Key Takeaways from the 2017 HUD Breakfast Briefing at Arnall Golden Gregory

Arnall Golden Gregory partners Jeffrey C. Adams and Althea J.K. Broughton hosted the AGG breakfast briefing “HUD Multifamily Programs: Southeast Region Multifamily Update,” held on March 9 at the firm.

The featured speaker was Ruben Brooks, HUD’s Regional Center Director, Multifamily, Southeast Region. Following Mr. Brooks’ presentation, several of his staff addressed specific issues, including production goals.

The 80 guests included developers and lenders who work on affordable and conventional multifamily housing projects. Among the topics discussed were these highlights:

Six essential considerations in a submission
Mr. Brooks said HUD considers six key areas when reviewing a financing application: the physical condition of the property, the market, the size of the loan, the borrower’s financial capacity and experience, the operating performance of the existing project, and environmental conditions (toxic materials, floodplain).

“Our 60-day production timeframe is based on a completed package with those six related items,” Mr. Brooks said. “Normally, if we do have a completed package we can meet the timeframe.”

Production numbers, transactions and goals — where HUD stands year to date in 2017
LaDonna Mills, Acting Director of Multifamily Production, reported that the Southeast Region FHA loans endorsed to date are 80, number of units to date are 13,140, and total FHA mortgage amount to date is $1,101,573,700.

The Southeast Region has met or exceeded its year-end multifamily production goals as of February 28, 2017 within all goal categories except affordable. However, HUD anticipates achieving the affordable goal prior to the end of FY 2017.

New communication and interfacing with the lenders — more responsive communiques
LaDonna Mills reported the establishment of weekly lender notifications of project and deficiency status. The underwriter sends the lender point-of-contact an email acknowledging the stage of processing and lists any outstanding deficiencies to be cured for each application.

Utilization of the single underwriter model – how has HUD been doing?
The single underwriter model (one individual completes a project’s review) is continuously improving by utilizing senior staff, senior underwriters, appraisers and construction analysts who will shadow less-seasoned staff through the application process to improve application processing deadlines.

Early start on a site puts submission at risk
Jon Bonner, Branch Chief, Technical Specialist Chief, Atlanta, said HUD is required to perform the environmental review (NEPA) and cannot delegate that responsibility. Disturbing the project site after initial contact with HUD but prior to HUD’s environmental review can jeopardize an application.

Mr. Bonner said initial contact is the beginning of communications with HUD, be it a phone call or a face-to-face concept meeting. If a developer works on the site after the initial contact, that could compromise HUD’s ability to conduct an environmental review. Environmental testing by the developer’s consultant, however, would be allowed during the HUD review period.

Properties with floodway and 100-year floodplains
Existing properties having both floodways on the property and improvements within the floodplains may not be eligible for HUD financing. All 223(f)s with this scenario will be sent to HUD headquarters for review.

Popular affordable housing tax credit pilot expanding
Lisa Gibson, Senior Underwriter, Atlanta, explained expansion of the tax credit pilot program for affordable housing within the 221(d)4 new construction and sub-rehab programs. The expanded pilot will apply to 9 percent LIHTC deals. Also, HUD is considering raising the $40,000 rehabilitation costs cap.

The review period will remain short, targeting 120 days, as HUD continues to delegate much of the underwriting and servicing to lenders and employs the single underwriter model. HUD is exploring the feasibility of a second faster track, just 90 days to closing, for more conservative deals. To date, the tax credit pilot has rehabbed 22,000 affordable housing units and spent more than $1 billion on construction.