1. Working with HUD as a Lender
Matt Brett
C.C. Huang
2019 Applegate & Thorne-Thomsen Developer Boot Camp, April 2, 2019

2. Audience participation is welcome!
Presentation topics
Pros and Cons of using HUD/FHA financing
Timeline of a HUD/FHA deal
Common HUD-LIHTC issues
HUD background and best practices throughout
Audience participation is welcome!

3. Getting to Know HUD
What is the FHA?

4. Pros and Cons of using FHA
Competitive interest rates (fixed)
Non-recourse debt
MIP discounts for affordable housing & green development

5. Pros and Cons of using FHA
Longer processing than conventional financing (9-12 months)
Less flexibility in deal structuring
Davis-Bacon wages and Environmental Review

6. HUD/FHA Best Practice: Picking the Right FHA Lender
Questions to ask when selecting FHA Lender
Multifamily Accelerated Processing (MAP)/FHA- approved Lender List

7. How many regions are there for HUD’s Office of Multifamily Housing?
Getting to Know HUD
How many regions are there for HUD’s Office of Multifamily Housing?

8. What is the Section 232/LEAN program?
Getting to Know HUD
What is the Section 232/LEAN program?

9. Getting to Know HUD
What is HUD OGC?

10. Timeline of a HUD/FHA deal
Approx months
FHA Lender and initial discussion w/HUD
MAP Application (Pre-App)
AEC and Underwriting/Production review
Firm/Full Application
Firm Commitment
Closing

11. Timeline of a HUD/FHA deal
Month 1:
Concept meeting w/FHA lender
Concept meeting w/HUD

12. Timeline of a HUD/FHA deal
Months 2-3:
Third-Party Reports
Questionnaires

13. Timeline of a HUD/FHA deal
Months 3-4:
Pre-Application Review
Submission of Pre-Application to HUD

14. Timeline of a HUD/FHA deal
Months 4-6:
HUD Review of Pre-Application
Identify waiver requests
Invitation to Proceed to Firm Application

15. Timeline of a HUD/FHA deal
Months 6-7:
Due Diligence for Firm App
HUD AEC Review
Finalize Appraisal

16. Timeline of a HUD/FHA deal
Months 7-8:
Finalize Appraisal
Submit Firm Application to HUD

17. Timeline of a HUD/FHA deal
Month 9:
HUD issues Firm Commitment
Start preparing Closing Package

18. Timeline of a HUD/FHA deal
Month 10:
Submit Closing Package

19. HUD/FHA Best Practice: Minimizing HUD comments and questions
Submit waiver requests early, with application if known
Review Firm Commitment for errors; submit amendment requests ASAP
Make sure all secondary financing sources are included
Package according to HUD closing checklist

20. Timeline of a HUD/FHA deal
Month 11-12:
Address HUD comments (Housing and Legal)
Schedule Closing
Send final closing documents to FHA lender counsel

21. Questions on HUD Timeline?

22. HUD/FHA Homework: Multifamily Materials
HUDCLIPS
MAP Guide
Closing Guide
OGC FAQs
Section 232 Handbook
ORCF Blasts

23. HUD Troubleshooting for LIHTC: Deferred Developer Fee
Debt vs. Equity Treatment
75% Surplus Cash Limitation

24. HUD Troubleshooting for LIHTC: Equity Pay-In Schedule & Bridge Loans
Initial installment requirements
At least 20%
May not be funded by other sources or bridge loan
Equity Bridge Loan
Typically limited to GP’s interest for security
May not be secured against project

25. HUD Troubleshooting for LIHTC: Other Sources and Secondary Financing
HUD wants subordination; control of form
Tax Credit EUA/LURA/RA
Secured government financing (state & local)
Unsecured debt
Collateral assignment of HAP contract

26. HUD Troubleshooting for LIHTC: Construction draws and requirements
Harmonize lender riders to construction contract with HUD requirements
Coordinate construction escrow requirements of funding sources
Final endorsement can be later than you think due to cost certification

27. HUD Troubleshooting for LIHTC: Reserves
Operating Deficit or Working Capital reserve as Special Condition – required at initial closing
Letters of Credit

28. HUD/FHA Best Practice: Coordinate early w/other sources
HUD-Required Provisions in LPA
Equity, construction, & reserves requirements
Repayments limited to surplus cash
HUD subordination and forms for secondary financing documents

29. I have an FHA-insured senior loan – now what?
HUD Account Executives
Multifamily Office of Asset Management
ORCF Loan Servicing

30. I have an FHA-insured senior loan – now what?
Transfers
Section 8 HAP Contract Renewals
Prepayment

31. Comments or Questions? Matt Brett Thank you: C.C. Huang
C.C. Huang