The August 28, 2015 LEAN Email Blast contains information on the final rule regarding fire safety equipment, the new delegated underwriter approval process, the Green Lane, and the mortgage termination process, among other topics.
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 completeAugust 28, 2015 Email Blast.
Conference Call Regarding Potential Improvements to Previous Participation Reviews
The August 10, 2015 Email Blast published a proposed rule, FR-5850-P-01 Retrospective Review – Improving the Previous Participation Reviews of Prospective Multifamily Housing and Healthcare Program Participants, regarding changes to the Previous Participation process. The written comment period closes on October 9, 2015. HUD will hold a conference call to discuss the proposed rule on Wednesday, September 16, 2015, 11:30 a.m.–1 p.m. EDT. Participants must register.
Final Rule Published Regarding Fire Safety Equipment
On August 11, 2015, HUD published the Final Rule on Fees and Financing Fire Safety Equipment. This final rule gives HUD flexibility in revising program fees and streamlines the regulations that govern financing the purchase and installation of fire safety equipment in insured health care facilities.
Underwriter Approval Delegation Mortgagee Letter and Housing Notice
Mortgagee Letter 2015-16 and companion Housing Notice H-2015-08 were published on August 12, 2015 and describe the new delegated underwriter approval process. HUD realigned the underwriter approval process, which will result in eligible MAP and LEAN Lenders designating a Chief Underwriter and, through their Chief Underwriter, approving and designating MAP and LEAN underwriters.
Cash Equity in New Construction/Substantial Rehabilitation Projects
During the Lender Dialogue in Jacksonville, Florida, ORCF received inquiries regarding equity in New Construction/Substantial Rehabilitation transactions. Projects must have sufficient cash reserves (e.g., initial operating deficit reserve, debt service escrow, working capital escrow) to support the project through opening, lease-up and stabilization.
The Green Lane and Environmental Checklist
As noted in the June 24, 2015 Email Blast, projects that are eligible for the Green Lane must be environmentally clear, as well as having the appropriate loan size and passing appraisal tests. The elements of the environmental review are contained in theEnvironmental Checklist. Lenders are encouraged to fill out the checklist with each application in order to increase the number of applications eligible for Green Lane processing.
Capitalization Rate from Comparable Sales
According to Handbook 4232.1, Section II, Chapter 5.3.R.4.m, when deriving capitalization rates from comparable sales, the sale’s analyzed income must be consistent with the appraised property’s income being capitalized. If the comparable sales’ capitalized income is not consistent with the appraised property’s income, the appraiser must analyze the impact of the sale’s income on the capitalization rate.
Firm Commitment Now Includes Property Insurance Requirements
Firm Commitment templates have been updated to eliminate the need to attach the ORCF Insurance Requirements. The commitments now contain language in the property insurance sections of the templates stating that, prior to closing, the borrower must provide evidence of all required insurance in conformance with current program requirements.
Reminder on Borrower Requirements — Experience and Citizenship
Handbook 4232.1, Section II, Production, Chapter 2.5.EE, states that only borrowers, operators and management agents whose principals have at least three years of experience will qualify for mortgage insurance. The experience of the management agent or the operator generally does not offset a borrower’s lack of experience. Additionally, Section II, Production, Chapter 6.1.D, requires that the single-asset borrower entity must be registered in the United States in the state where its corporate office is located, and at least one principal, with operational decision-making authority, must be a U.S. citizen.
Important Update for the Mortgage Termination (Pre-Payment) Process
Following the retirement of Mary Deschenes, all requests for ORCF pre-payments should be made to MFIOBTerminationApprovals@hud.gov. ORCF’s liaison, Rachel Miller, Rachel.E.Miller@hud.gov, may be contacted if additional information is needed.
Asset Management: New Sample Documents for Notifying ORCF of Action Plans
The Strengthening Accountability Rule, published September 7, 2012, and Section III, Asset Management, of the Section 232 Handbook 4232.1 (Chapter 3.10.5 and Chapter 4.4) require both HUD and the Lender to be notified when there are threats to a facility’s permits and approvals. ORCF posted sample formats that can be used to notify HUD of certain risk conditions and that detail the proposed action plan to remedy threats to the project’s permits and approvals. Use of the sample notification formats is not mandatory; however, the content provided under each category is required. Here are the sample formats: (i) Operator’s Notification to HUD of Threats to Permits and Approval and (ii) Servicer’s Notification to HUD of the Risks to Healthcare Projects and Action Plan for Remedy.
ORCF Reserve for Replacement (R4R) Specialized Team
The ORCF R4R Specialized Team is fully operational. Servicing Lenders should familiarize themselves with the related R4R documents posted on ORCF’s website before making R4R requests. The LEAN Email Blast explains in more depth how the team will work with servicing Lenders.