- Will ORCF agree to have a "pre-concept" or "pre-application" meeting before lenders commence processing new construction applications?
- Is a separate application fee required when a Change of Ownership (CHOP) is done in conjunction with a Section 241a supplemental loan?
- Quality Incentive Reimbursement Payments: Many states are moving toward quality incentive reimbursement payment systems. How should this be handled in the application?
- Quality Incentive Reimbursement Payments: Many states are moving toward quality incentive reimbursement payment systems. How should this be handled in the application?
- Does ORCF allow Intergovernmental Transfer (IGT) /Upper Payment Limit (UPL) structures? Are specific parameters required?
- Who may we contact regarding needed MIP Rate Calculation Corrections?
- Have FY 2016 MIP rates been reduced for Section 232, including LIHTC projects?
- I have questions about the Healthcare Portal. Can Lean Thinking answer my questions ?
- What is a typical or average interest rate for Section 232 loans right now?
- Does ORCF offer any incentives for "Green" construction or "green" renovations?
- We are requesting to use a non-recognized Green Building Certification (GBC) for our project. How is that done?
- If the Borrower is using a non-recognized Green Building Certification (GBC) that was previously approved by ORCF, what is the next step when submitting the application?
- Can the Energy Professional for Green MIP applications also be the Green Building organization’s rater/verifier/assessor?
- Will ORCF agree to have a "pre-concept" or "pre-application" meeting before lenders commence processing new construction applications?
No. Due to our small staff size and our transparency in application submission requirements, ORCF does not offer "pre-concept" or "pre-application" meetings. Instead, we request that Lenders submit specific questions on a project to our general mailbox at LeanThinking@hud.gov. The Policy Team reviews Lean Thinking (LT) inquiries daily and responds to them as quickly as possible. By responding to questions from a central mailbox, we ensure consistency and fairness to our customers. -- Aug-23 - Is a separate application fee required when a Change of Ownership (CHOP)is done in conjunction with a Section 241a supplemental loan?
Yes. With a 241a submission, the review would not align exactly with a complete Change of Ownership (CHOP) review, and unlike a 223a7, it is a supplemental loan adding on to the original Section 232 project, rather than a new FHA-insure mortgage of that underlying and original loan. -- Dec-19 - Quality Incentive Reimbursement Payments: Many states are moving toward quality incentive reimbursement payment systems. How should this be handled in the application?
The following guidance pertains to states with various supplemental payment programs and guidelines for including such revenue streams in underwriting: https://www.hud.gov/sites/dfiles/Housing/documents/SuppRevGuide.docx
(NOTE that this guidance does not change the guidance on treatment of supplemental income sources as noted in the June 30, 2021, February 24, 2021 and June 24, 2015 Email Blasts.)
As each state’s quality incentive reimbursement payment system is unique, the lender should provide a thorough explanation and analysis of the reimbursement program in the Lender Narrative including income and expense requirements, program stability (i.e. is this a permanent, temporary or pilot program?), and should point to specific program materials such as program regulations or websites to support the analysis.
• Appraised Value: Because ORCF wants a market value, the appraiser should recognize how market participants value the incentive payments. In some States where the program is permanent, it may be appropriate to capitalize all the income together with no separation of incentive income and expense. ORCF will generally accept methods that mirror those used by buyer and sellers in the market. In cases where the program is not permanent or has a sunset date, ORCF will require that the incentive payments be valued separately with a separate capitalization rate appropriate to the risk. Such cases will also require a bifurcated note.
• Lender’s DSC NOI: Lenders should analyze the requirements and stability of the program in concluding NOI for DSC. In general, the lender should use the most conservative scenario by including the expense, but not the income associated with the incentive program.
• Historic NOI: Historic NOI is to reflect the actual reimbursements and expenses.
Lenders are reminded that additional underwriting scrutiny is applied as the percentage of NOI derived from supplemental income sources increases, and conservative underwriting represents having little to no inclusion of these revenue streams in value for loan sizing, given the long-term nature of Section 232 insured mortgages. -- Apr-23 - If a facility seeks 223f financing and intends to add units, but does not want to hold up the refinancing to wait for the addition to be approved, when can a 241a application be submitted?
Current system constraints do not allow for issuance of an FHA Number on the 241a application until the 223f loan has reached endorsement. The other option would be to do a 223f on the whole project after the addition is completed (refinance is allowed under 223f provided the addition is smaller in size than the original, and the amount of work does not rise to the level of substantial rehabilitation). It would be necessary to mitigate any rent–up risk remaining (Initial Operating Deficit escrow, Debt Service Reserve escrow). -- Aug-23 - Does ORCF allow Intergovernmental Transfer (IGT) /Upper Payment Limit (UPL) structures? Are specific parameters required?
ORCF does endeavor to accommodate transactions for SNFs which receive UPL income, despite their complexities, as ORCF recognizes that UPL revenue is beneficial to a facility, at least in the near-term. However, in order to minimize the risk associated with this financing mechanism, ORCF has taken several precautionary measures. First, ORCF has not been relying on the UPL income stream to meet minimum debt service coverage ratios. Additionally, to the extent that any UPL revenue has been utilized for valuation purposes, ORCF expects to see a very high capitalization rate applied to that UPL revenue. Moreover, additional scrutiny is applied as the percentage of NOI derived from UPL increases. Finally, as comparable sales of facilities receiving UPL income become available, they will need to be reviewed and taken into consideration. SuppRevGuide.docx (live.com) -- Aug-24 - Who may we contact regarding needed MIP Rate Calculation Corrections?
Please direct all MIP correction correspondence to the Multifamily Financial Operations Division HUD Headquarters Building, 451 7th Street S.W., Room 6256, Washington, DC, 20410, Telephone Number: 202-402-2810, email: Iva.I.Elliott@hud.gov. --Aug-23 - Have FY 2016 MIP rates been reduced for Section 232, including LIHTC projects?
No. As stated in the Federal Notice FR-5896–N–01 - published on October 2, 2015 MIP rates for mortgage insurance programs under FHA’s Office of Healthcare Programs, including health care facilities and hospital insurance programs, confirmed that the rates then in effect were not being changed at that time. However, on August 12, 2022, HUD published a new Notice FR–6302–C–02 and added the Green MIP rates for certain commitments issued or reissued beginning October 1, 2022. (2022-17306.pdf (govinfo.gov) -Aug-23 - I have questions about the Healthcare Portal. Can Lean Thinking answer my questions ?
Questions about the Healthcare Portal can be directed to the Portal email box at: hhcp@hud.gov. Ihhcp@hud.gov Aug-23 - What is a typical or average interest rate for Section 232 loans right now?
Thank you for your interest in the Section 232 program. HUD does not set the interest rates for FHA-insured loans. You may wish to contact an FHA-approved Lender to discuss. -Aug-23 - Does ORCF offer any incentives for "Green" construction or "green" renovations?
Yes. HUD published a Green Mortgage Insurance Premium (MIP) rate reduction in the Federal Register (FR-6302-N-01) on May 19, 2022, (as corrected in FR-6302-C-02 on August 12, 2022) to encourage owners to adopt higher standards for construction, rehabilitation, repairs, maintenance, and property operations that are more energy efficient than traditional approaches. For more information about our Section 232 and the Green MIP program, please visit our website, which provides comprehensive guidance detailing the various HUD-insured loans and relevant information specific to the Green MIP program. Specifically, ORCFs Green MIP program is described in our Mortgagee Letter 2022-13, located on our website. ORCFs Section 232 Green MIP initiative will apply to mortgage insurance applications submitted by FHA-approved lenders financing residential care facilities. -Aug-23 - We are requesting to use a non-recognized Green Building Certification (GBC) for our project. How is that done?
All non-recognized Green Building Certifications (GBC) must be vetted/approved by ORCF on a case-by-case basis pursuant to Mortgagee Letter 2022-13. The GBC would need to comply with Mortgagee Letter 2022-13 for the Green MIP rate reduction. If a GBC is interested in participating in ORCF’s Section 232 Green MIP with respect to refinancing SNFs, ALF or BC projects, they would need to communicate with ORCF directly. There is no presumption of approval and so an application should not be started using a non-recognized certification. The Green Building Organization representative would need to submit their request to LeanThinking@hud.gov -Dec-24 - If the Borrower is using a non-recognized Green Building Certification (GBC) that was previously approved by ORCF, what is the next step when submitting the application?
Mortgagee Letter 2022-13 provides for the approval of non-recognized Green Building Certifications (GBC) on a case-by-case basis after the GBC certification was vetted by ORCF. Thus, even if a non-recognized GBC was permitted in one or more other transactions, the borrower must still obtain ORCF’s approval to use that for the subject transaction. To request consideration in this respect, the Energy Professional must submit to Lean Thinking a request to use the non-recognized Green Building Certification that was previously (on a case-by-case basis) approved and vetted by ORCF for the same loan type (e.g., 223(f)). In doing so, provide the project name, address, FHA number, and please confirm the following:
The project meets the required points to achieve the selected Green Building Certification. The project complies with Mortgagee Letter 2022-13. Additionally, the property is expected to meet the minimum requirements based on repairs/retrofits including:
• 15% site energy reduction usage (not cost) from the as-is SEP (EUI) is required: targeted reduction is XX.X%
• 10% site water reduction (not cost) from the baseline water usage is required: targeted reduction is XX.X%
• Baseline (as-is) SEP score is: XX
• With 15% reduction in energy from the as-is SEP (EUI), the resultant energy star score will be: XX (must be a minimum of 75)
• Climate resilience criteria will be met and described in the Lender Narrative -Dec-24 - Can the Energy Professional for Green MIP applications also be the Green Building organization’s rater/verifier/assessor?
No, the Energy Professional (EP) must be entirely independent. There can be no Identity of Interest (IOI) between the Energy Professional selected to model the project for energy and water retrofits/improvements, and the Green Building organization’s rater/verifier/assessor. The EP ensures that HUD’s Mortgagee Letter, 2022-13 is applied to the application and works with the rater/verifier/assessor for coordination of the design/modeling and the GBC certification. -Dec-24
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