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

by Pepper Hamilton LLP
Contact

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 September 26, 2013 LEAN E-mail Blast can be found here.

Backlog Due to Commitment Authority Shortfall and Closing

As everyone is aware, HUD ran out of commitment authority on September 16, 2013. When the federal government reopens and additional commitment authority is allocated, ORCF expects to issue approximately 40 Firm Commitments. There will be no closing priorities, and closing assignments will be made in the order in which full and complete packages are received.

Updated Section 232 Documents – Scrivener’s Errors

ORCF has been revising the new LEAN documents to correct scrivener’s errors and publishing them on both the LEAN Web site and HUD’s Client Information Policy Systems (HUDCLIPS). The edits correct typographical errors, make minor corrections and/or make clarifications; they do not represent changes to policy. See the LEAN Update for a complete list of the documents that have been changed, the page number of the revision and a short description of the correction.

Identifying Personally Liable Principals for the Healthcare Regulatory Agreement – Borrower Provision #38

One of the biggest changes in the new documents is Section 38 of the Healthcare Regulatory Agreement – Borrower (HUD-92466-ORCF), which requires an individual or an entity to be held personally liable for certain enumerated matters. ORCF felt it would be beneficial to clarify those individuals and entities that are acceptable to serve as key principals (this guidance is the same as that provided for Multifamily Housing).

For privately held entities: Section 38 generally requires two signatures for project sponsors. In most cases, HUD, upon the lender’s recommendation, shall select one individual signatory to sign in his or her individual capacity and the project parent/sponsor entity to sign in a corporate capacity. In any specific deal, underwriting may point to a different entity with the requisite control and involvement or interest in the project, positive credit history, and adequate financial strength relative to the size of the loan to serve in the capacity required by Section 38.

For publicly traded corporations or REITs, or non-profit organizations: The parent/sponsor entity itself is acceptable as the sole signatory. For such entities, any individual signing on behalf of the corporate entity does not sign in an individual capacity, but to bind the parent/sponsor, and no personal liability will be claimed against the individuals signing in such a capacity.

For any corporate entities: Every corporate officer is not required to sign. Whomever the corporation has authorized to bind the company in connection with the proposed transaction may sign, provided that the Participant Credit and Financial review has discretion to require additional signatories if warranted in a specific (exception) situation.

Please note the following prohibitions related to Section 38: Insertions of “or successors” language to the identification of signatories is NOT allowed. The Regulatory Agreement can and should be amended when there is a new individual who is responsible for the provisions of Section 38.

Riders to the Regulatory Agreement that attempt to limit a signatory’s liability are NOT allowed.

Section 38 may not be omitted because a project has been processed as a Section 223(a)(7) refinance.

If the Firm Commitment fails to specify signatories to Section 38: The lender should request an amendment to the Firm Commitment to name a key principal. It is the lender’s responsibility to perform the Participant Credit and Financial review of the parent/sponsor entity and to identify and justify the proposed Section 38 signatory.

Section 232 Loan Modifications - Revised Sample Format for Lender Analysis and Recommendations on HUD.gov

ORCF has revised the “Note Modification Costs” section in the document “Sample Format for Lender Analysis and Recommendations.” The revised document can be found here on ORCF’s program Web site on HUD.gov.

Upcoming Improvements to the ORCF Web page

ORCF is currently making major improvements to its ORCF Web pages. The improvements will be unveiled in November 2013 and will make the site more user-friendly.

FROM THE CLOSING CORNER

  1. HUD Closer Assigned after Submission of Legal Package
    HUD closers are only assigned when closing packages are complete and have been submitted to the HUD attorney. When the legal closing package is sent to the assigned HUD attorney, lenders should e-mail ORCFCloser@hud.gov and a HUD closer will be assigned.
  2. Withdrawing Firm Commitments:
    If faced with a Firm Commitment that needs to be withdrawn after being issued, please submit a written request to withdraw the Firm Commitment to ORCFCloser@hud.gov.
  3. Replacement Reserve Amendments (Section 232/223f Transaction):
    As noted in the August 19, 2010 e-mail update, the HUD closer will allow increases of less than $10,000 to the reserve for replacement account to avoid mortgage reductions as a result of cost certification. Any proposed increase to the replacement reserve account of more than $10,000 must include an explanation of the proposed uses (line item and timing) for the additional deposit and requires HUD underwriter approval.

Written by:

Pepper Hamilton LLP
Contact
more
less

Pepper Hamilton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.