans or grants to organizations, the docket, with any questions or comments of the State Director, will be submitted to OGC for a preliminary opinion as to whether the applicant and the proposed loan meet or can meet the requirements of State law and this subpart.

(3) An original and one copy of the appropriate environmental review document required by subpart G of part 1940 of this chapter must be completed prior to submitting the docket to the National Office for review.

(4) In cases not receiving a National Office review, the following statement is to be added to the Form AD-622: “You are advised against taking any actions or incurring any obligations which would either limit the range of alternatives to be considered, or which would have an adverse effect on the environment. Satisfactory completion of the environmental review process in accordance with subpart G of part 1940 of this chapter must occur prior to loan approval. The issuance of this review action does not constitute site approval.”

(5) Determining amount of grant.

(i) General. The State Director will determine the amount the applicant can obtain from other sources, including an LH loan, and the amount of the grant to be made, within the limits set forth in § 1944.164(b)(2). The State Director will make this determination after thoroughly analyzing the information in the docket and receiving authorization from the National Office.

(ii) Method of determining amount of grant.

(A) The State Director will examine the income of the project based on the estimated rental charges and operating costs of the housing when in full operation to determine the soundness of the operations. When there is any doubt as to the probable soundness due to unrealistic planning of income or operating expenses, or for other reasons, the housing project and its operation will be discussed with the applicant to determine changes which can be made to correct the deficiencies.

(B) When a sound plan of operation has been agreed upon, the State Director will determine the amount of funds that can be expected to be available from other sources, including an LH loan. The State Director will also determine the amount of income available for loan repayments after allowing for reasonable and necessary maintenance costs, payments on debts of the applicant, and the orderly accumulation of an adequate reserve.

(C) The amount of the grants will be the difference between the amount of funds to be provided in accordance with paragraph (c)(5)(ii)(A) of this section, plus any funds available from the applicant's own resources and the total development cost of the project. In no case, however, may the amount of the grant exceed 90 percent of the total development cost.

(6) When the State Director considers it necessary, any preapplication may be sent to the National Office for evaluation and instructions.

(7) The State Director will determine the priority of the preapplication when grant funds are applied for in accordance with § 1944.164(b)(1) of this subpart. If in accordance with those priorities, and after completing review of the preapplication material and determining the amount of grant, the State Director will notify the District Director of the State Director's determination and authorize the District Director to prepare and execute Form AD-622. The District Director will forward the original to the applicant, a copy to the State Director, and a copy to the case file.