In an effort to summarize the highlights of the LEAN Email Blasts that we receive, and rarely have time to review in a timely fashion, we at Pepper Hamilton are providing this quick synopsis of the latest LEAN update. Our aim is to provide pertinent information succinctly as a roadmap to the LEAN Email Blasts, not to replace the LEAN Email Blasts. We hope you find these summaries helpful. Here is a link to the complete April 27, 2016 Email Blast.

Sales History in the Appraisal

ORCF is frequently provided with appraisal reports that are not compliant with the sales history reporting requirements found in Handbook 4232.1, Section II, Chapter 5.3.R.3. Please ensure that the appraisal is not simply a cursory review of the sales history, but is compliant with the Uniform Standards of Professional Appraisal Practice (USPAP), which require appraisers, if the complete information is not available, to show that efforts were made to obtain the information. Failure to meet these requirements requires appraisal revisions and increases processing time.

ORCF Anticipates Risks to SNFs in Connecticut

ORCF notes that the 232 portfolio has been adversely impacted by Connecticut’s efforts to diversify and “right-size” skilled nursing facilities (SNFs). Lenders must address the state’s efforts to rebalance toward home- and community-based settings, and the potential impacts on a facility, in their Lender Narrative. These risks must be analyzed in the “Other Risk Factors Identified by Lender” section. Among the resources that Lenders may use in addressing the long-term financial viability of a project in Connecticut is the State of Connecticut Medicaid Long Term Care Demand Projections Databook(Aug. 12, 2014).

Quality Control Reviews Update/Waiver

Every Lender is required to submit Quality Control Plans and Reviews per Handbook 4232.1, Section I, Chapter 2.9. ORCF will consider waiver requests to forego the 2015 QC Review from any Section 232 Lender with only one commitment/closing of a Section 232 project in 2015. Lenders who wish to pursue waiver consideration must send a completed HUD-2-ORCF waiver to Mary Walsh at Mary.V.Walsh@hud.gov by July 1, 2016.

ORCF Reminds Lenders of Required Reporting of State Survey Findings

ORCF reminds the industry of the reporting requirements for state inspections of Section 232 FHA-insured projects found at Handbook 4232.1, Section III, Chapter 3.10.5. As it pertains to licensed nursing facility surveys, reporting is only required when a survey has any findings higher than a “G” level or any repetitive “G” level or higher findings from prior surveys. Lenders should be informed by the Operator within two business days of receipt of a notice, report, survey or other correspondence from the governmental entity (e.g., Notice of Imposition from the Centers for Medicare & Medicaid Services (CMS)). Upon receipt of notification, a Lender must notify the ORCF Account Executive (AE) of any finding that poses an immediate threat to licensure or funding, and then notify the AE as soon as the facility is back in substantial compliance.

Training on the Submittal of Quarterly Operator Financial Statements Through the 232 Healthcare Portal

Based on industry and ORCF collaboration, the data elements that must be provided as part of the quarterly Operator financial statements have been reduced to eight key data elements, and HUD intends to provide training for Lenders and Operators in mid-May 2016 on these elements.

ORCF Correspondence Should Continue to Use LeanThinking@hud.gov

As part of the Office of Multifamily Housing Transformation, various regional/state email boxes have been set up for industry questions. Although those mailboxes are for Multifamily questions, some Section 232 questions have also been submitted there. To avoid delays in getting your ORCF issues addressed, please be sure to use the ORCF mailbox, LeanThinking@hud.gov. If your question relates to a project in ORCF underwriting review or asset management, you should contact the assigned ORCF staff directly.