Summary Of HUD’s LEAN 232 Program E-Mail Blast: Office Of Residential Care Facilities (ORCF), June 26, 2013

In an effort to summarize the highlights of the U.S. Department of Housing and Urban Development (HUD) LEAN E-mail Blasts that we receive, and rarely have time to review in a timely fashion, we at Pepper are providing this quick synopsis of the latest LEAN update. Our aim is to provide pertinent information succinctly as a roadmap to the LEAN E-mail Blasts, not to replace the LEAN E-mail Blasts. We hope you find these summaries helpful. A link to the complete June 26, 2013 LEAN Blast can be found here.

Guidelines for New Lender Narrative Templates

As you are all aware, the new LEAN documents require use of the new Lender Narrative templates. ORCF has complained that several lenders are modifying the Lender Narrative templates, which slows down the review process, as a result ORCF asks lenders to keep the following in mind when preparing their Loan Committee memos:

  1. Do not convert the template’s embedded Excel spreadsheets into images within the Word template, or use images from other exhibits such as the appraisal, as images do not allow ORCF to quickly verify that the formulas are accurate.
  2. Present the charts in the manner noted in the Lender Narrative template. For example, do not provide total dollars when the template indicates using dollars per patient day, or vice versa.
  3. Do not change any of the formatting (e.g., font, order, colors) in the template. ORCF is very familiar with the templates and can move more quickly through lender narratives that have a consistent appearance.
  4. Do not delete sections from the template. If a section is not applicable to the deal, keep the headings and write “Not Applicable.” Please also keep the Program Guidance sections; they serve as guidance for everyone, including HUD staff.
  5. Do not combine sections, even if you feel like it makes sense for the deal. Please present everything in the order that it appears in the lender narrative template.

Categories Used to Measure Lender Performance with Examples

As ORCF continuously seeks to improve the LEAN process, they want to advertise what they have learned by tracking lender performance. ORCF has noted that underwriting errors have dropped from nearly 25 percent at the start of the fiscal year to 15 percent in the current quarter. For any questions on lender performance, please contact Mary Walsh, who handles ORCF lender relations, at: For additional information regarding a list of the categories that ORCF reviews and the common errors found in each, see the LEAN Update.

Loan Modification Sample Documents and Application Submission Logistics

ORCF has posted a revised “Sample Checklist” and “Sample Format for Lender Analysis and Recommendations” to here.

The primary change on the checklist deals with the logistics of submitting a Loan Modification application. Please submit all future loan modification submissions as an e-mail, with the documents attached, to the following e-mail address:

If you have already begun using the previous version of the “Sample Format for Lender Analysis and Recommendations” on a Loan Modification, ORCF will not object to you submitting the Loan Modification using that version.

Sample DACA and DAISA Now Available on

In response to the public comments received during the Section 232 PRA Document review process, the Deposit Account Control Agreement (DACA) and Deposit Account Instructions and Services Agreement (DAISA) were removed from the OMB-approval process. In their place, ORCF has prepared sample documents for use by industry lenders available on (available here sample DACA, sample DAISA). These documents are only samples illustrating how existing program guidance may be executed.

Please note that we recommend that these forms be reviewed by Lender’s internal counsel before being distributed as acceptable forms to borrowers/operators, as the Lender agrees to indemnify and cover fees in these agreements in circumstances that we do not believe best serves our clients.

From the Closing Corner


  1. Repairs – Do not forget to pay special attention to the Firm Commitment’s list of repairs and provide clear photos, invoices, and organized proof of completion to expedite review and approval.
  2. Forms – Unless otherwise directed, Lean 232 applications and closing documents should not use MAP Guide policies or documents.
  3. New 232 Documents and Future State of Legal Reviews - Beginning July 12, 2013 and in conjunction with newly revised 232 documents, all projects with Firm Commitments issued after July 12, 2013 will be required to use the new 232 documents found here.
  4. As stated in the May 31, 2013 E-mail Blast, a one-part review will replace the part 1 and part 2 process for all 232/223(f) and 232/223(a)(7)s with the exception of transactions involving accounts receivable financing or master leases (the review process for which will remain unchanged). For projects using all new documents with Firm Commitments issued before July 12, 2013, OGC will defer review until after Firm Commitment is issued. For all Firm Commitments after July 12, 2013, instructions on where to send closing packages will be included in the correspondence from the HUD underwriter.

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Pepper Hamilton LLP on:

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