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 completeOctober 30, 2015 Email Blast.

2016 FY Mortgage Insurance Premiums — No Changes

Federal Register notice was published on October 2, 2015 announcing no change in the Mortgage Insurance Premium rates for Federal Housing Administration (FHA) Multifamily, Health Care Facilities, and Hospital mortgage insurance programs that have commitments issued or reissued in FY 2016.

Electronic Submission of Davis-Bacon Wage Rate Certifications

On October 5, 2015, HUD published Mortgagee Letter 2015-25 and Housing Notice H 2015-09, which introduce an electronic means to submit the Davis-Bacon Prevailing Wage Payroll Certifications. The software is intended to improve HUD’s Davis-Bacon oversight and compliance.

The program initially will be implemented for new construction/substantial rehabilitation projects located in HUD regions VI (Southwest) and VII (Great Plains) that have yet to reach initial endorsement. Nonetheless, all program participants are invited to begin using the electronic submission of Davis-Bacon payroll certifications beginning Wednesday, November 4, 2015.

Use of the Davis-Bacon Electronic Certification Submission Program (ECSP) will be mandatory for all Davis-Bacon payroll certification submissions after March 30, 2016for all projects that are less than 50 percent complete as of that date.

Refund of Inspection Fees if Lender Administers the Non-Critical Repair Escrow

If the Lender elects to administer the Non-Critical Repair Escrow (NCRE), HUD will refund the inspection fee. Since the fee can be refunded, it should not be included in the transaction costs on the Sources and Uses page on the Maximum Insurable Loan Calculation (MILC). For the HUD Inspection Fee line item, include $0, noting the election to administer the escrow. The fee to pay the Project Capital Needs Assessment (PCNA) provider for the inspection/report after the repairs/improvements are completed may be treated as an eligible mortgageable cost. As a reminder, the Lender’s Firm Commitment application must specify that the Lender will assume NCRE administration on that particular transaction, and the Firm Commitment must include a Special Condition acknowledging that the Lender has been approved to administer the NCRE.

ORCF Expects Racial Covenants to Be Removed

Although it is not always easy to remove covenants that run with a property, ORCF expects that covenants contrary to the Fair Housing Act or other civil rights laws shall be removed prior to closing. In the event that, despite timely efforts to remove the covenant, the parties are not able to remove the covenant prior to closing, ORCF requires documentation regarding what efforts were taken to remove the covenant and a certification acknowledging the unenforceability of such provisions and repudiating them.

Submission of Asset Management Requests, Including TPAs by Lender

The 232 Handbook requires Lender involvement in certain asset management requests (e.g, transfers of physical assets [TPAs]), and, while not mandated, it is extremely helpful to all parties if the Lender is involved in all asset management requests. Therefore, ORCF has requested that all asset management-related requests and transactions (including Non-Lender delegated R4R release requests) be reviewed and submitted by the Lender.

Financial Statement Filing Extension Announced Applies to Section 232

The global extension for submitting financial statements posted on HUD’s Real Estate Assessment Center (REAC) Financial Assessment of Multifamily Housing (FASS) system website pertains to owners who have projects insured under Section 232. The posting pertains to both Section 232 and Multifamily properties, even though Section 232 is not mentioned specifically. See the posting for additional information regarding the extension until December 31, 2015.

Reminder: Maximum Additional Deposit to Reserve for Replacement is $40,000

As noted in the February 25, 2015 Email Blast, ORCF increased the Initial Deposit/Additional Deposit to Reserve for Replacements threshold to $40,000. As noted, all amounts more than $40,000 will be used to reduce the mortgage amount.

Only on an exceptionally rare occasion, ORCF will consider allowing a further increase in this amount, on a discretionary basis, if the following criteria are met:

  • The cost reduction could not be foreseen and was unexpected and unavoidable.
  • The request is submitted in writing, a minimum of five business days prior to the targeted closing date, in order to allow the ORCF Workload Manager, Underwriter and Closer time to review and process the request.

Post-Closing Documents — Transaccess CDs

Please note that ORCF’s electronic documents provider has changed from PSL Inc. to the Nolan Group. The HUD Attorney Closing Checklists have been updated (Refinances and New Construction/Sub Rehab/Blended Rate).