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October 28, 2020In This Update TOC \o "1-3" \n \h \z \u Section 106 Historic Preservation ReviewsReminder of Flood Level Marking RequirementsClarification of Expectations for Refinances of Recently Purchased ProjectsImportant ORCF Appraisal DatesFROM THE CLOSING CORNERSection 232/223(a)(7) Refinance – Required FeesSection 232/223(f) Purchase/Refinance – Required FeesWire Transfer Confirmation for Payoff after ClosingSection 106 Historic Preservation ReviewsLenders and Third-Party environmental consultants are reminded of the importance of submitting complete information to the State Historic Preservation Officer?(SHPO)?for use in the Section 106 consultation. In particular, please ensure that you are specific about the scope of work that is being completed as part of the FHA-insured project. Please include a full list of proposed construction, site work and repairs, including Critical, Non-Critical and Borrower Proposed repairs, a map, photos, and project plans as applicable. Please pay special attention to work which exceeds the level of “routine maintenance". Guidance on clarifying the difference between maintenance and repairs can be found (here). Please check SHPO’s website (here) prior to submitting a request for consultation because some states have their own process and submission requirements. While SHPOs have 30 days to review a submission, the submission must be complete and correct or the SHPO may require additional information, which can add to the review time.Keywords:Section 106Back to topReminder of Flood Level Marking RequirementsLenders and third-party consultants are reminded of the importance of submitting, as necessary, well-researched and documented Exhibit 2-4.D_Identification marks of past or estimated flood levels in the Application. In particular, please be aware that the mark needs to be permanent, located in a public area to “enhance public awareness of and knowledge about flood hazards”, and it must identify the past and estimated flood level. A metal plaque which is permanently installed on the exterior of the building would be acceptable. The Exhibit should include the information/calculation used to determine the estimated flood level. The reason the mark is required is for compliance with Executive Order 11988, “Floodplain Management”, Section 3, where it states:(c) If property used by the general public has suffered flood damage or is located in an identified flood hazard area, the responsible agency shall provide on structures, and other places where appropriate, conspicuous delineation of past and probable flood height in order to enhance public awareness of and knowledge about flood hazards.HUD implements the EO’s requirement for the flood mark at 24 CFR 55.20(e)(3)(iv):(3)?Actions covered by?§ 55.12(a)?must be rejected if the proposed minimization is financially or physically unworkable. All?critical actions?in the 500-year floodplain shall be designed and built at or above the 100-year floodplain (in the case of new construction) and modified to include:(i)?Preparation of and participation in an early warning system;(ii)?An emergency evacuation and relocation plan;(iii)?Identification of evacuation route(s) out of the 500-year floodplain; and(iv)?Identification marks of past or estimated flood levels on all structures.Keywords: Floodplain, Application ProcessingBack to topClarification of Expectations for Refinances of Recently Purchased ProjectsORCF has recently received a high number of applications with a recent purchase date, and therefore, a short operating history under the current owner and/or operator. In these cases, typically the underwritten net operating income is not consistent with historic operations, and market values exceed the purchase price despite the recent purchase. In addition, there have been cases where the participants have minimal industry experience. Lenders are expected to proactively address the risks associated with a transaction and to propose appropriate mitigation (for example: reduced loan sizing, debt service escrow, partnership equity remaining in the project, seasoning until a longer operating history can be established). In general, these risks warrant conservative underwriting. There are two key risks that lenders should address:Experience: You are reminded that HUD Handbook 4232.1, Section II, Chapter 2.5 FF, Experience of the Development Team, notes that three years of experience is the minimum experience. In addition, experience in a market near the proposed market is more highly valued than experience in a different region of the country. Lenders should evaluate the experience of the development team in their transactions to assure that recent purchase projects and other projects with multiple risk factors have strong development team experience, well in excess of the minimum three-year requirement. Transactions where the participants do not meet the minimum experience requirements are not eligible.Operations:? Lenders are also reminded that Handbook 4232.1, Section II, Chapter 3.13.F.2, requires a minimum of 12 months (under the new operator) demonstrated net operating income that supports the requested mortgage amount. For transactions that include a change of operations or turnarounds, the operator must have a proven track record of successful changes in operations or turnarounds and maintaining operations. In support of the operator’s proven track record, the FHA lender must provide, in the Lender Narrative, documentation from other similar project operations. Please see the turnaround example template (here) that includes the minimum information that should be included in the application for turnaround projects.? Keywords:Underwriting Important ORCF Appraisal DatesThere are three important dates in ORCF appraisals:The date of value – Historically this is the date of the inspection, but while the inspection requirement is being waived, the appraiser can choose another date such as the date the comparables were surveyed or the date of the most recent financial reports.The date of the report – This is the date the report is finalized and transmitted to the lender.The date of the most recent financials used in the appraisal. ORCF is seeing a larger gap than normal between the date of the financials used in the appraisal and the date of the report. ORCF’s expectation is that lenders will get appraisals with the freshest financials practicable. ORCF will be asking for new appraisal reports when it is clear newer data could have been used AND the operations have experienced a material change. Key Words: Appraisals, Financial ReportsBack to topFROM THE CLOSING CORNERSection 232/223(a)(7) Refinance – Required FeesORCF looks to the Lender to ensure the correct fees are included on the Firm Commitment, the Maximum Insurable Loan Calculation (HUD-92264a-ORCF), and Request for Final Endorsement of Credit Instrument (HUD-92455-ORCF). Please note the correct fees for Section 232/223(a)(7) Refinance loansHUD Application Fees:? An application for Firm Commitment must be accompanied by an application Commitment fee equal to $1.5 per $1,000 (15 basis point/0.15%) of the requested loan amount. HUD MIP Fees (October 2020):Section 232/223(a)(7) Refinance?without LIHTC: 0.50 basis points for Upfront MIP Rate at ClosingSection 232/223(a)(7) Refinance?without LIHTC: 0.55 basis points for?Annual MIP Rate (life of loan)?Section 232/223(a)(7) Refinance?with LIHTC: 0.50 basis points for Upfront MIP Rate at ClosingSection 232/223(a)(7) Refinance?with LIHTC: 0.45 basis points for?Annual MIP Rate (life of loan)?HUD Inspection Fees: Not ApplicableShould you have any questions, please contact the assigned Closing Coordinator for the project.Keywords: 223(a)(7), Application Fees, Mortgage Insurance Premium (MIP), Inspection Fee AmountBack to topSection 232/223(f) Purchase/Refinance – Required FeesORCF looks to the Lender to ensure the correct fees are included on the Firm Commitment, the Maximum Insurable Loan Calculation (HUD-92264a-ORCF), and Request for Final Endorsement of Credit Instrument (HUD-92455-ORCF). Please note the correct fees for Section 232/223(f) Purchase/Refinance below:HUD Application Fees:? An application for Firm Commitment must be accompanied by an application Commitment fee equal to $3 per $1,000 (30 basis point/0.30%) of the requested loan amount. HUD MIP Fees (October 2020):Section 232/223(f) Refinance without LIHTC: 100 basis points (1%)?for Upfront MIP Rate at ClosingSection 232/223(f) Refinance without LIHTC: 65 basis points (0.65%)?for Annual MIP Rate (life of loan)?Section 232/223(f) Refinance with LIHTC: 100 basis points (1%)?for Upfront MIP Rate at ClosingSection 232/223(f) Refinance with LIHTC:?45 basis points (0.45%)?for Annual MIP Rate (life of loan)?HUD Inspection Fees:$30 per underwritten bed if the total cost of the critical, non-critical and Borrower-proposed repairs is equal or less than $3,000 per underwritten bed.1% of the total cost of the critical, non-critical and Borrower-proposed repairs. Should you have any questions, please contact the assigned Closing Coordinator for the project.Keywords: 223(f), Application Fees, Mortgage Insurance Premium (MIP), Inspection Fee AmountBack to topWire Transfer Confirmation for Payoff after ClosingThe HUD Multifamily Insurance Operations Branch highly recommends wire transfer confirmation for payoff after closing in order to get timely processing of the refinances. For all Section 223(a)(7) loans, and those Section 223(f) that are paying off an FHA insured loan, please submit the wire transfer confirmation for payoff within 24 hours after the Note is endorsed and distributed.? Please provide confirmation for payoff to the assigned ORCF Closing Coordinator and Mike Lawassani.Please contact your assigned ORCF Closing Coordinator if you have any questions.Keywords: Wire Transfers, 223(a)(7), 223(f)Back to topPast Lean 232 Updates are available online.Have questions about the Lean 232 Program? Please contact LeanThinking@.For more information on the Lean 232 Program, check out: your loan servicing colleagues joined our email list? The Email Blasts contain information relevant to them as well. You might suggest they Join here.We hope that you will want to continue receiving information from HUD. We safeguard our lists and do not rent, sell, or permit the use of our lists by others, at any time, for any reason. If you wish to be taken off this mail list, please go here.Lean 232 is a publication of the Federal Housing Administration (FHA) Office of Healthcare Programs, U.S. Department of Housing and Urban Development, 451 7th Street, SE, Washington, DC 20410.Connect with FHA on Social Media ................
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