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 November 12, 2013 LEAN E-mail Blast can be found here.
New Document Implementation Matrix
ORCF has created a matrix with guidance on when the use of old documents may be allowed for certain special circumstances (e.g., Master Leases, AR Financing, TPAs, etc.). The matrix discusses various scenarios and explains which of the new documents are required and when some or all of the old documents are permitted.
Non-Material Changes to Lease Payments
HUD recognizes that operator lease payments occasionally need to be adjusted. The new Healthcare Regulatory Agreement—Operator (Form HUD-92466A-ORCF) anticipates that prior HUD approval is only required when the lease payment is materially changed. ORCF clarified that so long as: (1) the proposed change in lease payment maintains a lease coverage of 1.05 or greater; (2) the loan is not in default; and (3) there are no other concurrent material changes to the lease agreement; then the change in rental payment is not a “material change.” If the revision to the lease payment does not constitute a material change, HUD does not have to be notified.
Criteria for Bathroom Waivers
The June 27, 2012 and April 30, 2012 E-mail Blasts outlined the procedures to expedite the submission and consideration of requests for bathroom waivers of 24 CFR 232.7 (formerly 24 CFR 232.3). Since the expedited approach is not always feasible, lenders are requested to expedite only if all the factors set forth in the LEAN Update are applicable.
National Fire Protection Association (NFPA)-13 Sprinkler Systems Compliance
As previously mentioned in the April 29, 2013 and August 28, 2013 E-mail Blasts, the Centers for Medicare & Medicaid Services (CMS) requires all nursing homes be fully sprinkler compliant per the 1999 Edition of the NFPA-13 Standard for the Installation of Sprinkler Systems as of August 13, 2013. HUD must honor CMS’s requirement and therefore cannot add nursing homes to their portfolio that are not NFPA-13 compliant. Lenders should ensure NFPA-13 compliance when submitting applications, and address it in their narrative.
Environmental Review Requirements
ORCF wants to remind lenders that “draft” Phase I Environmental Site Assessment (ESA) reviews are not acceptable; a final, current ESA must be provided at the time of the application submission. The ESA must encompass the total project site.
When a project’s floodplain location is designated Zone X, lenders and environmental consultants are reminded to indicate whether the area is designated by FEMA as Zone X (shaded) or Zone X (unshaded). Zone X (shaded) is considered an area of moderate flood hazard and, pursuant to 24 CFR Part 55, HUD must complete an 8-Step Decision Making Process (either an abbreviated or full process, as applicable) as part of its environmental review for healthcare facilities. Zone X (unshaded) is designated as an area of minimal flood hazard and does not require an 8-Step Process.
Finally, please include all communication with the State Historic Preservation Officer (SHPO) with the mortgage insurance application. Any response from the SHPO that the lender or its agent receives after the application has been submitted should be provided to ORCF upon receipt. Failure to forward a SHPO response to ORCF in a timely manner may cause delays in the environmental review process.
Keep Electronic Documents Under 50 MB and E-Mails Under 15 MB
As mentioned in the May 31, 2012 E-mail Blast, due to HUD’s server limitations, please limit document size to 50 MB as HUD’s servers cannot handle anything over 50 MB. Please also note that ORCF’s e-mail limits are 15 MB per e-mail.
Verification of Refund Amounts before Submissions
More than a quarter of 223(a)(7) application fee refund requests received by ORCF are for the incorrect amount. ORCF requests that lenders verify the refund amount before submitting their request. Since ORCF refunds exact amounts and does not round calculations, please be exact in the calculation. An excellent method to check for the proper amount of a 223(a)(7) refund is to (i) take 0.15 percent (or 0.0015) of the final mortgage amount, and (ii) subtract that number from the original application fee amount paid. The difference is the amount due.
Check Transmittal Letter Eliminated
When the new documents came out earlier this year, ORCF merged the check transmittal letter with the electronic certificate of submission. A separate check transmittal letter is no longer necessary. The new merged document is Certificate for Submission of Electronic Firm Application (Form HUD-90022-ORCF).