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Staff Appraisal Template

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									  Question                                                         Answer

1 Will there be other "Lean Teams" besides Seattle, and if so,     Yes, both existing staff and new hires will
  where and when? Then how do we know where to submit?             be trained in Lean underwriting. Until
                                                                   further notice you will submit all
                                                                   applications to the HUD Workflow
                                                                   Manager, Roger Lewis, in the Seattle
                                                                   Hub.

2 Will these loans be subject to Quality Control Reviews similar Yes, a Quality Control Review similar to
  to what is required under MAP?                                 what is required under MAP will be
                                                                 required. The Lean Punch Lists will be
                                                                 used to audit submissions.

3 Will the virtual HUD Underwriter contacts be sent to all         Yes. The Lean Web site will be update
  Lenders so they may contact him/her to assess a potential        with the appropriate contact information.
  loan?                                                            Initial contact however should flow
                                                                   through the HUD Workflow Manager.


4 During the transition period, will all applications need to be   Contact the HUD Workflow Manager to
  submitted to the Seattle office?                                 determine where applications will be
                                                                   submitted.

5 A MAP Lender currently not approved for 232's was able to        Until new guidelines can be formulated,
  gain approval by processing & closing TAP transactions. If       the MAP approval process for lenders and
  TAP is being eliminated, how will 232 approval be obtained?      underwriters prevails.
  Can this be accomplished by hiring a 232 approved
  underwriter?
                                                                           LEAN 232/223f Program - Underwriting Training - June 30 - July 1, 2008


      Question                                                         Answer

      UPDATE SEPTEMBER 26, 2008 to Qualification for                   If an approved MAP Lender sent approved MAP
*     Section 232 LEAN Underwriter Approval                            Section 232 lender underwriters to the July 2008
                                                                       LEAN training in Seattle, a LEAN-trained underwriter
                                                                       may then review a LEAN-submitted Section 232
                                                                       mortgage insurance application which was prepared
                                                                       by another underwriter in their firm who did not
                                                                       attend the training (or by an approved Section 232
                                                                       underwriter in another firm who did not attend the
                                                                       LEAN training). After correctly preparing two
                                                                       Section 232 mortgage insurance applications, which
                                                                       are reviewed by a LEAN trained underwriter, the
                                                                       Section 232 underwriter who did not attend the
                                                                       training will be assumed to be trained. The LEAN-
                                                                       trained underwriter will only be certifying that the
                                                                       application has been submitted in accordance with
                                                                       the LEAN training, and he or she will not be
                                                                       assuming responsibility for the actual underwriting.
                                                                       That underwriting responsibility rests with the
                                                                       Section 232 underwriter who prepared the mortgage
                                                                       insurance application.



    1 Can the MAP 232 Underwriter sign the Firm Application            As of yet, there are no restriction on the Lender's Loan
      under Lean and also sit on the Lender's Loan Committee?          Committee.


    2 When will there be a separate Underwriter 232 Lean               A separate list of approved underwriters is being
      Certification?                                                   generated. To be approved, an underwriter must work
                                                                       for an approved 232 lender; be an approved 232
                                                                       underwriter as outlined in chapter 2 of the MAP Guide;
                                                                       and, have attended the Lean training.

    3 Will Lender's Underwriter need to have attended this             Yes
      session to be approved as Underwriter on an application?


    4 Will Lender's Underwriter's still need to be certified? If so,   Yes they will need to be certified. MAP certification is still
      will they still need to take the 3 courses or what are the       applicable.
      requirements?
                                                                    LEAN 232/223f Program - Underwriting Training - June 30 - July 1, 2008



 5 Lender's Certification can’t always be signed by the          The Underwriter and a person authorized to sign for the
   underwriter as they may not be authorized to bind the         Lender should both sign the certification.
   Lender. What do you do?

 6 Does the Lender's Underwriter have to visit the site or can   Any MAP-approved 232 Underwriter or Lean-approved
   an authorized representative of the Lender?                   232 Underwriter employed by the Lender, can inspect
                                                                 the site on behalf of the Lender. If the inspecting
                                                                 underwriter is not the underwriter of record, it must be
                                                                 clearly stated in the Lender sub-section of the Lender's
                                                                 Narrative Underwriting Team section and the inspecting
                                                                 underwriter must also sign the Lender's Narrative
                                                                 indicating "This report was reviewed and the site was
                                                                 inspected by:"

 7 Does Underwriter just certify that the Lender has gone to the The Lender's Certification has been modified to reflect
   site? (That's how the cert reads)                             that a MAP-approved 232 Underwriter or Lean-approved
                                                                 232 Underwriter employed by the Lender has visited the
                                                                 site.

 8 When the Lender has more than 1 Underwriter that is 232       Yes. Any MAP-approved 232 Underwriter or Lean-
   approved, could the Lender use another Underwriter to         approved 232 Underwriter employed by the Lender, can
   inspect the property if the Underwriter of record is not      inspect the site on behalf of the Lender. If the inspecting
   available?                                                    underwriter is not the underwriter of record, it must be
                                                                 clearly stated in the Lender sub-section of the Lender's
                                                                 Narrative Underwriting Team section and the inspecting
                                                                 underwriter must also sign the Lender's Narrative
                                                                 indicating "This report was reviewed and the site was
                                                                 inspected by:"

 9 If a Lean application has both an Underwriter and an          The Underwriter must make the site visit. It is highly
   Underwriter Trainee, is it sufficient that the Underwriter    recommended that both the Underwriter and the
   Trainee make the site inspection or does the Underwriter      Underwriter Trainee make the site visit together as part
   have to make it?                                              of the training process.

10 Would you please place a statement as part of the Lean        Yes. See above FAQs on site inspections.
   requirements that the MAP 232 approved underwriter sign
   and inspect the property? The underwriters responsibilities
   are far more important under this new program.
                                                                   LEAN 232/223f Program - Underwriting Training - June 30 - July 1, 2008


11 During the Risk Analysis section of the underwriting         HUD's Risk Analysis will fluctuate as the underwriting
   process, what are the risks that are evaluated and at what   experience and process develops over time with the
   point are weights assigned per each risk level?              Lean model. The Risk Analysis is not an indicator of
                                                                good or bad underwriting or the quality of an appraisal. It
                                                                identifies stress points that may require closer
                                                                examination by the HUD underwriter or a technician
                                                                depending on the leverage and debt coverage of the
                                                                transaction. In general, the lower the LTV and the higher
                                                                the DSC, the less the likelihood that an appraisal review
                                                                will be required.

12 If Lender's are supposed to evaluate risks, they should be   The Lender's Narrative template identifies all the
   evaluating the same valuation risks, correct?                information that HUD will be evaluating. The Appraisal
                                                                Statement of Work provides HUD's appraisal
                                                                requirements and addresses the pertinent risk concerns.
                                                                In essence, the same risk is evaluated under this loan
                                                                program as with any loan program - Is the value
                                                                conclusion supported by the comparable data and the
                                                                subject history? Is the comparable data supported and
                                                                applicable? (see answer 10 above for additional
                                                                guidance)

13 The HUD "Lean" team underwriters have come from several      The HUD Lean team is made up of all these discipline so
   discipline backgrounds, i.e. valuation, architectural,       they can assist each other. The lender is free to use their
   mortgage credit, etc. It appears that HUD is willing to      own support people as required by the lender
   accept that these individuals can be underwriters without    underwriter.
   having the same stringent requirements that the Lender has
   to have for their 232 underwriters. Why the differences?
   When some Lender's are not generating the 232 loans that
   larger Lender's generate in their pipelines, it is almost
   impossible to get another 232 underwriter approved.


14 Will HUD Lean team change underwriting                     HUD will review the Lenders application and
   conclusions/mortgage amounts as part of their underwriting underwriting. If HUD determines that modifications to
   process?                                                   the underwriting are required, they will communicate with
                                                              the Lender and discuss the modification necessary to
                                                              obtain HUD approval. The Lender will be responsible for
                                                              making any modifications to the HUD forms. HUD will
                                                              make modifications to the proposed special conditions
                                                              as appropriate.
                                                                          LEAN 232/223f Program - Underwriting Training - June 30 - July 1, 2008


15 If there is no parent entity of the Operator but multiple           If the principals are individuals, no investigation beyond
   entities, i.e. a different legal entity is established for each     the subject Operator is necessary. If multiple
   facility, should we underwrite each of the facilities or if there   organizations own the Operator and also participate in
   are common principals should we underwrite the principals           the Operation of other facilities through different entities,
   instead?                                                            those entities should be treated as Parents of the
                                                                       Operator. The Lender's Underwriter should particularly
                                                                       focus on any facilities that are covered by the same PLI
                                                                       policy as the subject.
  Question                                                            Answer

1 Monthly Accounting Reports: Under what circumstances would          Submission of the monthly accounting
  these be required?                                                  reports is required for the first 12 months
                                                                      after closing.

2 Will HUD take GAP Insurance from the title company?                 under consideration

3 Can the mortgagee be written into the obligation by the mortgagor under consideration
  and/or operator to provide financial statements (borrower/operator
  financial statements after closing)?

4 Does this process effectively eliminate any chance for pre-         HUD is willing to discuss unique or difficult
  application meetings with lenders and their customers? This pre-    underwriting issues with a Section 232
  scoping type of meeting has long been used to help "sell"           Lean Approved Underwriter. Any
  borrowers on HUD.                                                   meetings with borrowers will be held on a
                                                                      case-by-case basis after the Lender's
                                                                      approved underwriter has screened the
                                                                      transaction and determined that has merit.


5 Is the definition of a principal the same as the MAP Guide and/or   Yes. The definition of a "principal" has not
  2530?                                                               changed as a part of the Lean revisions.


6 Will there be notifications when the checklists get updated?        Not at this time. It is the Lender's
                                                                      responsibility to check to website each
                                                                      time to make sure that they are using the
                                                                      most current list.

7 Will the Website be available to everyone?                          Yes.

8 Please identify the correct website the Lender should refer to.     http://portal.hud.gov/portal/page?_pageid=
                                                                      73,3915250&_dad=portal&_schema=POR
                                                                      TAL

9 How can the Lender get the templates and checklists?                http://portal.hud.gov/portal/page?_pageid=
                                                                      73,3915250&_dad=portal&_schema=POR
                                                                      TAL
10 How are waivers determined and by whom? Are they only         Until such time as a Lean Guide can be
   Regulatory Waivers? Are handbook and policy waivers no longer formulated, the MAP program
   necessary? Clarify waiver policy.                             requirements are still in place unless
                                                                 otherwise amended by the Lean
                                                                 documents. If Lean has not already
                                                                 amended an item, the waiver is of the
                                                                 MAP Guide, Notices and Handbooks, as
                                                                 applicable.

11 When waivers are requested, given that the MAP Guide is no          Until such time as a Lean Guide can be
   longer applicable, what authority is being waived?                  formulated, the MAP program
                                                                       requirements are still in place unless
                                                                       otherwise amended by the Lean
                                                                       documents. If Lean has not already
                                                                       amended an item, the waiver is of the
                                                                       MAP Guide, Notices and Handbooks, as
                                                                       applicable.

12 Do all the MAP FAQ's become null and void for 232's?                Only as amended by Lean.

13 Does the prepayment approval requirement mean that we need          HUD's approval of the prepayment of any
   the HUD issued approval or the package to request HUD               currently insured or HUD-held loans must
   approval?                                                           be obtained prior to submission of the firm
                                                                       application. An approval with conditions is
                                                                       acceptable.

14 Do Supercerts, etc. need Fed Reg. or OMB Clearance as new           No. The Super Certifications are simply a
   docs?                                                               consolidation of existing certifications and
                                                                       forms. The other documents and forms
                                                                       under Lean are suggested formats that
                                                                       identify the exact information HUD
                                                                       requires for the application exhibit.


15 When will a manual be generated on the Lean process?                Eventually

16 In the test case for the Lean program, can you give some details,   No Comment
   i.e. $ amounts, # units, etc.
17 Page 13 of Narrative: What does subject turnover for each unit        Subject Turnover rent is the current rent
   type mean? Over what period?                                          the project charges new tenants for that
                                                                         unit type, or in other words, the current
                                                                         asking rent.

18 Can language be added so that a fax copy of the Mortgagor and         under consideration
   Principal Certs shall also count as authorization.

19 How will the Lean Program handle a single ownership of multiple       Yes. It remains as it is currently handled.
   facilities that are presented to a Lender for refinance (including
   audited financial statements)? Does it remain as it is currently
   handled?

20 Lender Narrative: Independent units; Confuses Board & Care            The intent of the template is to
   "Independent Units" which are licensed & limited to 25% of units      demonstrate that each type unit should be
   with unlicensed Independent Living Units which are not licensed       addressed separately. Board & Care units
   and not eligible.                                                     should be discussed separately of
                                                                         unlicensed independent units.


21 Smaller companies may not have a loan committee structure due         All Lenders are required to have a loan
   to their size. Will a loan committee be required by Lean or will it   committee. For smaller Lenders, it may
   be optional for smaller Lender's?                                     consist of qualified people outside of their
                                                                         organization.

22 Are there changes to program requirements such as the percent         Stay Tuned
   of independent units?

23 If the 80% LTV or above is a Risk Factor, then does HUD consider From a loan-to-value standpoint, a
   all Purchase Transactions to be inherently more risky than a     purchase transaction has the same
   refinance of less than 80% LTV?                                  inherent risk as a refinance transaction of
                                                                    the same leverage.

24 3-year Rule: Presently, an addition smaller in square feet and beds The 3-year rule as defined under MAP has
   than the original building would not disqualify the project. Has that not changed as a part of the Lean
   changed?                                                              revisions.
 Question                                            Answer

1 APPS System does not work. This will cause a       APPS should be attempted in every case. If
  tremendous problem with being able to submit the   problems with submitting in APPS persist for a
  application if a paper 2530 is not allowed. Can    particular principal, a paper form HUD-2530 can
  one be submitted?                                  be submitted; however, this may slow
                                                     processing time and prevent HUD from meeting
                                                     the established Lean time frames.
  Question                              Answer

1 Do Lenders still need to obtain the   No. HUD no longer requires the Lender to
  borrowers equity investment in the    demonstrate the Borrower's financial capacity to
  property?                             close the loan. It is the Lender's responsibility to
                                        ensure that a Borrower can close.
  Question                                                            Answer

1 What are the login and password requirements?                       To be determined.

2 Will vendors, i.e. appraisers, legal counsel, etc. be able to use and To be determined.
  would they have to have their own login and passwords?

3 Once the Lender has obtained their FHA "key" will the Lender be     Previous Participation clearance will still
  able to process the 2530 for the borrower?                          utilize APPS. Currently, some Lenders
                                                                      successfully navigate APPS on behalf of
                                                                      their clients.

4 When the Lender is assigned a Master Code and creates              To be determined.
  secondary codes for access to the Oracle database, is it a per
  project code for access or global for that Lender's projects? i.e.
  Lender's counsel would have 1 code to access all Lender's deals?
  Question                                                   Answer

1 What about all the NEPA requirements?                      HUD's Environmental requirements remain unchanged.


2 Is SHPO letter required if property is not eligible for    When no substantial renovations or changes to the
  National Historic Register?                                project's design are proposed, the refinance is not
                                                             considered an undertaking and there is no potential effect
                                                             on historic properties per 36 CFR 800.3(a)(1), and SHPO
                                                             consultation is not required.

3 As a 3rd party provider, do I still need to complete the   It is not required; however, the Lender can include it in
  4128 anymore?                                              their statement of work and request that you provide it.


4 It seems that a 4128 will still need to be performed to    It is not required; however, including it may assist HUD in
  assure that the Lender is aware of anything that may       completing the analysis in a timely manner.
  come up. Is one required or should it be required?


5 On the 223f punchlist, item B-11, does this mean that Yes, that is the timeframe. With existing properties, where
  HUD has 7 business days to do either or both the 4128 no changes are proposed, this process is usually fairly
  and appraisal review?                                 quick. If environmental concerns are present, this process
                                                        may take longer.
   Question                                      Answer

30 Punchlist item D-2 refers to 3-years          No. If the Mortgagor has less than 3-years
   experience for the operator. Prior guidance   experience, the HUD Underwriter will consult
   has allowed for minimal experience of         with asset management staff to determine if
   owner/operator if development team has        the experience is acceptable or if acceptable
   experienced management agent. Is this a       mitigation has been recommended by the
   change to the Notice?                         Lender.
  Question                                                      Answer

1 Checklist: What about situations where the operator hires a   At present, information on a Management
  separate management agent?                                    Agent is only required if (1) the facility is
                                                                not leased; (2) the management agent is
                                                                named on the license for the facility; or, (3)
                                                                the management agent directly controls
                                                                the operation of the facility.
  Question                                                           Answer

1 Can you provide an example or demonstration that Accounts          There are no plans to provide an example
  Receivable financing is feasible?                                  or demonstration.

2 Regarding Accounts Receivable Intercreditor Agreements, will         Transfer language should be permited with
  there be an ability to assign these agreements on sale of the loan the approval of the AR lender and HUD.
  to another Lender prior to closing, or will these be executed solely
  at closing?
  Question                                                   Answer

1 Will appraiser utilize market replacement reserves         The appraiser will determine the replacement
  (i.e. $250-$350 per bed) or replacement reserves           reserve based on an assessment of the market data.
  inline with lender's recommended reserves?                 The Lender's underwriting will reflect their own
                                                             conclusion based on an analysis of the replacement
                                                             reserve schedule in the PCNA.

2 Does the appraiser now use an average of 15 years          The appraiser will determine the replacement
  repair needs or still use 10 in RR expenses to             reserve based on an assessment of the market data.
  determine NOI?                                             The Lender's underwriting will reflect their conclusion
                                                             based on an analysis of the15-year replacement
                                                             reserve schedule in the PCNA.

3 Will appraiser's "going concern" value set the upper       If the Lender's Underwriter concludes to a different
  limit of value constraint, or will lender's underwritten   value than the appraiser, the underwritten value
  value (if different) set the upper limit?                  should be used for mortgage sizing. It is
                                                             permissible, with appropriate justification, to
                                                             conclude to different net operating incomes for value
                                                             and debt service coverage; however, this may
                                                             require a more detailed review of the appraisal by a
                                                             HUD appraiser.

4 Will appraiser's utilize actual management fee  The Appraisal Statement of Work states: "A
  expense or standard market management fee which management fee must be included in the expenses
  is typically 5.0% of revenues?                  for determining overall market value. It should be
                                                  supported by expense comparables with arms length
                                                  management agreements."

5 Will upward or downward adjustments to market      If justified and supported, the Lender's Underwriter
  management fee be allowed by lender's underwriter? can modify the management fee as they feel is
                                                     appropriate.

6 For the appraisal, can we assume that the reviewer Yes, so long as the Appraisal meets USPAP
  will be healthcare educated so that we can eliminate requirements for a self-contained report.
  the "fluff" describing what a SNF, ALF, etc. is?


7 Many Not-for-Profits have real estate exemptions       Real estate tax exemptions continue to be
  based on their 501c (3) status. Does underwriting for underwritten as they have been under the MAP
  such a borrower require the inclusion of property tax? Guide and MAP FAQs.
 8 Is there still a higher LTV (90%) and DSC (90% of   The maximums as stated are still in place, however;
   NOI) allowed for non-profit loans?                  see items 18, 19 and 20 below regarding lender
                                                       justification and HUD review.

 9 Are there any restrictions on the payor mix or      For existing properties, there is no change to how a
   vacancy rates?                                      facilities payor mix or vacancy rate is underwritten.
                                                       Both conclusions must be supported by market data
                                                       and the subject's operating history. The program still
                                                       requires a minimum 5% vacancy and collection loss
                                                       factor. Further guidance on payor mix thresholds for
                                                       new construction projects will be forthcoming.


10 Will HUD economists continue to review the market   The current nationwide policy does not call for review
   section of the appraisal?                           by the HUD economist for refinances of existing
                                                       facilities. This will remain the same. The review
                                                       requirements for new construction/substantial rehab
                                                       is still being developed.


11 Does the MAP Market Study guidelines/requirements No. The appraisal must incorporate a market
   still apply?                                      analysis that complies with the 232/223f Lean
                                                     Appraisal Statement of Work and USPAP.

12 Is DSC calculated on in place NOI or cash flow      Unless otherwise specified, debt service coverage
   generated by the appraisal?                         (DSC) is to be calculated based on the underwritten
                                                       net operating income (NOI) used to calculate the
                                                       debt service mortgage criterion on the form HUD-
                                                       92264-A. There may be instances in the Lender's
                                                       analysis or sensitivity analysis were demonstrating
                                                       historical debt coverage is appropriate and/or
                                                       requested.

13 Is there anything that prevents the Lender from     No. The Lender can have the appraiser provide
   having the appraiser complete forms that are not    additional forms or documentation; however, the
   required?                                           Lender's Underwriter will sign and be responsible for
                                                       the content of any required HUD underwriting forms
                                                       in the application submission.
14 Without the use of the HUD Form 92273, how do we The new 232/223f Lean Appraisal Statement of
   keep consistency among appraisers in how rents are Work and USPAP will create more consistency. A
   derived?                                           Lender can require an appraiser to provide the forms
                                                      HUD-92273 as part of their scope of work, but it is
                                                      not a required submission.

15 There is no uniform system of accounts for             For skilled nursing facilities, Medicaid and Medicare
   healthcare. What major categories and what format      have reporting requirements that provided
   do you want expenses to be compared to and             consistency. For assisted living and other care
   analyzed? Consistency could be jeopardized.            types, most trade groups and healthcare appraisal
                                                          standards set out general categories. For appraisal
                                                          and underwriting purposes, the key is consistency
                                                          between the operating history and the comparable
                                                          data.

16 It sounds as if HUD is trying to default to national   There is no change under Lean as to how
   sources for expense comps and not localized data.      comparable data should be derived. Local market
   Will local market derived information still be of      derived information is of first importance. The
   importance or over-ridden by national stats?           appraiser can expand the area as appropriate and
                                                          justified.

17 Market Cap Rates?                                      Yes. Capitalization rates are to be derived as
                                                          outlined in the 232/223f Lean Appraisal Statement of
                                                          Work, which requires an analysis of sales
                                                          comparables. No adjustment for proprietary
                                                          earnings is made.

18 Will LTV's change?                                     No, however, if the loan exceeds 80% of the
                                                          underwritten value conclusion, the Lender must
                                                          provide sufficient justification/mitigation to support
                                                          the additional risk associated with the loan.

19 Will DSC change:                                       No, however, if the debt service coverage of the loan
                                                          is less than (a) 1.45 for skilled nursing; (b) 1.30 for
                                                          assisted living; or, (c) 1.25 for independent or board
                                                          and care facilities, the Lender must provide sufficient
                                                          justification/mitigation to support the additional risk
                                                          associated with the loan.
20 If we are looking at a 1.45 DSC we are probably        At this time, the program loan terms for loan-to-value
   looking at a 70%-80% LTV at best on a SNF. If we       and debt service coverage remain unchanged. As
   can justify a 1.25 coverage then we are probably       identified in the Lender Narrative template, an LTV in
   looking at an 80% LTV or lower. That's where the       excess of 80% or a debt coverage below the stated
   Capital Market's criteria is so how does that          amount for the type of housing, require additional
   differentiate HUD's "Lean" program from the Capital    explanation and will warrant additional examination
   Markets?                                               by the HUD Underwriter and other technicians as
                                                          needed.

21 What if any role will EMAS (HUD Economist) have?       EMAS will be involved as an advisory resource and
                                                          be requested by the HUD Underwriter when
                                                          warranted.

22 I presume that management fees will now be         For underwriting, per the 232/223f Lean Appraisal
   included as expenses. Will HUD have a guideline as Statement of Work, "A management fee must be
   to what amount (% of gross revenue) that can be?   included in the expenses for determining overall
                                                      market value. It should be supported by expense
                                                      comparables with arms length management
                                                      agreements." In cases were a management agent
                                                      review is required, the management fee approved by
                                                      the Lender should be consistent with and supported
                                                      by the market for similar types and sizes of facilities.
                                                      In these cases, the underwritten net operating
                                                      income should reflect the higher of market and the
                                                      contracted fee.

23 On your census mix risk analysis, does your program Yes.
   incorporate the reduced expenses associated with a
   change, i.e. lower Medicare should reduce rehab
   labor and costs?

24 HUD-92264: Do we ignore the parts on page 3 and 6 Yes. Assume proprietary earnings of 0%.
   related to Proprietary Earnings?

25 The example on page 42 of the narrative shows an       The example tests the lease payment against the
   NOI plus reserves, taxes and insurance are less than   mortgage obligations to ensure that there is sufficient
   1.176 How can that be? What is the significance of     debt coverage to make the monthly mortgage
   the "operators" adjusted coverage?                     payment and the monthly impound and reserve
                                                          deposits. The second test is to ensure that the
                                                          Lessee has a sufficient return after making the lease
                                                          payment.
26 Narrative, page 42: Must the operating lease          The Lease payment must cover all obligation
   payments now be at least 1.176 times the total of     required in the Mortgage documents, including taxes
   debt service, impounds and MIP? What if operator      and insurance - regardless of who pays them.
   pays taxes and insurance?

27 Do you still have to prepare a Business Value and an The 232/223f Lean Appraisal Statement of Work
   Ongoing Concern?                                     outlines the required value determinations.
                                                        Proprietary earnings is no longer included in the
                                                        analysis.
      Question                                                   Answer

      Is there any grace period for those that have done Yes, the 2 year requirement will be phased in and will
*     transaction with the MAP 1 year rule in mind?      apply to debt that has been funded or put into place
                                                         after September 1, 2008. Note that under the 2 year
                                                         requirement 100 percent of the debt incurred for
                                                         project specific upgrades and improvements
                                                         perfected prior to 2 years may be included if 90
                                                         percent of costs can be verified by the lender. HUD
                                                         assumes that 10 percent of the project specific costs
                                                         are allocated as incidental costs, overhead and
                                                         minimal developer fee. Retracted 9-15-2008.


    1 In the Lender Narrative Template section "Existing         No, as long as there is no identity of interest between the
      Indebtedness Question 2", is it the intent that a bridge   Mortgagor/borrower and the underwriting HUD lender
      loan made by the underwriting HUD lender or one its        and/or its affiliated bridge lender, the refinance transaction
      related entities would have to wait for a 5 year period    may be treated under the Two-Year Rule.
      to refinance a bridge?

    2 In the Lender Narrative Template section "Existing         Yes, in item 1 the phrase, "or purchase, should be added
      indebtedness Definition of Eligible Debt 1 only            after construction.
      indicated that debt incurred in construction can be
      included. Can debt incurred in a purchase also be
      included?

    3 Is there any grace period for those that have done         Yes, the 2 year requirement will be phased in and will
      transaction with the MAP 1 year rule in mind?              apply to debt that has been funded or put into place after
                                                                 September 1, 2008. Note that under the 2 year
                                                                 requirement 100 percent of the debt incurred for project
                                                                 specific upgrades and improvements perfected prior to 2
                                                                 years may be included if 90 percent of costs can be
                                                                 verified by the lender. HUD assumes that 10 percent of
                                                                 the project specific costs are allocated as incidental costs,
                                                                 overhead and minimal developer fee. Retracted 9-15-
                                                                 2008.

    4 Does the Lender still obtain "Residential Mortgage         Yes, Residential Mortgage Credit Reports are still
      Credit Reports"?                                           required on individuals.
 5 If Dun & Bradstreet does not have a report on an        The punchlist is being rewritten to allow other sources
   entity, can you go to Experian or another credit        besides Dunn & Bradstreet, consisting of reviews of:
   reporting agency that provides the 3 bureau merge?      1) Public filings that includes suits, liens, judgments,
                                                           bankruptcies and federal debt.
                                                           2) UCC filings
                                                           3) Credit payment history
                                                           4) An Overall credit score of 400 or above
                                                           5) Industry standards showing how the facility compares
                                                           in the areas of financial stress and payment trends


 6 Under Lean, do the Lender's still process the LDP and Yes. The Lender's Certification includes an affirmative
   EPLS?                                                 statement that the LDP and EPLS lists have been
                                                         searched.

 7 Our Dun & Bradstreet credit reports on the Mortgagor Dun & Bradstreet's Comprehensive Insight Plus credit
   and Operators, have Financial Risk Scores of 1-5 and report will meet HUD's requirements.
   Credit Scores of 1-5. Is there a different D & B report
   with scores of 100-500?

 8 The Mortgage Credit Supplemental sheet identifies a     The forms definition of a Principal will be modified to
   Principal as a 10% LLC Member. In yesterdays            reflect Members of an LLC with 25% or more ownership.
   conversation, Principals were defined as 20% LLC
   Members. Which is correct?

 9 Do we still have to provide the Format for Computing    Yes.
   Fees?

10 Does every page of the Financial Statement need the No. A financial statement certification applies the
   signed certification?                               statement(s) identified in the certification and applies to all
                                                       statements for the specified period or date. Audited
                                                       financial statements do not require certification.


11 The sole activity of many mortgagor entities is to own See 4 Above
   the real estate. Therefore, they have no activities that
   are captured by Dun & Bradstreet and the D & B
   response is of no value and may not even have a
   score. We stopped using D & B about 10 years ago
   because of unsatisfactory information. Will there be
   some credit verification alternative?
12 $2,500 in accounts payable and accounts receivable     No Change
   that are delinquent over 60 days is too low of a
   threshold to trigger a discussion with the lender.


13 Do the Project Liability Insurance HUD Notices still   Yes, please see lender narrative template.
   apply under LEAN processing?
  Question                                                 Answer

1 Can an existing survey be provided with the              A current ALTA survey that has been reviewed by counsel is
  application or must it be an updated survey?             to be submitted as part of the firm application to HUD.


2 Do the immediate repairs, both critical and non-         Yes.
  critical, need to be broken out to General and
  Specific?

3 Are non-realty reserves (MME) 15 years as well? Yes. Major movable equipment is considered by the needs
                                                  assessor and incorporated in the 15-year replacement
                                                  reserve analysis.

4 Is the 1-10 year period the only years that need to No. The Lender's analysis must demonstrate that the
  be positive in the reserve schedule?                estimated year-end balance for each year through year 15 is
                                                      positive.

5 Does the Replacement Reserve balance need to The Lender's analysis must demonstrate that the estimated
  be positive and equal to 2 years of the annual year-end balance for each year through year 15 is positive.
  deposits?                                      At this time, there is no required minimum balance, but the
                                                 lender must insure that adequate funds are available,
                                                 expecially for aging facilities.


6 Is the concept of "Near Term" replacement still          No. The needs assessor is to provide a 15-year
  valid?                                                   replacement reserve needs analysis as outlined in the Lean
                                                           PCNA Statement of Work. There is no need to identify
                                                           "near term", "long term" or "remainder" components.


7 Is it still okay to verify outstanding Fire, Building,   No. Verification must be in writing and submitted with the
  Zoning Code violations by telephone with the             application. If a locale or authority will not issue a letter,
  local official?                                          contact the HUD Workflow Manager and discuss a waiver or
                                                           acceptable mitigation. Be prepared to provide evidence
                                                           from or contact information for the authority that will not
                                                           provide the confirmation in writing.
 8 Is there anything that prevents the Lender from  No. The Lender can have the needs assessor provide
   having the inspector complete forms that are not additional forms or documentation; however, the Lender's
   required?                                        Underwriter will sign and be responsible for the content of
                                                    any required HUD underwriting forms in the application
                                                    submission.

 9 What happens when an existing building is not      Section 504/UFAS Compliance only applies to the following:
   100% UFAS compliant?                               All housing receiving Federal financial assistance, plus all
                                                      existing HUD Section 232 New Construction, and existing
                                                      HUD Section 232 Substantial Rehabilitation (but only those
                                                      building elements that underwent alteration), built after 1973.
                                                      When there are violations, the work must be considered
                                                      Critical Repairs, and be completed prior to closing.


10 Does the PCNA inspector have to show each          The PCNA needs assessor needs to include each borrower
   optional borrower repair by A & E handbook         proposed repair that is to be funded by loan funds and/or is
   Section 5-5.4.                                     considered to be complete by the Appraiser. The needs
                                                      assessor must determine the acceptability of any proposed
                                                      repair and their cost in those cases. The repair description
                                                      must be sufficiently detailed so that an inspection of the
                                                      completed repair can be done.


11 For UFAS for existing buildings: 1) Do they have Any repairs required for UFAS compliance are critical
   to be done if they are infeasible? 2) Are they   repairs. Elective compliance with UFAS for marketability or
   always critical or can they be non-critical?     other reasons, can be classified as non-critical repairs.
                                                    Section 504/UFAS Compliance only applies to the following:
                                                    All housing receiving Federal financial assistance, plus all
                                                    existing HUD Section 232 New Construction, and existing
                                                    HUD Section 232 Substantial Rehabilitation (but only those
                                                    building elements that underwent alteration), built after 1973.
12 UFAS: Will "cost to cure" still be required in any   Any repairs required for UFAS compliance are critical
   cases?                                               repairs. Elective compliance with UFAS for marketability or
                                                        other reasons, can be classified as non-critical repairs.
                                                        Section 504/UFAS Compliance only applies to the following:
                                                        All housing receiving Federal financial assistance, plus all
                                                        existing HUD Section 232 New Construction, and existing
                                                        HUD Section 232 Substantial Rehabilitation (but only those
                                                        building elements that underwent alteration), built after 1973.


13 How do you recommend specific detailed repair        A sufficient number of units must be inspected to create lists
   locations when only a portion of the rooms are       of Critical and Non-Critical Repairs that are detailed and
   generally inspected? i.e. Replace 50% of the AC      inspectable. Repair requirements, for example, that state,
   units - show where?                                  "Replace 50%..." are not acceptable per the Lean PCNA
                                                        Statement of Work.
 Participant Question                                 Answer

1 Can we get the Power Point presentation e-mailed to The presentation is available at
  us?                                                 http://portal.hud.gov/portal/page?_pag
                                                      eid=73,3915250&_dad=portal&_schem
                                                      a=PORTAL

								
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